Social Investment Toolkit Module 8

Approaching Investors
Social Investment Toolkit | Module 8
Version 1.0
Approaching Investors | Guide to using Term Sheets | Module 8
Content
Overview 3
Introduction 4
Checklist: Before You Start 5
Investment Timeline 6
Finding your Social Investors 8
Who are Social Investors? 8
Mapping your Potential Investors 11
Exercise: What Kind Of Investor Are You Looking For? 12
How to find Social Investors 13

Investor Tip: The Power Of Personal Introductions 14
Investor Tip: Manage Expectations on Timing 15
Investor Tip: Ask for Advice 15
Investor Tip: Learn from Rejection 16
Which Investor Materials Do You Need? 17

Investor Tip: When to send Investor Materials 18
Investor Tip: Telling your Social Investment Story 18
Writing a Business Plan 19
Creating an Investment Slide Deck 21
Investor Tip: How to Use Slides in a Pitch 21
Due Diligence 22
Investor Tip: How to Manage Due Diligence 22
Legal Due Diligence 23
Financial Due Diligence 24
Commercial Due Diligence 25
Managing Negotiations 26
Managing Investors Post-Close 28
Checklist: Completing this Module 29
About the Social Investment Toolkit 31
In this booklet, we cover:
– Types of Social Investor

– How to approach Social Investors
– How to pitch your Social Venture
– Which Investor Materials should you prepare?
– How investors conduct Due Diligence
– How to manage negotiations
– How to manage investors after
raising investment
By the end of this module you will have prepared all of the key items
necessary for entering into discussions with investors and be ready with
a plan how to find and approach them.
We are keen to
receive your feedback
for the Social
Investment Toolkit.
Page 3
Introduction
If you’ve worked through previous modules in this Toolkit Your first meeting with social investors will be crucial. This
and have now reached this stage, congratulations! You are is when you make your “investment pitch”. First impressions
finally ready to approach social investors. count. This will be a make-or-break moment where you will
either be invited to continue discussions, or the conversation
In this module we will walk you through the final stages will end. We offer suggestions on how to make a pitch
of how to identify and approach social investors, which mate- in a compelling way, presenting information in a format that
rials you need to prepare for them, and how to manage investors are looking for. We also point out some common
negotiations. Having information for investors prepared before pitching mistakes that social entrepreneurs make.
you start talking to investors will greatly enhance your
prospects of securing investment and speed up the process If you are able to get past the first pitch, you will be invited
once you start discussions. to enter into negotiations with investors. This means providing
investors with key information about your social venture and
We’ll begin by explaining who social investors are. There the financing that you wish to raise. We will explain to you the
are several different types of social investors, ranging from key materials that you will need to prepare for investors and
social angel investors (private individuals investing their how best to manage the negotiation process.
own money) through to foundations and large impact invest-
ment funds. It’s important to know who you are dealing Investors will also start to review the fundamentals of your
with, as each will have different requirements, objectives and business in a process known as “due diligence”. This
capabilities. You need to find the right type of investor will include reviewing both some of the legal basics (e.g. is
who is suitable for your type of venture (early stage ventures, your venture correctly incorporated? Are all key legal
for example, typically require angel investors, and may not contracts in place? Do you have all necessary licenses and
be suitable for large funds). authorisations to conduct your business?) as well as
understanding the commercial environment in which you
We will then discuss how to approach social investors. are operating (e.g. Who are your “customers”? Do you
You need to have a strategy for identifying and approaching have good operations and systems in place for financial
the investors. You need to be able to rapidly work out management?)
which investors are right for you so as not to waste time
approaching investors who don’t invest in your type of We will offer you some tips on how to manage both the inves-
project. tor due diligence process, in order to make it as efficient
and painless as possible, as well the investor negotiation pro-
cess, so that you can secure the best possible financial deal.
Finally you need to consider how to manage your investors

after you have raised investment. Keeping your investors
updated on an ongoing basis, and having a good mechanism
for consulting them and getting their approvals for key
decisions, is an important task. You need to put in place pro-
cedures in advance to ensure that all of this goes smoothly.
If these topics sound relevant for the stage that you’re now at,
then this Module is right for you. Let’s begin by talking
about the timeline for managing this stage of the investment
raising process, and the steps you’ll need to undertake.
Then let’s meet our Social Investors.
Page 4
Checklist: Before You Start
The following items ought to be completed from prior

modules before you approach investors. These items are:
Social Change Model:

you need to be clear on what your social mission is, exactly who you are trying to help,
and how your venture will do this (Module 1)
Impact Measurement:
you need to have clearly defined social impact metrics, including both outputs and
outcomes, which you can measure and report back to investors on (Module 2)
Revenue Model:
you need to be able to set out your activities into clearly defined “products” and / or
“services”, and have an understanding of the unit economics (price, cost and gross
profit margin) of each revenue stream (Module 3)
Scaling Plan:
you need a growth plan and strategy for how to scale up your venture (Module 4)
Financial Model:
a forecast of expected cash flows based on the growth plan (Module 5)
Legal status:
your venture is properly incorporated and ready for investment (Module 6)
Term Sheet:
a completed set of financing terms with which to approach investors (Module 7)
Page 5
Investment Timeline
Approaching social investors is the final stage of the investment raising process,
and should only be done once you have completed all of the preparations
discussed in the prior modules. This part of the process can easily last several months
just by itself, but having a good roadmap will greatly speed up your journey.
1. 2. 3. 4. 5.
Investor Mapping Approach Pitch Follow-up Expression of Interest
1. Investor Mapping: during this phase you are actively map- 4. Follow up: following the investment pitch, you will follow
ping out potential social investors. You will be working out up with the investor by sending more detailed information
which funders invest in your type of venture, how much they about your venture, including any specific answers to ques-
invest, what kind of investment they make (debt, equity, tions that the investor has. We show you the materials
grant) and what requirements they might ask for (e.g. board that you need to have ready to send to the investor immedi-
seat). You will be using your networks to find such funders ately after your first pitch (not before – you don’t want to
as well as researching online. You will be compiling a shortlist bombard investors with information too early, and you want
of suitable funders. It is important to be selective in your to control the flow of information to ensure that it is
shortlist as sending an unsolicited investment pitch to a funder tailored to what investors have asked for).
without doing your homework on that funder is a waste
of time. 5. Expression of Interest: the follow-up phase should
c onclude with getting a firm expression of interest from the
2. Approach: once you have a carefully chosen shortlist investor in whether they wish to continue into the next
of potential funders, you will then start to approach funders. phase of negotiation with you. It’s important to be clear
This is sometimes done by applying to funders online, for whether an investor is actively considering to invest or
those that have online application processes. More often the not, and to cut out discussions with those that aren’t serious
best opportunities come about through personal introduction. as soon as possible.
We discuss below how to set up those introductions and
how to position yourself in the best way to get invited to pitch.
3. Pitch: if your funder approach is successful, you will

be invited to meet with the potential funder and to make an
investment pitch. This will usually in the form of a short
(20 minute or so) presentation backed up by slides, followed
by question and answer. We discuss below how you should
manage the investment pitch.
Page 6
6. 7. 8. 9.
Due Diligence Negotiation of terms Documentation Financial Close
If they say yes, then the discussion then moves onto nego 7. Negotiation of terms: In parallel with the due diligence
tiating the actual details of the investment. At this stage, process, you will enter into negotiations with the investor
the process splits into two processes that can run in parallel: on the actual terms of your investment. If you are selling equity,
due diligence, and negotiation of terms. how many shares will you sell and at what price? What
rights are you willing to offer the investor? The tool for helping
6. Due Diligence: in the “due diligence” part of the investor you manage the negotiations is the Financing Term Sheet,
process, the funder learns in detail about your venture, to which we showed you how to prepare in Module 7. By this
satisfy themselves that you are a proper organisation that is stage, you should have a term sheet completed and ready
ready and capable of receiving investment. This part of to send to investors as part of the Investor Materials (please see
the process will involve providing the investor with a lot of below) that you send in the follow-up. This contains all of
information about your venture and how you operate, the key terms that you are willing to offer investors. We discuss
including your audited financial accounts, details of your below how to conduct the Term Sheet negotiation. This
financial and information management systems, your phase concludes with both parties signing the Term Sheet
legal status etc. In the section below, we discuss the key infor- once all terms have been agreed.
mation items that you will need to prepare in advance,
and how to manage this process to make it as efficient as pos- 8. Documentation: once the Term Sheet as been agreed
sible for both you and the investor. If the funder discovers and signed, the deal moves into its final phase: formal legal
a fact that might make them pause (for example, you don’t documentation. Your lawyers will be responsible for this
have the patent rights to your intellectual property), they part of the process. They should prepare the final Investment
may either pull out of the investment or you will need to find Agreements, which will be based on the agreed Term Sheet.
a way to mitigate the problem to their satisfaction (e.g. The documents will also be reviewed and marked-up by
file a patent for your intellectual property). The investor may the Investor’s lawyers, and there may still be some further
require the problem to be fixed before they will invest negotiation over the finer points of the deal. However
(a requirement known as a “condition precedent”). all of the main points should have been covered in the Term
Sheet phase. The Documentation phase ends with a
The due diligence process is therefore very useful for both specific signing date on which all signatories sign the final
sides and is designed to flush out any issues that may agreed document. This is also the moment when you
later cause you trouble. You should welcome a full and vigor- can finally celebrate!
ous due diligence, as it will help you become a better
organisation and help you identify and reduce any business 9. Financial Close: once the documents have been signed,
risks. Moreover, you should anticipate what the investor the deal officially closes once the funds are actually transferred
will look for, and be ready to address issues in advance. into your venture’s bank account. The date on which funds
are transferred is known as the “Financial Close”. Investors will
only transfer funds once their lawyers have made a final
check that all “conditions precedent” have been met. These
are all the conditions that investors asked for during the
Due Diligence phase that must be met before the deal closes.
This might include for example successfully obtaining a
key license that your venture needs to operate, or the signing
of any key contracts that are necessary for your Venture’s
business plan. Please note that Financial Close can be over a
period of time, not just on a single day, giving you the
opportunity to bring in more investors over a period of several
weeks. This is known as a “rolling Close”. All investors
must however sign up on exactly the same terms during a
rolling Close.
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Finding your Social Investors
Who are Social Investors?
Social investors are people and organisations who specifically bound by rigid time horizons on when they must exit their
invest some of their capital in ventures with a clear social investment, nor by minimum financial return targets.
and / or environmental mission. Many such investors are look-
ing to invest in particular causes, such as environmental –– Angel investors typically invest in earlier stage investments
protection, or to benefit a specific community or group such given their smaller investment size. An angel deal will
as the elderly. normally have a group of angels co-investing together. For
example, an early stage social venture looking to raise
In order to find social investors who are right for your venture, a seed round of USD 400,000 might do so from 8 angel
you need to have a way to map investors both by type as well investors investing an average of USD 50,000 each. Of
as by what they are looking for. this group, one or two of the investors typically play a more
prominent role than the others (we call these “anchor inves-
Here are several major types of social investor: tors”) who invest more (say USD 100,000+ each).
–– An anchor investor is usually an investor who makes the larg-

est individual investment, takes a board seat and is willing
to represent the interests of the other angels on the board.
Very often you can negotiate most of the main points of
Social Angel Investors your deal with an anchor investor before approaching other
–– Social angels are wealthy private individuals who invest angels. Getting an anchor investor on board first is a good
their own money into ventures that support social causes means to attract other social investors, who see that at least
they care about. Many are philanthropists experimenting one other investor is willing to invest a sizeable amount
with social investing as a more sustainable way of support- and has already done extensive due diligence on your ven-
ing social causes (i.e. if the investment succeeds, they ture. If an anchor investor is willing to represent other
will receive their funds back which they can invest again angel investors, that’s ideal for both you and the investors.
into more social projects). They are a major source of
funding for early stage ventures. –– Given the greater number of investors in a typical angel
deal, many social angels are comfortable to be relatively
–– Given their diversity, angel investors differ widely in the level “passive” investors and not make too many demands on the
of financial return that they are looking for. Some expect management. However some angels like to be very
the same returns as a purely commercial investment (i.e. active and some may wish to join your board; it very much
annualised returns of 20% + per annum for risky early stage depends on individuals. Be careful not to have too many
equity investments). Others are willing to accept a lower active angels however as the group can otherwise become
return because of the social nature of the investment. We difficult to manage given their relatively small investment
have seen some social angel investors willing to accept just in your venture.
their capital back, or more modest returns of up to 5% per
annum. –– You should only offer a board position if the angel investor
is willing to invest a significant sum and you would genu-
–– The amounts that social angel investors are willing to invest inely welcome that individual’s presence on the Board. Do
per deal will vary widely depending on the individual inves- not give board positions to individuals you are not com
tor. We have seen typical investments of between USD fortable working with unless you have very little choice (i.e.
10,000 – 50,000 per angel, with an average of around USD they are a very significant investor). Even then, be cautious.
30,000. But this average covers a very wide range and often
one or two investors will invest much more than others. –– The social angel networks are more developed in markets
such as the US, UK, Canada, and parts of Europe. The US
–– Since social angels invest their own money, they can often and UK perhaps the most developed markets with networks
be more flexible and quick to make decisions that institu- such as Investors Circle, Toniic and ClearlySo Angels. In
tional investors such as impact investment funds (who need most other countries the concept of a “social angel investor”
to get their investment decisions reviewed and approved is still relatively new, although rapidly growing.
by an Investment Committee). Angels can invest in the form
of debt or equity, and approve terms that are more flexible
that institutional funds. Unlike funds, they are also not
Page 8
–– If you are operating in an area where it is hard to find social –– The upshot for social entrepreneurs is that you should
angels, we recommend that you approach philanthropists search for which foundations are active in your country in
with an investment proposal, and see if they would be will- making social investments. The foundations that do so
ing to invest on the basis that they will receive their capi- will state as such on their website and typically have a way
tal back if the investment succeeds. For many individuals, to apply online for investment. You may also be able to
this can be a persuasive argument to experiment with make inquiries through your donor networks to see if any
impact investing. foundations might be interested in experimenting with a
loan rather than a grant. Finally some foundations can make
–– You may wish to consider first trialling the idea of raising a grant as well as a loan (e.g. a grant to help cover some
social investment with your existing donors (if you have set-up costs, and a loan for working capital) which is even
previously raised funding in the form of philanthropy) to see more favourable.
if they might be support you in this way.
Impact Investment Funds

Foundations –– Impact Investment Funds are professional funds set up for
–– Foundations are charitable institutions set up to make grants the purpose of making investments into social ventures.
or otherwise directly engage in social impact work. Some Funds tend to provide either loans or equity but not both,
are set up by individuals, others have been set up by institu- as debt and equity are very different forms of investment.
tions, companies or even governments. Examples include A few are able to offer either form of investment.
foundations such as NESTA, one of the largest foundations
in the UK supporting science, technology and arts. –– Impact funds usually have a geographic focus (i.e. only
investing in specific countries or regions) and a sector
–– The typical foundation has an endowment (an amount of focus (i.e. renewable energy or water and sanitation). You
capital that it has been gifted, which generates income should work out which funds invest in your region and
which it can use to fund its operations and make grants). your sector. “Sector” may be defined broadly – some funds
Normally foundations are set up to make grants, but such as Acumen, for example, support ventures serving
some foundations are now experimenting with using a por- the “base-of-the-pyramid” i.e. economies where the aver-
tion of their endowment to make social investments age per capita income is less than $4 per day. But this
into projects aligned with their social mission and values could cover projects as diverse as clean cook stoves and
(so called “Mission Related Investing” or MRI). affordable medicine.
–– Some foundations are also willing to use a portion of the –– Many impact funds are set up with a finite life, which is usu-
annual income generated by their endowment to directly ally 7 years (a few go longer). That means that they must
invest in social ventures. This is known as “Program Related sell out of all of their investments by a certain date within
Investment”, or PRI, since they would be using the same 5 – 7 years from launch of the Fund and return all of
capital that would otherwise be available to make program their capital back to their investors. If you raise capital from
related grants. The PRI market in the United States in an investment fund, expect them to sell their shares in
particular is very large thanks to the favourable US tax code your venture within that time-frame. In order for them to do
for PRI loans (most PRI is in the form of low cost debt). this, they may ask you to begin preparing the whole
Moreover, the US tax code requires PRI loans made by foun- company for sale sooner than that (within 5 years to give
dations to be at “below market rates” of interest and time for sale). You must therefore be open to selling
with the primary purpose of creating social impact, not your company in this time-frame if you raise funds from an
maximising profits. This makes the PRI market very Investment fund, and discuss with them if this is indeed
attractive for US based social entrepreneurs looking to their “exit strategy”.
tap into this source of funds.
–– The purchaser of the fund’s shares may be another fund, or
–– There is a special type of US legal entity known as a “Low may be a company operating in your sector (which is known
Profit Limited Liability Company” or L3C which US as a “trade sale”). In a very rare few cases, the fund may
based social entrepreneurs can use (please see Module 6 ultimately hope to list your company on a stock exchange
“Legal Structure” for more details on this) which is and sell the shares to members of the public (this is called
specifically designed to make it easier for social entrepre- “going public” and the stock market listing is known as an
neurs to access PRI funds. For entrepreneurs outside of “Initial Public Offer” or “IPO”). But this only applies to
the US, social investment from foundations is still possible companies that reach very large revenues (usually at least
but more scarce. USD 50 million per year).
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–– The advantage of raising capital from an Impact Investment

Fund is that they can usually invest in larger sizes than
angel investors. The typical Impact Fund can invest USD
1 – 3 mn in a venture, and many can invest more. In fact,
many funds prefer not to invest smaller amounts (i.e. below
USD 1mn) as the amounts may be too small for them Banks
to manage efficiently. This means that funds often favour –– Some commercial banks lend through their Corporate Social
companies that are raising USD 1 – 5 mn+ in capital. If Responsibility (CSR) programs. Banks only provide loans;
you are therefore past the seed round of investment and they typically do not invest equity into businesses unless they
approaching a Series A round (please see our booklet manage their own Impact Funds. If you are looking for
“Investment Fundamentals” for more details on stages of a loan from a bank, you should investigate which banks in
investment) then you may need to approach Impact your country have programs that lend to social entrepre-
Investment Funds to support you. neurs. This can be found through their websites.
–– Examples of Impact Investment Funds investing in earlier –– Commercial banks should not be confused with multilateral
stage social ventures include Acumen, Aavishkaar (investing development institutions such as the World Bank or the
in Indian social enterprises), the Beyond Capital Fund, Asian Development Bank.
BonVenture (in Germany), LGT Venture Philanthropy, and
the OASIS Fund (managed by Bamboo Capital). –– Even if banks do not have an explicit social entrepreneurship
or “Community Lending” program, they may be able to
provide you a line of credit or a working capital facility as a
regular business customer. If working capital (i.e. the fund-
ing of cash shortfalls that arise from any timing mismatch
between your revenues and costs) is an important feature of
your venture, then approaching a bank for working capital
Government & Development Agencies: funding can be a useful source of funding.
–– Development Institutions are governmental or quasi-govern-
mental organisations set up for the purpose of financing
regional development projects. They include large multilat-
eral agencies such as the International Finance Corporation
(IFC, part of the World Bank), the Asian Development
Bank (ADB) and the European Investment Bank (EIB), as well
as many other regional and local development agencies.
–– These agencies usually have substantial amounts to invest

and are ideal for supporting larger scale projects, parti
cularly in infrastructure, that can clearly be tied to a goal for
developing a particular region. If your project falls into
this category (for example, if you are building infrastructure
to bring affordable energy to remote rural areas), looking
at the websites of suitable Development Institutions might
be a good research option for you.
–– Many agencies will list clearly on the site how to apply

to them, and the kinds of Funds which they manage. Funds
will usually have a specific geography and sector in mind.
–– Be warned though that Development Institutions typically

run very rigorous application processes that may take
considerable time, and could be 6 months or more on deci-
sion making. You therefore need to apply early and be
prepared for the time commitment.
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Mapping your Potential Investors
Now that you are aware of the different Type: Which kind of investor is this? (social angel, impact investment fund etc)
types of investor, you can begin build-
ing a map of which investors might be Sectors: what types of project or cause does this social investor invest in?
suitable for your venture.
Geographies: which countries or regions does this investor invest in?
We recommend making a “investor list”
(a simple spreadsheet will do) which Form of investment: does this investor offer debt, equity or grants?
records different investors that you come
across through networking opportuni- Investment amount: what is the typical investment size that this investor will offer?
ties, research, or by referral from your
contacts. This list should categorise each Preferred stage: how early in a venture’s life will the investor invest?
investor according to several different Will they fund ventures that are pre-revenue, or with less than [3] years of track record?
characteristics. We’ve already discussed Will they fund ventures that are only at pilot stage?
the first of these: the type of the
investor. Are they a social angel, impact Financial Return: how much financial return does this investor seek?
investment fund, foundation, govern-
ment agency, bank or some other type Time horizon: how long will this investor typically expect to stay in this investment?
of entity?
Exit: how does this investor expect to ‘exit’ their investment? Will they ask you to sell
Next you need to work out some key your company in several years’ time?
information about your investor.
Every investor operates within quite Board seat: would this investor require a board seat if they were to invest?
strict parameters about the kind
of investment that they will make. Active / Passive: how active would this investor seek to be in your day-to-day
management? Will they expect monthly calls with you? Will they expect to advise
These are the key features that you on your business strategy?
you should try to identify about
a potential investor: Resources: what else can this investor bring to the table other than money? For
example, do they have technical expertise of your sector? Do they have a strong net-
work or connections they could introduce you to? Can they open doors for you?
It’s wise not to pick investors solely for their money (especially active investors) but to
see if they can bring more to the table in terms of connections, expertise and ability
to help you grow.
For social angel investors, you will need to have a conversation in person early on in
your interactions with them to find out this information. It’s important to do this early
in your discussions to avoid future misunderstandings.
For institutional investors this information can be gleaned from looking at the
Investor’s website (most will tell you explicitly what they are looking for and how they
invest) and also from looking at the kinds of ventures that the Investor has already
invested in. Ventures that the Investor has invested in are often profiled on their web-
site too.
Page 11
Exercise: What Kind Of Investor Are You Looking For?
SolaRise Ideal Investor Profile
Investor Type Any (but especially angel investors given early stage
of venture)
Before you begin mapping out Sectors Renewable energy
potential investors, you should Poverty alleviation
write down how your own venture Improving livelihoods
fits relative to this matrix of Base-of-pyramid economy
requirements. Climate Change
Areas Sub-Saharan Africa
Let’s take the example of our fic-
tional case study, SolaRise. SolaRise Form of investment Equity or Convertible Debt
is a start-up social enterprise Investment amount SolaRise will accept investments in units of $20,000.
selling solar-powered chargers in Total funding needed is $850,000
regions in sub-Saharan African Stage Early stage / pre-revenue (sales have not yet commenced)
countries that do not have access Financial Return Up to 10 % per annum
to electricity.
Time Horizon Must be willing to invest for 10 years
Here is how SolaRise might set out Exit Exit for investors will be through trade sale
the kind of investor that it needs for (i.e. sale to a larger company willing to continue social
its first seed round of investment: mission of SolaRise) or sale to an Institutional Investor
(i.e. a private equity fund) within 7 – 10 years
Board seat SolaRise would be willing to offer a board seat to any
investor investing $200,000 or more at this stage
Active / Passive SolaRise is looking for no more than 3 active investors
who would be “anchor investors” (i.e. commit larger
amounts, take board seat) with the remainder as passive
social angel investors. The active investors would
ideally be foundations, Impact Funds or Development
Institutions with substantial contacts, expertise and
future funding capacity in the off-grid energy sector in
rural sub-Saharan Africa
Other Resources Investors with expertise in running businesses in rural
needed sub-Saharan Africa, or with relevant contacts (e.g.
other funders). Also looking for investors with operational
expertise with running off-grid solar ventures
Please see if you can make a similar “ideal investor profile” for your own venture.
As you begin mapping potential investors, you should identify those that fit
well with your ideal investor profile. This will enable you to draw up a shortlist of
only the most suitable ones which you can focus on applying to. There is no
point, for example, in applying to an Impact Investment Fund that will not invest
in early stage ventures if you have not started making sales yet. Similarly don’t
waste time applying to investors who don’t invest in your region or your sector.
Time invested in finding investors who are genuinely a good match for your
venture is time well spent.
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How to find Social Investors
In order to find social investors, you will need to conduct a The advantages of seeking recommendations from your
process of investor mapping. We’ve just discussed the first immediate circle is two-fold: firstly your contacts know you
step of this process: working out the kind of investor that best, so should be able to match you with the right kind
you’re looking for, whose requirements (sector, geography, of investor. Secondly there is nothing that beats the power of
size of investment, financial return, exit horizon, stage of ven- personal introduction (please see our Investor Tip below).
ture etc) match with what your venture can offer. Armed with
this “target Investor profile” you are now ready to begin Begin to pool suggestions on Investors that your contacts
searching for that kind of investor. come up with. As suggestions come in, you can add them to
your prospective “Investor List” which we showed you how
Here are some next steps that you can then do: to compile in the previous section. This list should be updated
continuously. From this list you can identify those recommen-
Prepare an Investment Teaser dations which most closely match your “Ideal Investor” profile.
We recommend that you write an “Investment Teaser”.
This is a very short summary (maximum 4 pages, but a one You may have to go through several rounds of this process
pager would do) that summarises the key features of your before you have a good list of investors. For example,
venture, including the type of investment that you’re looking you should ask your contacts not only to recommend potential
for. It might be the Executive Summary of your Business Plan. investors but to ask their contacts to recommend investors.
Often it is the recommendation from the “friend of a friend”
The teaser should describe very succinctly what you do and that gives you your best lead.
the social impact that you create. It should also state how
much funding you’re looking for, what kind of funding (debt, When ready, ask your contacts to make an introduction for
equity, grant) and some key terms of the deal (for shares, you (or to find someone who can make a personal intro
this would include your Valuation; for debt it would be the duction for you). They can send the Investment Teaser as part
interest rate and loan maturity). of their introduction. An introduction from someone who
already knows the Investor personally is always more effective
The Investment Teaser is not intended to be a business plan than writing to the Investor without an introduction. Hope-
or full investment pitch. It’s just a short summary which is fully if this introduction elicits interest, you will be invited to
designed to be sent to prospective investors to see if there have an introductory call with the Investor, or better still to
might be initial interest. meet to make an Investment Pitch.
Start with your immediate contacts Before you approach any investor, remember to conduct some
After you have prepared your Investment Teaser, you should background research on them first. Institutional Investors
start asking your immediate contacts for suggestions will have a website telling you all about their investment strat-
on potential investors that they might know or connect you egy and preferences, as well as the kinds of ventures they
to. Start by sending a copy of the Teaser to your Board have already backed. You will glean so much relevant informa-
members, your Advisory Board members, and any close con- tion here, enabling you to make a very tailored approach.
tacts of your Senior Management team. Don’t forget to
include your existing supporters, shareholders and investors Introductions that are clearly written only for that investor
in this group. (“We notice that you’re currently looking for ventures that can
alleviate poverty in Uganda, particularly for rural households.
Perhaps you have contacts who are themselves social We believe that we fit this profile because …”) and that show
entrepreneurs who have already raised investment. that you’ve done some background research on them are
Can you ask them for recommendations on social investors much more impressive.
to contact?
Focus in particular on investors who seem to be backing
ventures that look similar to your own. For example, our solar
energy company SolaRise might approach a fund such
as Acumen, LGT Venture Philanthropy or Bamboo Capital
because all of them have invested in early stage product
companies selling to low income rural customers earning less
than $2 a day in sub-Saharan Africa. You need to be that
specific.
Page 13
Networking Online Research

As the founder or senior manager of a social venture, you will Inevitably, searching for investors through personal networks
be networking continuously. Networking might be at public alone is not enough, and you will also need to conduct online
events such as conferences where you have the opportunity to research. You can do this by running an online search for
present your social innovation or meet other. It might be foundations, Impact Investment Funds and other funders who
at private events where you might be introduced to a potential provide social investment in your area and for your type of
investor, or learn details about a foundation or Impact Invest- venture.
ment Fund.
Reviewing the website of the following networks may be
If you are actively looking for investment, you should be ready a helpful place to start:
to follow up with any connections and send the investor –– European Venture Philanthropy Association (EVPA)
your Teaser or Investment Slide Deck after your initial meeting. –– Asian Venture Philanthropy Network (AVPN)
If not, you should still exchange contact details with the –– Investors’ Circle: for US based ventures looking for angel
potential Investor and seek to stay in touch. It’s important to investors
keep these contacts warm until such time as you are ready –– Toniic: a leading international social angel investment
for investment. network
–– Impact Assets: a US based organisation that publishes the
Join Social Entrepreneur Networks ImpactAssets 50, an annual list of top 50 leading Impact
We also recommend that you connect with the Social Investment Funds. Many of these funds invest outside the
Entrepreneur’s networks and organisations in your own coun- US as well.
try. These will have forum and events where you will be –– Global Social Enterprise Network (GSEN): a global
able to connect with social investors, meet like-minded social network of organisations supporting and advising social
entrepreneurs and also receive help and support in how to entrepreneurs
raise investment. Social enterprise communities such as Impact
Hub are also springing up in cities around the world and
providing a flourishing support eco-system for social entrepre-
neurs, including access to training, peer-to-peer events
and co-working spaces.
Investor Tip: There is one particular group that you should ask straight-
away for help with finding investors: your existing
The Power Of Personal Introductions
funders. Social investors tend to know other social investors.
A recommendation from someone who is already back-
The most powerful way to meet social investors is ing you is therefore the most powerful introduction that
to be introduced by someone who knows both of you you can get.
personally. A personal introduction from a credible
source (e.g. a board member, another social investor, This advice includes grant funders as well. A recommenda-
or an investee who has raised funds from that inves- tion from someone who has given you a grant can be
tor) instantly places your project at the top of the list, as good as from someone who has invested in you. Your
compared with ventures that rely on cold calling or existing funders, whether as investment or philanthropy,
which do not have a personal introduction. are by definition people who believe in you and have backed
you with their own money. They should be keen to see
The online networking site LinkedIn is particularly good you succeed in raising investment. They will be your best
for flushing out these kinds of contacts. Indeed LinkedIn is ambassadors – please call on them.
specially designed to make it easy for you to find contacts
who might know a particular investor. If you find an investor,
you may be able to use LinkedIn to find someone who
knows them and can introduce you.
Page 14
Investor Tip: This kind of statement works because it doesn’t put any
pressure on the investor now, but it sets you up later on to
Manage Expectations on Timing be able to come back when you are ready. If you let a
contact go cold for six months, and then try to reactivate it,
With all the investors that you are keeping track of, you will find it more difficult unless you have already man-
it’s good practice to advise them of your potential aged expectations ahead of time. Similarly if an investor has
timing. agreed to stay in touch, please do keep them informed of
developments so that you can build a long term relationship
“We’re not raising investment right now, but we expect to with them even before if you’re not raising investment
be looking for funds early next year. When we do start just yet. An update every few months on your progress can
raising funds, would it be ok if we send you a copy of our be very helpful to keep them in the loop, so that they
Investment Proposal?’ are prepared and waiting for when your Investment Proposal
is ready.
Investor Tip: the investor to see the opportunities inherent in your

venture. We have seen many social entrepreneurs very skil-
Ask for Advice
fully (and genuinely) approach investors for advice, and
ended up building a rapport that led to investment. You can
“When I asked for money, I got advice. also approach certain investors to join your Advisory
When I asked for advice, I got money”. Board as a means to get them involved with your venture,
and to build up some trust and relationship before you
There is more than a grain of truth in this entrepreneur’s ask for investment.
joke. Investors love to be asked for their advice on your
venture. You should solicit advice as much as funding, espe- Finally, always ask investors for their advice on where else
cially if you have met a potential investor but are not yet to look for investment. If they invest in you, this is the first
at the fundraising stage. Not only is this easier to ask for, but thing that you should ask (“Thank you so much for your
it enables you to have a conversation about your venture investment. Do you have any other contacts that you might
without having to pressure an investor into whether they will be able to recommend us to?”). There is no more power-
give you funds or not. Asking for advice shows that you ful fundraising champion for your venture than an existing
are an entrepreneur who is willing to listen and seek feed- or newly signed up social investor.
back, a quality which all investors look for.
Even if an investor decides not to invest in you, they will
Very often, when an Investor has had a chance to review know plenty of other investors who might. This may
your business and given you advice which they see is taken be a way to convert a “no” from an investor into a positive
seriously, they will be more inclined to invest in you. new lead.
A sking for advice is both flattering as well as a way to get
Page 15
Investor Tip: ture or your presentation didn’t work for them? Please invite
them to be brutally honest. If you are lucky, you will get a
Learn from Rejection goldmine of useful feedback that will help both your venture
and your presentation.
With all the investors that you are keeping track of,
it’s good practice to advise them of your potential Perhaps you didn’t explain your revenue model well enough?
timing. Perhaps the investor was confused about what your
social impact really is? Where one investor stumbles, another
Raising investment is like making a sale: you need to expect is likely to as well. It’s therefore essential to work out
a very high rate of rejection. Almost every major success- where your business model or presentation lost people,
ful venture has been rejected by investors literally dozens of and then fix it if you can.
times before someone said yes. Your venture will be no
different. You should never be disheartened by people say- Always treat any feedback respectfully and resist the tempta-
ing no but simply recognise that this is the nature of the tion to argue back. There is an insight in every feedback,
investment game. even those you disagree with, that can help you. An investor
is never wrong when they tell you that you lost them
However you should always take the opportunity to learn on a certain part of your pitch. Entrepreneurs are usually so
from a rejection. You should always thank an investor in love with their venture that they cannot see their weak
for their time, and then ask them what aspect of your ven- spots. The fresh eyes of an investor can help you.
Page 16
Which Investor Materials Do You Need?
Once you’ve pitched to an investor, you need to be ready 3. Investment Slide Deck: this is the same information as
to follow up with your Business Plan as well as all of in your Business Plan, but formatted as slides with extensive
the follow-up Investor Materials that they will expect to see use of pictures and graphics. Some teams only prepare an
from you. Investment Slide Deck and skip writing a formal Business Plan.
We recommend that you do both, as some investors prefer
You will present your investment story to investors in a n
umber the Business Plan format, but the choice is up to you. If you
of different formats. You need to compile a pack of informa- only pick one, we suggest go for the Investment Slide Deck,
tion that you can hand over to investors once you have begun as most investors are very busy and prefer easy-to-digest
the pitching process. You don’t want to be compiling informa- information.
tion on-the-go once discussions have begun, as this can delay
the process and will look to investors like poor preparation. 4. Investment Pitch: this is a short version of the Investment
Slide deck (probably no more than ten slides, with very
You should have a single set of documents to present to all little text), designed for you to use in a ten-minute verbal pre-
investors. This ensures a common understanding by all parties, sentation. A 10 – 20 minute pitch, followed by questions
and prevents different discussions taking place based on and answers, is the typical format offered to entrepreneurs in
different information. investment pitch events. You will need to get very practised
at delivering this pitch.
5. Elevator pitch: The “elevator pitch” is a two-minute

verbal pitch of your social venture made without any slides or
other materials. Again you need to be very practised at
making this pitch. You will use it in conferences and chance
The key items for your Investor Pack are: meetings with potential investors where you need to
explain in no more than two minutes exactly what you do
1. Business Plan: a detailed write-up (usually up to 30 pages) and why your social venture is exciting. A huge number
that provides all of the key information about your venture. of opportunities arise in chance meetings and you need to
Please see below for a recommended outline for how to write have the key facts, figures and phrases at your fingertips
a business plan. if the opportunity arises.
2. Executive Summary / Investment Teaser: a condensed 6. Financial Model: The Financial Model is an Excel-based
1 – 3 page version of the Business Plan (often used as the spreadsheet projecting your cash flows for the next few years.
Introduction of the Business Plan). The Executive Summary is In Module 5 of this Toolkit we showed you how to prepare a
usually the first document that you provide to investors Financial Model, and provided a Template Model using SolaRise
to solicit interest. We referred to it earlier as an “Investment as an example. Ideally, you should send investors your Finan-
Teaser”. You can then follow up with the full Business Plan cial Model showing various growth scenarios that you are pro-
and / or Investment Slide deck if the investor expresses interest. jecting. Please see Module 5 for a detailed discussion on
what should be in your Financial Model.
7. Financing Term Sheet: in module 7 of this Toolkit, we

showed you how to prepare a summary Term Sheet listing
out the key financing terms that you are offering to investors.
This can be used as the basis of negotiation.
Page 17
Investor Tip: Investor Tip:

When to send Investor Materials Telling your Social Investment Story
The typical timing for sending these Materials to Whichever format you use to present to investors,
investors is as follows: whether as a business plan, investment slide deck, or
personal pitch, it’s important to remember that you
1. First, begin by sending your Executive Summary or are telling a story. By story, we mean providing infor-
Investment Teaser to potential investors to solicit interest. mation in the form of a narrative arc that answers
all of the key questions in an investor’s mind.
2. When invited to make a Pitch, present using your Short
Form Investment Slides. Any social investor considering your venture will have four
questions uppermost in their mind:
3. After your first pitch, for those investors who wish
to continue conversations you should sign a Confidential- 1. Are you tackling a sizeable social problem?
ity Agreement. Please note not all investors will sign (i.e. is there a big “market” for your idea?)
a Confidentiality Agreement and it’s up to you to decide –– Who are your customers & beneficiaries?
if you wish to proceed with such investors. We gener- –– Will you have many potential customers / beneficiaries?
ally recommend that, unless your venture relies on highly
confidential trade secrets, you send your information 2. Does your solution solve the problem?
anyway, as the value of reaching more investors usually –– Does your solution tackle the root cause of an issue?
outweighs the risk / damage from a potential breach Is it scalable?
of confidentiality. –– Is this the best solution relative to competing ideas?
–– Why is your solution impactful?
4. You can then send all of your other follow up Investor –– Is there a viable business model that can deliver this
Materials: Business Plan and / or full Investment Slide Deck, solution in a financially sustainable way?
Financial Model and Financing Term Sheet.
3. Are you the best team to implement this solution?
5. The Investor Due Diligence and Term Sheet Negotiation –– What unique advantage (if any) do you have over
phases will then start in parallel. your competitors?
–– Who’s on your team and what do they offer?
4. What are the proposed terms of the investment?

–– How much money do you need?
–– What is the social impact per $ invested?
–– What is the potential financial return on this investment?
Ideally these questions should be answered in this order. If

you can’t convince the investor that there is a meaningful
social problem here, then telling them about your wonder-
ful team is useless. Note that talking about the actual
terms of the finance comes last. There’s no point discussing
how much money you want to raise if you haven’t con-
vinced investors that there is a substantial market / problem
that your venture addresses, or that your solution is the
best one out there, or that you are the right team to imple-
ment that solution. If you can nail the first 3 points,
then you’re actually more than 90% there. Discussion of
the proposed terms of the financing is always how you
should close out the conversation once the investor is con-
vinced on the rest. Never open by talking about finance.
Page 18
Writing a Business Plan
Your Business Plan is a core document which investors will

read closely. The Business Plan is a written document of about
20 – 30 pages that sets out all of the key elements of your
social venture. It should include: a detailed description of the 3.
problem you are trying to solve, your solution and how it Detailed description of your Business Model
works, your plans to grow the business, how much finance
you wish to raise, and in what form. If you have worked a. Product: Describe the product or service that you are
through previous modules in this toolkit, you will already have offering. Ideally show pictures of the product or service
compiled most of the information needed in a Business Plan. in action.
A well-written business plan is your opportunity to persuade b. Customers: Describe a typical customer, and provide
investors of your social impact, financial viability, and why they customer testimonials. Why would the customer buy
should invest in you. from you?
c. WHY YOU? What is special about your team? What
There are many different ways to write a Business plan. You differentiates you from others such that investors
can also download samples off the internet. We recommend should prefer to back you? This is a really critical section,
that your Business Plan should broadly follow the format so you need to highlight this.
that we set out in the “Telling your Social Investment Story” d. Economics: What is the price and marginal cost of your
section of this module above. product? Can customers afford to pay for your product?
Can you make it easier for them to do so? (e.g. offering
Most business plans should contain the following hire / purchase or leasing options)
elements: e. Sales & marketing: how will you acquire customers?
What is the cost of acquiring a customer (both upfront and
over time?). Avoid arguments of the type “If we capture
just 3% of the Chinese market, we will be selling 5 million
units” which give no detail on how you will acquire
customers. Instead, give investors a detailed strategy for
1. which customers you are targeting and exactly how
Description of the social problem you are trying to solve you plan to sell to them (e.g. “We are in discussions with
the 3 largest supermarkets in the UK and we have
a. Social Problem: What is the social problem? already demonstrated that we can save each of them £XXX
How many people are affected? In what way? by procuring from us …”)
b. Your Vision: What is your Vision for how this problem could f. Distribution: how will you reach customers and deliver
be solved? (as explained in Module 2) your product(s)?
c. Beneficiaries / customers: A detailed description of your g. After Sales: what you need to provide in terms of after-
t ypical beneficiary, as well as your typical customer sales support to customers?
(if different). If they are different, how are they connected? h. Social Impact: what is your social impact and how will
What is their capacity and willingness to pay for your you measure it?
product? i. Growth forecast: how you do expect sales and impact
to grow over next 5 years?
j. Team: who is on your team? List bios of key team members
k. Organisation: explain how your team is organised. Who
does what? If you operate in more than one country /
region, what is the relationship between head office and
2. local teams, or between your head country and the
Description of the solution that you are offering local country offices? What is your group legal structure?
a. Solution: How does your solution address this issue?

What is its impact on the beneficiaries?
b. Competition: who are your competitors?
How does your solution compare to them?
Page 19
4.
Detailed description of your Financing: These four elements –
a. Financial forecast: how will sales grow over the next Problem, Solution,
5 years? What are your financial forecasts based on these
growth projections? Business Model, and
b. Milestones: what are the key funding milestones
you wish to achieve in the next 3 years? Are there any
Financing – are generic
alternative paths to growth?
c. Funding: how much funding are you seeking? If you
to all business plans.
are raising equity, what percentage of your business are
Unless there is a compelling reason otherwise, we
you selling?
recommend that you write a Business Plan in
d. Terms: on what terms are you raising finance?
this order. This corresponds to the “narrative arc”
(e.g. loan maturity, interest rate etc)
that we described in the Storytelling session
e. Exit: what is the expected exit for investors? For example,
above (i.e. it answers investors’ questions in the
do you anticipate reaching a trade sale or buying
order that they ask them).
back shares at some stage? What is your timeframe to
pay back investors? What level of financial return
should investors expect?
f. Sources and uses of funds: table showing how the
money you raise will be spent
Page 20
Creating an Investment Slide Deck
You should also create an Investment Slide Deck. This contains

the same information as in your Business Plan, but presented
in a slide format (usually PowerPoint or Keynote). We don’t
recommend Prezi, another popular presentation tool, as in our
experience investors find Prezi presentations distracting and
confusing to navigate.
Investor Tip:
We recommend creating two versions of your slide How to Use Slides in a Pitch
deck: a long form and a short form.
Here are a few tips on how to create good slides
–– The Long Form can be 30 – 50 slides, and is designed to for a short form deck (i.e. for a presentation that
be emailed to social investors after you have made a presen you will be giving in person):
tation to them. Essentially it is your business plan in slide
form, and can be used as a follow-up containing all of the Use as few slides as possible. If you can possibly delete
key details of your venture. It should be readable by a slide, please do. Some of the best pitches that we’ve
someone who hasn’t heard you speak. It does not have to seen used no more than 5 slides, and really good speakers
contain full paragraphs. Text should be very short and to often don’t use any slides at all. A slide is great for
the point. Bullet points are preferred. The Long Form slide showing your product, or your project in action. It’s aslo
deck contains a lot of information that you wouldn’t great for putting up key figures, such as your revenue
have time to cover in a ten minute presentation. projections or key sales forecasts. Anything else is nearly
always better said by you in person.
–– The Short Form is the slide deck that you use when making
a verbal presentation to an investor. It should only be 10 – 12 Use as little text as possible. The best short form slides
slides at the most (designed for a 15 – 20 minutes presen just have a picture, a chart, or a statistic, sometimes
tation). It should contain as few words as possible (ideally without any words at all. Words simply distract from what
each slide would just be a graphic). The Short Form you’re saying. Don’t use text as a memory jog for you
doesn’t have to be comprehensible to anyone who isn’t while speaking; use the graphics for that.
hearing you speak alongside the slides. It should only
contain the key charts and pictures that you want to talk Each slide makes just one point. Use no more than 1
about. In other words, your slides should enhance your graphic or chart per slide. In practice, the audience can’t
speech, not distract from it. If the audience is reading the concentrate on more than one graphic at a time. Those
presentation while you’re speaking, you’ve put too beautiful looking slides that have four charts in different
much information up on screen. quadrants of the screen? No one reads them. If you
have several charts, place them on consecutive slides and
talk through each one after another.
Don’t write what you’re planning to say, unless it’s

a key number or quotation that you wish to highlight.
The moment that you show a slide, your audience will start
reading it. So if you’re going to be saying what’s written,
you’ve just ruined your punchline while distracting the
audience from your talk. Similarly never commit the cardi-
nal sin of just reading out text on your slides. If you’re
going to do that, your audience will feel cheated. You
might as well just give them the text beforehand and
save them the time. Remember – your investors want to
hear from you, not read a presentation. They can get
the business plan or the Long Form Slide Deck afterwards.
Page 21
Due Diligence
Once investors have seen your pitch and expressed an interest, A “Due Diligence Package” is a collection of the key items of
they will enter a more detailed review period known as information that an investor would need in order to get
“due diligence”. Investors won’t take your statements about comfortable that your business is indeed well run, and that
your venture solely on trust. They will need to do their own the key information that you are presenting to them stacks
homework on your business before they invest. up. Some of this is very basic legal information, such as proof
that your company is correctly incorporated. Investors will
“Due Diligence” is a necessary but laborious part of the also want to see the governing documents of your business,
capital raising process. You can help speed this up by provid- as well as audited financial accounts. The compilation
ing investors with all of the key information that they and review of this information is known as “Due Diligence”.
will need to review in one easy-to-review package known Sometimes investors will have their lawyers conduct a
as the “Due Diligence Package”. large part of this phase of the review.
Due diligence can be split into three areas: legal, financial

and commercial. We discuss each of these three areas below.
Investor Tip: These can then be provided to other investors as well as

placed in your data room. This will save yourself and other
How to Manage Due Diligence
investors considerable time answering the same questions.
There can be a single written repository of questions to
Here are some ways that you can manage the address the most commonly asked questions about your ven-
due diligence process: ture. If a question is asked frequently enough, you should
probably update your business plan and investment slides to
Prepare a Data Room: A “data room’ is a place where address it.
copies of the key documents provided above can be
kept. Sometimes this is literally a room, most likely at your Be Open About Challenges
office, where investors can come and review the docu- Don’t feel the need to present a perfect picture of your
ments themselves in a confidential way. More frequently venture during Due Diligence. If there are weaknesses in your
these days, the “data room” is an electronic folder venture, such as missing an important position such as
placed online and password protected, so that only inves- CFO or having problems with a particular product or service,
tors entrusted with the password have access. The elec- it’s much better to disclose these upfront and ask for
tronic data room can be housed on cloud-based platforms help. No enterprise is without its problems. Investors feel
such as Dropbox or Box. The access to the data room much more comfortable with entrepreneurs who are
should be read-only, and copying or downloading should open and candid about any issues from the beginning.
be restricted.
Ironically, the teams that can talk openly about their chal-
Providing investors with access to a data room can save time lenges and weaknesses often have a better chance of
emailing documents back and forth, although some degree securing investment, because they build trust with investors.
of emailing is inevitable. It can also help manage confidential- It’s better to be open about this than for investors to find
ity issues. The data room is also where you should keep the out two months after closing a deal with you and having to
latest version of key deal documents such as the Term Sheet, deal with a problem that you didn’t disclose beforehand.
Financial Model and latest draft of Investment Agreements. Be upfront about your challenges and you may be surprised
how willing investors are to come on board and work with
Create an Investor you to solve them.
“Frequently Asked Questions” (FAQ) list
In the course of your discussions with investors, you will get
asked many questions. As you go along, it is worth compiling
a written list of questions together with your responses.
Page 22
Legal Due Diligence
Legal due diligence is a review of all of the key legal documen- Working with your lawyer, you should prepare copies of all of
tation pertinent to your social venture regarding its correct these materials in advance. They can be placed in a data-room
incorporation and governance, as well as the regulation gov- (or electronic copies can be placed in an online password-
erning your venture and your legal rights to operate. protected folder using software such as Dropbox) for investors
to be able to quickly review. Preparing this in advance will
The purpose of legal due diligence is to ensure that your ven- save you a great deal of time.
ture is legally authorised to operate and receive investment.
This includes a basic check that you are correctly incorporated, The Legal Due Diligence process will also check whether there
that your venture is authorised to enter into an Investment is any litigation currently taking place against your organisa-
Agreement, and that you have all permits, licenses and con- tion. Is anyone suing you for any reason? If so, you will need to
tracts needed to operate. If your venture relies on specific disclose what is the nature of the law suit, and what potential
or proprietary intellectual property, the legal due diligence damages might be if you lose the court case.
process would check that you have clean title to that
intellectual property (i.e. a registered patent or license). Conflicts of interest is another area that investors will wish
to review. Does your CEO or any board member sit on the
board of a competitor, or have interests in a supplier to your
venture? Potential conflicts of interest do sometimes arise
in the course of business, and need not necessarily be a prob-
lem for investors depending on the context. The importance
here is that they are noted and disclosed to investors to make
Legal due diligence will include reviewing: a judgement. You don’t want these potential conflicts to
come out after an investment has been raised, as this may
–– Your Certificates of Incorporation (including memorandum expose you to liability.
and articles of Association)
–– Any other founding documents or key license / registration In this Module, we provide a supplementary document called
documents “Sample Legal Due Diligence Checklist” which contains
–– All relevant company filings and registrations a more comprehensive list of items typically provided in a legal
–– Most recent board minutes, documenting authority for due diligence. This has been provided by our legal sponsor
management to raise additional capital Hogan Lovells and can be downloaded alongside this booklet.
–– Copies of most significant material contracts necessary
for the conduct of the business (e.g. key supplier, distributor,
or customer contracts)
–– Examples of customer contracts (where relevant)
–– Confirmation of correct registration of any core intellectual
property, including patents, trademarks, and other licenses
Page 23
Financial Due Diligence
Financial due diligence involves a review of all of the key If you have been operating for more than a couple of years,
financial information about your organisation, in order to audited financial statements is a requirement. For ventures
understand your current financial health. that are very early stage and have not yet had a full year of
audited accounts, please do explain this to investors and
they will have to take a view as to whether they can rely on
unaudited accounts.
If you are planning to raise investment in the next 24 months

and don’t yet have audited accounts, we recommend that
Financial due diligence would include: you begin appoint an auditor as early as possible, as the pro-
cess can take several months. Not having an audited set of
–– Audited Financial Statements for past 3 years accounts can prevent you from raising investment.
(or since inception of the business)
–– Most recent management accounts (unaudited)
–– Budget for current fiscal year
–– (Possibly) copies of bank account statements for past
3 years
–– A “capital table” listing current shareholders investor,
how many shares they own, their % shareholding,
amount invested and the current value of those shares
–– Details of any borrowings made by the company
(from whom, how much, on what terms)
–– Details of any other indebtedness of the company
–– Details of any funds owed to founders, and clarification
of any financial relationship
–– e.g. directors loans,
–– shareholder loans from founders,
–– “sweat equity” arrangements
(i.e. shares awarded to founders in lieu of salary)
Page 24
Commercial Due Diligence
Commercial due diligence is about understanding the nature Supply chain risk: what are the risks inherent in your supply
of your operations. Do you have a strong team, with chain? Are you vulnerable to problems with your suppliers,
good systems in place for managing customers, suppliers, distributors or any key partners? SolaRise, for example, out-
partners and cash? What are the key risks that your sources all of its manufacturing to one producer based in
venture faces that might threaten your ability to operate? China, and then imports these to its distribution centres and
Are you dependent on any particular parties such as a warehouses in various countries. An investor might be con-
distribution partner? What would happen if any of your part- cerned on the extent to which SolaRise is dependent on one
ners were to go under? How resilient would your venture supplier. This concern should be recognised, and then miti-
be in the face of such business risks? gated by showing that there are several other manufacturers
who could produce the Solar Kits if SolaRise needed to
The nature of the commercial due diligence will depend on switch suppliers rapidly.
what kind of venture you are. You should think in advance of
what are the key operating risks that you might be exposed Commercial due diligence may include reviewing:
to, and then prepare a list of items to discuss with investors to
show that you are aware of these risks and have ideas on –– Copies of key contracts of the venture
how to manage them. (e.g. supplier agreements, licenses, key customer contracts)
–– Bios and employment contracts of the
Senior Management team
–– Bios of the board; possibly investors may require
opportunity to interview the board
–– Detailed explanation of the customer management system,
the information management system and the cash
Two types of risk that come up in commercial management system
due diligence are:
In addition to written materials, you should ideally offer
Operating Risk: how good are the management systems investors the opportunity for a site visit to see the social
that you have put in place? Investors will wish to review venture at work and meet with customers and staff on site,
your cash control processes (is there risk of theft? Do you as well as to meet with beneficiaries and understand the
have two pairs of eyes reviewing every expenditure to direct social impact of your work.
spot mistakes / fraud?). Do you have a good invoicing and
follow-up system to ensure timely collection of revenue
from customers? Are you tracking customer orders effec-
tively? Are you monitoring complaints and do you have
procedures in place to spot trouble and fix it?
Page 25
Managing Negotiations
Alongside the Due Diligence process, you will be negotiating Set a Deadline
with investors on the terms of your financing. The starting We recommend setting a specific deadline for each of your key
point for this negotiation will be the Financing Term Sheet milestone events: signing the Term Sheet, agreeing final
which you have prepared (please see Module 7 for full details). documentation, and closing the deal. This deadline should be
Your ability to get a good deal will depend on many factors, agreed by investors so that there is a clear time-frame to
including how urgently you need funding, and how significant work to. This is important as you will need some degree of
the investor might be for your overall fundraising round. certainty on when you will receive funds.
Please bear in mind that institutional investors such as Impact Use the Term Sheet
Investment Funds are also under pressure: they need to The Term Sheet is the official record of the current state of
invest their funds within a certain time-frame and are always discussions. The starting Term Sheet should be the one
looking to find good deals. Good social investment oppor prepared by you with help from your lawyers and / or advisers.
tunities are scarce. So if you are a strong social venture with This Term Sheet will represent your starting position for
excellent prospects, social investors will be keen to invest negotiation.
in you.
The Term Sheet will be emailed back and forth between you
Here are some guidelines on how to manage and the Investors with your respective mark-ups. Please
the investor negotiation process: ensure that there is only one current version of the Term Sheet
(save each version with a date so that the latest version is
1 always obvious) and record any agreements or changes imme-
Set a Deadline diately on the Term Sheet. This will save much time and
2 confusion.
Use the Term Sheet

Any changes to the Term Sheet should always be done using
3
“Track Changes” so that all parties can see what has been
Conduct Investor Negotiations In Parallel
proposed as a change, and review it for approval or discussion
4 accordingly. Once a point has been agreed by all parties,
Use the Same Information for All Investors mark it as agreed so that there is no re-negotiation later.
5
Know What You Are Willing To Negotiate Conduct Investor Negotiations In Parallel
6 Assuming that you have more than one investor, you will need
Treat Every Investor As A Future Business Partner to negotiate with several investors at the same time. The
advantage of discussions with multiple investors is that you
have a back-up if some investors drop out. Some Impact
Investment Funds will wish to lock you into an exclusive nego-
tiating period in which only they are in sole discussions
with you. Only agree to this if you believe that Fund could
invest the entire amount that you are looking for, or that
you wish to secure investment from this Fund first before
looking for others.
Page 26
It’s up to you to decide if you want to hold meetings with Treat Every Investor As A Future Business Partner
multiple investors together, or to meet them individually Don’t go into an investor negotiation thinking that it’s a zero
each time. There are pros and cons to each approach. On the sum game where you win and they lose. Everyone must come
one hand, it may save you a considerable amount of time out of the deal feeling they got a good deal. Remember you
not having to duplicate the same conversations. On the other will need to work with these investors for many years after the
hand, there is a risk that investors will begin to negotiate deal has closed.
as a single group, which may be to your disadvantage. You
will need to judge based on the specifics of your situation. Instead view an investment as securing a new business
partner. In the case of equity investment, this is literally true:
Use the Same Information for All Investors the investor is becoming a co-owner of the venture along-
It is important to send the same information to all potential side you, and will be making key shareholder decisions with
investors so that everyone is on the same page. Ultimately you going forward. It’s very important therefore that you
all investors will be signing up for the same deal on the same have a good working relationship with the new shareholder.
terms. This is why it’s essential to have just one Term Sheet If you don’t feel that you would work well with an investor
and a single set of Due Diligence documents to share with (especially an equity investor), we recommend that you do
investors. You don’t want to send different growth forecasts no take the investment unless you have little choice.
to different investors, and then be accused of misleading
them later on. Please assume that investors know each other
and may very well compare notes on your deal.
Know What You Are Willing To Negotiate

You should be very clear in your own mind about your critical
“red lines” in any negotiation with investor. Which items are
you prepared to be flexible on, and which ones not?
We recommend that you go through every item in the term

sheet and work out what your negotiating range is, and how
far you would be willing to trade. For example, what is the
maximum shareholding in your company that you would be
willing to sell, and at what price? If raising debt, what is the
maximum interest rate that you would be willing to pay?
You should be willing to walk away from any investor if these
threshold conditions cannot be met.
You should also work out which items are most important to
you, and what the priority is. For example, is it getting the
lowest possible interest rate, or raising as much debt as possi-
ble, or to have a few covenants as possible? Only you can
decide which terms are most important for you.
Page 27
Managing Investors Post-Close
The final process to put in place as your deal closes is an Finally, you should agree with Investors which items they would
agreed method for managing all of your new investors. like a special meeting to discuss. This might include business
It’s worth preparing this before the deal closes in discussion decisions such as whether to expand to a new country, launch a
with your investors, so that you have a clear protocol for new product or service, as well as issues that will affect the
how to treat investors on an ongoing basis. investors directly, such as plans to raise a new round of capital.
Your Investment Agreements will specify how such Investor
Investors will expect to be updated about how your business meetings occur, what a quorum for such meetings would be,
is doing on an ongoing basis. You should agree with and what are the respective voting rights of the investors.
your investors in advance how frequently they would like to
be updated (monthly, quarterly or annually?), in what Above all, please view social investors as your allies and
form they would like updates (email, monthly call?) and how business partners. Please maintain good relations with them
they would like to be consulted about investor decisions? and discuss with them openly how you’re thinking about
the venture and your future plans. Social Investors want you to
Active investors may like a bi-monthly or quarterly call succeed, and have invested in you because they believe in
with you. Passive investors would probably be fine with a you and your vision.
quarterly or semi-annual update by email. We generally
recommend quarterly reporting for all as a good balance. It’s likely that you may wish to ask the same investors again
for more funding in future rounds. Your social investors
You should prepare an “Investor Report” with a standard can also help you find new investors, and market your venture
format that you can update regularly and send to all for you to other business partners and future investors.
of your investors. This report doesn’t have to be very long. They may be able to help you solve business challenges such
A well-designed one-pager summarising your key met- as hiring for a key position. When you do raise investment
rics would be sufficient (sales to date, costs to date, expected in future, new investors will look to existing investors for their
revenue pipeline, cash in bank, beneficiaries reached, feedback on your venture and willingness to invest more.
key impact metrics etc) as well as a few bullet points report-
ing the successes and challenges of the past quarter
would be≈sufficient.
The Investor Report format and frequency should be

pre-agreed with all of your investors, and you should use
the same Report for all investors to save time.
Page 28
Checklist: Completing this Module

If you have successfully completed this
Module you will have prepared the following:
Investor Map
(list of potential investors to approach, updated continuously)
Business Plan
Pitch Deck
(Long Version – designed to be emailed to investors)
Pitch Slides
(Short Version – designed to be spoken to)
Due Diligence Package
Investor FAQ
Financial Model (prepared in Module 5)
Financing Term Sheet (prepared in Module 7)
Investment Documents (prepared in Module 7)
Investor Reporting Template
Page 29
Well prepared Investor Materials – a good Business Plan

and Investment Slide Deck, Due Diligence Package, Financial
Model and Term Sheet – are key to a smooth investor
process. We’ve outlined in this Module how to prepare these
Investor Recap documents and given some tips on how best to present.
The field of social investment is very new. It’s important

Congratulations on completing the final module of this to remember that social investors are a small but growing
Toolkit! The steps that we have outlined will hopefully have niche of investors, and that social investors are actively
given you greater insight into the process of raising searching for those few social investment deals that are truly
social investment and how to present to social investors. ready for investment. By working through this Toolkit,
you will have gained insights and understanding that will
In this Module 8 (“Approaching Investors”) we discussed the greatly accelerate your ability to find and engage with
final stage of raising investment. We spoke about the social investors.
key steps including creating an Investor Map, working out
your “Ideal Investor” profile, and various strategies for If you are a social investor yourself, or someone who is
finding and approaching social investors. simply interested in learning more about social investment,
we hope that you also gained valuable insights from this
We discussed who social investors are and what they are Toolkit.
looking for. The main points to emphasize from this
section are the importance of doing your homework on If you have found this Toolkit helpful, please do recommend
potential investors and making a targeted approach it to friends and colleagues, and please do give us feed-
to investors. Look for those that are truly matched with back on our website so that we can improve the Toolkit for
your venture’s needs. future users.
We wish you the

We also wish to emphasize again the importance of using
your personal networks to find social investors. Nothing
beats the power of personal introduction from a credible
source. This includes your board members, supporters, very best in your social
current investors, donors and all others who have supported
you and want you to succeed.
investment journey!
Page 30
About the Social Investment Toolkit
This Module is part of the Social

Investment Toolkit, a series of online Feedback
workbooks and tools for social We welcome any feedback that you might have via this link here. Did we
entrepreneurs looking to raise social succeed in explaining the process of raising social investment? Did you
finance. It is published by UBS and find the tools, case studies and exercises helpful? What further information
Ashoka under license from the author. or advice would you like to see? How could we improve this Toolkit?
The full set of eight Modules in
the Social Investment Toolkit can be We plan to upgrade the Social Investment Toolkit r egularly based on
found online at www.ubs.com/sit. feedback from our users, so your f eedback will be very helpful to us.
Please do send us your comments and help us make a better

Social Investment Toolkit!
Thank you from all on the Social Investment Toolkit team.
Page 31
The information and explanations in this document are for your information only and are not intended as an offer, or a solicitation of an offer, to buy or
sell any product or service. Although all information and opinions expressed in this document were obtained from sources believed to be reliable and in
good faith, neither representation nor warranty, express or implied, is made as to the document’s accuracy or completeness, nor it’s appropriateness to
your organisation’s specific objectives, financial situation and financial needs. UBS and Ashoka will not be held liable for any decisions you make based on
these materials. UBS and Ashoka strongly recommend that anyone using the information and explanations described in this document obtain appropriate
independent legal, financial and other professional advice.
This document and the materials in it are owned by or licensed to UBS. The information and materials in this document may be printed and used for stated
purposes only. You may electronically copy or print extracts from this document without alteration, addition or deletion provided also that such information
and materials are not in any way sold for profit. Any other use requires the express written permission of UBS.
© UBS 2017. All rights reserved.
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Approaching Investors

Social Investment Toolkit | Module 8

How to find Social Investors 13

Which Investor Materials Do You Need? 17

– Types of Social Investor

Finally you need to consider how to manage your investors

Then let’s meet our Social Investors.

Checklist: Before You Start

The following items ought to be completed from prior

Social Change Model:

3. Pitch: if your funder approach is successful, you will

Finding your Social Investors

Who are Social Investors?

–– An anchor investor is usually an investor who makes the larg-

Impact Investment Funds

–– The advantage of raising capital from an Impact Investment

–– These agencies usually have substantial amounts to invest

–– Many agencies will list clearly on the site how to apply

–– Be warned though that Development Institutions typically

Mapping your Potential Investors

Exercise: What Kind Of Investor Are You Looking For?

SolaRise Ideal Investor Profile

How to find Social Investors

Networking Online Research

Investor Tip: the investor to see the opportunities inherent in your

Which Investor Materials Do You Need?

5. Elevator pitch: The “elevator pitch” is a two-minute

7. Financing Term Sheet: in module 7 of this Toolkit, we

Investor Tip: Investor Tip:

4. What are the proposed terms of the investment?

Ideally these questions should be answered in this order. If

Writing a Business Plan

Your Business Plan is a core document which investors will

a. Solution: How does your solution address this issue?

Creating an Investment Slide Deck

You should also create an Investment Slide Deck. This contains

Don’t write what you’re planning to say, unless it’s

Due diligence can be split into three areas: legal, financial

Investor Tip: These can then be provided to other investors as well as

Legal Due Diligence

Financial Due Diligence

If you are planning to raise investment in the next 24 months

Commercial Due Diligence

Use the Term Sheet

Know What You Are Willing To Negotiate

We recommend that you go through every item in the term

Managing Investors Post-Close

The Investor Report format and frequency should be

Checklist: Completing this Module

Due Diligence Package

Financial Model (prepared in Module 5)

Financing Term Sheet (prepared in Module 7)

Investment Documents (prepared in Module 7)

Investor Reporting Template

Well prepared Investor Materials – a good Business Plan

The field of social investment is very new. It’s important

We wish you the

About the Social Investment Toolkit

This Module is part of the Social

Please do send us your comments and help us make a ­better

Thank you from all on the Social Investment Toolkit team.

© UBS 2017. All rights reserved.

You might also like

– Types of Social Investor

a. Solution: How does your solution address this issue?

Please do send us your comments and help us make a better