I just came across this article by serial social entrepreneur Liam Black in Pioneers Post - it makes interesting reading for those of us who have built a social enterprise and holds some good pearls of wisdom!
Ever wondered what it's like to lead a social enterprise that scales with investment? Read on...
It starts with a passion to change the world, to put your ding in the universe.
Your mother had dementia and you were shocked by the terrible lack of support (Unforgettable). You’re sickened by the homelessness in your city (Homes For Good). You want to give troubled young people a chance to shine (Latimer). You are passionate about tackling climate change (Green Running). You want to help poor families out of debt (Fair For You).
You set up a business. It’s bloody hard work. You get a grant which barely covers your costs. Your mum and dad stump up some cash. You beg, borrow and steal to keep it going. You employ a few people and lie awake at night worrying about the overdraft. You hear “No” a lot from funders, the bank, so called professionals in your sector, politicians. It’s tougher than you ever thought it would be but you hang on, sometimes by your fingertips.
A couple of years pass and you win your first social entrepreneur award. It feels great. You get included in lists of people changing the world but you feel uneasy because you know all too well about the gap between the hype and reality. Best not talk about that too much. Your Twitter following starts to grow.
You have a real business but you're stuck. Incremental growth just won't get you there and you have no assets to borrow against. You are still being pulled all over the place and you know you are too close to the day to day operations and that you’re not really leading, just coping. You are still passionate about your mission and really believe that you can scale this thing.
You start hearing about impact investors and you get in touch with one to sound them out. Turns out they’re not the patronizing City suits you feared but are as passionate as you about changing the world through business. And they have lots of money.
The due diligence process starts and the questions don’t stop as your business model is interrogated relentlessly. For the first time you're asked detailed questions about your social impact and you tell lots of stories. But you know, as you face their skepticism, that winging it won't cut it any longer. You get told your governance structures are weak and your business systems lack resilience. You know this is true but it is hard to hear.
This process goes on longer than expected, you feel impatient and a growing resentment at the time this is all taking. You completely understand why some people drop out at this point. But you stick at it – you’re great at sticking at it.
The date is set when you’ll meet the full investment committee. It’s intimidating but there's £1 million at stake so you expect a grilling. It goes well and they even laughed at your jokes. There is plenty of nodding and note taking.
Jesus, you think, more work? Don't they realise how demanding the day job is?
A couple of hours later you get the call. You've got it! Thumbs up! The million quid is agreed. In principle. But they want more of your company for that investment and they want more work on the social impact. Jesus, you think, more work? Don't they realise how demanding the day job is?
Six weeks later the deal is done. Champagne! You're ecstatic and it all suddenly seems worth it. You can go out and employ new talent with the skills you really need and your enterprise can breath for the first time in ages as the cash flow pressure eases.
The euphoria doesn’t last long. Your first board meeting with your investors at the table is actually pretty difficult. The reality that they own a chunk of your business and have strong points of view about how it should be run and led – well, that really takes some getting used to. They want to spend more time on the numbers and the profit and loss statement – and they really know what they’re talking about – and there seems less time for the stuff that excites you.
Results for the quarter are in: not great and below budget. You are not looking forward to the next board meeting. Your new chair – her appointment a non-negotiable part of the deal – asks why you were out of the business for two days at a social entrepreneur event in Europe (where you gave a very well received talk about the success of your business) when the number one job is getting out there and selling.
You tell your mentor you feel exposed and that you miss the old days when it was just you and a handful of true believers battling the odds. But now with so much at stake and with a board holding you to account it’s not so much fun.
You knew that impact investment would change the culture but you didn’t expect the biggest impact to be on you. For the first time you’re being made to think hard about the kind of leader you really are and whether you’ve got what it takes to rapidly professionalise this social enterprise. Can you learn to thrive in this new reality, which is every bit as hard – maybe harder – as the uncertainty and chaos of your start up years.
But you know that without new partners and their money your social entrepreneur dreams will stay small and marginal. If changing the world was easy everyone would be doing it wouldn’t they?