Financing Social Enterprises: From Start-Up Through Exit

business chart showing success

The Boalt Social Enterprise Group, Berkeley Center for Law, Business and the Economy (BCLBE)  and the Impact Law Forum are excited to present a ground-breaking symposium on social enterprise law and finance! The symposium will explore cutting-edge legal issues faced by social enterprises in different stages of growth. We’ll hear from social enterprise attorneys, investors and entrepreneurs about the challenges of preserving mission through various stages of capital-raising and discuss creative solutions to overcome them. We will host two panels: the first on preserving mission through start-up and early stage financing and the second on overcoming challenges later stage financing and “exit” present to mission-driven social enterprises.

Here are some highlights from the April 3 symposium:

Early Stage Financing:

  • Are for-profit social enterprises seen as a new asset class to institutional investors?
  • There is a dominant perception of a tension between doing good and making money.
  • Investor assumption: to do good, the return will be lower – but this is slowly changing. See, for example, KKR Responsibility; Carlyle Group Responsible Investing.
  • Understanding who will be your compatible investors is critically important (social-profitability continuum).
  • Think about what type of money serves you in the best way (some orgs may need to say no to debt) – align w/ goals.
  • Revenue-based financing as alternative to relying just on exit strategy – attracting investors.
  • Most effective way to protect mission in for-profit social enterprise – use IP licensing (e.g., tie the rights to using the name to continued performance of social mission); also can include in charter, s/h agreements.
  • Social purpose metric – investors will want to know – simpler, fewer metrics will be more attractive.
  • Typical board of corporation – mix of founders, investors, independents. Should it be different for social enterprises?
  • Due diligence is just as complicated as with traditional companies (employment, IP, etc.); it can get especially complicated if entity needs to spin off another entity seeking the investors.

Late-Stage Financing & Exit Strategies:

  • Exits may be through IPOs (which can alternatively be a financing, rather than an exit, strategy) or merger and acquisition (75% through M&A).
  • Revolution Foods is VC-backed so will have an exit at some point; CFO wants it to be the first mission-based company to go public.
  • Institutional investors have difficulty understanding how to factor social mission into the valuation.
  • Valuation of social enterprise – ability to convert out of social purpose may add value even if never exercised.
  • Crowdfunding (JOBS Act) will have limited impact on exit strategies; compliance still difficult (state blue sky laws may be more difficult than federal laws); M&A will still be clear majority of exits.
  • Benefit corporations, flexible purpose corporations, social purpose corporation, etc. – Revlon principles (re: selling to highest bidder) may not apply, but need to think how appraisal/dissenters’ rights work into the deal.
  • Protecting social mission: Could build in social performance metric as post-closing covenant of buyer.


Suz Mac Cormac, Morrison Foerster
Eric Talley, Berkeley Law
Will Fitzpatrick, Omidyar Network
Kendall Baker, Revolution Foods
Mark Perutz, DBL Investors
Jan Piotrowski, Credit Suisse
Ayesha Wagle, Komaza