I want to highlight a question raised by Oliver Karius, one of our social investor experts. There has been a lot of discussion activity today and I didn't want to see Oliver's really interesting topic get buried. I'll paste it below:

“What is the equivalent of equity financing for non-profit organizations that generate (or plan to generate) revenue and can become cash-flow positive? What type of financing would allow an investor to carry the financial downside risk and participate in the financial upside potential?”

In a for-profit setting you would finance the growth stage of an organization with equity (tied to rights/milestones/returns). This does not exist in the world of organizations with the “non-profit” status and forces you to either finance through grants or loans. Grants are not that attractive to the investor because this is in essence “free capital”. Loans are attractive to the investor but not necessarily to the organization b/c a loan needs to be booked as debt (even if this is a very soft loan and there being no/little collateral). The “equity” equivalent to finance non-profit, revenue-generating is lacking.

(Jessica speaking again): I'll add that social investors don't always want to see financial return because they want to make money. Although their own financial sustainability is important to their impact, many social investors who seek some level of financial return feel that this is an important element of keeping social entrepreneurs focused, driven, and accountable.

If we get some activity on this topic I will post a description of one innovative structure called "quasi-equity", or "revenue participation rights". One social investor in the UK is experimenting with this vehicle with some success. If you'd like to read about them you can do so here:
http://www.cafonline.org/pdf/Venturesome%20-%20Quasi%20Equity%20-%20Marc...

Best
Jessica.