When I chat with investors and entrepreneurs, one question always pops up: Is there a secret formula? Though everyone asks, investors and entrepreneurs look at it differently.
I’ve spent a lot of time in social entrepreneurship and working with impact investors. So I am a bridge between both, who hears the story from both sides.
Beyond the deal commercials, impact investors often worry about the effort needed to set up a company’s basics and its impact foundations, thinking it might make their investment model too expensive. They also think about how to work well with the founders, build the right team, and keep an eye on things without taking on too much.
Entrepreneurs, though, face their own challenges. They say things like: “Need more traction – but need money to get the traction!”, “Endless due diligence”, “It’s hard finding aligned investors and co-founders”.
And the list can go on.
This is exactly what I’ve seen in my eight years of scaling up with Fairphone and raising over 50 million in impact funding: lending, VC, crowdfunding, convertibles, you name it, we probably did it.
When I joined, Fairphone it was a handful of people who had no idea what to do with a lawyer’s CV. And after working for the big guys all my career, I was ready to join a start-up, not because I wanted the experience, but because I truly believed in the mission.
Now, Fairphone is a big name in tech in Europe, leading the way in making electronics more sustainable. That’s a huge deal because the tech industry has some of the most complicated supply chains, with materials travelling all over the world before they end up in your phone.
Looking at the company now, it’s easy to forget the starting journey.
Lesson 1: Find Mission-aligned Investors Early On
Listen, I wish there was a shortcut here, but unfortunately it isn’t. Finding the right investors is tough but so important. Sometimes, you have to meet hundreds of people to find the ones who really match your mission. That’s what we did in the early days of Fairphone, and it made a huge difference. Aunnie Patton Power talks a lot about this, and she’s spot on. I’ll link her article at the end of the blog.
And even when you find them, the dilemmas go on. How do you know when you’re actually mission-aligned with your investor? Is it simply finding an investor who supports the mission, regardless of their impact background, or should we seek investors whose investment philosophy aligns with our mission and falls within their impact theme?
While the investor’s profile could be an essential factor, it is not the sole determinant of mission alignment. Working on the investment deal is the only way to find how aligned you truly are. Here are two tips to consider:
- Before getting into the investment details, take time to reach common ground regarding the shared vision of building a sustainable social enterprise and how that relates to the mission of the company and of the investor.
- Agree on the structures needed to protect the company against mission drift, how you’re going to implement them and who bears the costs.
It’s not just about finding any investor who likes your mission. They really need to get what you’re about and be on the same page about building a sustainable business together. Then, you need to figure out the details to make sure they help keep your mission on track.
Lesson 2: Be Smart About What You Compromise On
You can’t have everything your way, especially at the start. It’s all about figuring out what’s really important and what you can let slide. Fairphone did something smart here – we didn’t separate our business goals from our mission. They were one and the same, which helped the company stay focused on what it was trying to achieve.
Negotiating with investors is a big part of this. You have to talk about what’s important to keep your mission alive, like how the business is run, how you measure success, and how you plan to grow. It’s all about finding a balance that works for both sides.
Lesson 3: Make It Easy for Investors to Say Yes
Having everything in order is a big plus. This means keeping your company’s values clear and making sure everything is organized, like contracts and documents. At Fairphone, we kept one good data room and updated it regularly, which made things a lot smoother for investors looking at us.
This organized approach showed we were serious and made it easier for investors to understand and support us.
When you’re talking to investors, remember that things always seem messier from the inside. But to someone looking in, your efforts and what you’ve achieved can look pretty amazing.
Raising over EUR 50 million for a company focused on making a difference isn’t easy. It takes patience, a willingness to adapt, and a strong commitment to your mission. Fairphone’s story shows it’s definitely possible.
For anyone out there trying to make their company both impactful and profitable, remember, it’s a journey. But with the right approach and the right people, you can make a business that not only grows but makes the world a better place.
Read Aunnie’s article about looking for capital for your social enterprise
