Thought Articles

How to Crack Institutional Funding

By October 24, 2018 No Comments

Here’s everything you need to know while moving from the support of family, friends, crowdfunding to institutional funding. We learn the tricks of the trade on what works and what doesn’t with Vipin Sharma from ACCESS Development Services and K. Chandrasekhar from Forus Health who have raised 4 million and 17 million respectively.

Q. What was your first institutional funding experience -the thrills & challenges?

K Chandrasekhar:
My very first stint was to raise 3.5 cr – 4 cr. I had no background in healthcare or medical devices. I was just a semiconductor engineer for 21years and the Director of Strategy at Philips. I stepped into institutional funding leveraging everything I knew from a consulting standpoint. I made a trade – consulting services in exchange for donations (a.k.a fundraising). The challenge here was to adapt and to bring something unique to the table. Not having planned anything out was a bit dicey, but an enriching learning experience nonetheless.

Vipin:
The biggest challenges that you most definitely face when you set up an NGO is that you’ve got no brand equity yet. Funders are looking for some vintage – how long have you been around? As an NGO that has just started off, you also don’t have a well-articulated value proposition and funders tend to focus on the size of the balance sheet. All of which doesn’t work in your favour. 

 

Q. Sans the advantages you had back then, what would be plan B?

K Chandrasekhar:
Back when I started off in 2010, fundraising was not as popular as the momentum it has gained today. Without the advantage we brought to the table, Government grants could have been an option  – The Technology Development Board, but that would also depend on the area you were in.

Vipin:
Building a value proposition is essential.
Documenting what you want to do, articulating how you want to do it and finding a niche in the crowded space is very important. We had time to incubate our ideas back then. If that wasn’t available, it would have been tough.

 

Q. How often are you turned down by funders? What impact does it have on the business? What are the challenges faced while trying to maintain consistent numbers?

K Chandrasekhar:
While formulating a business plan, you are made to believe there will be cuts (by the investors). It’s an unsaid practice that when you create a proposition -you bloat it, as investors tend to cut down 50%. This fortunately or unfortunately can have a backlash on your business. If you do not bloat, you get lower valuation or people don’t take you seriously. If you do bloat, investors will demand equivalent achievements.

My sincere advice – Bloat and achieve.

For me, fundraising is a seasonal affair (not periodic). A great analogy to explain this would be the Life of Pi – you have the tiger, if you leave it, it may just come and bite you. Similarly with fundraising, once you have started, you need to ensure you are consistently working to achieve suitable results to justify the investments. Often what serves as a great source of motivation is the fulfillment of a mission and decent traction. That also attracts investors. 

Vipin:
Fundraising is always a challenge. Formulating new ways of doing things that resulted in the recognition we have today. Breaking away from the routine can be very beneficial at times. We design the ideas and enthusiastically take it to donors. Some of our early funders have stuck with us for about 10-20 years. Look for something new every day. Be consistent with revamping the approach. Persistence should be a steady pillar throughout.

 

Q. Being a For-profit and Not-for-profit – is one better than the other?

K Chandrasekhar:
In my opinion, if your activities are philanthropy driven, they must be able to sustain themselves and must have the potential for scalability. For-profit is the way to go, but if required then a not-for-profit can be set up.

Fundamentally your company should be driven on three pillars:

1. Innovation – Everything done should be driven by innovation. It should be your point of recognition when you walk into forums.
2. Impact – Whatever you do has to be impactful
3. Investibility – A company should be looked upon as an investible company for funders, stakeholders etc.

Vipin:
If you start off as a Not-for-profit and then want to change to a For-profit, you find yourself very deeply immersed in the core purpose of the organisation and all of these other things won’t matter to you. Balancing purpose and profits are a huge challenge. And often a greater challenge if you decide to be a not-for-profit.  

Being a for-profit organisation lays down a certain kind of discipline in terms of programmes and profits. You are compelled to be a little more hard-nosed about it. As a social entrepreneur, there is an impulse to always give a little more (to the artisan or farmer). Push their margins a little bit, give them more than the local traders. But these relationships developed with the primary producers is a loss-making proposition. You have to stick to either one, strictly. In whatever you chose, you have to be very market-oriented and establish a balance between purpose and profit.

 

Q. Did you ever give investors and funders the dreaded – NO?

K Chandrasekhar:
It is very important that any investor chosen adds value to your organisation. You have to be very clear about where you want to go and how these investors will play a role in getting you there. You have to be wise about the amounts offered too. Taking too much could result in a struggle of how to use it, and timing plays a significant role here too.

 Vipin:
One fundamental rule should be: Don’t compromise on dignity. Believe that if someone is ready to provide the funds, it is nothing but a clear indication that you are competent enough. It is a two-way street – it’s not just you who needs them, they need you too. CSR investors look for competent companies that are hard to come by. So take pride in the fact that you are competent and view it through that lens.

In some cases, while implementing a program and a funder is not aligned with the idea, we have said no to funders. Because you need to be mentally aligned with the donor. Nothing should drive you away from your core competencies.

 

 

The Huddle is UnLtd India’s annual event that brings together our network of social entrepreneurs and key stakeholders in the ecosystem to leverage connections, build new collaborations and celebrate the entrepreneurial spirit. This article is drawn from the excerpts of the session conducted ‘ For the successors, by the success-ers: How to crack institutional funding.’

UnLtd India

UnLtd India

We find, support and grow early-stage social entrepreneurs to build high-impact organisations and grow as catalysts for social change.

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