Investors tips for social entrepreneurs

Investors tips for social entrepreneurs

How to survive the global crisis

Like everyone else, we were first very worried when the COVID crisis hit: how will impact ventures survive these unexpected times?

To get a better understanding of the dynamics of the impact investing market and the repercussions we can expect for social entrepreneurs, on March 31st we launched the Impact Investing Barometer – Investing in times of global pandemic.

34 Impact investors across Europe gave us rather positive news: almost 80% of them are maintaining their investment levels, or even increasing them for certain sectors such as healthcare, food & agriculture or education.

Nevertheless, investors worry about higher default rates due to business interruptions, cash constraints and other external factors. So, we asked them, “what can social entrepreneurs do?”. Here are four suggestions.

1. Be patient – do not give up!

If the crisis caught you in the middle of your investment round, there are 3 strategic options:

  1. Stick to the original plan, but increase the time to achieve it.
  2. Postpone that investment round for a few months, if you can.
  3. Move forward, but be prepared to accept less favorable conditions and lower your valuation expectations.

Irrespective of your decision, don’t get discouraged and keep moving forward!

2. Be creative and & come up with good ideas on how to thrive in these circumstances

How quickly are you able to transform the current crisis into an opportunity for your organisation and team? What alternative strategies have you considered to address the shifts that this crisis brings? Can you tailor some of your activities, products or services to be supportive to the battle against Covid-19? Last but not least, think of how you should adapt to the “working more behind a screen” mode.

3. Rationalise diligently!

Take a hard look at every assumption in your model. Adapt your business plan, make unpopular decisions if needed, look at every single P&L line item and explore cost savings to extend your cash runway.

You might also want to re-evaluate your funding needs. For instance, consider bringing the company to profitability before looking for funding. Also, be careful about adding debt to the balance sheet now if you know you won’t be able to invest it into the growth of your company.

4. Stay calm and approach your shareholders first

Some social enterprises wonder which investors to approach at this moment. First of all, don’t jump into bed with whomever happens to come first. Try to find financing from your current investor base who already knows you well. Also, think laterally and use their networks.

Remember that everybody, is nervous, including investors. Still, signs of stress coming from entrepreneurs will close doors quickly. Be candid on the situation and share the effects of the crisis on your company openly. This will increase trust with the investors.

Summing up, social entrepreneurs are advised to stay focused on the challenges lying ahead of them, shapen their ears, react with agility and…

Most importantly, let everybody know how urgently your solutions are needed for building a better society after this crisis is over!

For more information, check out the Impact Investing Barometer – Investing in times of global pandemic.