The Seed Impact Investment Template Note Developed by and for Entrepreneurs
A few years ago, Donnel Baird, a 2012 Echoing Green Fellow, needed seed capital to expand his social enterprise BlocPower – an online marketplace that connects investors with clean-energy projects in underserved communities. He went to impact investors because he wanted investors who understood Blocpower’s potential for social and environmental impact. However, after hundreds of conversations, he wasn’t getting terms that provided him with patient, risk-tolerant capital aligned with Blocpower’s goals. Eventually, he raised investment from venture capitalists in a quick trip to Silicon Valley. While they didn’t call themselves “impact” investors, their investment terms more closely aligned with Blocpower’s mission.
Donnel’s story is just one of many we at Echoing Green have heard. When fundraising, social entrepreneurs like Donnel face challenges beyond what typical start-ups encounter. Our Fellows tell us they receive terms from impact investors that don't align with their social mission. And, at the seed stage, they often don't have access to, or are unable to pay for, quality legal services, so they may agree to unfavorable terms to get the financing needed to scale their meaningful work. Compounding these challenges is the fact that they have not had a social enterprise-friendly financing template that they can bring to investors to start the conversation.
Until now. For nearly 30 years, Echoing Green has supported a global community of emerging leaders and we’ve witnessed first-hand the struggles they face in their work to make an impact. With our experience, input from a diverse group of social entrepreneur Fellows running for-profit and hybrid organizations who have successfully raised investment, and the expertise of Sullivan & Cromwell LLP, an international law firm that represents many of the world’s major financial institutions, we created the Seed Impact Investment Template Note, or “SeedIIT,” to empower emerging social entrepreneurs.
The SeedIIT is designed for a debt investment into an early-stage social enterprise by investors who are primarily concerned with advancing the social or environmental mission of the company and not with earning a speculative financial return on their investment. It offers social entrepreneurs an alternative to traditional debt financing terms. We’ve also created an easy-to-read Q&A about the SeedIIT for those just starting to consider their investment options.
The social entrepreneur Fellows helped create the SeedIIT because they wanted to “pay it forward” and help future emerging entrepreneurs gain financing that prioritizes impact. While we are proud to share the SeedIIT, it’s a first step. We hope it raises awareness about the challenges in early-stage impact investment and provides a starting point for discussion.
The Seed Impact Investment Template Note ("SeedIIT") may not be the right means of financing for all persons and should only be used in consultation with legal counsel and tax, financial and accounting professionals. The SeedIIT and related material (including the related Q&A and this blog post) do not constitute legal, tax, financial or accounting advice.