Early Stage Social Enterprises: Read This Before Raising Grant or Equity Capital

When I look at my podcast download stats, one episode stands out: bootstrapping a social enterprise. It makes sense: finding grant money or equity investors takes a lot of time and effort, and it’s not guaranteed.

In my experience, there are pros and cons to spending all that time applying for grants or raising equity capital. At times, taking the bootstrapping route can be the better option, especially if your goal is scale. Here’s my breakdown of the pros and cons of finding and taking “free” grant money or raising capital early on.


  • If you raise early capital, you don’t have to eat Ramen noodles while you’re building your social enterprise. You can pay yourself a reasonable salary, maintain a certain standard of living and maybe even enjoy a few luxuries.
  • Another advantage is that when you take capital from a big-name funder, like the Bill & Melinda Gates Foundation, you get a kind of credibility. It tells others that they’ve checked you out and you’re OK. This can add some clout to help you find future partners, like investors, universities and employees.
  • Early capital gives you the ability to hire a team, so you don’t have to do everything yourself from day one.

Of course, grants or equity capital can be your only option if you’re developing hardware, or something with a lot of upfront R&D cost. They also have a role to play in funding entrepreneurs from poorer backgrounds with a great idea. But if you do have an option, weigh the cons against the pros before you decide.

Potential cons:

When you take grant money, you’re beholden to your donor.

Your donor(s) will hold you accountable to certain deliverables and milestones; most of the time, you are agreeing to do certain things in exchange for the money. You’re doing those things because you have a theory of change — if you do certain things, people’s lives will be improved, which is what donors want. You’re agreeing to give up some flexibility in exchange for a grant. It has its obvious benefits, but it can be limiting. In reality, things can change. The best way to tackle the problem is not necessarily the one you started out with; your thesis might even change. If you’ve accepted donor money, it might be harder to adapt.

You’ll be pressured to focus on impact early on, rather than building a company.

In a successful social enterprise, the product or service comes before the impact. You need to build the car before you go the distance. If you’re too concerned with the impact early on, you might not be focused on what’s important — like whether the product is a good fit for the market. While demonstrating impact early on makes donors happy, it might not be the best thing for building a scalable business.

Elon Musk once said “The strategy of Tesla is to enter at the high end of the market, where customers are prepared to pay a premium, and then drive down market as fast as possible to higher unit volume and lower prices with each successive model.”

So focusing on impact too early would rule out this option of building a really good product or service, gaining a foothold in the market with higher-income customers, and then making your product or service much cheaper at scale.

When you take early capital, your costs will exceed your revenues.

I see this all the time: people raise capital, grow their team, but when the capital runs out, they can’t continue paying people. So they hop from one grant or investment round to the next without balancing their costs and revenue.

As a bootstrapped startup, it forces you to be disciplined about spending money. Hiring someone is a big decision because it increases the rate at which money goes out the door. Consider instead having received early capital. You have a healthy bank balance and hiring people is an easy decision to make. When the grant runs out, hopefully your revenues would have grown to meet your increased costs. If not, then it’s back on the cycle of raising funds, taking your focus away from building a product that people will pay for.

Raising grants and reporting to donors is a time sink for the whole team.

The process of raising grants is lengthy, and time consuming. First, there’s the task of researching donors. You need to painstakingly go through their website to find out whether they’re a good fit for your social enterprise. There are thousands of potential donors, so the common shortcut is to ask your peers and advisors for recommendations. Even this can be a slow process. Once you have the shortlisted donors in your sights, the next step is a long and drawn-out courting process. There’s hours of research to find out what they fund, how they fund, when they fund, and how to apply for funding. It may be that there’s an ‘open call’ for applications, so you need to spend hours preparing your application and then waiting for the results. You might fly out to conferences to meet them or try to find an introduction from your network. Finally, once you get the funding, there’s the due diligence process, the monitoring and evaluation forms to fill in, the narrative report to submit, the countless ‘check in’ calls and the visitors to host when the donor’s in town.

Ultimately, grants and investors can distract you from your business and customers.

Greg McKeown said in his book ‘Essentialism’ – “If you don’t prioritise your life someone else will.” As mentioned above, when you take grant money, you’re choosing to spend a considerable amount of time on the donor, rather than on your business. Early on, you should be learning all the jobs that are necessary to grow your business. You’re doing your finances so one day you can write the job description for a finance manager. You’re doing customer service, so one day you can write the job description for a customer service manager. You’re doing sales, product design, running an office, driving the delivery truck, onboarding new customers – the founding team needs to do everything in the early days. That’s a lot on its own, and it takes focus. Worrying about donors and investors only makes it more complicated.

Audrey Cheng’s Story of Bootstrapping Moringa School

Audrey Cheng is a successful founder who swears by the bootstrapping approach and is living proof that it can work.

Audrey spoke to me about her journey. It began while working for a Kenya-based investment firm. There she saw many founders seek funding too early. They ended up getting a really poor deal and having to give up huge chunks of their company because they weren’t showing enough growth. She’d also seen what grants had done to founders. She learned that grants could be quite distracting, taking away the discipline of selling and iterating a product with real customers.

When she started Moringa School, a tech skills accelerator in Nairobi, Kenya, she decided to do it differently. She worked a summer fellowship before starting, so she would gain more skills and enough money to start her company. She invested some of her savings into the company and kept some aside to cover her living expenses.

As with any new company, it was hard to get traction early on. She interviewed over 120 applicants for their first class of students. She finally convinced 4 high-quality students to pay the full tuition fees for her first cohort, and her startup was born.

She managed her accounts ruthlessly, taking courses in advanced excel and pushed herself to learn new skills quickly. Every dollar spent had to be justified. Moringa was focused on providing clear value to students from day one.

The experience taught her discipline. She ensured that every hire was a great addition to the team and that they would make a clear contribution to the bottom line. She wasn’t distracted by delivering milestones to donors or reporting back on ‘lessons learned’. Her team was lean and fully occupied.

When she went out to raise her first investment, it was from a position of strength. Moringa had reached a reasonable scale, her team was strong and they felt confident they could meet the expectations of donors and investors. The discipline she learnt from bootstrapping has made its way into the company culture and stands her in good stead for continued growth.

Final thoughts

This article aims to give early stage social entrepreneurs food for thought when considering raising external capital. But with writing and getting feedback, I’ve realised there’s so much nuance to explore. Such as the idea of giving grants to entrepreneurs from poorer backgrounds, as a more equitable approach to entrepreneurship and development. Or the effects on worker health and the environment when operating at lower costs. What is your perspective on this? Tweet it out or share it on LinkedIn to encourage debate amongst your peers. Or leave your comments below. Thanks to Satya Suri, Rachel Sklar and Audrey Cheng for reviewing this article.

FIP 128: The principles of fundraising, building teams and asking for advice with Jack Lowe of the Fit For Life Foundation

I’m very honoured to speak to Jack Lowe this week. He’s come on share lessons learnt throughout his 40 year career in microfinance and the startup world.

Jack was asked to become CEO of BlueOrchard Investments in 2004 — a microfinance fund that he grew from $40 million to close to $1 billion, stretching to 45 countries. It became the largest private microfinance lender in the world. Jack graduated from Stanford in 1965, joined McKinsey in 1969, and went on to grow a string of successful startups, from oil and gas to food distribution and restaurants. Jack is currently building another startup, Fit for Life Foundation, helping people stay active and age well.

On this show you’ll learn:

  • The fundamental difference between the business and non-profit sector (2.24)
  • The experience of pitching the microfinance fund to pension funds, family offices and institutional investors (4.57)
  • The two basic principles of fundraising (7.41)
  • How to know when something’s not working and to try something else (11.19)
  • Professional intimacy and other insights from building teams (14.12)
  • Using a network and calling on people for help and advice (18.45)
  • Getting out of a tough spot and avoiding depression (24.15)
  • Advice to his younger self (31.54)
  • Why exercise and ageing well is the feature of Jack’s next startup (36.31)
  • 3 quick fire questions (44.08)

Links from this episode

Get in touch with Jack

Amanda Cotterman Headshot

FIP 125: Venture Debt Fund for revenue-generating businesses during COVID-19 with Amanda Cotterman

Today’s challenge is for those businesses who’re seeing a temporary loss of revenue due to the COVID-19 crisis, but also anyone in the business of raising capital, and interested in different funding instruments.

We’ve got Amanda Cotterman on the show, and we’re talking about the fund she’s raising, Equalife Capital’s Africa Venture Debt COVID Recovery Fund. We help you understand whether this funding instrument is right for your enterprise or if you’re a donor or investor, whether you might want to put some capital towards this fund.

What you’ll learn on this episode:

  • Amanda works for Equalife Group. They’re raising a $20M venture debt fund. It’s for businesses that are revenue generating and cashflow positive, and have a specific revenue stream or they want to prove out a revenue stream to get a better valuation. The debt would need to be serviced.
  • Examples of appropriate businesses include:-
    • Agriculture businesses e.g. a milk distribution business that pays farmers up front, before going to market
    • A wholesale distributor in Rwanda, who buys from farmers, adds value to veg by cleaning and packaging, and sells to hospitality market.A
    • FinTech factoring business, that pays against invoices.
  • Businesses that have a genuine liquidity issue are most suited to this fund, so there’s good product market fit, there’s a demand for their product, but it’s just a matter of sourcing sufficient working capital to cover purchases in the short term.
  • How the fund could be used to weather the COVID-19 storm:
    • Businesses might have seen a drop in revenue and need cash to weather the storm. They don’t want to take on more equity.
  • Amanda has been an entrepreneur in Kenya for 9 years , working in an operational role with several ventures. She moved to Kenya after working in Asian markets with Morgan Stanley. With a deep understanding of financial instruments and the needs of African ventures, she saw the gap for debt to come in alongside venture capital. The debt can be useful where the venture has a profitable revenue stream and wants to demonstrate the potential to gain a higher valuation, but is struggling with cashflow. Shareholders don’t want to dilute their shareholding by using equity to support with cashflow needs.
  • The venture fund prices for the risk, so interest in the range of 5-10%.

Links to useful resources:

Connect with Amanda:

FIP 114: Why you need a clear fundraising strategy before going to market with Solonia Teodros of The Change School

This week on the Finding Impact Podcast, we are talking to Solonia Teodros, Co-founder of The Change School, who describes why social entrepreneurs need a clear fundraising strategy and goal before starting their fundraising activities. Solonia shares her journey of fundraising for The Change School, with lessons from her experience of almost closing a fundraising deal, changing course and walking away from the deal and coming back to it later with a clear strategy.

On this podcast, you will learn:

  • How Change School helps transform organizations and individuals by helping them re-connect with their values, re-design their work and re-define success as authentic leaders. Change School thus equips and empowers people to navigate uncertainty and embrace change during the transition or transformation that they are going through.
  • About Change School’s journey of testing various offline business models such as: creating immersive retreats for people to re-connect with themselves while enabling a peer-to-peer and community learning experience; to creating Change School mind gyms for bite-sized learning to develop mental resilience; and creating bespoke experiential transformation programs for organizations.
  • How the founders encountered the growth and scale challenges of Change School by evolving and developing an online delivery model of working with its vast pool of trainers and experts while drawing from the expertise of its offline immersive retreats and retaining the Change School brand personality.
  • Why social entrepreneurs should have a strategy of pro-actively approaching investors for funding and alignment with business growth plans rather than just nosediving into fundraising re-actively in trying to impress investors, while not losing focus on the business vision and operating matters such as managing cash flows properly.
  • Finally, you will learn about Change School’s online courses and tutorials for anyone needing resources and additional support to managing change and transitions. Check out the free online course at, which is a 5-day visioning challenge for teams or individuals to help find clarity of vision in careers or lives.

Links to Resources:

Connect with Solonia:

FIP 99: How local founders can attract foreign impact capital, with Andreas Zeller

This episode shines a light on why local founders, who have excellent businesses, struggle to attract foreign impact capital. Open Capital Advisors has been advising in Africa for 9 years now, helping entrepreneurs grow, and helping advance economies, whilst also helping build a generation of business leaders in Africa. Based in Kenya, Uganda and Zambia, covering 20 countries in Africa and have worked on 450 engagements to date.

On this episode you’ll learn:

  • Village Capital studied the amount of impact investment money going to local founders, which showed less going to local founders. Some of the reasons is the lack of understanding by local founders about what is needed to raise capital, not being active in the networks that foreign investors are active, and knowing how to communicate effectively. Alot of OCA’s work goes towards bridging this gap.
  • Many impact investors from North America or Europe don’t have local offices and are not familiar with cultural norms or business practices in country. When they do, local staff are not part of the decision making process, so when they take deals to their investment committee, made up of members who are not familiar with the context, they’re often rejected.
  • Founders need to get good at how they describe themselves to foreign funders, how they articulate their value prop, how much info they need to share.
  • Another challenge is that local founders might expect to build a relationship over several interactions, whereas foreign impact investors might expect to develop a relationship over one meeting, because their time is limited in country.
  • Local founders might not have international brand names on their CVs like international founders. They may still have very good CVs with experience at reputable local companies or universities, but are not known about by international investors.
  • The due diligence process can be more effective by helping local founders understand what is necessary, what information needs to be shared and when.
  • Local events can be organised to allow for more touch points between local founders and investors.
  • One of the biggest frustrations of all the local founders that OCA works with is for an investor to quickly say No, if its a No, instead of wasting their time for 3-6 months on a lengthy process process.
  • A greater understanding of the language used by investors would help the whole process. But investors should not expect Founders to be finance specialists to enter into these conversations.
  • A primary reason why investors might give a No to local founders is lack of documentation and record-keeping. Also, a simple inability to communicate with local founders effectively. Also lack of trust, that local founders might not be willing to give a share of their business to international investors.
  • Local founders should also be clear about what they mean by impact, including how it will be measured – which is much harder than financial indicators.
  • Local founders should do their due diligence on investors, who you really trust, who believes in you and your company, and what they fund.
  • Funders who fund broadly, either early stage or later stage, who’re open to any stage of business, often, in fact, do have a sweet spot.
  • Getting support can help local founders, be it a mentor, an accelerator, or a business support provider, who are plugged into the investor community.
  • Andreas has seen a shortage of qualified Chief Financial Officer type human capital, who are people who can run analyses, help businesses make decisions, or form strategies. They created Arcadia to fill this gap.

Links to resources:

Connect with guest

FIP 74: Gender Smart Investing with Suzanne Biegel

On this episode we continue our podcast takeover series with Tamsin Jones of The Boardroom Africa. Her guest today is Suzanne Biegel of Catalyst at Large. Suzanne has more than 25 years’ of experience as an entrepreneur, investor, board member, and hands-on operational manager. Her consulting, speaking, facilitation, writing and field scanning is in gender lens investing, globally and spans work with a variety of institutional actors.

On this episode you’ll learn:

  • About what it means to practice smart investing for gender impact. Suzanne provides tactics and strategies to help us improve.
  • The importance of having a culture that is built to last. Suzanne has learned through experience that there is strength in diversity.
  • If you don’t have a management team that reflects who you are representing, you might be missing something. Inherent value in having different perspectives.
  • Suzanne tells us about the benefits of analyzing your business through a gender lens.
  • If you are designing products for women and girls, wouldn’t it make sense to have them involved in the design process?
  • Pay attention to ‘hidden influencers’ along the way. These might not be your customers, entrepreneurs, or end clients, but could be the controllers, HR staff or accountants in the company. Are they benefiting from the resources and support? Who is in your supply chain?
  • Is your company paying attention to women’s needs? Transportation? Child Care? Is there a safe way for women to get to and from work?
  • From a customer standpoint, how are you speaking to your women customers? Are you being respectful? Are you hitting stereotypes? Start by asking questions.
  • The data shows that once you get product market fit right for female customers, they will be more loyal. Once you secure a female customer, they tend to be more communicative about the product to others and in essence become an ambassador. They are more likely to recommend products and more likely to buy more.
  • Be purposeful in where you use your energy. There are a lot of people on the same journey as you. Find partners and work collaboratively where possible.
  • Start with a problem that you are really trying to resolve and go towards it relentlessly.
  • There are endless events and resources worldwide. People are realizing there is power in connectivity! Visit a few of Suzanne’s resources below…

Links to Resources:

Resources for Investors:


Connect with Suzanne:

  • @womeneffect
  • @zanne2
  • #genderlensinv

FIP 72: Funding 4/4 – Breaking Down Term Sheet Terms with Nina Gené of Jasmine Social Investments

Our final episode in our 2018 fundraising series features Nina Gené of Jasmine Social Investments. The goal of this episode is to provide entrepreneurs with insights to better prepare them for negotiations with potential funders or investors. Nina joined Jasmine in 2007 with the responsibility to identify prospective investments, support partner organisations and collaborate with a network of social investors. Jasmin Social Investments funds high-performing social ventures and outstanding social entrepreneurs who are solving a basic need of the very poor.

My key takeaways from this interview were:

  • Nina believes that Jasmine, who also invest in tech startups in New Zealand, are better venture capitalists because they are philanthropists. Learnings from the social side include how to do comprehensive due diligence, how to listen to other investors and leverage others’ due diligence, and how to give advice as generalists to organisations in their portfolio.
  • On their granting side, Jasmine takes one single measure of success and they ensure they know in detail the underlying economics of it. This type of thinking in the early days should help entrepreneurs decide whether to scale through equity or grants. And this is a big learning because entrepreneurs sometimes instead of deciding, they end up guided by investors and the lure of getting funded so they grow quicker. Therefore entrepreneurs need the confidence to only go after the funding they really want.
  • Entrepreneurs shouldn’t get caught up on getting the highest valuation they can get, because a deal is about alot more than the price. It’s about the opportunity to work with great people who are also very aligned to your mission. And if you delay, you risk running out of money, which is a poor negotiation position.
  • Seed rounds are normally done on a convertible basis these days, instead of straight equity, so you’re delaying the valuation discussion. Whether an investor requires a valuation or not is a personal thing. But if you choose not to do a valuation, you might need to informally put a price on the valuation, so you protect your seed round investors from the demands of the investors in the next round.
  • Another critical question to figure out is about raising the right amount of capital and getting the timing right. Entrepreneurs try to raise the minimum amount now so they can raise a larger amount later at a higher price. But then the entrepreneur could end up in permanent fundraising mode instead of making some key hires and iterating the model. Better to take the money now and set yourself up for a longer time.
  • Make sure you keep terms simple, because the next investor will lay the rights on top of yours, and you could wind up getting too complicated. Always ask yourself: “Am I doing something in this round that will prevent someone fantastic to come in on the next round?”
  • Smart clauses to include are anti-dilution rights, which ensures existing investors are always protected by a future down round. And giving them pro-rata rights, so you allow current investors to participate in future rounds so they can maintain their percentage ownership.
  • On allowing Board seats, small and effective Boards (five seats) are essential so giving investors a seat on the advisory Board might be better, otherwise you end up with a massive board which is unproductive.
    And access rights might be avoided because you might not want to share the full stack of your accounts for every investor always, but on the other hand, one email every six months should be the minimum for all investors.
  • Other than your own learning (see resources below), entrepreneurs should talk with their peers, talk about terms and their views.

Links to resources mentioned in this interview:

Connect with Jasmine:


FIP71: Fundraising 3/4 – Getting to First Close (Part 2) with Miora Randriambeloma of Chalkboard Education

Today we continue to hear from Miora Randriambeloma, co-founder of the ed-tech startup Chalkboard Education, which is changing the culture of African education through e-learning. Chalkboard Education aims to democratize learning by providing mobile learning solutions that work on all mobile devices – even without internet connection. On Part 2 of the interview, Miora tells us about the importance of having a strong network of critical friends and how long fundraising really takes.

On this episode you’ll learn:

  • How Miora herself had to learn about equity investments, such as how do shares work, what are shareholder agreements, what are the long-term implications of equity, as well as other important vocabulary.
  • The different types of investors in West Africa, including venture capital, foundations, crowdfunding (including churches and local platforms), incubators, and business plan competitions, and the fact that there is not always a match between the capital that organizations can provide and start-up needs.
  • What issues start-ups should take into account when considering equity for acceleration programs, and what the implications of giving up 10-15% of equity to an accelerator can mean over the long-term.
  • Why she and her co-founder decided to launch their company in Ghana because of the growing tech scene, but also how they used their international networks to gain valuable connections and advice.
  • That for Chalkboard Education, raising the Seed Series took 8 months, even though they knew after 3 months that they would get the capital — and that she wouldn’t recommend accelerating the process because it was important for them to really understand what they were getting into.
  • How having strong advisors and networks was key for good decision making during the company’s first raise.



Connect with Miora:

FIP70: Fundraising 2/4 – Getting to First Close (Part 1) with Miora Randriambeloma of Chalkboard Education

Today we hear from Miora Randriambeloma, co-founder of the ed-tech startup Chalkboard Education, which is changing the culture of African education through e-learning. Chalkboard Education aims to democratize learning by providing mobile learning solutions that work on all mobile devices – even without internet connection. Miora tells us what it was like for her team to secure their first investment and how they went about choosing their investors.

On this episode you’ll learn:

  • The major shifts Miora has observed in education. She comes from a family of teachers and professors. When her parents were choosing a career, teachers and professors were a highly respected choice – now people are shying away from education. What has changed?
  • Miora tells us about her Liberal Arts background and how it has developed her critical thinking skills and ability to tell a good story. These skills were invaluable during her time as a Marketing Consultant and extremely important to her now.
  • Miora see Chalkboard Education as solving an accessibility issue – they are bringing the content of a university to individuals who may not otherwise be opportunity to pursue an education. Miora is simplifying a tech problem so that universities don’t have to invest in the tech and can focus on the content.
  • Chalkboard Education set themselves up at a university so they could get constant feedback from their users.They could work closely with those who would be using their product to troubleshoot problems in real time.
  • They tried selling the product before they had investors, figured if they could sell the product, that would be a good sign.
  • How did you know you were ready to raise money? Have a prototype or BETA.
  • Miora tells us about the value of competitions like Seed Stars. They learned a lot from other companies at these competitions. Everybody there was going through similar journeys and facing similar challenges. They created a Whatsapp group to formalize the community and get instant feedback from each other.
  • Entrepreneurship can be a lonely path! Find communities and join networks where opportunities arise.
  • Miora tells us what it means not “just look for money” but, to look for “the right money.”
    This type of investment usually comes with a mentorship relationship. Wait for investors who truly care about guiding you in a positive direction.
  • They needed support from someone who really understood their business. Miora didn’t want someone to just write a cheque and walk away.



Connect with Miora:

FIP 69: Funding 1/4 – Are you ready to raise money? With Elizabeth West of iGravity

Today we hear from Elizabeth West of iGravity on the subject of investment readiness and the first steps in fundraising as the first episode in our fundraising series.

On this episode you’ll learn:

  • What it means to be “investment ready” and what are some preparation steps that enterprises should consider taking before engaging with investors, including taking time to build an advisory network and going one step further in terms of investigations or iterations on the product or business model. She notes that more than anything else, early-stage companies need constant advice and feedback from friends and critical friends.
  • For Elizabeth, investment readiness involves four main elements: an enterprise that really knows its customer segment and the value of its product or service, understands exactly how much capital it needs, and what they want to use investment capital for.
  • Elizabeth explains that when she is trying to determining the level of a company’s investment readiness, she does ask for signs of external verification of the company’s efforts, such as the names and numbers of customers and files with all the background research that the company has done.
  • Another important item that enterprises need to better highlight is the team – at the end of the day, investors interested in early-stage companies are investing in teams, not a particular idea or product, so the team should be presented thoroughly and professionally.
  • She recommends that even for start-ups, companies should go beyond initial signs of traction and do some real investigation into their markets and customers as a way to set them apart from other enterprises meeting with investors.
  • Elizabeth also mentions the importance of personality and that entrepreneurs should know that investors talk to each other, so it is important to represent yourself well in every meeting, because impressions will be shared.
  • Elizabeth advises enterprises to work closely with the investment officer to become an advocate for your company when the deal is presented internally and not try to push too quickly for the investment to be presented for an investment decision.
  • Finally, she shares that early-stage companies should try for multiple outcomes from a meeting with an investor, including a follow-on meeting, critical feedback on the business model, or connections with other investors that may be interested.

Links to Resources:

Connect with Elizabeth: