Giving Compass’ Take:
• Pi Investment’s Aner Ben-Ami writes for Transform Finance and argues for a more versatile method for financing social enterprise projects, specifically with “structured exits” (a path to liquidity embedded into deal terms).
• Because some of the solution proposes are still emerging, impact investors need to ask the proper questions. What are the tax implications? What’s the best way to raise follow-on rounds of capital?
• In this article, pathways for social investors to scale impact is discussed.
The social enterprise community is held up as an innovative ecosystem of investors and entrepreneurs, designing businesses models as diverse as the challenges they address — from poverty in the global south, to recidivism and urban farming in the US.
How are these businesses being funded? Oddly enough, the vast majority are raising capital using the standard equity (or convertible note) term sheets that are designed to support fast-growing tech start-ups. If a company is building a water distribution system in Kenya or local food hub in North Carolina, why would they be funded using the same investment terms that were used to fund Snapchat, Instagram or Uber? When was the last time you saw an artisan sourcing project IPO or get acquired by Google?
To counter this “one size fits all” approach, there is a growing group of investors and entrepreneurs that are working to develop and apply deal structures that support the growth trajectory of the business, while providing realistic returns to investors.
Read the full article about innovating finance for social enterprises by Aner Ben-Ami at Transform Finance.
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