Ready for Investment?

A social enterprise guide
to raising equity

 

For many social enterprises, grants and loans provide the early fuel to get started. But what happens when you want to scale a proven idea, launch in a new market, or invest in bigger infrastructure? That’s where equity investment could come in. 

Unlike debt, which has to be repaid with interest, equity means bringing in investors as co-owners of your enterprise. It can unlock not only capital but also strategic support and networks. The question remains, how do you know if it’s the right step for your organisation? 

 
 

What is equity investment? 

Equity investment is when someone puts money into your enterprise in exchange for a share of ownership. In return, they may benefit from dividends or a share of profits, but unlike debt, there is no obligation for you to repay the money on a fixed schedule. 

This makes equity particularly attractive for enterprises with growth ambitions: instead of taking on heavy loan repayments, you gain breathing space to reinvest in scaling. The trade-off is that you are sharing ownership and decision-making with new partners. 

There are also hybrid models, sometimes called quasi-equity, such as convertible loans or revenue-sharing agreements. These can sit between debt and equity, giving investors a return linked to performance while giving you more flexibility in structuring the deal. For example, a revenue-sharing agreement might mean paying an investor a small percentage of turnover each month until they have received an agreed return. A convertible loan, by contrast, starts out as debt but converts into shares once a larger investment round takes place. 

 
 

Stages of equity funding 

There are different stages of equity fundraising, each suited to a different point in your enterprise journey: 

  • Pre-seed/Seed: Early support to test an idea, build a prototype, or gain first customers. Typically funded by friends, family, angel investors, or early impact funds 

  • Series A: For enterprises that have proven their model and want to scale. Investors at this stage look for traction in terms of steady revenues, growing customer base, and clear governance 

  • Series B and beyond: Larger rounds that support expansion into new markets, new product lines, or significant infrastructure. These rounds often involve institutional investors and require strong systems for both financial and impact reporting 

Each stage comes with greater expectations. The further you go, the more robust your governance, financial controls, and growth strategy need to be. 

Getting ready – top tips 

  • Get legal advice: Understand the types of shares you can issue, what rights attach to them, and whether existing agreements require consent before bringing in new investors. 

  • Review governance: Make sure your board processes, reporting, and compliance are strong because investors will look closely at how decisions are made and risks managed. 

  • Align with investors: Equity is a long-term partnership. Be clear about your mission, growth plans, and impact so you can build relationships with investors who are the right fit for you, just as much as you are for them.

    These steps not only increase your chances of raising capital but also protect your organisation’s purpose as it grows. 

Is equity right for your enterprise? 

Equity isn’t for every organisation, but it can be a powerful tool if the following apply: 

  • Your legal structure is ready: If you’re set up as a company limited by shares, you can issue equity. This opens the door to investors who want to become long-term partners in your growth. 

  • You’re aiming to scale: Equity is designed for enterprises with the ambition to expand. This can range from launching new services, reaching wider markets, or investing in larger infrastructure. 

  • You welcome collaboration: Equity means sharing ownership and decision-making. If you are open to this, this can bring in valuable expertise and fresh perspectives to help you strengthen your enterprise. 

If these points resonate, then equity could be the right kind of capital to take your mission to the next level. 

 

Reflection 

Equity is not quick cash, it’s a long-term tool that can fuel growth, resilience, and impact.

The key question to ask yourself is: What would equity finance allow us to do that we cannot do already?

Whether that’s scaling a new service, strengthening cash flow, or investing in assets, equity can unlock opportunities that other forms of finance can’t. 

 
 

Get Support

If you’re exploring this route, make sure you have the right legal and governance scaffolding in place. That foundation will not only make you investment-ready but also protect your mission as you grow. Once you have investors lined up and are ready to undertake your equity raise, our pro bono legal support services can help you complete the necessary legal steps with expert guidance. 

Get in touch with us at sfhd@primeadvocates.com for more information.