June 18, 2013
VA Angels’ CEO Randy Thompson writes a column for the Calgary Herald. Here is one of the articles.
May 17, 2013. 4:42 pm • Section: Business, Technology, Technology
I really love the startup space in all its shapes and sizes. It is part of why I am on the Startup Calgary Board. This love includes what’s happening in the not for profit (NFP) and the social ventures (SV) space, in fact, myself and three partners are currently working on the re-launch of Generus, a web platform that matches not for profits to merchants in a “Groupon like” environment. Last week a colleague and I were at EpicYYC, a new incubator in Calgary that focuses the energies of the local social venture community.
Epic isn’t the first in the accelerator/incubator space in the city. And Calgary’s social venture partners have run some fantastic pitch events over the past 12 months. Terry Booth from Collins Barrow and I ran a similar dog and pony pitch show in Edmonton for The Edmonton Social Enterprise Fund last year. In all close to 100 social ventures and not for profits have attended these pitch sessions, so it is a growing space in the province.
The message being delivered is simple: In the investment space social ventures have an equal chance to their for profit counterparts of raising investment capital.
In one sense the premise seems silly… A deal providing a 10 times return in the Internet space or the 100th hole in the ground that will be turned into black gold should always be where an Investor puts their dollars. But on the other side of the coin, if you’re a member of a group like VA Angels and have already invested in six “for profit” deals, there is always interest in a different type of deal.
These other deals are the ones that will change the world or leave a lasting legacy that an investor and their family can be part of.
There is a caveat to this of course, social ventures and not for profit companies do not get extra brownie points or investment dollars based on moral superiority. The reality is the same rules apply to social ventures as they do with “for profit” companies. The quality of the opportunity and the quality of the team will dictate investor’s interest. Additionally, whether the social venture likes it or not, the quest for capital is competitive in the same way as the push for donors. As an example, what makes one donor choose World Vision over CARE or Plan is as important as trying to determine why an investor would choose a social venture over a mobile app company.
Some of the criteria reads like a standard venture capital list:
What is the impact of my money on the community?
Does the team have credibility or are the simply bleeding hearts?
What is the track record of the team with regards to their past use of funds?
Am I the only one in this deal?
What is interesting to me is when I have pitched this premise to the social venture community in Alberta I often get pushback, which is understandable. After all as a social venture you probably have been on the street looking for money. It’s a hard business no matter who you are. Guess what? For profit companies go through the same pains and successes in trying to raise capital. Notice I am avoiding calling it fundraising, I believe this is a different exercise. Raising capital has everything to do with the bullet points above and very little to do with the product or the concept you are pitching.
The other premise that is lost in the capital raise is that investors, unlike those depicted on TV, have souls, have causes they are desperately passionate about, and they recognize the importance of their ability to cause change. I always tell social venture groups to imagine they are an investor, and I ask them if they would stop working in the SV space. The obvious rhetorical answer ensues – vision. But ask the NFP worker what it would take to get them to write a cheque as an investor and the answer is interesting. They tell me that vision isn’t enough. Instead, when they put themselves in an investors shoes, they always want to know; “What are you doing with my money? And who is in charge?” These questions trump vision every single day.
Gena Rotstein at Places2Give has accumulated a list with over 83,000 not for profits in Canada alone. It’s a staggering number. However, put into a business perspective this number of 83,000 becomes a massive competition these NDP’s for both fundraising dollars and raising sustainability capital. Whether you like it or not, the truth is you need to learn to be aggressive, business like and highly engaged with your customers and user base to succeed. In other words, you had better start acting like the kid who’s raising money for his mobile app.