5 Ways to Score Impact Investment

(Source: Got Credit, Flickr)

1. Angel Investors

Angel investors who want to support social impact startups, especially those who share an interest in your type of mission, can be a promising place to find funding.

• Ekso Bionics, a technology company promising to revolutionize the life of paraplegics through robotic legs, raised more than $30 million over three years, $8 million of which came in Series A Funding from angel investors, most notably IronPort cofounder Scott Banister.
• Reaction Housing, an Austin-based company that created affordable, reusable, and portable shelters in the wake of Hurricane Katrina, raised $1.5 million in seed funding with the help of 11 angel investors and MI Ventures last year.

You can start your angel search at Gust, where investors have funded over 1,800 startups in just the last 12 months, and given a total of $1.8 billion in funding; AngelList, which registers almost 30,000 investors, and features big shots like Jeremy Stoppelman (Co-founder & CEO of Yelp) and Travis Kalanick (Co-founder & CEO of Uber); and Enable Impact, a searchable database of over 1,000 impact investors and 600 programs.

2. Venture Capital

Venture capital investment topped $48 billion in 2014, reaching its highest level in over a decade, according to a study by PriceWaterhouseCoopers and the National Venture Capital Association, with roughly $2.3 billion to $4.8 billion going into impact investment and those numbers are set to grow.

• Revolution Food, which delivers healthy and affordable meals to school kids in California, first scored money from venture capitalist firm DBL Investors in 2009. DBL fine-tuned the business plan, introduced the founders to additional venture capitalists, and helped Revolution Food score Series A funding totaling $6.5 million.
• The salad chain Sweetgreen secured $22 million in funding from Revolution Growth, a venture capital firm, in December 2013. Since then, the D.C.-based operation scored an additional $18.5 million, and has opened stores in New York City, Boston, Philadelphia, and LA for total of 31 stores as of early 2015, reports Entrepreneur.

Below is a list venture capital firms you can start to explore:

• DBL Investors, a venture capital firm investing in enterprises like Revolution Food that deliver traditional returns, and social or environmental impact.
• Unitus Capital, a venture capital firm founded by the international nonprofit Unitus Labs, with investments in Asia and plans to expand globally.
• Investors Circle, an early-stage investment network that works with angel investors, VCs and foundations, investing nearly $200 million in over 300 social enterprises.
• Renewal Funds focuses on organic and natural food, green products, and environmental and social innovation. It generally offers between $500,000 and $2 million to companies generating over $1 million in annual revenue.
• Kapor Capital invests in tech-driven startups committed to closing the gap of access, opportunity or outcome for low income communities and/or communities of color in the US.
• GrayGhost Ventures goes for companies that offer tech and other products for underserved people in emerging markets.
• City Light Capital focuses on businesses that develop innovative technologies that create change in education, safety, and the environment.
• Good Capital invests in companies that create market-based solutions to poverty and inequality. Their investments focus on startups with two or more years of operating history and $500,000 in annualized revenue.

3. Grants & Fellowships

Grants, most of them government sponsored, make up roughly $3 to $5 billion of the funding to high impact startups, and they include:

• Federal programs such as Startup America, a $2 billion White House initiative that supports high impact startups and companies that lack the means to acquire traditional bank funding, and Small Business Innovation Research Program, which awards about $2 billion a year to high impact tech startups for research and development, and bringing their products to market. (For more on federal grants, research The Corporation for National and Community Service.)
• Omidyar Network, a hybrid foundation and impact investment firm started by eBay founder Pierre Omidyar, funds entrepreneurs committed to social good, investing nearly $400 million into for-profit companies since launching in 2004.
• Echoing Green’s Fellowship Programs has granted emerging social entrepreneurs more than $4.6 million in seed-stage money in 2015 alone.
• The Case Foundation, The Ford Foundation, The W.K. Kellogg Foundation, and Draper Richards Kaplan Foundation also offer grants to high impact startups, often in partnership with other organizations.
• Dell Social Innovation Challenge, and the NYU Reynolds Program in Social Entrepreneurship and D-Prize host competitions for social entrepreneurs to show off their ideas and win capital for their businesses.

4. Accelerators

Accelerators take a six to eight percent stake in your startup in exchange for their mentorship and capital. Most programs last three to six months, and offer somewhere between $14,000 and $20,000.

Several accelerators specialize in social impact startups including the following three, which are the largest and best reviewed:

• Impact Engine’s team of entrepreneurs and investors have collectively raised hundreds of millions of dollars focusing on social impact businesses. The successful accelerator offers two and sixteen week programs, $25,000 in seed funding to each startup that completes its course, and access to its angel network.
• Village Capital gives more than $50,000 to the top two of twelve startups that graduate from its very competitive programs, which are split up by sector. Participants rank each other according to six criteria throughout their course, and after the final ranking, the top two companies receive the investment.
• Unreasonable Institute seeks to grow startups into ventures that impact at least one million people, raising $72.1 million for more than 90 startups since its launch in 2010. Its programs run five days to five weeks, and includes labs, investor pitching sessions, and boot camps geared for high-impact investors.

There are additional opportunities that have more specifics parameters including Leapfrog Investments, a private equity fund that invests in high-growth companies that help serve low-income families (primarily in Africa and Asia); Equilibrium Capital, which funds startups working on sustainability issues; and Catapult Incubators, which focuses on students.

5. Crowdfunding

Experts expect crowdfunding to explode by 100–300 percent a year, with money topping $300 billion by 2025, according to the World Bank’s report, Crowdfunding’s Potential for the Developing World.

• Goldieblox: The Engineering Toys for Girls raised almost $300,000 on Kickstarter to create a toy and book set to spur the interest of young girls in science and engineering.
• Grapevine Craft Brewery kicked its $50,000 goal out of the park on Fundable, raising almost $62,000 in a single push to launch its craft beer company out of North Texas. Part of its crowd appeal included dedicating 5% of its profits to the local community on a quarterly basis, specifically to Grace, a nonprofit that serves underprivileged children and families in and around Grapevine, Texas.
• Lumni, an international pioneer in “human capital financing” invests in higher-education for low-income students mostly by supporting income share agreements, raised $50,000 through Mission Markets and now boasts about $50 million in funds from a combination of individuals, corporations, and foundations.

Crowd funding sites like StartSomeGood, Chuffed, and CausesVox focus exclusively on social impact financing, while Indiegogo and Kickstarter cater to a more general audience, and offer more traffic and eyeballs. Mission Markets (MM), a different type of crowdfunding site, works as a private capital marketplace for impact investing where accredited investors scout approved social enterprise offerings.

To learn about social impact and our pro bono consulting services for startups, please visit our site at StartingUpGood.info.