Позитивные изменения. Том 2, № 3 (2022). Positive changes. Volume 2, Issue 3 (2022)

“The response to the current crisis is similar to what happened in 2020. The first reaction is a shock, and then everyone realigns themselves to keep helping the vulnerable people they work for. Some may be facing some temporary financial difficulties. But actually all the 60 projects we are working with are still up and running. They are related directly to people from vulnerable groups and understand that in case of the crisis their customers would be even more vulnerable. Of course, social entrepreneurs cannot leave them alone, and have to continue their activities and mission,” says Lyubov Yermolayeva.

However, since BuySocial has many corporate clients, the service has been affected by the departure of international companies; yet, it hopes that Russian and international companies remaining in Russia will continue to support social entrepreneurs. The BuySocial platform is now restructuring its operations, focusing on its core product, corporate gifts, relying on marketing and PR tools and partnerships.

“We hope that the ESG agenda will continue to be relevant from the business perspective. It matters, for example, for those who enter the Asian markets. Promoting social and environmental topics, including through the purchase of souvenirs from social entrepreneurs, is a good way to show that the company is not indifferent to what is happening in the world. And it also increases the loyalty of their customers, partners and employees,” Lyubov Yermolayeva adds.

REQUIREMENTS FOR IMPACT PROJECTS

“There is no crisis in the impact investment market,” says Olga Ryabova, an independent expert on social entrepreneurship, permanent chairman of the Future of Jobs Committee of the G20-Y Summit, and a practicing impact investor.

“The volume of funds from private investors exceeds the number of applications we receive. This paradox can be explained by underdevelopment of the impact investing market. People who come to us with applications do not always understand what impact investing is, and that different investors have different tools in their toolbox,” the expert explains.

For example, the European Venture Capital Association begins its introduction to impact projects with pro bono support. And only a year later it proceeds with loans (interest-bearing or interest-free). In this case, pro bono is often even more useful for social entrepreneurs than the direct financing tools, or loans.

According to the expert, often applicants to the Impact Investors Club come from the positions of a philanthropy project, rather than that of a social entrepreneur. Projects like these often have no business model and no view of the future. Which means an experienced investor would not fund such an application. After all, a social entrepreneur must have a calculated financial model, and an objective of solving a specific social problem. Besides, applicants often fail to consider the impact investors’ motives, which also means they do not receive funding.

“In the current situation, it is not the amount of funding in the market that changed, but the social entrepreneurs’ willingness and desire to seek funding, which they have to repay later. Remember: when we take a loan, we borrow somebody else’s money for some time, and when we repay it, we part with our own money for good. A loan is all about responsibility. Of course, we will ask for reports, we will look at how the project goes, because we often commit not just our money, but also our expertise, connections, and contacts. The money in this market has not run out. Some impact investors have indeed left, but others are coming in: people who had been involved in venture capital investments and have grown interested in the social component,” says Olga Ryabova.

Applying to the Club is not the only way to declare yourself as an impact project. As noted above, many impact investors use different tools. Some hold special “speed dating” days, when the founder of any project can sign up for a one-on-one meeting with an impact investor. A typical pitch session does not exceed 15 minutes. Pro bono support options are also available.

IMPACT INVESTORS’ EXPECTATIONS

The difference between impact investors and ordinary investors is greater faith in the project, experts say. What criteria must a social entrepreneur’s project meet in order to be supported?

For an impact investor, as clichéd as it may sound, it is important to hear how the founder talks about the project, to see his/her expression and feel his/her energy. The investor would also want to see the project team, because there is strength in numbers. The team does not have to be composed entirely of professionals, but they must be committed to their project, and not eager to leave tomorrow. Next, it is important to understand why you are doing this particular project. Is anyone else solving this social problem? The worst advice is to say that you are the only ones dealing with the problem.