What Are The Advantages And Disadvantages Of Social Venture Capital?

Similar to venture capital funding, social venture capital also provides its share of advantages and disadvantages. If a social enterprise is considering social venture capital as a funding option, the following points are important to keep in mind.

The advantages of social venture capital

Many of the advantages of social venture capital are similar to venture capital. Enterprises are not only able to attract capital; they will also receive the experience of the investor. Social venture capitalists can provide guidance to these enterprises and therefore, guarantee they fulfil their potential quicker.

In addition, the social venture capital investment model offers a relaxed repayment model. As with traditional venture capital funding, the

Since both parties in the deal are aiming to earn money, as well as to create a social impact, it is easier to reach common ground.

The disadvantage of social venture capital

There are disadvantages to social venture capital as well. Since investors also emphasise the financial returns together with a specific social or ecological requirements, the criteria to attract this investment can be challenging. Start-ups and entrepreneurs might struggle to find investment. Furthermore, similarly to venture capital, the amount of control involved can occur detrimental for new enterprises. While social venture capital focuses on other metrics of success, they still emphasise the ROI as well. But social entrepreneurs often don’t have a self-sustainable financial model implemented right from the start. Therefore, start-ups might find other financing alternatives more suitable, as the focus wouldn’t be as heavily on the financial return. For example, crowdfunding, while expecting a return of some kind, doesn’t necessarily focus on a financial return. Furthermore, social enterprises might find philanthropy and donations to better support the social cause of the

Venture capital has helped a number of famous companies, such as Facebook and Twitter, succeed, while these companies have gone to impact how we live our lives. Social venture capital is attempting to harness this impact and ensure socially responsible companies alleviate some of society’s biggest struggles.

In the past, most social issues have been left for non-profit organisations and national governments to solve. But national governments are often faced with issues such as underfunding and high levels of bureaucracy. On the other hand, venture capitalists have tended to focus on finding investment opportunities that focus on providing hefty financial returns. But social venture capital meets these two opposite ends in the middle and combines the aspirations of the two.

Social venture capital can help companies provide change that is more meaningful. Technological innovation has proven especially useful in helping eradicate social issues from providing clean drinking water to connect rural small businesses with larger companies. Social venture capital has the potential to direct the wealth of available funds in an effective manner towards projects, which have a bigger social or ecological impact on local