Being a social entrepreneur invariably involves a fair amount of risk—even more than your typical start-up. But while we may be loath to communicate this risk to investors, it is precisely why we do the work we do. We are working to solve some of history’s most intractable problems. Many of us are operating within the world’s most challenging markets. Tackling these issues—and taking on the risk that comes with venturing where others dare not go—is precisely what makes our value proposition unique. Pretending otherwise can not only exacerbate difficulties once challenges arise, but fails to address the full scale and scope of our work. Successfully navigating these risks will necessitate strong, honest relationships with investors from day one. But how can one do so without scaring investors away? The following steps offer a guide to cultivating clear expectations and open communication with investors about the risks of your work.
Be clear with potential investors about challenge points you expect to face. These may range from the mundane—supply chain inconsistencies—to the more dramatic—unstable local currencies and geopolitical turmoil. Being upfront about these challenges, while making clear you have detailed plans for handling them, will prepare investors for potential difficulties ahead. If you have experience working within this sector, or within a particular region, be sure to emphasize how you will carry lessons-learned forward. This can help to ease any lingering anxieties, like those around market uncertainty. Being straightforward with potential investors will help you to both attract those who share your priorities and establish a culture of accountability.
Carry that culture of accountability forward by checking in with investors on a regular basis. While reporting to investors can feel like an obligation, checking in, especially when things are going well, ensures channels for open and ongoing communication. The first-time investors hear from you should not be when something has gone wrong. Regularly updating investors on your key “wins” can help build investor confidence in your core business while also portraying a favorable impression of your enterprise even in the midst of headwinds.
As challenges inevitably arise, communicate frequently and clearly with investors on the steps you are taking to manage the situation. Not only will this assure them of your ability to handle the problem, but also provides the opportunity for them to offer their insights on navigating the challenge. This is precisely what you should look for in an investor: not just someone who can write big checks, but a partner who is ready and willing to offer strategic guidance. Those with a genuine desire to help you succeed will be invested in navigating the storm with you. And in the end, everyone will benefit.
Those of us who decide to become social entrepreneurs don’t do so to line our pockets or get a pat on the back. We do so because we see an urgent need to satisfy, or identify, a problem that has yet to be solved by the powers at be. And although it might seem convenient to pretend to investors and ourselves that such endeavors are entirely free of risk, being open about potential challenges early will establish the grounds for success later on. Building and maintaining strong relationships with your investors will be the key to navigating risks responsibly, while recognizing the value of your essential work.
Originally posted on LinkedIn.