Lecture 7

Question 1

Non-profit

Answer 1

No earned income (social mission and donation)

Question 2

Hybrid non-profit

Answer 2

Mixed earning model (earned income, donation, social mission)

Question 3

Yunus Social Business

Answer 3

Re-investing dividends (social mission, earned income)

Question 4

Social Enterprise

Answer 4

Dividend distribution (social mission, earned income, dividend)

Question 5

Socially responsible business

Answer 5

Focus on the TBL (dividend, earned income, partly social mission)

Question 6

Traditional business

Answer 6

Profit maximising (dividend, earned income)

Question 7

Avoid dependencies by…

Answer 7

having as many sources of funding as possible

Question 8

Equity- third parties holding shares of your company, Raised via…

Answer 8

• Founder, Friends and Family
• Business Angels, Private investors
• Venture Philanthropy Funds
• Social Capital Markets

Question 9

Benefits of Equity…

Answer 9

• Longterm engagement of investors
• Coupled to performance
• No earmarking
• Non-financial support (know-how network)
• Better cash position

Question 10

Downsides of Equity…

Answer 10

• Investors have a say!
• No tax benefits
• Due diligence and reporting needs

Question 11

Debt financing is when somebody lends money for a yield, the versions are

Answer 11

• Loan
• Balloon loan
• Micro credit
• Leasing

Question 12

Benefits of debt financing

Answer 12

• No release of shares
• No agency expressing opinion
• Scope for design regarding duration, repayment etc.

Question 13

Downsides of debt financing

Answer 13

• Only small amounts due to collateral
• Bank do not understand TBL business plan
• Reputational risk

Question 14

Donating finance is when the X gives money for philanthropic causes, versions are…

Answer 14

• Classical donation
• Transitory donation
• Recoverable grants

Question 15

Benefits of donating finance

Answer 15

• Not refundable, no claims
• Definitive money transfer
• Risk mitigation

Question 16

Downsides of donating finance

Answer 16

• High uncovered costs
• Might be bidding via appropriation/earmarking
• Timing?
• Net value

Question 17

There is a market for social finance…

Answer 17

• Social banks
• Social investment
• Social stock exchanges
• Social venture capital funds
• Donor consulting

Question 18

Think from an investors’ perceptive

Answer 18

Goals, needs, rights, their stakeholders, tax, pride, psychology, public relations, strategic fit… and EXIT

Question 19

Think from a social venture perspective

Answer 19

Timing, opportunity costs, independence, impact, values, succession, risks, growth, leadership and satisfaction

Question 20

What is impact investment?

Answer 20

Generally a smart, financial, and direct investment (equity, loan, mezzanine) into a private company. It can be both for or not-for-profit.

Question 21

What does an impact investor expect?

Answer 21

To gain return on impact AND financial investment with no loss to the initial sum.

Question 22

How to GO into the market?

Answer 22

• Impact investing and social finance are not just another asset class
• Smoothly test, e.g. get involved in some Crowdfunding
• Finance an organisation NOT just project
• Do equity deals via an intermediary
• Consider collective impact strategies
• Impact driven investment strategy ideally consist of a mix of early stage philanthropic start-up investment and later stage impact investment e.g. via a fund