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Social Entrepreneurs Need to Make Money Too

June 13, 2012
URL: http://www.entrepreneur.com/article/228795

If you think starting a successful social venture is simply a matter of finding a way to aid a social cause, think again. Increasingly, social entrepreneurs are required to show how they intend to sustainably carry out that mission. In other words, they need money.

The hallmark of successful social ventures has always been resource magnetism, says David Hodgson, co-founder of Echoing Green, a New York-based nonprofit charged with finding and supporting social entrepreneurs. But increasingly, one of those resources -- being able to earn revenue -- has become even more vital.

"It speaks to the ability of these organizations to ultimately attract capital, which is usually critical to scaling up and having the maximum social impact," says Hodgson. Impact investors often back companies and organizations that don't rely solely on philanthropic support but can also attract financial capital the same way for-profit businesses can, he adds.,/

Even as social-purpose businesses and B Corps have continued to attract adherents for this reason, the emphasis on revenues has even driven some nonprofits into business, says Lara Galinksy, senior vice president of Echoing Green. "Even a nonprofit bakery will have an earned-income stream of selling bread," she says. "But it's set up as a 501(c)3" -- that is, a U.S. tax-exempt organization.

So what does this mean for all of the social-venture hopefuls? If you haven't already begun exploring revenue models, you'd better get cracking. Here are three additional tips for making a social venture more appealing to investors:







What is the hardest part of starting up a social venture? Leave a comment and let us know.