How To Build A Mission-Driven Company (And Raise A Ton Of Capital Along The Way)
Atticus LeBlanc Leveraged His Company’s Social Mission To Raise $4 Million+ From Nonprofits and Socially-Conscious Investors
Before launching his own company, Atticus LeBlanc spent about a dozen years as an affordable housing investor in Atlanta. He worked with both public and private housing, which gave him a well-rounded view of the property market — including the drawbacks.
“I saw some fundamental flaws,” Atticus says of the typical rental real estate market.
“For instance, why would any landlord make energy efficiency improvements to a property when they know that the tenant is on the hook to pay those utilities?”
“The answer is they don’t, usually.”
Ideas for improvement began to coalesce in his mind. He wrote them down, submitted a whitepaper to an Atlanta affordable housing ideas competition and was selected as one of three finalists. Suddenly he had $10,000 to pursue his idea.
Atticus saw that as a green light: “Okay, there’s something here and this is something I’m going to focus on.”
Eventually, the idea gave rise to PadSplit, an affordable housing marketplace for low and middle-income Americans. While offering cost-effective rentals, the platform also helps private market owners make a profit from existing residential spaces.
Since its founding in 2017, PadSplit has expanded within the Atlanta area, picked up 39 investors along the way and landed $4.6 million in funding (in an oversubscribed round).
Here’s how Atticus garnered support for his mission-driven company.
Foundation funding 101
Before seeking out investor money, Atticus looked into partnering with non-profit foundations that were aligned with PadSplit’s mission.
Though it can be “much harder” to open doors in the philanthropic world, Atticus eventually landed a $1 million line of credit from a foundation.
“The good news is it’s non-dilutive. The bad news is that you’ve got to pay it back,” Atticus says.
Some entrepreneurs avoid debt financing like the plague, but as a self-described “real estate guy,” Atticus insists he has “very little aversion to debt” — under the right circumstances.
And in this case, he was able to check the necessary boxes.
Atticus didn’t regard the foundation funding as growth money, though. “We never viewed [the line of credit] as growth capital,” he says. “We viewed it as building out this local enterprise and getting started, perhaps in the way that most people would think of a traditional seed round.”
With nonprofit giving, grants tend to be more common than lines of credit. At the same time, social impact investing is becoming more popular and foundations are beginning to think of themselves more like investors, and less like traditional charities, Atticus says.
As an added bonus, foundation funding often has a subsidized interest rate and considers “repayment of capital [to be] a bonus,” while VCs want a guaranteed return on their investment.
Is this right for you? Foundation funding is “certainly a source that’s out there for any mission-driven organization,” Atticus notes. “But if there’s no mission, then there’s no point.”
Wooing Foundations vs. VCs
Atticus used the same approach when engaging with foundations as he would have with traditional investors, but with one slight difference: he placed extra emphasis on the “massive social benefit” of supporting PadSplit’s mission to address housing insecurity.
According to Atticus, the company’s model saves roughly $500/month for people making $20,000 a year.
“You don’t have to serve that many people before you make a really significantly outsized impact,” he says. “So that was a big part of the pitch.”
Social impact investors gravitated towards the company but actually finding those VCs “took longer than it probably should have,” according to Atticus. While there’s no database of mission-driven VCs, he credits his first set of connections to Techstars Atlanta.
“The size and breadth of the network were pretty incredible,” says Atticus. “Coming out at demo day with a really solid pitch that was watched by a bunch of VCs in the audience gave us a huge springboard to be able to start the fundraising process.”
But Atticus waited to start raising officially.
“If you don’t know how you’re going to spend the money, then you’re not ready to raise the money,” he says.
“I felt like the business was not at a point where we had built our foundation to be able to look somebody in the eye and say, ‘I want you to give me one million bucks.’”
While Atticus ironed out the details, he started laying the groundwork for long-term relationships with potential investors.
“It’s a lot easier to come back and ask somebody for money if the first time you’re not asking for money,” he explains. “Build those relationships over time and demonstrate that you’re a straight shooter.”
Relationships based on shared values
When he went out to raise VC, Atticus began going through his “really long list” of investors who “aligned personally” with PadSplit’s mission. Those investors included Kapor Capital, Cox Enterprises and Core Innovation Capital, which led the round.
“All of our institutional VCs publicly stated that they were social-impact driven,” says Atticus. “That was a really important part of the way I was evaluating VCs because it’s a big part of who we are.”
Thinking back on his unique fundraising journey, Atticus says two main tactics have helped a lot.
Tactic #1: Collect written commitments before you begin collecting checks.
In PadSplit’s case, Atticus sought out individual investors who felt invested in its mission to get third-party validation.
“Those are the people who are most likely to invest in you, period,” says Atticus. “Even if you’re not collecting their checks, [you can] collect commitments and then go back to VCs saying, ‘These are the people who believe in me.’”
While it’s an unconventional strategy, it worked. He got investors to commit more than $4 million that way.
But when PadSplit started getting institutional interest, “we had to push a lot of those investors down, which was painful,” he admits. “At the end of the day, the vast majority of those folks didn’t really care if they were in for 10,000 or 100,000. They just wanted to be part of this.”
Tactic #2: Provide weekly investor updates with “transparent” reporting on the company’s KPIs.
Atticus is a believer in weekly (vs. less frequent) updates. Some investors might prefer monthly or quarterly updates, but regardless of the cadence, Atticus says the practice is an effective way to keep investors and other stakeholders in the loop.
He sends one update to everyone on his list every Wednesday night and tries to be transparent about the “good, the bad, and the ugly.”
He’s also found the updates helpful for his team and beyond.
“It has been very cathartic for me as a founder, as well as a very good way to keep the rest of our team and myself on track,” he says.
But there’s the bigger picture, too. “Our mission is to effectively solve the affordable housing crisis,” says Atticus. “There are a lot of lessons that I would want to be out there if I get hit by a bus tomorrow.”
Nathan Beckord is the CEO of Foundersuite.com which makes the leading fundraising CRM for startup founders. Foundersuite’s software has helped entrepreneurs raise over $1.2 billion in seed and venture capital since 2016. This article is based on an episode of Foundersuite’s How I Raised It podcast, a behind-the-scenes look at how startup founders raise money.