Local social enterprise hub Flywheel is partnering with Miami University’s Center for Social Entrepreneurship to create a social impact fund that will help social startups gain access to capital.
Flywheel, which opened in 2011, also runs Elevator, an accelerator program that helps businesses with their social enterprises. Though they have been having success with the program, there was a pain point that needed to be solved.
“One of the things we have been struggling with is access to capital for these companies,” said Flywheel Executive Director Bill Tucker. Tucker noted that it’s difficult for these startups, as opposed to those who go through a tech accelerator. Investors in tech companies have the idea that a startup is going to have a big exit in 5-7 years, and they’ll get a significant return on investment, according to Tucker.
The companies that go through Flywheel aren’t designed for that kind of an exit, so they have had trouble finding financial support for social impact companies.
“In the social impact space, it is difficult to get access to capital, as opposed to the venture capital that is readily available — chomping at the bit — to invest in the startups that go through the technology accelerators in this community,” Tucker said
Two years ago, they started doing some research, and they found an accelerator that does revenue-based financing. So, instead of expecting an exit, there’s a return of the risk capital that the company received.
“We’ve been piloting that for the last couple of years and had some success with it, but there’s been no fund on the back end that’s been able and willing to make those investments,” Tucker said.
A few months ago, Tucker and Brett Smith, the founding director for the Center for Social Entrepreneurship at Miami University's Farmer School of Business, started having a conversation about the topic.
“We’ve always been focused on how can we add value to a number of different stakeholders in the [social entrepreneurship] space,” Smith said, adding that the Center for Social Entrepreneurship was one of the four founding partners of Flywheel.
They saw this opportunity to help a vital player in this ecosystem.
The undergraduate-led fund also developed out of the Farmer School of Business’ desire to get students to participate in experiential learning. They run a student venture fund, but it is more focused on the tech-oriented side for a for-profit business. The social impact fund will help students make deals in the social business space.
Former Miami University alum Arthur Collins, who was the former CEO of Medtronic, provided the initial funds to get the social impact fund up and running.
