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#1 Problem Facing Social Entrepreneurs? Lack of Capital. What to do?

Scott Cooney | Tuesday November 30th, 2010 | 1 Comment

Recently, in conversation with Kevin Danaher, whose non-profit Global Exchange is the co-producer of the Green Festival, I asked him what he’s learned in several years running the Green Festivals. It’s clear that the events keep growing, that more and more people are looking to get into their dream of becoming a Green Business Owner, and that interest in green business is coming from all angles of the economy. What’s also painfully clear, according to Danaher, is that what’s holding back most social entrepreneurs from growth, including hiring employees and scaling production, is a lack of capital. “Everyone we talk to mentions it,” said Danaher.

In an article in Entrepreneur Magazine, CEO Kevin O’Connor (former head of DoubleClick.com, which sold to Google for $3.1 B) argues that it is time to move business forward…regardless of capital limitations. He gives several avenues for how to go about this that green business owners and other social entrepreneurs can use.“People go into holding patterns,” said O’Connor. There are typically two scenarios during recessions. One is that a company has battened down the hatches, hunkering down to weather the storm, but has also been raising capital throughout. In this case, the company is now in great shape to invest in their growth, with both labor and raw materials as inexpensive as they are likely to be.

The second, much more likely scenario, is that companies focused on cost-cutting but not raising capital, which means that they’re now a little cash-strapped. Have no fear, says O’Connor. “Most startups are still launched with an initial investment of $25,000 to $50,000,” the article says. O’Connor adds that, “if you can get your product to a prototype state ad hook some customers, you’re still on the right track, no matter how gloomy the projections are.” Bottom line? Push your business forward!

As for doing the most with the least, O’Connor advises a lot of cost-cutting and bootstrapping. His company has made several offers that include mostly equity (stock options), and has a ratio of full-time employees to interns that is almost one-to-one. Employees are asked to supply their own computers, cell phones, and other accessories that might normally be covered by the company. Using cloud-computing solutions, he adds, also help drive efficiency.

Also see this article about raising capital for triple bottom line businesses….

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Scott Cooney is author of Build a Green Small Business (McGraw-Hill), which he is giving away for free on his website through the holidays, and Principal of GreenBusinessOwner.com


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