I was asked to give a talk a while back on funding strategies to a group of aspiring social entrepreneurs going through Portland State’s Impact Entrepreneurs course. (It’s a great program run by awesome people - you should check it out) Like any good guest lecturer I immediately googled around looking for a presentation I could steal. I found some useful ones, but I was struck by how many otherwise sane people were telling social entrepreneurs that their main source of funding would be venture capital - either commercial VCs or that elusive (mostly imaginary) beast, the impact VC. The presentations focused on how to construct a pitch - to communicate the business to VCs in terms they understand - without stopping to consider one basic fact.
95% of social entrepreneurs will never receive venture capital.
What do you need to be venture fundable?
If you can do all of these things, then venture capitalists will, in theory, will provide you with millions of risk-loving dollars to rapidly scale your venture. There are a few social ventures that fit the bill and for those (or this one), venture capital is a great tool. It’s actually where I have spent much of my career, but it’s a tiny tiny sliver of the entrepreneurial landscape.For most ventures, even a lot of great ones, it’s a non starter for any number of reasons, including:
By now, you are probably asking “What’s the harm in all of this VC talk?” After all, a few ventures do get VC funded and the rest were probably crap anyway, right? Well, I think there are a few reason’s it’s dangerous.
So, as Chernyshevsky once said, What is to be done? Well, first off, I want the companies that are appropriate for venture capital and for the impact focused venture funds to keep kicking ass. Nothing in the above screed is an indictment of those for whom the VC model actually works, For the rest, though, I have a few incomplete ideas that I’ll be kicking (and I appreciate any feedback) I think we need:
Well, I definitely went over my time limit today. Hence the proposed solutions being less fleshed out than the problem statement. I guess I’ll work on this more another day and in the meantime, feel free to let me know what you think.
Patrick Maloney lives in Portland, OR where he helps nice people working on cool stuff. He tries to limit his blogging to things about which he knows something.