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What does it mean to Raise the Right Money from the Right Investors?

What does it mean to Raise the Right Money from the Right Investors?

I was at a great event last week called Food Funded. Kate Danaher of RSF Social Finance was speaking on a panel and said that she meets too many entrepreneurs who tell her that they have certain goals for their business but they have already raised money from investors in a way that is completely inconsistent with their goals.

A few years ago, I started telling entrepreneurs that they need to raise the Right Money from the Right Investors because I was seeing something similar to what Kate was talking about.

The Right Money means that the type of investment you are offering is designed so that your investors‘ interests and expectations are aligned with yours. For example, if you offer equity and never plan to pay any dividends, your investors are likely to expect you to sell the business as quickly as possible so they can get paid. If you don’t want to be pressured to sell the business before you’re ready, you should offer something different!

The Right Investors means that your investors share your goals and values, as well as your vision for the future of your business. They won’t pressure you to take things in a direction that doesn’t feel right to you.

Unfortunately, there are still far too many entrepreneurs that (usually inadvertently) take on the wrong money from the wrong investors.

If you are thinking about raising money for your business, I would love to talk to you about your strategy. My Women Raising the Right Money from the Right Investors mastermind program summer cohort is starting soon. If you’d like to learn more, click here.

Investors are Incredibly Diverse

Investors are Incredibly Diverse

When you think of investors, what do you picture?  White guys in suits or khakis looking for the next Snapchat?

Or do you picture a group of young people who say things like this:

To invest is to put resources (energy, work, finance, love) into something to create change over time.  We must seek, with our investments, to fundamentally change the very shape of the economy.

At the Confluence Philanthropy Gathering in Boston, I caught up with Kate Poole, one of the founders of Regenerative Finance.

Regenerative Finance is an organization of young people “with access to wealth and class privilege who believe in a more just world. . . . Regenerative Finance shifts the economy by transferring control of capital to communities most affected by racial, climate and economic injustice.”

The members of Regenerative Finance look nothing like the stereotype of an investor and their goals and worldview could not be more different from the typical venture capitalist or investment fund.

When you picture an investor, keep an open mind!  That kid with all the piercings and tattoos sitting next to you at the coffee shop could be your next investor. Approximately 55% of Americans invest in the stock market. Many more have savings at financial institutions.

A majority of the population of the U.S. is made up of investors! The more you broaden your definition of potential investors, the greater success you will have raising capital. Instead of fishing in that tiny pond of venture capitalists, professional angels, and investment funds, why not fish in the ocean of non-professional investors – some subset of which might be really excited by your vision and passion.

Spotlight on a Successful Social Enterprise: Equal Exchange

From the Equal Exchange YouTube channel

Financial Success and Core Values
One of my favorite examples of an organization that has been able to raise millions of dollars of capital while staying in control and true to its values is Equal Exchange.

Despite posting enviable growth, this company has successfully retained its mission to create mutually beneficial relationships between farmers and consumers and support worker democracy and fair trade throughout the world.

Try some of Equal Exchange’s teas, coffees, chocolates, and fruit. You’ll be hard pressed to find goods of this quality anywhere else, and you’ll feel awesome that what you’re consuming is good for you and good for the world.

So what’s their secret?
How has Equal Exchange been able to grow and thrive for over 25 years while maintaining its mission and values?

Equal Exchange stipulates from the outset that investors have no voting rights. Investors are sufficiently confident in the worker-owners of the company to steward its resources. And investors have never been disappointed – they have received generous dividends every year, resulting in a return that exceeds a comparable investment in the S&P 500.

Notably, Equal Exchange’s structure prevents any investor or owner from profiting from the sale of the company.

Equal Exchange’s structure and investor agreements ensure that only values-aligned investors will be interested. The controls placed shareholder participation have never proven a hurdle to gaining investment. Demand exceeds supply every time. Equal Exchange offers its preferred stock.

Values-Driven Business
Equal Exchange is not successful in spite of its commitment to its mission but because of it. A majority of investors and consumers want to do business with values-driven companies and Equal Exchange meets that demand.

There is plenty of room for more companies to do the same!