The Path to Funding Social Enterprises Beyond Infancy

By Jen­nifer Walske & Lau­ra D. Tyson

In our research, we took a deep dive into eight suc­cess­ful social enter­pris­es in order to iden­ti­fy the crit­i­cal ele­ments of their success.

To read the full blog, vis­it Berke­ley Haas Insti­tute for Busi­ness & Social Impact.

Call­ing all Ven­ture Capitalists

Rev­o­lu­tion Foods, which pro­duces high qual­i­ty school lunch­es and con­sumer prod­ucts, got its ini­tial boost by plac­ing first in the Berke­ley-Haas Glob­al Social Ven­ture Com­pe­ti­tion. The prize mon­ey pro­vid­ed co-founders Kristin Groos Rich­mond and Kirsten Saenz Tobey with a small amount of prize mon­ey, but more impor­tant­ly it led to a $50,000 invest­ment from angel investor, Dick Beers, and then to a $500,000 invest­ment from DBL Investors.

Those invest­ments allowed Kirsten and Kristin to get a truck, lease kitchen space, and hire four addi­tion­al employ­ees, includ­ing an exec­u­tive chef, two prep cooks and a dri­ver. That in turn enabled them to run a pilot pro­gram, which pro­vid­ed the proof of con­cept for their busi­ness mod­el and paved the way for addi­tion­al investors. Nan­cy Pfund, founder of DBL Investors, told a recent Berke­ley-Haas col­lo­qui­um on social finance that she quick­ly saw the poten­tial for Rev­o­lu­tion Foods, lead­ing her to sup­ply mean­ing­ful ear­ly stage funding.

“I met Kristin and Kirsten at Haas, and imme­di­ate­ly saw the val­ue of their idea,” Pfund said. “Pro­vid­ing large amounts of ear­ly cap­i­tal is extreme­ly impor­tant for founders who are prov­ing the field.”

Anoth­er key les­son from Rev­o­lu­tion Foods is the val­ue of seek­ing fund­ing from tra­di­tion­al for-prof­it ven­ture cap­i­tal firms. Rev­o­lu­tion Foods began as a for-prof­it enter­prise, though one with social goals, but it raised mon­ey from both kinds of investors. The social ven­ture cap­i­tal firms includ­ed DBL Investors, Cata­mount Ven­tures, New Schools Ven­ture Fund, Physic Ven­tures, and the West­ly Group. But they also gar­nered sig­nif­i­cant financ­ing from tra­di­tion­al VC firms, led by Oak Invest­ment Part­ners. Rev­o­lu­tion Growth, the ven­ture cap­i­tal fund cre­at­ed by AOL founder Steve Case, recent­ly invest­ed $30 million.

One hur­dle for social ven­ture cap­i­tal investors is the lack of stan­dard­ized met­rics for assess­ing social impact. Accord­ing to Kirsten, Rev­o­lu­tion Foods devel­oped its own met­rics rather than rely­ing on frame­works devel­oped by its investors. And, now that Rev­o­lu­tion Foods is B Lab cer­ti­fied, which pro­vides some stan­dard guide­lines for social impact, the process of social impact mea­sure­ment has become even easier.