Crowdfunding Primer for Social Enterprises

Crowdfunding.

Crowdfunding is one way of raising funds from the public or friends, family, customers, and individual investors. This approach helps in getting large number of individual investor through Social media and Crowdfunding platforms and leverages their networks for greater reach and exposure.

Crowdfunding is essentially the opposite of the mainstream approach to business finance. Traditionally, if you want to raise capital to start a business or launch a new product, you would need to pack up your business plan, market research, and prototypes, and then shop your idea around to a limited pool or wealthy individuals or institutions. These funding sources included banks, angel investors, and venture capital firms, really limiting your options to a few key players.

Crowdfunding platform helps the entrepreneur to showcase and present the innovative idea. With crowdfunding, you get the funds from one who is interested in your project which gives them more ways to help grow your business.

Types of Crowdfunding

CSR: As a social enterprise ecosystem enabler

In a historic move in 2013, the Indian parliament passed its first update to the country’s corporate law in 50 years. Among many other reforms, one that caught much attention was the one that mandated CSR spend of 2% of profits (before tax) by all public and private companies registered in India meeting a revenue and profitability criteria.

At EntireIySo! we have been tracking the CSR spend trends over the last three years since the CSR law was enforced. We believe that for slightly mature Social Enterprises (having operations for 3 years or more) have significant opportunities for a win-win collaboration.  As of FY16, the top 100 companies listed on the BSE have grown their spend by almost 30% CAGR over the last three years. Despite this growth and a spend of 7100 crore, the overall underspend (as per the 2% rule) still stood at 2079 crore.  In India, there are about 7000 to 8000 companies who need to comply. We estimate that the net spend on CSR, at 100% compliance, should aggregate to 20,000 to 25,000 Crore INR annually.

[ Check the detailed CSR spend analysis and presentation at the DreamerDoers Conference 2016 Here ]

CSR, though not a core business activity of the corporates, has significant mindshare of the Board of Directors. For publicly listed companies, the Board is directly responsible to articulate the CSR initiatives and framework to the shareholders and the market regulator. Further CSR is one of the core pillars of brand building. Social and Environmental responsibility are fundamental pillars of the existence of corporations.

With “social impact” also being core to the vision and mission of social enterprises, we assume that collaboration with corporates is but natural.

Over the last 3 years, EntirelySo! has interacted with hundreds of social enterprises and understood that areas of concern.  Three that stand out are

  1. Capital Access
  2. Market Access
  3. Resource Access

The average CSR budget for the top 100 companies is about 70 Crore (maximum being 650 crore).  Capital access is one of the challenges that can really be solved with CSR collaboration.

So what can SE’s do to be visible and realise a CSR partnership ? Besides having real, on-the-ground connect and operational maturity,  our analysis indicates that the following factors are key for a successful collaboration

  1. trust and transparency
  2. alignment of cause
  3. corporate brand recognition
  4. adherence to reporting / monitoring processes

One of the major reasons, cited by the companies, for non-compliance is, lack of visibility of trusted execution partners. At the same time, data from MCA (Ministry of Corporate Affairs) indicates that as of 2015, there are 4878 companies incorporated under Section 8. Obviously there are gaps either in visibility or impact capability.  Either of them are solvable problems.

Today we have the right environment in India to create transformational social impact at scale.  Regulations, Corporations, Non-profit or For-Profit social enterprises and impacted beneficiaries have witnessed multiple examples of transformative change being brought about by CSR initiatives in collaboration with execution partners.  [ See the case study of How Naandi Foundation has transformed the Araku Valley Region here ]

EntirelySo! is a social enterprise to enable social enterprises. If you are a Social Enterprise feel free to reach and join our Social Venture Founders Forum.  Let us collaborate to  make the our world a beautiful place to live.

Dreamer Doers 2016

This platform is about social Enterprises. Our objective is to build and maintain an Integrated development environment for social enterprises. To help social Enterprises take shape, grow well and become remarkable.

Dreamer Doers is an Annual Social Enterprise Conference organized to showcase social enterprise. This is an opportunity for entrepreneurs and startups (Karmayogi) working in the areas that will impact society at large. To showcase, pitch and seek support from fellow social enterprise enthusiasts, impact investors and catalysts.  dd2014

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