Is it better to go with a proven business model or something unique?
In preparing to raise capital, it’s critical to have a well defined business model, which fundamentally signals to prospective investors how you intend to derive revenue for your impact business. The challenge for impact founders and CEOs is how to marry their impact strategy with a business model that the impact investment community will find attractive.
If you are introducing a completely new business model that investors are unfamiliar with, the capital raising strategy may require more stages in order to validate key proof points. This will lengthen the fundraising process and increase capital raising costs overall. In other words, when you have something that’s unproven you may have to do several small rounds of capital. There is nothing wrong with that, it’s just a different path than going out for capital with a proven business model.
For example, one of our clients, Get Help, presents itself to the impact investment community as becoming the “Airbnb of the healthcare industry”, a proven marketplace model. Another former client, Thrive Market, presented themselves early on as “where Costco meets Whole Foods online”, a proven middleman model for natural foods and packaged goods.
When marrying an impact strategy with a proven business model such as:
1. Become The Middleman (AKA The “Warby Parker” Model)
2. Become A Marketplace
3. The Subscription Model
4. Customized Everything
5. On-Demand Model
6. The Modernized Direct Sales Model
7. Freemium Model
8. Reverse Auction
9. Virtual Good Model
…which are some of the most recognized, your model will be a lot more predictable and in ways, perceived as less risky to prospective investors. This is especially important as the business model is one of the heavier weighted criteria that prospective investors are considering for their investment. Applying a proven business model with a new product or in a newly defined market niche provides the impact entrepreneur with easy comparative data points.
Want to get prepared to raise capital successfully?
Download our Free Fundraising Checklist Here: https://thechangeagenthub.net/fundraising-checklist
Once you receive the checklist you’ll be redirected to a video walkthrough so you can use this checklist most effectively. And you’ll also be invited to check out our 9-step fundraising preparation roadmap with detailed information called Impact Incubator Immersion. This program is the exact process all our impact clients have used to raise capital successfully.
