Financing Social Enterprise: Is the Crowd the Answer?

How does a business that wants “do good” while doing well finance its operations? In particular, how does a business of that kind find investors who understand and are committed to both its nonfinancial and financial objectives? This chapter addresses issues at the intersection of corporate governance and corporate finance with those questions in mind. Specifically, the pages that follow assess common foundational elements of social enterprise and crowdfunding and whether crowdfunding may be a promising (or even suitable) source of funding for social enterprise businesses. As young popular and populist corporate governance and corporate finance adventures, social enterprise and crowdfunding hold some attraction for and traction with each other. Yet, the envisioned public benefits of crowdfunded social enterprise may be illusory or infrequently realized in practice, and even if real and realized, the benefits of social enterprise crowdfunding may not outweigh financial, reputational, opportunity, and other risks and costs. In particular, crowdfunded securities offerings for social enterprises present a number of significant challenges. Of course, both social enterprise (including especially benefit corporations and other new mission-driven statutory forms of entity) and crowdfunding (including especially securities crowdfunding) are to a great extent early-stage experiments. The results of these experiments are yet to be revealed. Even if the outcome is that the potential for mutual benefit is not realized or realizable (at all or in certain cases), we no doubt will learn much from the experimental process.