Writing a Prospectus: A Winning Document for Investors
The social entrepreneurs who have worked with Root Cause consultants as part of the Social Innovation Forum, a social enterprise of Root Cause, have found the prospectus to be an excellent document for marketing an organization to potential investors.
Much like an executive summary for a traditional for-profit business plan, a prospectus begins with one page that clearly and concisely describes the organization’s goals, in addition to the investment required over a period of time to meet those goals. This is followed by three to four pages that connect the dots between the problem, the organization’s solution, their expected goals and outcomes, and the resources required to accomplish those goals and outcomes. For organizations new to business planning, the prospectus constitutes either a short-cut to business planning, by developing a prospectus based on current activities, or the final step of a business-planning process. Either way, its primary purpose is to attract investors who may offer financial or in-kind resources, with the intention of getting them to invest and re-invest in an organization based on on-going, proven results.
The first page of the prospectus is meant to be a stand-alone document. It should include the following topics in brief:
- Description of the organization’s mission
- Location, Web site, founding date, and current annual budget
- Geography and people served
- A summary of the organization’s target social problem
- Key accomplishments and social impact
- Goals for a fixed period of time
- Total financial investment required for that period of time
- Ways to invest, including specific in-kind needs and a summary of the impact that different levels of financial support will provide
Following this introduction, the body of the prospectus fills in the details outlined on the first page; this section of the prospectus is meant to be distributed as a supplement to the first page of the prospectus, never on its own. It should cover the following topics:
Need and Opportunity: Describe the social problem that your organization is addressing, the root-cause factors contributing to the problem, and the current landscape of organizations working to address the problem. Ultimately, this section should make an argument that shows how your organization is addressing a clearly identified problem.
Solution/Social Change Model: Develop text and a graphic that illustrates your organization’s model for solving the social problem described in the Need & Opportunity section. Focus on how your activities, stakeholders, and outcomes are aligned, and include an explanation of how your approach fills a gap in your field.
Indicators of Organizational Health, Strategy Performance, and Social and Economic Impact: These three types of indicators show how you measure the health of your organization and the impact the organization is having on the problem identified. For a guide to developing indicators to measure your performance and impact, see our November issue of Root Cause Solutions “Measuring Performance and Impact.”
Financial Sustainability: Describe your financial strategy and goals, including:
- A brief text explanation of your chosen financial model and revenue strategy
- % of revenue by source in the current fiscal year
- % of revenue by source three years from now
- the total amount of philanthropic dollars needed to fund your organization for the next three years
Leadership: Provide information about the key team member(s)—staff and board members—who are responsible for ensuring that the organization achieves its goals. Your list may include individuals, as well as information about the size of a board or group of advisors. Keep this brief, and choose team members who will lend credibility to the organization.
Key Funders: List your organization’s key support, also keeping in mind to lend credibility.
Success Stories: Include a few stories that capture the organization’s solution to its target social problem. Typically these stories offer perspectives from people who benefit in various ways from your work. An after-school program, for instance, might include stories from a parent, a teacher, and a student.
Ask a Root Cause Consultant: Once I have a prospectus, how do I put it to use?
Our answer to a question from the field.
To submit a question, write to: Ask@rootcause.org.
A completed prospectus is an external document designed to aid in soliciting revenue of all types—corporate, foundation, government, gifts from individuals, and in-kind goods and services—in order to accelerate impact as well as achieve long-term financial sustainability. Here are some practical ways to put a full prospectus, or its introductory page, to use:
- In a one-on-one meeting, as a handout, possibly supported with a PowerPoint presentation
- In an introductory email, as a one-page summary of your organization's model, impact, and goals
- In a public forum or other event, as a one-page hand-out for participants to pick up
- When recruiting new talent, as an introduction to your organization
- In a marketing folder or kit, as one of your organization’s standard documents
- On your Web site, available for download
Tools for Practitioners
Recommended tools on the Web.
Sample Prospectuses
Here are a few examples of winning prospectuses, developed by Root Cause consultants for the Social Innovation Forum’s Social Innovators.
The Tricky Business of Nonprofit Brands
In this interview from Harvard Business School Working Knowledge, the authors of The New Global Brands: Managing Non-Government Organizations in the 21st Century describe what branding can do for organizations working to solve social problems.
Making the Pitch: How to Present to Funders/ Investors
This brief PowerPoint presentation developed for Community Wealth Ventures offers tips for creating winning funding or investment pitches, including how to target your pitch and common mistakes to avoid.