240 | Should You Pursue Funding as a Social Entrepreneur? with Paul Zelizer
This week on the pod is our monthly solo episode with Awarepreneurs Founder & CEO Paul Zelizer. Paul explores options for social entrepreneur funding and whether VC funding is a good fit for where your social enterprise is at and what your goals are.
Resources mentioned in this episode include:
Episode with Awarepreneurs Founder & CEO Paul Zelizer on Social Entrepreneur Funding
NOTE: While it’s not perfect, we offer this transcription by Otter.ai for those who are hearing impaired or who don’t find listening to a podcast enjoyable or possible.
SPEAKERS
Paul Zelizer
Paul Zelizer 00:01
Hi, this is Paul Zelizer, and welcome to another episode of the Awarepreneurs podcast. This podcast is all about the intersection of three things: conscious business, social impact, and resiliency practices.
Paul Zelizer 00:15
Three times a month, I do a deep dive interview with a thought leader in this intersection. Once a month, today, I do a solo episode where we go into a topic with more depth and more focus than we would in an interview. Before I get into our topic today, I have one request. If you could go over to Apple podcasts or whatever app you're listening to this show on to a rating and review, it helps tremendously. Thanks so much for considering it. today. Our topic is Should You Pursue Funding as a Social Entrepreneur? And it's with me, Paul Zelizer, the founder of Awarepreneurs and the host of this podcast. So this comes from an article and some conversation about this article that's happened on LinkedIn. The article was a March 8 article in Forbes. And the title of the article is, Research Finds Conventional Accelerators Aren’t Good Fit for Social Entrepreneurs. Now, if you're a listener for a while, how could I not talk about that right? :)
Paul Zelizer 01:18
Here we have a major business publication, doing some research about a traditional startup infrastructure like an accelerator, they use the example of Y Combinator. And just to give you a sense of this research, what they did, the research was done by a researcher Santae Kim, and I'll put a link in the show notes. So you can go check this all out. And what this professor I believe it was at Boston College did was followed 2 accelerators. One that's a traditional one. They use the example of like a Y Combinator model, if anybody doesn't know a Y Combinator, it's a very well known business startup mentorship accelerator program in the San Francisco area. And there was a more non traditional one that was more focused on local impact oriented startups. These were both in the Detroit area. And this person followed for eight years while writing I believe it was a dissertation or was a master's thesis I can't remember but a graduate level, you know, very smart person tracking to accelerators looking at how in inner city ecosystem like Detroit, where urban redevelopment was on people's minds. But what are the long term repercussions of these two different products? The short version of the answer, what this person found, is that the majority of the enterprises in the more traditional accelerator who got funding through the accelerating accelerator process went bankrupt within a year. the significant majority of people who were in that accelerator gap funding didn't exist in less than a year, what the person found about the folks who were in the more non traditional program. And just to give you some short version, if you haven't yet read the article, what they found in this program that was less accelerator, less VC focus, let's get you ready for funding and scale quickly is what a more traditional Y Combinator accelerator would do, what this person but what this program would do is more help people connect and form deeper connections with the communities they wanted to help and use existing resources, sometimes in non traditional ways to help them meet their impact goals. So an example in the article they talk about a food startup and somebody who was trying to have impact, you know, in places where they're called food deserts, or you know, food, places where there was a lot of food insecurity. They were helping people access, like commercial kitchens and daycare centers and senior centers and other places where they would maybe serve lunch, but wouldn't be used at other hours. And make those kind of connections form those kinds of relationships, use those assets in a win win kind of a way. That's an example of this. Second program last traditional last focused on getting VC funding and scaling very quickly. So that's the article. Go check it out. And beyond the findings of this specific vertical,
Paul Zelizer 04:53
What I wanted to have is a conversation is the larger issue of social entrepreneur funding. It's not, you know, always a easy conversation, there's a lot of inequalities that show up. Some people have more access to, let's say, a friends and family around funding because their friends and family have more wealth because of inequality through generational waves, right? So it's it's loaded terrain, it's complex terrain. And it felt like of course, we should go there, because that's who we are. That's who you are. As an Awarepreneurs listener. And as an Awarepreneurs community, I really appreciate we're willing to have hard conversation. Rather than a yes or no, you should go for social entrepreneur funding, or you shouldn't do this. What I have is four questions or four considerations that I want to bring to the table to help you as an impact entrepreneur. Think about VC funding or other kinds of social entrepreneur funding, that might help you scale and can really help you impact more people. And we've had many people on the AWARE printers podcast who've done this. We've also interviewed people who've taken a more bootstrap approach, either, because they consciously chose to go with a more, you know, that second non traditional approach in terms of the resources we mentioned in the article, to leverage local relationships, and use resources in non traditional ways, or because honestly, they tried to get VC funding, and were unable to particular for women founders and founders of color. We know the research says that the ability to access capital to access VC funding, if you're a woman founder, or if you're a founder of color, and especially when you fit in both of those categories, it's just really hard to get VC funding, certain amazing people are working at getting those obstacles out of the way and getting more capital into the hands of women founders and founders of color. And it would be not my style at all, to pretend that those obstacles aren't there. So let's take a look at these four areas or buckets that might help you as an impact entrepreneur, you know, find your right relationship with potential VC funding, we're choosing not to pursue that mechanism, whatever you choose, I want to be a resource, not tell you how to do it. And hopefully, this can be helpful in helping you find that right relationship with potential VC funding. So the first question, especially coming out of this dialogue about this article, in my note works as on a scale of one to 10, how strong would you say right here, right now, are your relationships with the community that you want to have impacted, or that you want to serve? If you're at a 10, and this is a self assessment, right, not somebody else judging you, but just be really honest. If you're wanting to help certain, you know, communities in the city you live in or certain demographic, you want to help women you want to help, you know, black young people, whatever it is, how well are you currently connected with that community. And again, that article, I think, might help if you think of what it's speaking to, in a more non traditional approach, what they were doing is helping people deepen those connections and make really meaningful relationships with the communities that they want help in those folks tended to have more impact, and they didn't go out of business, it's hard to have positive impact if you go out of business, right. So just self assessing or like speaking with some people who know the community you want to serve, get some sensory starting, and wherever you are on that is fine. And you don't have to be at a 10 It's not like a to is catastrophic to your impact goals. But let's be honest about it. And if your relationships with the community you want to help is, you know, very weak as a starting point, you just haven't yet put a lot of time or energy there and you pour a bunch of money in you try to scale really quickly. And the people who give you money, they give you money with the desire to get quick returns, it's going to be a very different journey than if you already have strong relationships in the community. So that's the first question. Just be honest with yourself and among your trusted advisors, in the leaders you're turning to and have an honest conversation. Where are you in your existing relationships in that community? One to 10 Go.
Paul Zelizer 09:52
Second one is, how critical is it for you to have substantial funding to begin to make positive impact. And let me give you some example. If you're trying to build something that or you know, key to your business, your product or your services, something that's very expensive to build or produce. I'm thinking of an example of Jennifer stitch vich, who is the founder of vegan Women's Summit. And you know, if cultured food is one of the things you're really passionate about as a founder, it's an expensive proposition to go through the process of culturing foods. It's not something you can easily do with a bootstrap kind of model. I'm not saying it's impossible, but you know, I don't know that space super well. But from what I've heard, and from the research I've done, is That's an expensive space to play in, and food safety issues, process of culturing the food, the process of getting enough product where it's makes sense to even go to market, right, you get a sense where I'm going with that. I'm thinking of another person who is on the podcast, will Shelton and will, it's an incredibly smart man who's built a very lean, but incredibly impactful organization. It's called willpower integrated marketing. And Will's a black Barber, who had his own barber shop and started talking to other black owned beauty salons and barber shops and created a network that's become incredibly powerful and is having impacted a very large scale, and has contracts with Google and MGM Studios and the US government. And he's doing that that to build that network took time. And but it didn't take a lot of investment upfront, right. So that's more a process of building relationships and networks and finding the language and the mechanisms to leverage this now 100,000 members strong network that will and his team have built, right. So you see where I'm going with this. In one case, it's about relationships and language and structures and framing and pricing for will versus want to Jennifer as founder who's, you know, creating a cultured food product, they there's different needs right up front, to get a product or service to market to the point where it's sustainable. What's true in your space, I don't think there's a one size fits all answer, but somebody who's needing a lot of expensive
Paul Zelizer 12:48
technology, staffing a large team upfront, they might have a very different relationship and see that it's important to navigate this world of getting funding upfront, that somebody who has more of a relationship based product or service may not need as much funding or could totally Bootstrap. Right. So what's true in your situation? The second question to ask yourself, the third question to ask yourself, is how are you going to take care of yourself financially? As you're building this out? What kind of sources of support do you have to financially take care of your monthly needs? Keeping a roof over your head? Putting food in the refrigerator, transportation, etc, etc? Do you currently have a job? And is this a can you do this as a side hustle a part time or full time job is the most common strategy for many social entrepreneurs? Doesn't mean it's right for you. But let's at least have the conversation right? Do you have a source of support? Or could you get a source of support that would allow you to live in a, you know, your basics are taken care of kind of way and to grow this in a patient way? You know, do you have one of our interviewees will today Tatum Edwards was really smart about getting some fellowships because she tried to get some startup funding to build her social enterprise called free cap. It's about disrupting the prison industrial complex. And as a black woman, she was not able to do so not because she's not super smart. She's a genius, but because of some of these historical inequalities that we were talking about earlier. So today was very skillful about applying for fellowships, use those fellowships to get free kept to a point where now the market you know, they have sources of revenue for their product. Could you do a friends and family or is there somebody in your community that would, you know, get a level of support what we find is that It's very stressful for founders and leadership teams, people who are early on in social enterprise, to try to do startup and to be worrying about paying their own, like just how do I buy food, that's a, it's already an emotional journey, being a founder. And being a leader in social enterprise startup, if you're also trying to figure out just your basics, it, it breaks people. So an honest conversation, sometimes you might be in a space where, okay, the product or the service is not hundreds of 1000s or millions of dollars just to get it to market. But you're not yet in a position to take care of your own financial needs. Is that a situation where it makes sense to seek some kind of funding? Or is this a situation where it might be helpful to get some sort of part time or full time job that would allow you and your team to have that startup phase go with a decent amount of financial ease, as opposed to biting your fingernails? And we got to get this rolling because of the financial pressure of the founder, or the leadership team? The last suggestion is, again, it's a self assessment, as the last question is to think about how ready are you as a leader, and anybody else who's on your leadership team for a faster growth trajectory, when you get a early stage, enterprise of any kind, but especially one that has the goal of providing long term sustainable, positive impact in an area where, by definition, there's oftentimes for the kind of people that listen to this podcast, there's oftentimes been, you know, it's an area that needs attention, it hasn't been getting a lot of resources, it hasn't been going that well, in this space. Otherwise, people who listen to this podcast wouldn't be focusing on it.
Paul Zelizer 17:04
Are you ready to scale quickly? And that is something that is a little uncomfortable to talk about, but just like, let's be honest, it takes time to build up leadership, and they're oftentimes challenging issues when you're a social entrepreneur? And are you ready for those hard conversations have you built the trust that you need among your leadership team and in the communities you want to serve, and if you get a bunch of money, and you try to move quickly, but either internally, the relationships aren't quite yet robust for that kind of rapid growth that a traditional accelerator is wanting, that's why they give you large sums of money, they want you to grow quickly. And then they want you to either have enough sales that you can pay back the people who give you money upfront, or more typically, what it is, is they're looking for a sale, a fairly quick sale, certainly within five years or less. And if your leadership team isn't ready for large sum of money, quick scaling, you know, going from zero to 100, in terms of products and services sold, that can be an incredibly challenging moment. One piece of research to give you some kind of example of what I'm talking about is if there are co founders in a startup, and these single biggest cause of failure for startups with co founders, and I think co founders can be an awesome resource. We just published an episode by Josh Ross, who's the founder of humanics. And he talked very eloquently about how he and his co founder in pneumatics, was an incredible source of support. He said, he didn't think they'd be where they currently are, if the Mitch was, you know, completely disrupting the ticketing industry for positive kid, if he didn't have the co founder that he's had, they've known each other for a long time. I mean, they literally on a handshake, Josh kept working because he was in the final financial space. While I believe his co founders name is Adam was the techie he has engineering and computer skills. And he was actually building the product and they both lived off of Josh's salary, incredible, a lot of trust there. And you know, a lot of support there as well. So I'm not in any way saying we shouldn't have these kinds of relationships. But if there is a co founder relationship in a startup and that startup fails, the single biggest reason why startups with co founders fail is because of co founders conflict and co founder divorce. So, being mindful of our relationships, it's kind of a theme you hear it here, right? has come up multiple times, when you pour a lot of money on an early stage startup, or you try to grow something that's been going very slowly, and suddenly you try to take it to a very quick level, the relationships in that organization become critical and self awareness exercise on how are those leadership relationships, both internally and with important key players, outside the immediate team, like for instance, with people who may be buying your product or taking them to market, if those are in good shape, great, that's something really important to recognize, if those, you know, haven't had a lot of time, or there's something shaky about them, be really honest about that. And be choice fall about what you do to go forward from there. And if you are going to pursue getting more money from VCs or some other source of significant funding, let's do some work and strengthening that leadership team so that it's solid and robust in this rapid acceleration time, as opposed to not asking the question, getting a bunch of money, putting that group of leaders under a lot of pressure. And, you know, let's not pretend that anybody would be surprised if we're looking through this lens, that that's a place where problems can happen if it's not tentative.
Paul Zelizer 21:29
So that's what I got for you today. And those four questions real quickly, on a scale of one to 10. How strong are your relationships with the currently right here right now with the community that you want to serve? Number two, how critical is it for you to have substantial funding to begin making positive impact? Are there ways you can make positive impact without needing rapid substantial funding? Number three, what sources of support? If any, do you have access to start up or grow your enterprise? A job fellowships, friends and family funding, etc? And number four, how ready is your leadership team for a faster growth trajectory? I hope those questions are of service to you. If you are a startup founder, or you have an idea for a social enterprise, and you're in this inquiry about should I go for VC funding or other important question, I wanted to let you know that I do consulting on these issues. This is what I specialize in helping impact entrepreneurs make really granular choices that are based on your unique situation. Right? That was one of the things in the article, the second non traditional resource for social enterprises, they really were working to customize plans and not a cookie cutter one size fits all, everybody should get, you know, VC funding and grow quickly, that approach, cookie cutter approaches don't tend to work very well in our space. If you could use a thought partner and somebody who's been in this conversation, it's been 15 years now. Please take a look at my site. If it sounds like there's a way that I could be supportive to you. You can find out more about my services at Paul zelizer.com. I'd love to hear from you just go to my contact page, send me an email. Thank you so much for listening. Before we go, I just want to remind you that we love listener suggested topics or guests either for an interview for a guest, or if there's a topic you'd like me to cover in one of these deeper dive. Please go to the AWARE printers website, go to our contact page. And you get a sense there I try to give the guidelines of what we're looking for. And if it's something that feels like a flip, please send it on. For now I just want to say thank you so much for listening. Please take really good care in these intense times. And thank you for all the positive impact that you're working for in our world.