Lecture 6 Flashcards
(29 cards)
What does ‘Financing for Impact’ mean?
Financing with the intention to achieve social and environmental impact while generating financial returns.
Why is financing social enterprises different from commercial businesses?
Because social enterprises often lack traditional revenue models and must separate impact creation from financing.
What challenge arises from beneficiaries not being paying customers?
There is no direct business model and external funders must be secured.
What are the two main business areas of a non-profit according to Foster et al.?
1) Program activities (value creation), 2) Fundraising (capital acquisition).
Name three typical fundraising sources for nonprofits.
Individuals, government, corporations.
Name five of the ten nonprofit funding models by Foster et al.
Any 5 of: Heartfelt Connector, Beneficiary Builder, Member Motivator, Big Bettor, Public Provider, Policy Innovator, Beneficiary Broker, Resource Recycler, Market Maker, Local Nationalize
What is the core difference between for-profit and non-profit organizations?
For-profits are paid by the customers they serve while nonprofits are not.
What is a Heartfelt Connector?
A model that mobilizes many small donors through emotional connection.
What is a Big Bettor?
A model that relies on a few large donors for funding.
What does the ‘Investment Spectrum’ describe?
The range between ‘Financial First’ and ‘Impact First’ investors.
What are three challenges in impact investing?
1) Measuring impact, 2) Investor expectations, 3) Transparency.
What is an example of a hybrid legal form for social enterprises? (US/UK)
Benefit Corporation (USA), Community Interest Company (UK).
Why is impact measurement essential in impact investing?
Because investors demand clear evidence of social/environmental outcomes as they do not always receive economical outcomes.
What is an ‘Impact First’ investor?
An investor focused primarily on impact, willing to accept lower financial returns.
What are typical funding sources during the seed phase?
Grants, philanthropy, crowdfunding, angel investors, subsidies.
How does the enterprise stage influence financing strategy?
Early stages need risk-tolerant capital; later stages attract market-oriented investors.
Why does legal form matter to investors?
It signals transparency, purpose-locking, and profit distribution limits.
What is a central challenge for hybrid organizations?
Donors fear their contributions may end up as profits for private investors.
How do governance structures support fundraising?
They build trust through accountability and clear stakeholder responsibilities.
What are the three criteria used to differentiate the ten funding models?
1) Funding source, 2) Funding decision maker, 3) Funding Motivation
What is the core motivation behind the “Member Motivator” model?
Collective self-interest: members fund the organization because they directly benefit from its existence.
How does the “Beneficiary Builder” model operate?
It relies on former beneficiaries who later become donors due to their gratitude or loyalty.
What distinguishes a “Policy Innovator” model?
The organization provides innovative services that governments adopt and fund over time.
What is the “Public Provider” funding model?
A model where the organization receives most of its funding directly from public entities to deliver essential services.
