Financing social entrepreneurs
Friday, June 8, 2012
When social entrepreneur Luke Dowdney needed to raise funds two years ago to support Fight for Peace, the charity he founded that teaches boxing and martial arts to at-risk youth to reduce violence in gang-ridden communities, he didn’t go the usual route of looking for donations. Instead he launched LUTA, a martial arts-based sportswear company featuring street wear created by young designers from the tough Brazilian neighbourhoods where Fight for Peace began.
In doing so, Dowdney raised just under £1m in investment from seasoned investors who loved the idea. Half of the profits from LUTA go to support the charity, providing much needed funds at a time when other charities were seeing donations dry up during the financial crisis. And the business provides street cred and useful publicity for the charity.
Dowdney’s solution is typical of the kind of creative business and financial innovation that social entrepreneurs are increasingly adopting to stay afloat, and indeed to thrive.
Social entrepreneurs often struggle with the dilemma of how to raise finance. Should they be a charity, and seek donations? Or a business and look for commercial funding? They are driven by a social mission, but traditional philanthropy doesn’t provide them with a stable, long term source of finance. At the same time, commercial investors neither understand nor trust them, many believing that “social” means “soft” and is usually a polite word for “loss-making.