When I first started out in business the lines were pretty clearly drawn: if you wanted to make money, you joined the corporate world or followed your entrepreneurial vision. If you were a do-gooder, you gravitated to the non-profit sector. When I founded a global economic development company back in 1999, a for-profit social enterprise, I felt like I was almost alone out there.
But what I’m seeing as I mentor and coach entrepreneurs in the U.S. and globally is that more and more of them want to build companies that can make a positive social impact — in health care, in education, in the environment, you name it — and they’re still interested in making money.
It’s practically beyond argument that the problems we face are so enormous, we’re going to need more and smarter market-based solutions to solve them. And female entrepreneurs are well-positioned to seize those opportunities.
The research suggests that women’s investment decisions are more deeply influenced by their social and environmental values than men’s. If, as some finance experts predict, women will control 2/3 of the nation’s wealth by 2030 there should be a tremendous amount of female investor money finding its way to female-led or co-led companies trying to make the world a better place.
“We’re seeing an incredible and disproportionate number of female entrepreneurs coming our way who are deeply passionate about social impact businesses,” says Jenny Abramson, founder and managing partner of Rethink Impact, one of a growing number of venture capital firms specifically looking to invest in companies with diverse leadership, especially companies with female founders and CEOs.
But there’s a catch. Big investor capital has, for the most part, not yet caught this surging demographic and economic wave. I’ve listened to plenty of frustrating stories from my female entrepreneurs mentees who have been passed over by VC firms in favor of male counterparts with businesses that have less traction.
Those stories are validated by some grim numbers — only 9 percent of VC investors are women and only 2.3 percent of VC dollars are currently being invested in women-run companies, according to a study from Pitchfork. What I tell my Georgetown University students, especially the female entrepreneurs with a social vision, is that this is a great time to get funding for your new venture, because not everyone has caught up.
Here’s my primer on how to beat the odds:
1. Know your worth.
If you’re a female entrepreneur in the social change space, you’re effectively offering impact investors “two for the price of one” — gender diversity and the opportunity to fund solutions to pressing social problems.
There’s no ROI penalty attached to doing well by doing good. One BCG study found that companies founded or co-founded by women earned 10 percent higher revenues than male-led firms. And, according to the Global Impact Investing Network, 91 percent of investors in the social impact space say their returns have meet or exceeded their expectations.
2. Learn to jujitsu investor gender bias.
Dana Kanze, at the London School of Business, discovered in a 2017 study that potential investors, men and women alike, are more likely to ask male entrepreneurs “promotion” questions, about hopes and aspirations, and their female counterparts, “prevention” questions, about how best to manage trying situations. When I coach women entrepreneurs I tell them to answer the question you should have been asked.
3. Geography isn’t destiny.
Most of the country’s venture capital is amassed in Silicon Valley but that’s not necessarily where women investors are, or the entrepreneurs they’re investing in. Only seven of the 56 investment funds that specialize in woman-run companies are headquartered in the S.F. Bay Area. That means the onus is on female entrepreneurs to get themselves noticed, with the help of start-up accelerators and incubators who VCs look to for referrals, and media outlets, including INC’s The Fundery, which publish lists of funds in the business of investing in women. No matter where you live, find a fund or an investor pipeline looking for people like you, with goals like yours.
4. Stick together.
Often the best source of information on where to go for funding, and what kind of funding to go for, are your peers, other entrepreneurs. Abramson at Rethink says she often gets high-quality recommendations on prospective investments from the companies already in her portfolio. Networking with your peers can also give you a better sense of whether you and your company are ready to enter the VC sweepstakes.