* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.
Advice on how to best structure a social enterprise is key in attracting investment capital
Sarah Chiles is Vice President of Thomson Reuters Foundation and former Adjunct Professor in Social Entrepreneurship at NYU Stern School of Business. She manages relationships with members of TrustLaw Connect and oversees high impact programs in the areas of social entrepreneurship and impact investing.
Not too long ago, Ed Dowding created Sustaination, a new social enterprise with an ambitious goal: to “create a sustainable and resilient food system which produces enough good food, for everyone, forever.” A social entrepreneur by any measure, Ed created on online platform that helps small food businesses find, buy, sell, and promote locally produced food and drink.
Nicknamed “a LinkedIn for Local Food and Farmers,” it helps producers, distributors and retailers work together to shorten the supply chain, and save time and money in the process. As it grows, the company wants to create a sustainable alternative to the supermarket-led food system.
Like many social enterprises, Sustaination gets revenue both from philanthropic donations as well as from earned income, but Ed needs advice on how best to structure his organisation to attract the investment capital he needs to scale his revolutionary model.
He, like so many others, are butting up against limitations with our current tax and regulatory codes that continue to view a venture as either for profit business or charity but not as a blended value of the two.
Yes, new legal forms are popping up in the UK and in the U.S. but the choices remain confusing and not-quite-perfect for entrepreneurs like Ed.
Through TrustLaw, we have worked with hundreds of new and existing social enterprises from around the world that are faced with similar challenges. TrustLaw has matched them with pro bono legal advice to help them make the best decision for their social ventures, because for non-lawyers, choosing among these legal structures – community interest company, charity, sole trader - is daunting and difficult. Yet, it’s clear that the legal structure can greatly influence the types of capital available and how the organisations can operate and evolve in the coming years.
On Tuesday, I’ll be moderating the launch of the Thomson Reuters Foundation Social Innovation Series. This first event is aimed to help Dowding and other social entrepreneurs get expert counsel on how to best set up operations to attract investments and further their business models.
We’ll also hear from Arthur Wood at Total Impact Advisors and Louise Savell from Social Finance UK on what new developments they see and how social entrepreneurs should position their ventures now to be able take advantage of them in the future.
At this Live Pitch event, titled “How can I structure my social enterprise to attract the right investors?” Sustaination will be joined by Future First, a UK social enterprise that goes beyond existing career services in state schools to engage alumni networks to inspire and advise current students.
Sustaination and Future First will pitch our panel of top lawyers and impact investors, and get advice on their new and growing ventures. We’re counting on Arthur and Louise, along with Ben Higson from Hogan Lovells and Sophie McGrath from Morrison Foerster to give these entrepreneurs candid feedback and important strategic advice.
Our event marks the launch of TrustLaw Connect’s newest publication, created through a partnership with Morrison and Foerster. “Which Legal Structure Is Right for My Social Enterprise?” is a free step-by-step outline for social enterprises in England and Wales to use in navigating the available legal structures for incorporation. With a user-friendly decision tree that outlines the most important strategic considerations for an enterprise, the guide is a must read for all social enterprises struggling with these challenges in the UK.
We have also put this guide together thinking of those working in the social sector or government in countries throughout the world. They are also looking at the variety of legal structures available in the UK as they consider possible policy changes which could move the sector forward in their own countries.
With the right information, social enterprises in the UK and beyond can better position themselves to attract the right kinds of investments from both the philanthropic and impact investing markets.
Tuesday’s event should prove to be a fast-paced and interactive session to help us understand the strategic implications and investors’ take on different legal structures. Be sure to follow #TRFinnovate on Twitter for updates during the event and look out for post-event coverage on our Social Innovation homepage.
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