Social Finance Not Ready For Primetime

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By DARRELL KOPKE | PIVOT Magazine Contributor

I live in the chasm between activism and capitalism. On one day I may be attending a social ventures conference like the Social Ventures Institute or a BCorporation event; on the next day I may be in meetings with investment bankers and traditional financiers. Trust me when I tell you that despite the emergence of social finance, the chasm is wide and deep.

Let’s get one thing straight. I’m not an advocate for financing a social venture only because its corporate mandate is good for the world. I am of the mind a sustainable company should be a solid business AND a committed social venture. If your business model, marketing plan, and team are weak, you shouldn’t get funding. Period. No matter how great your social impact.

Having played a role in raising over $20 million for social impact corporations in the last 3 years, I can openly say social finance is a fledgling prospect. Investors are not lining up to fund social causes. They want a return, and nobody can blame them. Activists, therefore, often have to rely upon traditional for-profit only investors to finance their social ventures.

Part of the divide is the language of finance. So many activists are in conflict with running a for-profit business. Historically it has been non-profits and charities that leave positive societal legacies. For-profit corporations have until recently been the exploiters.

What we know now is what’s good for the world is good for business. By focusing on social impact, social responsibility, and conscious capitalism, corporations are outperforming old school for-profit only corporations on financial metrics. You make more money by being good. Late to the game, though, is social finance.

What does that mean for you activists? Being good for the world is not good enough, yet. You will need to prove your corporation can handle itself pitted up against the “I don’t care about the world” crowd. If you don’t have a great handle on the numbers side of your business, better not knock on too many investors’ doors. Get up to speed and get a handle on your finances.

There will come a time when social investors will be a huge industry. Until then, better get out your calculator.