Twenty-five years ago, it would have been tough to find angel investors considering the mere idea of contributing to the rise of nonprofits. However, standpoints have changed regarding the work of nonprofits and how the nonprofit world operates. Social entrepreneurs now find and attract investment opportunities if they have solid, well-planned, and impactful agendas to present to their soon-to-be investors.
Here’s our table of contents for all social entrepreneurs out there:
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Who are angel investors?
Angels are private investors who, during their active working lifetime, have gained wealth and experience. They are ready to invest in small and medium enterprises in order to help young entrepreneurs and to make proﬁts for themselves.Veland Ramadani
South East European University in Tetovo, Macedonia
Angel investors are wealthy, passionate individuals who provide funds, knowledge, training, and networks to early-stage and start-up business enterprises. They mentor and support young entrepreneurs to develop their emerging businesses by playing a vital role in financing their small and medium-sized enterprises.
After business angels have had successful careers (usually the case) and gained wealth and experience, they invest in new innovative ideas to help young entrepreneurs and profit simultaneously.
Additionally, angel investors prefer to remain anonymous. For this reason, many countries have established business angel syndicates and networks to facilitate the process of matching entrepreneurs and business angels.
What are their motives for investing?
As an entrepreneur, you need to know the answer to this to plan right. Angel investors can have different reasons for supporting new, innovative, and risky ideas; for example, expectations for significant returns and profits, giving back to the community, and knowledge transfer to the young entrepreneurs. Other business angels invest only to start a new adventure, have fun, and enjoy the game.
Angel investors for nonprofits?
I agree. This was not very common before. Nonprofits did not seem like an attractive field for angel investors. However, things have changed with a twist in both the intentions of angel investors and how nonprofits plan their businesses.
The concepts of Venture Philanthropy and Impact Investment have drawn the attention of investors to nonprofits. According to these, both approaches aim to create revenues and financial returns (not always the case) while contributing to the welfare of others and making the world a better place.
Do you want to attract angel investors to your nonprofit?
Angels invest where they see passion, commitment, and outstanding people.Dr. Tom McKaskill, An Introduction to Angel Investing
Before you pitch your idea to the next angel business investor, you must ensure that your business plan is solid and transparent. Remember that you are attracting investors here to build your non-profit; you are not looking for a charity fund. You are good to go if you have firm answers to the below.
Is your solution innovative enough?
I believe it’s infrequent to find “new” challenges and problems around us that have not been discovered before. The world is full of problems and social causes that nonprofits can work to highlight. However, investors and donors are eager and more interested to hear about our new innovative solutions to the challenges and problems that have long existed. Your knockout idea is what makes investors ready to join in your adventure. Remember that being innovative does not mean being impractical. A new revolutionary approach to changing societal patterns and attitudes stands out among other ideas.
Are you thinking of “sustainability”?
If you think of short-term and service-based interventions, you will probably not be very welcome. It’d be essential to highlight the sustainability measures you plan to apply to all your programs to ensure that the impact you are creating on societal problems will last after the investment.
Financial and programmatic sustainability measures need to be included in your business plan.
Can you explain to your next investor how you plan to continue working and doing good to others if your funding sources vanish for any reason? Is self-funding on your list?
Can you also explain how your programs will create lasting benefits for your target?
You can also check out this for some key steps to building a sustainable nonprofit organization.
How can investors measure the impact?
Some emerging nonprofit businesses sometimes miss the importance of an indicators table. Similar to any other type of business, nonprofits should have a clear, logical/results framework with clear objectives, outcomes, and assumptions. Accordingly, each objective should have KPIs with means of verification to make it easier for potential investors to understand how the impact will be measured and witnessed.
A robust Monitoring and Evaluation department (M&E for short) in nonprofit organizations is vital for following up on progress and achievements.
In the same way, you should be able to know:
- The impact of your work to date
(using both qualitative and quantitative measures)
- The extent to which you are solving the main social problem and issue
- The methods followed to address the root causes of the social problem
Your investor can be right around the corner.
Angel investors invest locally and in ideas, they feel connected to and passionate about. They look for enterprises they can frequently visit to check the status of their investment and see how things are progressing. You will also need to know your area’s history and the business investors’ profiles there. You can learn that a potential investor is keen on the social causes you are addressing and have similar intentions that you can discuss together.
Remember, entrepreneurs looking to attract angel investment opportunities are involved in a lot of legwork.
Angel investors are adventure-seekers and risk-takers. They look for bold leaders passionate about the social causes they aim to address. They also look for transparent, accountable, and responsible partners to work alongside them. It is essential to show potential investors that you have the entrepreneurial qualities they are looking for in a nonprofit leader.
To put it another way, potential investors will probably consider your:
- Dedication: how dedicated are you to the cause, and how are you linked to the social problem?
- Trustworthiness: Can they trust you to bring the social change strategies you claim to implement?
- Boldness: Are you willing to go the extra mile to make an impact?
Examples of big money to nonprofits
Ashoka is the world’s largest community of leading social entrepreneurs (around 4000) across 90 countries. The organization identifies and supports social entrepreneurs (people, not projects) with ideas for social change. Through their unique fellowship program, Ashoka searches the globe for innovative changemakers bringing significant positive impact to their community. Corporate partners, foundations, and high-net-worth philanthropists fund Ashoka’s programs. Additionally, much of the funding comes from existing fellows after their businesses flourished to support other systems-changing ideas. Some of the best-known Ashoka fellows today are:
- Kailash Satyarthi, 2014 Nobel Peace Prize Laureate and anti-child labor movement leader
- Muhammad Yunus, 2006 Nobel Peace Prize Laureate and Founder of Grameen Bank
- Paul Rice, Founder of Fairtrade International
Also, New Profit, a venture philanthropy organization founded in 1998, raises money from wealthy individuals and family foundations. Following this, the organization directs the funding to innovative nonprofits impacting low-income Americans. Last month, New Profit announced that they had invested up to $1 million of unrestricted financing in six nonprofit organizations working on education and transformational economic projects in America.
That was our pager on angel investors for nonprofits
Putting everything together, if you believe you are a social entrepreneur driven by a cause and striving to make an impact in the lives of others and the community you live in, you will find support from the right angel investors. All you need to do is to have a solid plan with innovative, sustainable, and impactful action points to pitch. Equally important, your profile and research around the block are essential to get you to your potential investors.
Before talking to the investor, I recommend creating a storyboard. This will help.
Meet The Author Of This Article
I’m Jenny Ayman, a project manager in the development field with specific knowledge and experience in capacity building and entrepreneurship programs. I aspire to transfer the hands-on experience I gain in my professional career through writing.
Also, if you need help planning your business, I recommend checking out some of our freelancer’s business plans or pitch decks!