Six Essential Lessons For Impact-Focused Start-Ups
Thursday, 25th January 2018 at 8:25 am
Lisa Cotton, co-founder and former CEO of The Funding Network (TFN), shares the essential lessons for impact-focused startups that TFN has learned along the way.
Over the past six years, The Funding Network has given 170 grassroots not for profits with extraordinary ideas, a chance to publicly flex their entrepreneurial muscle.
Based on TFN UK, TFN Australia was launched in 2013 to help democratise giving and support grassroots not for profits.
Since then, nearly 5,000 donors have participated in a live crowdfunding audience. And for the social entrepreneurs? Well, they have revelled in the exposure to such an audience, with many going on to forge lasting relationships that have fundamentally changed the trajectory of their organisations.
However, as an enterprise that’s successfully innovated around an existing methodology out the UK, it hasn’t always been smooth sailing. We have learned some essential lessons for impact-focused startups:
- Identify your market and target your offering to them
When we started out, our target market was everyday Australians who want to give within their means. This meant we were a “donor centric” organisation led by a membership program, following our UK founder’s approach. Only members could put forward not for profits to pitch at events.
We discovered very early on, that this was limiting our reach, so we converted our members initiative to a supporters program. Our messaging was focused on building a deeper culture of giving in Australia – a big aspiration for a small start-up. It was three years down the track when we were interrogating where we were applying most of our resources, that we realised what we were actually doing was capacity-building for small not for profits. As important as donors are, we flipped our value proposition and now talk about the power and potential of grassroots innovation, which resonates more powerfully with givers.
- Apply a “network theory” to build trust and participation
Creating the formal structures to achieve commonly shared social change goals is one thing. But forging interpersonal connections that result in authentic bonds among participating leaders is something quite different. Often this takes years and many start-ups don’t have years to prove a model. To have real impact with a new model, you need to compellingly articulate a vision and hit the ground running.
And to hasten the trust building process that’s key to any collaboration effort, apply a “network theory” mindset; understanding that no one organisation can progress social change alone, regardless of its size and influence. Our approach was to ensure that our work was part of a larger, more diverse and powerful effort with “trust” sitting at its heart.
Back in 2012, we established a national steering committee made up of cross-sector leaders to help guide our efforts. The following year, we undertook extensive community consultation and network briefing sessions around Australia to understand the issues and opportunities in introducing a new giving model. This phase culminated in pilot events in 2013 to showcase the potential of the model and to establish Leadership Councils in each state. The credibility and the relationships formed in those early days provided solid foundations critical for driving authentic bonds, as well as enabling us to maintain momentum in our start-up years. Creating infrastructure for widespread engagement to mobilise collective action and enable people to act and connect with one another, can dramatically accelerate your progress.
- Get the right people on the bus
Having the right team of staff, board, consultants and volunteers in place, and a healthy dose of goodwill, will enable you to “box above your weight”. A clear vision and direction attracted experienced and talented people, but to keep them, they need to feel deeply engaged. We are lucky that our live crowdfunding events provide regular inspiration, but in a sector that doesn’t pay large salaries, taking goodwill and long hours for granted is a surefire way to lose them, which is an expensive outcome when operating with a lean team.
A culture of open and honest feedback and recognition is encouraged. Last year, we undertook an independent team and board review, which enabled us to re-focus on systems and processes, and to recalibrate the type of relationships we wanted to have with each other. Doing this relatively early in the life of a start-up is vital, as it’s all too easy to keep running from year to year without stopping and reflecting on culture, authenticity and the individual contributions that have made your organisation a success.
- Develop a diversified revenue model and genuine relationships with funding partners where benefits flow both ways
It’s no great surprise that securing capital is the biggest challenge for a startup. But for any start-up, it is not just getting funders onboard with seed capital, it is about what else they can bring to the table in the form of access to talent, resources and strategic input.
The premise for our model’s success and impact is collaboration. We consider our corporate and philanthropic funders as long-term partners whose opinions, networks and advocacy is key to achieving reach and dispelling the myth that philanthropy is only for the wealthy. Our operational funding was a 20 per cent mix of self-generated revenue and 80 per cent philanthropic donations. Last year we recognised that, despite the fact that we were undertaking more capacity building programs, we were not fully realising the great potential of our methodology to open up more streams of capital and resources for the broader not-for-profit sector. We piloted a fee-for-service white-label offering where we now teach others how to run live crowdfunding events as a new and efficient way to raise funds, and importantly to engage donors in an authentic and inspiring experience. We anticipate that once we scale this service, it will cover 60 per cent of our operating costs.
- Maintain operational focus
Coming up with new initiatives is easy, but transforming that idea into a working product or service and meeting milestones can be extremely challenging. This is where the dreaded mission-drift can occur. We worked with our chairman, who had previously used a simple and extremely effective process of building 90-day deliverables, to help our team prioritise essential operations. The process of defining and prioritising milestones, and clearly delineating ownership and responsibility for key tasks, ensures that our lean team is focused on the most critical issues over these periods.
- Establish good governance
In addition to meeting regulatory requirements, taking time to establish robust governance processes and practices pays back ten-fold. And this isn’t just about regular board meetings, well written reports and strategic guidance. It’s about ensuring everyone is across risk, developing a framework to compensate talent appropriately while maintaining long-term viability, and it’s about introducing their networks to the startup leadership and forging connections that facilitate growth. Ultimately, good governance is key to establishing credibility with key stakeholders for the long-term.
Australia has vast untapped financial and human resources to address most of our community problems. And if more leaders embrace the idea of engaging the power of the collective in a way that makes them feel connected to something larger, then we’ll start to see more community cohesion and some real social change.
About the author: Lisa co-founded The Funding Network in 2012 with the late Steve Lawrence AO. Previously, Lisa was CEO of philanthropic consultancy firm Funding Edge and, before that served as director social investment at Social Ventures Australia for seven years. Earlier Lisa was associate director of DDB Worldwide Communications. She has also held senior government roles in business strategy and marketing with Gold Corporation and the Western Australian Tourism Commission. She is currently a board director of mentoring program Kilfinan Australia, the former chairman of Documentary Australia Foundation, a member of the Kokoda Track Foundation Leadership Council and former board member of School Aid Trust.