beyond fundraising

Sponsored by:

Beyond Fundraising

Drew Tulchin November 20, 2013

Twitter Hashtag - #4Glearn

Part

Of:

Sponsored by:

Advising nonprofits in:

• Strategy

• Planning

• Organizational Development

www.synthesispartnership.com

(617) 969-1881

info@synthesispartnership.com

INTEGRATED PLANNING

Part

Of:

Sponsored by: Part

Of:

Coming Soon

Sponsored by:

Today’s Speakers

Drew Tulchin Managing Partner

Social Enterprise Associates

Jamie Maloney Community Developer, 4Good

Founding Director of Nonprofit Webinars and Host:

Sam Frank, Synthesis Partnership

Part

Of:

Webinar Beyond Fundraising

Drew Tulchin Managing Partner

Social Enterprise Associates

4Good Nov. 20, 2013

Training Objectives

• How to leverage new capital, manage cash flow

• How to work with vendors, bankers and other providers of capital

• How to get more money from sources you already have

• Have fun, learn and share

About Social Enterprise Associates

Drew Tulchin, Managing Partner, MBA • Written >100 business / strategic plans

• Efforts raised >$100 mil. in capital

• Biz plan winner, Global Social Venture Comp; raised $1.2 mil. in social investment

• Judge in national social enterprise & social business competitions

Consulting firm - Registered ‘B Corp’ Network of experts offering consulting & capital raising to triple bottom line efforts- for people, profits, planet. Registered ‘B Corporation’, recognized: 2011 'One of the Best for the World' small businesses 2012 Honoree NM Sustainable Business of the Year

Consulting Examples

SW Native Green Loan Fund: Structured term sheet that recruited $1 million in impact investment

Solar Energy Loan Fund: Wrote business plan, financial projections and located investors that led to $400 K in funding

Restore the Earth Foundation: Developed investor pitch that quantified social value of 10,000 acre wetland reforestation

Sea to Table: Coached entrepreneurs and orchestrated $1 million funding package from multiple sources

World Food Program: Devised five year plan for $400 million private sector engagement strategy

Nemours Health Services: Assessed impact, measured SROI, cost / benefit, to diversify funding; create new funding proposal

Resources

Free publications: www.socialenterprise.net

Topic Examples:

• Surfing the Crowdfunding Wave

• Nonprofit Earned Income Strategies

• New Sources of Capital

• Integrating Social and Environmental Metrics

Getting Started

Group Brainstorm List financial vehicles/channels

open to NGOs, small businesses

Framework &

Structure

12

Definition of Terms

• Measures degree which operating income covers adjusted operating exp

Financial Self-Sufficiency

• When operating income is greater than adjusted operating expenses

Project Profitability

• Cash or assets used to generate income

Capital

• Present needs met without compromising ability for needs met in future

Sustainability

• Compensation from participation in a business, including wages, salary, tips, commissions, and bonuses

Earned Income

More Terms

Risk capital The wealth that a person allocates for investment in new or speculative securities with high risk.

Loan

The act of giving money, property or other material goods to a another party in exchange for future repayment of the principal amount along with interest or other finance charges.

Savings

The amount left over when the cost of a person's consumer expenditure is subtracted from the amount of disposable income that he or she earns in a given period of time.

Venture capital

The money provided by investors to startup firms and small businesses with perceived, long-term growth potential. It typically entails high risk for the investor, but it has the potential for above-average returns.

& Finally – Terms Socially Responsible Investment (SRI)

An investment strategy which integrates social, environmental and/or ethical criteria into the processes of analysis, selection, and choice of investment except for the financial criteria.

Socially motivated capital

The money provided by investors to fund businesses or programs that actively achieve social or environmental impact.

Mission related investment

The investment of a foundation's endowment assets in

opportunities that align with its program goals.

Triple bottom line

A business oriented solution generates returns of financial performance, social impact, and environmental sustainability entrepreneurs, their organizations, and the industries in which they operate. And, now, the Quadruple Bottom Line – the 4th Dimension.

Quadruple Bottom Line

Source: www.npsp.sa.gov.au

Why go Beyond Fundraising?

Volume of Capital

Philanthropy

ANNUAL giving of all US Foundations

Investment

DAILY transactions of the financial markets (“Wall St.”)

$ 30 Billion

$ 1 Trillion

Which pot of money would you rather be drawing from?

Benefits of Beyond Fundraising

Do more with less Less government $$ Twice as many NGOs as 10 years ago Don’t leave money on the table Build self-sufficiency Be the dog or the tail?

Continuum of Financial / Social Expectations

High Low Risk / Return Expectations

High

Social Value

Creation Expectations

Philanthropy donation

No expectation of return

PRI from a foundation

~0-2% year interest

Socially responsible

investors debt • Fewer obligations

• ~3-5% in dollars or local currency (8-10%)

Banks debt

~10% year interest

Venture capitalist

• Ownership expect • 20% returns a year in equity

Places to Learn More

Best sources we like

Investopedia.com Dictionary: a Forbes digital company provides a comprehensive financial dictionary/glossary

The Dictionary of Sustainable Management: an online dictionary constructed by the Presidio Graduate School defines sustainability and business-related terms

Glossary of Business Terms from Skoll Foundation: a glossary of business terms relevant to social entrepreneurship

Glossary from Nonprofit Good Practice Guide: a glossary of terms and expressions that are commonly utilized in the nonprofit sector

Income Statement

Income Statement

From Social Enterprise Associates Tip Sheet #12:

Nonprofit Earned Income Strategies: Where to Start www.socialenterprise.net/assets/files/TipSheet12EarnedIncomeStrategies.pdf

• Is social enterprise a fit for your organization?

• What are steps in decision-making?

• Does this solution match the problem?

Incremental Steps

Step 1: Internal Organizational Assessment

•Does organization have sufficient staff capacity?

•Are there strong internal systems for new effort?

•Does organization have sufficient knowledge, expertise in this area?

•Is there sufficient cash flow to take on new projects?

Incremental Steps

Step 2: Feasibility Study

•What are the organization’s goals for this undertaking in terms of money and mission?

•What are the costs and revenues associated with this new project?

•How operational will the organization do this ‘new thing’?

•What organizational changes and adjustments need to be made?

Incremental Steps

Step 3: Market Analysis

•How big is this opportunity?

•Who else is doing this?

•Who are the customers and what are they doing now to satisfy this ‘need’?

•Is there space for us?

Incremental Steps

Step 4: Business Plan

•What is purpose of this social enterprise?

•What is value proposition (special sauce)?

•How will it make money?

•Who is the management team?

Incremental Steps

Step 5: Financial Projecting

•How much money is needed in year 1, 3 and 5?

•What type of financing is appropriate: donations, equity, debt, partnerships, contracts?

•What are the key sources of revenue & major costs?

•When does this project break-even, if ever?

•What happens if expenses are 50% higher and/or revenues 50% lower?

Incremental Steps

Step 6: Fundraising & Investment

•Who are targeted ‘investors’?

•What is value proposition for funders & investors?

•Why should they choose this project?

•How much ‘in the bank’ is needed to begin ops?

The Capital Pie Where you are now your existing universe • How do you want to diversify (split the pie)? • How do you want to grow the pie? • What’s needed to be stable, increase revenue & manage cost?

Brainstorming List NGO Earned Income Options

Brainstorming List NGO Earned Income Options

• Facility revenue

• Program service fees

• Events

• Grants

• Marketing partnerships

• Sponsorships

• Membership fees

• Book publication

• Earned interest

• Capital gains

• Bartering

• Product sales

• Consulting contract / service fee

• Training, expertise

• Honorariums, speakers

• Licensing

• Supporting organizations

• Advertising

• Awards, competitions

• Teaching

• Affiliate referrals – i.e. those dxmn bracelets

Example Projects Greyston Bakery http://greyston.com/programs/

“We don’t hire people to bake brownies, we bake

brownies to hire people.”

Cash Flow

Internal Options for Capital

• Accounts Receivable Money owed to you. High net sales to A/R ratio = faster collections

• Accounts Payable Money you owe. Increasing purchases to average A/P amount = faster payments

• Leverage Existing Assets Money earns money

From Social Enterprise Associates’ “Finding Money for Your Business: Often Overlooked Options”

www.socialenterprise.net/assets/files/InvestorsCircle.pdf

Cash Turnover

ASK & TRY Can you get paid before you do the work

Offer incentives for invoices paid as soon as possible Negotiate w/ vendors to pay them later, slower

Difference b/t your A/R and A/P Keep your cash the longest

How?

Crowdfunding

Are you a good fit?

1. Benefit from small amounts of capital up to $15,000 2. Have product pre-sales, particularly to finance making something 3. Early stage specific project 4. Willing to do own marketing; have outlet to reach people: facebook, e-newsletter, etc. 5. Lack an existing payment processing mechanism online

37

Crowdfunding Websites

More than 4 million people pledged $734 million since 2009 launch Average contribution $71, most common contribution $25

Successful campaigns average 40 days to fund Average contribution $86, most common contribution $25 Common perception better for smaller projects

3rd largest crowdfunding site Campaigns often focus on individuals: education, medical bills

38

Crowdfunding Websites

Tell a story; stand out. In 2012, Indiegogo campaigns with videos raised 114% more than those without. Cultivate donors & share. In 2012, 14% of Indiegogo campaigns had a single contributor refer more people to the campaign than the campaign owner Most give small amounts. 85% of backers give less than $50 Give something meaningful. Make the perk something people want: gift, memento, product

Who’s done crowdfunding?

Kickstarter’s most funded projects:

Food: Windowfarms

Fashion: 10-Year Hoodie

Technology: Affordable 3-D Printer

Example Projects Espanola Community Market is coop in NM (and a client). Open to general public; features foods made or grown locally Gofundme campaign to raise money for staff, longer hours, more inventory

Kickstarter success: Lucky Penny Farm raised

funds for equipment to expand product offerings. Most gave $65 to $250. Project totaled $11,850 (above $10,700 goal).

For… Backers Received:

$15 A Facebook thank you

$25 Bar of goat milk soap

$65 Luck Penny t-shirt

$100 New Product Sample

$250 Plate of goat milk cheeses

$1000 Farm outing

$2500 Cheese pairing with 10 guests

$3500 Presentation by owner

Direct Public Offerings

“Crowdfunding meets fundraising” Laws vary by state

Anyone can invest

Best for small-to-medium sized companies & CO-Ops

Made to unlimited # of accredited AND unaccredited investors

Directly to investors (no middleman)

DPO Examples

Thanks to: Cutting Edge Capital

Balance Sheet

Balance Sheet

Assets = Liabilities + Equity

Build credit over time

Leverage

Put what you own to work

Treasury Management

Alternative Sources of Capital

• Community partners overlooked as donors

• ‘Upselling,’ ‘cross-selling’ existing relationships

• Fee for service: training, TA, consulting

• Individual donors: high net worth, community wide, program alumni

• Build relationships over time

• In-kind value

• Impact, social, faith-based investors; foundations’ PRIs/MRIs

• Off balance sheet transactions

• Crowdfunding

Practice what you preach to clients - build assets:

How to Work With Banks?

1. Understand what financiers’ value and how they make decisions

2. Establish long-term networks

3. Build credit history, credit score over time

4. Formalize and report on the organization

5. Have back-up plans (contingencies)

Financing 2 Cents

Foundational thoughts: • YOU must be credit-worthy • Organization needs to document why worth an investment • If you aren’t willing to put skin in game, why should an investor? • Be realistic, know market based risk costs Options: • Go to funders earlier than later, when you have $ • Self finance: bootstrap, leverage assets. Watch credit card debt • Friends, Family, Fools – put it in writing with real docs • Peer to Peer Lending – cool new options but caveat emptor

The 5 C's of Credit

49

A complete & attractive

loan package

Capacity

Capital

Collateral

Conditions

Character

The 5 C's of Credit - Defined

50

Most important by bank to consider loan application Personal credit score diagnose how well you manage your finances Financial statements to evaluate financial health of your entity

For a bank to know how much invested in your entity Written & verbal credit information sharing reflects level of

responsibility of the organization and its leaders

Often necessary to secure debt Independent appraisal can estimate value of collateral U.S. Small Business Association Guarantees increase opportunity

Capacity

Capital

Collateral (or guarantee)

I

II

III

Reasons you are asking for a loan Written explanation of conditions state how you will use money

Most subjective factor Provide biographical summaries of key managers and advisors Get to know your lenders

Conditions

Character

IV

V

Treasury Management

Defined: Administer financial assets and holdings Goal: Optimize liquidity, make sound investments, manage excess cash, and reduce financial risks Use $ to make $ (even when interest rates low): 1. Talk to your banker. Know by NAME 2. Use your cash to maximize $ 3. Leverage your assets when you have them (i.e. line of credit)

Leverage Existing Assets

Peer-to-Peer Lending

Ebay, for debt

Borrowers request loans, amounts vary by site, range $2 K to $25 K

Lenders invest as little as $25

Facilitated by website for fees

This is DEBT, it must be PAID BACK

Peer-to-Peer Lending • Loans funded to date: $2.2 billion

• Interest paid to investors to date: $192 million

• 1,880,000 member lenders

• $583,000,000 in personal loans funded

• Direct loans

• First loan max $5,000 (up to $50 K)

• 0% interest, repay w/in 24 months

• Share your story

Resources

IdeaEncore

Social Venture Network

Global Impact Investing Network (GIIN)

Aspen Network of Development Entrepreneurs

Impact Investment Exchange Asia

SoCap, PRI Makers, SRI in the Rockies, HUB Ventures

Let’s Sum Up

Recap, Review Tips & Tricks

Resources: William James Foundation, Skoll Social Edge, SoCap, BID Network, Soc. Ent. Alliance, competitions, SSIR, ClearlySo & more

Free publications: www.socialenterprise.net

Questions? Answers?

Drew Tulchin

Social Enterprise Associates www.socialenterprise.net

drew@socialenterprise.net

Thank you!