Social Entrepreneurship Challenge Good Morning!! The Aaron L. Levitt Social Entrepreneurship Challenge “Be a Changemaker” Workshop 3: March 5, 2016

Welcome to Today’s Session Funding and Financing Workshop March 2013 9/18/2018 Welcome to Today’s Session Agenda: Reporting Out: Each person/team is to present a succinct explanation of their social venture and logic model (maximum of five minutes per venture!!) Funding, Financing, and New Enterprise Development Revenues, Revenue Models, and Funding Questions and Discussion Dave Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Funding and Financing Workshop March 2013 9/18/2018 Reporting Out Each project has a maximum of five minutes to present a succinct explanation of the social venture and the key elements of its underlying logic model. Dave Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Funding, Financing, and Venture Development

Nonprofit Resource Considerations Funding and Financing Workshop March 2013 9/18/2018 Nonprofit Resource Considerations Consistent with Strategy Program Stability Capital Structure Restriction Transaction Cost Scott Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Understanding Resources Funding and Financing Workshop March 2013 9/18/2018 Understanding Resources Revenue Capital Scott Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Funding and Financing Workshop March 2013 9/18/2018 Scott Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

A Different Perspective Funding and Financing Workshop March 2013 9/18/2018 A Different Perspective Revenue Type Beneficiary Restriction Fee-for-service income Individual Tied to service Foundation /Philanthropy dollars Collective to groups Temp Restricted/Unrestricted Government/Philanthropy dollars Society wide Corporation dollars Corporations and nonprofits Unrestricted From Dennis Young, Financing Nonprofits. Scott Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Funding and Financing Workshop March 2013 9/18/2018 Capital Facilities Working Permanent Social??? Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Means of Capital Grants Individuals Debt Tax Credits Equity ??? Angel’s Crowdsourcing Debt Loans Bonds Tax Credits Equity ???

Assessing Your Strategy Funding and Financing Workshop March 2013 9/18/2018 Assessing Your Strategy Budget costs and revenues Record new and lapsed donors Calculate ROI Scott Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Funding and Financing Workshop March 2013 9/18/2018 A Quick Question What do you envision will be the source(s) of financial support for your venture? Scott Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Funding and Financing Workshop March 2013 9/18/2018 Capital Structure The nature of the venture’s financial Assets Liabilities Net assets Need to understand in terms of: Adequacy and alignment of assets you have and what you will need Diversity and Liquidity (esp. restriction and fixedness) Risk that is inherent in the capital structure you design Trends and changes that may alter the above Dave Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Where Social Entrepreneurship Tends to Reside Traditional Nonprofit Nonprofit with Income-Generating Activities Social Enterprise Socially Responsible Business Corporation Practicing Social Responsibility Traditional For-Profit Mission Motive Stakeholders Accountability Income Reinvested in Social Programs or Operational Costs Profit-Making Motive Shareholder Accountability Profit Redistributed to Shareholders David Renz: The Midwest Center for Nonprofit Leadership at UMKC

Form Should Follow… Environmental conditions Transaction Costs Consumer behavior Consumer potential Market share Transaction Costs Capital Considerations Markets Capital Structure

The Opportunity Creation Process (CASE Model: Nash 2010) Sparking Social Entrepreneurship The Opportunity Creation Process (CASE Model: Nash 2010) Opportunity Identification & Opportunity Creation 2017: David Renz: PA 5529 CSR & Social Entrepreneurship

Nonprofit Resource Considerations Restriction Unintended Consequence Output Value Cost-Benefit Social Norms Stability Consistent with Strategy/Capacity

Scale and Capital: A VC Model New Venture Needs Human Capital Strategy Capacity Support Scale VCs provide support in addition to capital

Nonprofit vs For Profit Philanthropy Restrictions Unsupported Programmatic Fund start-up VC Unrestricted Capacity support Scaling Fund > 3 years

Financing Solutions Strategy based Consistent with capital structure Considerate of sustainability goals Innovative – Beware of transaction cost

Some Key Revenue Model Considerations Funding and Financing Workshop March 2013 9/18/2018 Some Key Revenue Model Considerations Degree of Financial Independence (especially, associated with source) Capital Structure Nature of Assets Funding Dynamics How Resources Come In (Flow, Timing, etc.) Dave Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Funding and Financing Workshop March 2013 9/18/2018 Nature of Assets Fixity of Asset Type Level of Restriction Low Medium High Unrestricted Cash Building Temporary Restricted Permanently Restricted Endowment Dave Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Funding and Financing Workshop March 2013 9/18/2018 Funding Dynamics Reliability: Extent to which revenue source is consistent and predictable year to year. Range from Low to Medium to High Autonomy: Degree of restriction and/or enforceable conditions on the use of funds Dave Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Reliability and Autonomy Funding and Financing Workshop March 2013 9/18/2018 Reliability and Autonomy Level of Autonomy Level of Reliability Low Medium High One-year government project grant Unrestricted Bequest Restricted endowment Small regular contributions Dave Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Characteristics of Revenue Source Options Funding and Financing Workshop March 2013 9/18/2018 Characteristics of Revenue Source Options Who Pays? How The Form of Revenue Comes In? How Reliable? How Autonomous? Other Characteristics (Pro and Con) Financial Independence Impact on Capital Structure Dave Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Your Venture’s Revenue Mix Funding and Financing Workshop March 2013 9/18/2018 Your Venture’s Revenue Mix Please take about ten minutes to identify the source(s) of funding and financing that your venture will need to rely on at its beginning stages of development and rate it/them on the worksheet. Dave Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership