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Entrepreneur Funding: Two Approaches that Work

Posted By: Daniel Barwick NACCE Blog ,

The photo below is of the new Fab Lab at Independence Community College in Independence, Kansas, and it’s an amazing place. I’m proud of the programming there, and I’m also proud that nearly every piece of equipment in the building, and much of the building itself, was paid for with external funds, most of those coming from entrepreneurs who support the lab. Presidents spend a great deal of time fund-raising, and luckily, soliciting support from entrepreneurs is one of the most enjoyable aspects of the fund-raising role. Entrepreneurs are fun people to be around and work with – they tend to be independent thinkers, with a natural curiosity and a desire to help. In 15 years of working with entrepreneurs, I’ve found that specific approaches, for specific types of support, are more effective than others. 

Philanthropic support can be categorized in three ways, with a little bit of overlap:

  • Annual gifts (typically modest, but may be expected to recur if the relationship is maintained)
  • Major gifts (larger and likely more sporadic)
  • Endowed gifts (fairly rare, must be quite large to be impactful on an annual basis)

I won’t address annual gifts here – suffice it to say that when the president and the entrepreneurship program employees fully engage interested local entrepreneurs, annual support (ranging from modest to considerable) is a natural consequence. With regard to major gifts, endowed or not, the timing of major gifts from entrepreneurs often reflects the sporadic nature of discretionary income for entrepreneurs. Gifts may be made in the form of cash or gifts-in-kind (goods, services, or time).

Gifts-in-kind are generally only desirable when they enable the donor to provide support in a way that he/she couldn’t otherwise. For example, I once created a recurring gift-in-kind from a surprising source, the Drug Enforcement Administration (DEA). The DEA was not in a position to provide cash support to our forensics program, but they were willing to give us expensive, fully useable equipment that was five or more years old. (Policies require the DEA’s lab testing equipment to be less than five-years-old to maintain the integrity of testing and the credibility of testimony in criminal cases). This resulted in the lab receiving millions of dollars’ worth of equipment that we could not have afforded on our own, and that the donor could not have provided in  cash.

When seeking support for your entrepreneurship program, there are two likely types of donors: individual entrepreneurs and corporations. These typically require quite different approaches, and this is  important because some entrepreneurs (a few) behave as if they were corporations.

In my experience, entrepreneurs tend to share some common characteristics. There are certainly exceptions, but at the risk of generalizing (these characteristics are all complimentary!), I’ve found that entrepreneurs demonstrate the following:

  • Are either self-employed or be employed by a company that they founded with other-like-minded people.
  • Are more risk-tolerant than average.
  • Are more emotional and passionate about what they do.
  • Want to “make a difference” when giving.
  • Earn income at a more variable rate from year to year compared to salaried employees. (Not sure what highlights are here, but generally in bulleted list started with a colon, place a colon at the end of the last bullet only.)

Individual entrepreneurs approach philanthropy differently:

  • Because they are typically self-employed, they are the decision-makers
  • Because they are fairly risk-tolerant, you can bring untested, “first time” ideas to them
  • Because they desire to make a difference and have passion for their work, entrepreneurs have a strong inclination to be philanthropic
  • Because they tend to have variable income, you must be prepared for a “not this year, but come back next year” answer.

Occasionally, entrepreneurs may have partners who may not share an interest in your project. As unusual as it sounds, I recommend you approach partners as if they are spouses, because they have much of the same role in decision-making. Engage them fully. If ultimately the project does not resonate with them, the original entrepreneur still has the option of being personally involved, distinct from his company. This outcome is common, for instance, when he/she is an alum and thus has a personal stake in the college.)

Corporations are typically very, very different. Corporations can be very supportive of philanthropic projects, but most often they require a solid business case for that support, i.e., the corporation receives X (exposure, tax advantage, etc.) in exchange for its support. Generally speaking, the process is more transactional than working with an individual.

Periodically, you may encounter entrepreneurs who take a more quantitative approach. This is fine – the cost/benefit approach is a normal one to take with corporate sponsors. In fact, I often feel that this approach feels like it offers additional value – the donor receives whatever level of emotional satisfaction he/she is seeking, but it’s very rewarding for me to be able to show why the satisfaction is complimented by a good business case.

If you are not engaging the entrepreneurs in your community or your alumni base, you are in for a treat. They are inquisitive and smart, with an independent mindset that is refreshing. This independent mindset often leads them to be prescriptive – so listen to their recommendations. Entrepreneurs see solutions that the rest of us do not always see. Philanthropic support and solutions to problems are a great combination!

Author

Dr. Daniel Barwick

President

Independence Community College