Social Investing: What Matters From the Perspective of Social Enterprises?

Due to a massive increase in available social venture capital (SVC), social entrepreneurs often get to choose among various financing options. As financial parameters can easily be adapted or replicated, this article analyzes how social entrepreneurs evaluate the central nonfinancial features of these funders. Based on an experiment with 44 social entrepreneurs, we assess their perception of the five most relevant criteria for evaluating investor attractiveness: business advisory, network access, information rights, control rights, and reputation of the investor. Our analysis of 1,056 hypothetical decisions reveals that the investor's reputation is the single most important criterion and that the positive effect of support provided through business advisory and network access strongly outweighs the negative effect of oversight via information rights and control rights. These findings indicate that social entrepreneurs perceive the behavior of SVC investors as steward like rather than principal like.