When Proof of Concept Isn’t Enough: Fundraising Realities in the Social Sector

Health and Fitness startups in India were yet to raise big rounds of capital raising awareness around the rising demand for fitness solutions and fitness coaches. And Covid was yet to shake up the world, and wake us up to the unfortunate reality that comorbidities —  primarily non-communicable Diseases (NCDs), played a major role in Covid related deaths. The only way to reduce the risk of NCDs were to get started on a fitness journey. 

Slowly, we started getting positive responses from funders. Unfortunately for us, the meetings followed a similar pattern. Meetings start on a high note because our focus area was suddenly relevant and our model was unique. They enquire, or we transparently share that we have not managed to land any institutional funding but gotten so far with the support of the founder's personal savings, family, and friends. Instead of appreciating the hustle, we see doubts flicker across their faces. You can almost hear the mental red flags going up. To get them excited, we share with all the passion we have that we have been at it for (started with 6, then seven, and now) eight plus years hoping we will impress them with our perseverance. It does not have any effect. You can almost feel the energy shift— a polite nod, then quiet disengagement. 

I'll be the first to admit that not being able to fundraise large amounts of institutional money is a red flag. But should it be a deal breaker? Please ask us any number of additional and/or follow up questions. Hell, you could start with: why are you still doing this without any funder money in sight? 

I have answers, not excuses, to most questions they might have. I have the answers because I am serious about this work, and in most rooms, I am the one who has spend more time researching the problems and implementing the solution. If I don't have an answer, I will be only happy to think and respond.  am itching to answer the previous question and others, but before that, it might be useful to get on the same page by calling out a few realities of the social sector that seem to be forgotten when gatekeepers of this ecosystem question new entrepreneurs — 

1. High impact organizations ≠ Well funded Organizations: "In the nonprofit world, organizations are accountable to their donors, not their beneficiaries. Nonprofits are therefore only held accountable for their effectiveness as far as it affects their ability to obtain further funding. With a compelling story and a strong fundraising team, projects can continue — even scale — without evidence that they work or, even when there is evidence, that they don’t." I could have written this, but these are not my words. Two social entrepreneurs who recently decided to shut their org, wrote about their experience in July 2024 and called out something that doers and funders in this space have long known. Kevin Starr, as part of the three-essay series on the Trouble with Impact Investing said more than a decade ago in July 2012, "Financial markets work because despite hiccups, money flows effectively towards profitable firms. The Philanthropic world is hugely inefficient because there is no analogous market for impact." 
2. It takes time from idea to replicable/scaleable high impact model: Muhammed Yunus gave out $27 to 42 women in 1976, his first pilot of sorts, where he acted on his simple insight – poor women lack access to credit and small amounts of money could go a long way. Grameen Bank was born in 1983. It took another 10-15 years to scale nationally in Bangladesh and spread internationally. In 2006, he received the Nobel prize, which can be a proxy for the microcredit finally becoming global with the potential to influence the financial system.  Simply said, it takes 4-6 years on average to arrive at a repeatable, scaleable social impact model, and even longer to scale it sustainably. Here are a few more examples:

• BRAC’s Education Model: ~6 years from pilot to large-scale rollout.

• Pratham (India): Took ~5 years to perfect Teaching at the Right Level before scale.

• One Acre Fund: Iterated 4–5 years before going multi-country.

Now let's tackle some of the questions I wish I were asked:

1.Why do you think you have not raised institutional funding yet? 

• Our legal entity – We wanted to be a social enterprise/inclusive business from day one. In India, it meant registering as a for-profit. As the founder, there has never been a doubt that we are impact first. But we learned the hard way that thanks to our legal entity, philanthropic organizations reject us outright, and investors (impact or otherwise) rightly view us as a lousy place to put our money. 
  
  
• Our inability to tell our story well – We knew that we needed grant money for all the impact work we needed to do. We were also figuring out revenue streams from day one so that we could be sustainable someday. We failed miserably to communicate that we were still in the early stages of figuring it out — the model, the revenue streams, the impact story. We knew what we needed.But navigating the world of funders — with limited skills, and even less bandwidth— left us like deer in headlights, paralyzed by the mixed signals from the funding world. 

• We didn't invest in building our skillsets —. Fundraising is a skill. Like any skill, it improves with practice. We just didn't put in as much effort to learn about, and build this skill. Part of the blame can be assigned to our belief system (described below)

2. Why didn't you focus on raising money?

• Our Belief System – I wanted to implement the model, iterate with real beneficiaries and users, and prove our impact before seeking funds. There was also an element of naivete in believing that, "Build & they will come." I knew that there were hardly any successful social enterprises, and if I get the model right, there will be no dearth of money. 

• Limited Bandwidth – According to me, the skills required to build an impact model are disparate from fundraising. There are so many elements to get the model right, and my focus was just that. I do believe that our ability to deliver on impact, with such limited resources, is a testament to this focus. 

• Chasing Revenue Streams — Part of the reason we set up as a for-profit is because we wanted to figure out revenue streams that would make our model sustainable. We imagined that once we get our revenues sorted, we could reduce our dependency on grants.  We were reminded the hard way that people are poor because they have no money. However, we spin it, poor people who are struggling to make ends meet don't have the money lying around to pay for the impact we wanted to create in their lives. If we have to be impact first, our impact work will have to be funded by grants. Period. 

3. Why are you still doing it if there is no money in sight? 

• Impact First, Pay Later - when I joined the social sector close to two decades ago, I never thought I would make any money. I assumed that I would have to figure out a life with limited material aspirations if I chose to build a career in the social sector. Once I worked for INGOs, I was exposed to big(ger) pay cheques and for a while, I did start believing that I should be paid well even if I am doing non-profit work. When I stopped drinking this kool aid, I recognized that my issue was not about getting paid, it was that the link between my pay and the impact I created was not very clear. I have no issues making big money, but only after I have delivered on the impact I promised.  And on a personal note, I joined this sector to live a life of service. Am I being true to myself, if my service orientation is dependant on how much I get paid? 

• It's still early days - Before I started building CoolCoach, I had realized that once I become good at doing good, I don't want to travel (for the sake of travel) and do good. After years, in the sector, the social entrepreneurs I admire have picked a focus area and a geography and been relentlessly at it for decades. Take Joe Madiath, of Gram Vikas. He travelled to the Eastern part of India in 1971, ended up staying there, and set up Gram Vikas in 1979 and he is still there. For me, and for CoolCoach, it's been less than a decade. 

• Our view of the world, our assumptions, our model were right – At the cost of sounding arrogant, the problem I picked, how I foresaw the world to take shape, the trends I identified and bet on, the assumptions I made, and the model I created based on proven ideas, all came out to be true. We have not raised money, doesn't mean we have been proven wrong. 

• To dig in and build the skill in the face of rejection – The more common tale of successful entrepreneurs is of hanging in there in spite of all the rejection they faced. Many also share that more than luck & timing, it's about perseverance. I still have enough fire left in the belly to try. I have identified some of the skillsets I need to build, and I will build them. 

4. Why do you think your model is scalable? 

• It's based on proven solutions/models – Fellowships in the social sector have been proven time and again as an effective means to get young people to fill in as teaching resources in underserved schools. The German Dual track Vocational Education and Training (DVET) is a proven program that has helped Germany become a successful developed country. Crossfit & other group fitness formats have shown how structured programming combined with scaling options allow a single (or small number) coach to effective train a group of people. Re-imagining Physical Education classes with this insight has been a game changer for us. The CoolCoach School Health Program and the CoolCoach Fellowship Program have been build on the shoulders of these successful programs. 

• Trends are universal, and model elements are present – Physical Inactivity is on the rise globally, and so are Non-Communicable Diseases. The opposite of inactivity is activity, and that's exactly what our model delivers on. For our model to work, we need underserved schools, sports persons from poor families, and a growing fitness industry (to place the sports persons after they graduate!) These three conditions are met in almost every developing country that we know. 

• Incentives are aligned — Increased activity is great, but that's not a necessary condition. Luckily, Physical Education is already a part of most school curriculums. By making our School Health Program sticky for school administrators and students, we ensure that schools, especially underserved ones, want us.  Each PE session is designed for children to move & have fun, which means they will come back for more. The Fellowship year is also designed as a "Learn while you Earn" program that keeps it interesting for the sports persons we recruit. On top of it we promise placements that ensure youth are able to build a career in the fitness industry. 

• We have tested our assumptions and our model, and it works — In late 2016, a lot of what I have written above were just assumptions and ideas. I started with taking post-school fitness sessions for a football team in an underserved government school. From there, we went on to develop our program and not only test our assumptions but also measure our impact. And did I mention that we implemented this model across 2 geographies, with an inexperienced team, and minimal resources? The children we trained fitter, the schools we were in keep asking us to come back (clearly we must have done right), and the youth we trained are still building careers in the fitness industry!!

Please note, I didn't even mention Covid in all of this. Covid was a big shock for us, just like for the world. Instead of losing hope, we pivoted and built out an online Fitness Coaching service as an income generation opportunity for our alumni who lost their jobs when gyms were shut in India.  

With the above said, does it really look too bad that we have taken 8+ years? And just because we do not have large institutional backers does it imply we don't have an impactful model worth fighting for?  

There are days when the rejections are piling up, and nothing is going right for you. You are down, and you are forced to confront all the choices you made. In such times, I can't help but wonder if the proof of concept I should have worked hard on was to find institutional funders for our idea, and not on the model itself. Such moments are few and far between, but I would be lying if I said that I didn't sometimes wish if I had done things differently. 

Such moments are rare because I am quick to remind myself that by definition, entrepreneurship is risky. It is risky because not everyone makes it. I am yet to give up, but just because we have not raised money does not imply we have not created impact. And as you might remember, we are impact first. 

So if you’re a funder, I won’t ask for your belief—yet. Just your curiosity. Ask us the hard questions. We’re ready