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Sustainable Funding Schemes #SocialFinanceLab

An absolutely essential, mandatory element of a sustainable business model is a stable funding scheme.

In order to actually propose an effective solution for a certain social problem, it is crucial to find sustainable investment sources — this way a social impact of meaningful scale is achieved.

Social entrepreneurs should take into account that their and their potential investor’s visions should be similar — as well as to think of what kind of strategic support the funder can offer, beyond the monetary capital. A shared vision is mandatory for impact.

Each funding source, no matter whether it is an organization or an individual, have their own set of commitments and obligations, schedules, and timelines. Often, these assets are dedicated to a specific social topic or geographically based location. It is important to keep in mind that, while a crowdfunding campaign will help you short-term, a connection or a stable professional relationship with an investor might offer sustainable funding for years ahead.

STEP 1 Market measure or checking the waters

In order to get started with your social business idea, one of the easiest ways to test and validate it is:

👉 Bootstrapping 👉 Pitching to your relatives, friends, and network

Both of these activities might accumulate just enough funds to get your idea to the first stage of creation and testing. This enables the entrepreneur to gather feedback for their initial solution and improve it prior to presenting it to investors — proving the market requirement.

STEP 2 Building and launching

This is the stage where the product gets an injection of funds in order to be built, elaborated, and marketed. This is the step where the impact starts. Such momentum can be achieved mainly with the help of:

👉 Crowdfunding 👉 Incubators 👉 Accelerators

Incubators and Accelerators offer the participating entrepreneurs the resources they need to grow — not just financial benefits. Often, crucial support comes in the form of mentorship, network building, and simple exposure for the new entrepreneurs — this step wouldn’t be possible without pro bono experts/mentors in start-up communities. Their sharing of their knowledge consitutes active participation in the growing, fostering, and helping of the common good to flourish.

Accelerators prepare the social entrepreneurs to search, find and secure further investments with angel investors, venture capital, and other equity investments.

STEP 3 Growing and scaling

Don’t worry — a lot of investors see the substantial meaning behind #impactinvesting and the industry is on a steep rise. Investors often choose based on:

👉 Stage of business (Early or Developed) 👉 Geography 👉 Social impact area

However, it is all about creating impact and creating it in a scheme or business model that is sustainable. The common goal is to enable social good.

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Erasmus Plus KA2 Cooperation for innovation and the exchange of good practices

Project No: 2020-1-DE02-KA202-007564

Project title: Collaborate learning of alternative finances and funding for social entrepreneurs

The European Commission support for the production of this publication does not constitute an endorsement of the contents, which reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein.

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