Free money for your impact tech startup

Congratulations!  You’ve decided to launch a technology-enabled startup with a positive social impact!  Nearly every major Silicon Valley venture-capital firm has now invested in a B Corp; maybe you will be one of them!

Now the bad news: some venture capitalists have a bias against startups with an explicit positive social impact, on the grounds that they have a smaller addressable market, and that the founders are not sufficiently focused on creating shareholder wealth. And of course, effectively all venture capitalists are going to require some equity for their investment.

For our full list of free sources of capital, see Free money for your impact tech startup.

* I’m an investor in this company.

Thanks to Emily Campbell, Esq., of The Campbell Firm PLLC for helpful input; she has advised me on some legal matters in the past.

I cross-contributed this to Techcrunch.

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  1. Tim Olson says

    I’m an ADVISOR TO impact startup fOLIA materials which makes a revolutionary water filter that reduces the cost of clean water by an order of magnitude. it’s targeted at base-of-the-pyramid consumers in low-income countries and has a potential market of 2 billion people paying a couple cents per day… A market of $10-30 billion annually.

    the bad news first, then the good:
    the “impact funds” they talked to make a lot of posturing and noise but ultimately silicon valley gave them nothing. there’s no iphone app or 95% gross margins, so even though one firm awarded them “Most fundable startup,” that same firm invested in someone else, not Folia. hahah? they were able to raise from angels, but the impression we got from “impact vc’s” is that it’s just a marketing tactic to get LP’s. maybe they are willing to shave a percent or two off their IRR target in order to pat themselves on the back for “doing good.” make no mistake, folia has real technology and a huge market and they are showing traction. but it’s a materials company, not a saas, and silicon valley has absolutely no clue if your product isn’t an iphone app. my assessment of impact vc’s is that they are really no different from regular vc’s in the way they evaluate companies. they will –say– they’re different but when reality comes along, the impact of being an “impact startup” is a very small factor. unless you’re a tech company or saas with unprecedented margins who could raise from regular vc’s, do not expect impact vc’s to help.

    now the good:
    folia has legitimate technology and has been able to raise millions from other sources:

    – raise from angels. disintermediating vc’s and going straight to rich people can work. many of them actually do care about changing the world. vc’s need to show a return in order to raise their next fund, but wealthy people are looking for legacy. skip the middlemen whose interests are not actually aligned with your vision. these days, debt rounds can run into the millions of dollars without ever talking to vc’s.

    – government grants. folia has secured grants from both the nih and nsf to develop and commercialize their product. the sibr program can take a long time (a year) before you see the money, but it’s free money with no dilution, and phase 2 and phase 3 funding can also grow to millions of dollars

    – corporate social resposibility. believe it or not, many large corporations have social programs. from soft drink manufacturers to oil drillers, corporations are often looking for ways to boost their image in communities they work in. if you’re drilling oil wells in a remote area, it’s pretty easy to just drill a water well for the local village and make them all love you. if you’re producing soft drinks, you need a clean water supply to begin with, so you might as well help out the public water system. these are marginal costs for corporations and the activities are already aligned with their profit development.

    – outright corporate sales. in folia’s case, several large corporations saw promise in the new technology for uses that folia didn’t even consider. i can’t say which ones, but there are -large- companies outright handing them money to explore alternative use cases for their technology, which may benefit the corporation if it works. companies do R&D all the time, and they may be willing to outsource that r&d to you if there’s synergy. big companies are scared of disruption and they generally would rather develop a relationship with you early on than have to deal with you after you’ve grown big.

  2. Tim, I’m glad to hear that you’ve had success with this!