Sustainability for social ventures–is it OK to take grant money?

I was chatting today with a friend who is a very high potential social entrepreneur. She’s had grant funding in the past, but has thought about it as a “hand out.” She told me that she really wants to stop taking grants, and just focus on building revenue streams towards a fully self-sustaining venture.

I think she’s has absolutely the right idea in the long run, but may be several years early in pursuing this path.

My experiences in the conventional business world tells me about the importance of seed capital and startup funding towards bringing a business to profit. There are few if any businesses that can bootstrap from nothing and quickly develop into substantial enterprises. Although it’s true that there are pitfalls to taking capital, it’s also true that it takes a certain amount of capital to properly set up a business for success. Ultimately, I don’t know that social ventures are any different.

In fact, several of the most interesting social ventures that I’ve researched use a combination of earned income and grants in order to build their enterprise, and develop scale and expertise that brings them closer to financial sustainability.

This notion of financial sustainability is a key point on which the grant discussion hinges. In that way I think my friend is right on the mark. She’s in effect saying “I don’t want my mindset to become one that relies on handouts.” At the other end of the spectrum, if an organization never takes in any grants or other forms of financing, it could artificially limit the growth and impact that would be possible otherwise, with funding.

Thus it seems to me that there is a healthy balance to be struck between a financial self-sufficiency mindset, scaling up, and being smart and selective about taking on grants and other funding *with the goal* of achieving self-sufficiency. This is what I see successful players in the field doing, and I think it’s important for the talented young social entrepreneurs to understand this balance.

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