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Start-Up Roadblocks: Top Fundraising Pitfalls of Social Entrepreneurs

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Even though I have started several social ventures, I have never been a natural fundraiser. I had to learn the hard way through many false starts and failed attempts to raise money. Now working with a diversity of start-up social entrepreneurs I have witnessed their incredible passion for their missions, but also a reprise of the same incredibly misguided fundraising ideas and practices that I finally learned didn’t work. Social entrepreneurs often end up wasting precious time running after unrealistic funding opportunities and knocking on doors that will never open instead of investing their energies in more effective approaches.

If you want to get a social venture off the ground, here are a few common fundraising pitfalls to avoid:

1. Completely unrealistic prospect lists

If the foundation names we regularly see on the prospect lists of start-ups were celebrities they would read like this: George Clooney, Angelina Jolie and Bono. These people are household names for their social consciousness and generosity and we wish we could hang out with them, but truth is that most of us will never find ourselves in the same room with them. The same is true of the Skoll, Gates, Rockefeller, Ford and MacArthur Foundations. These are the celebrities of the foundation world--most of us have heard of them but they are not going to take a phone call, let alone fund a start-up organization. At least not right now. They will only begin to consider social entrepreneurs when those organizations demonstrate results, impact, and scale. We advise social entrepreneurs to embrace realism: take these brand name foundations off your prospect lists and make room for viable prospects.

2. Going after competitions and prizes

Competitions and prizes have become very popular and they are very tempting. They dazzle with their focus on innovation and the promise of money and fame. Unfortunately, the numbers are not in your favor. The competition organizers judge the success of the competition by how many people apply, not how many win--and only a few win. The time spent on competition applications could be better spent getting to know potential funders who could support one’s organization for many years, not just once. Kevin Starr of the Mulago Foundation explains in detail why you (and our sector) should dump the prizes and competitions.

3. Twisting like a pretzel to fit a funder’s guidelines and program areas

Many foundations have very specific program areas and they are very serious about them. Imagine that your organization is focused on college scholarships and you find a funder who supports K-12 education. It may seem reasonable to create a high school program to gain funding or to try to present your program as a comprehensive education solution--but it’s not. We see too many young organizations trying to twist and turn and tap-dance their way into a fit with a funder’s interests. Social entrepreneurs need funders who love all of their vision and who are aligned with their organization’s mission. This is especially true in the early years of an organization when you are still working to figure out your core model.  Now is no time to take on funding that requires activities on the periphery of one’s mission.

4. Hiding in your office or behind your computer screen

It’s easy to get caught up in the written word: obsessing over just the right turn of phrase in a grant proposal, designing the perfect website, or crafting the one-pager to explain a vision to funders. The reality is that when there are few results to evaluate, people give to people. Sitting in front of a screen 24-7 is unlikely to bring in funding, even if that feels safer to a new social entrepreneur who is still trying to figure out how to tell their story. What’s more, a laptop provides very little human encouragement, positive feedback, or good ideas. We suggest that social entrepreneurs step away from their screens. Get out and talk to potential funders and find people who can help make warm introductions to funders who share your interests and focus.

5. Constantly looking for new funders

We see social entrepreneurs treating fundraising like an online dating site, obsessively looking to see if someone new and better-looking has turned up, and swiping past perfectly attractive prospective funders that they have already identified as compatible. Even worse, they ignore actual current funders who have invested money in their ventures. We call it the “shiny object syndrome”. It’s hard for social entrepreneurs to build sustainable, fruitful relationships with funders if they are stuck in a series of first (and only) dates. A more strategic approach is to focus on a list of Top 10 funders (both prospective and current funders) and to get to know those groups before chasing every new name that comes across the screen. Funders also want to know that you are interested in partnering with them specifically, not just knocking on every door randomly.

6. Overly ambitious outcomes in grant proposals

A hallmark of social entrepreneurs is their fearlessness and ambition. Too often, however, these traits can back them into a corner when they over-promise outcomes in grant proposals in the start-up years, and then fail to deliver those results. It runs the risk of disappointing funders when the relationship is just getting going and adds a lot of stress on founders and their teams.  A compromise is to create realistic goals for the current year, while also detailing more ambitious impact in future years. 

Jane Leu

JANE LEU is an internationally recognized social entrepreneur and Ashoka Fellow with more than 20 years of experience in founding and leading numerous social enterprises. Her latest venture is Smarter Good, a global services firm with a dual mission to improve the efficiency and impact of small nonprofit organizations and create purposeful careers for aspiring changemakers in emerging markets. 

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