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Episode 53: Questioning Customary Investment Terms: The Role of Foundations

Episode 53: Questioning Customary Investment Terms: The Role of Foundations

On this episode of the Capital Insight podcast, hosts Jenny Kassan and Michelle Thimesch explore foundations as funders and whether their investment term sheets align with their impact missions.

As lawyers dedicated to growing the social enterprise and marginalized entrepreneur finance ecosystem, Jenny and Michelle have repeatedly witnessed funders claiming to share a similar mission who often miss the mark when it comes to the investment deal terms. Despite their stated desire to address the ever-growing income equality gap and support underserved entrepreneurs, their model of investing is far less equitable — it favors the investor over the entrepreneur and other stakeholders.

In order to better help foundations and other mission-driven investors create the positive impact they strive for, Jenny argues that attorneys for these kinds of investors must break away from the “customary” investment term agreements. She says there is a need to help lawyers feel comfortable with more diverse models so that they don’t always resort to the traditional — and inequitable — approach.

Michelle notes that foundations must work to ensure they better understand the terms of their investments and not over-rely on attorneys and other professional advisors. “Part of this change comes from a willingness to look at things from a different lens and to appreciate the ripple effects of our decisions and where we put our money.” This, she believes, will lead to better alignment between the missions of foundations and the impacts of their investments. Listen to the full conversation below.

 

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The Capital Insight podcast intro and outro is voiced by Marina Verlaine. She can be contacted at reel.peach.vo@gmail.com