Giving Compass' Take:

• The author relays advice when pivoting to becoming a social enterprise that needs to be show impact but also benefits stakeholders. 

• Funding is a huge challenge for start-ups and can be the reason the majority do not last more than five years. What innovative funding mechanisms are available to start-ups?  

• Read the recommendations for social entrepreneurs wanting to make an impact. 

Our university partner had just dealt us a crushing blow: It canceled the agreement, citing internal politics. Our board of directors was discouraging us from launching without a university partner and was pressing us to find a different university when a fellow “edupreneur” told us: “Given how slowly universities move, staking everything on academic partners is not safe—in fact, it’s the riskiest strategy of all!”

As the recent article “Time to Reboot Grantmaking” argues, “Nonprofits’ organizational resilience is based on financial health.” With the hope of helping other social enterprises navigate decreasing nonprofit funding and strong pressure from donors to prioritize the number of people served over the depth of impact on those people, here are six lessons we learned about starting and building a financially sustainable organization in emerging markets.

  1. Keep your day job as long as possible. It is back breaking and heart wrenching to start a new organization, especially without significant outside funding. The odds are on failure.
  2. Prototype your business model as much as your product. The importance of prototyping is enshrined in innovative thinking. But it usually just means testing your product or service.
  3. Your work begins at “no.”  In the beginning, we applied to all the major fellowships and start-up funders in social entrepreneurship. Everyone said no. These rejections made us more determined to never depend on outside funding for our work.
  4. Scrimp and save until you build a reserve. Our culture is consciously lean; our team is always looking for creative ways to leverage resources without spending too much.
  5. Earn some money You need to save enough to be able to walk away from a bad deal.
  6. Financial sustainability is a team sport. Our team always rallied in response, every staff member supporting our marketing efforts. Although stressful, these red-zone moments brought us together and showed that it is not just the responsibility of the leadership team to make it work.

Read the full article about building a social enterprise by Ilaina Rabbat & Roshan Paule at Stanford Social Innovation Review