I’ve been a funder in the impact space for a long time. I love investing in and supporting social entrepreneurs. I’ve learned (and am frankly still learning) how to do it well. 

The impact financing landscape is witnessing a significant shift as founders and funders increasingly advocate for changes to how capital is channeled. However, I’ve noticed that BIPOC, women and nonbinary founders are conspicuously absent from this movement, despite creating social ventures that serve the overlooked majority. This piece is an effort to share my perspective about how we might better support them to build the ventures this world desperately needs. 

I understand that most folks associate the term “funders” with the nonprofit world and “investors” with the for-profit world. For the sake of brevity, I will use these terms interchangeably and the steps outlined can be employed irrespective of the type of capital you channel. If you dispense funding to social ventures, this article is for you.

What the financing world looks like to social entrepreneurs

Early-stage social entrepreneurs often find themselves caught between two extremes when looking for the capital they need to build their ventures. On the one side, there are philanthropic grants, prized because they allow founders to retain all of the equity in their ventures, but very challenging to secure and often require lengthy applications. On the other side, there are a growing number of impact venture capital funds that can be faster to acquire but founders often struggle to deepen impact while maximizing profits. What’s more, traditional modes of philanthropy and venture capital are especially exclusionary to chronically under-financed BIPOC founders due to systemic biases, resulting in an unequal distribution of resources. Camelback Ventures has been exploring ways to redesign the financing experience to serve both the interests of funders and entrepreneurs. This piece is geared toward impact investors and funders who want to do the same.

Redesigning the financing experience 

Just as we expect founders to design products and services that meet the needs of their target markets, I contend funders must also put in the effort to design financing instruments that align with the needs of BIPOC, women and nonbinary social entrepreneurs. To be honest, Camelback Ventures is still figuring out how to do this but believes strongly in the importance of sharing as we learn. Another caveat: we don’t believe there’s one right way to design financing instruments for social entrepreneurs. This is simply the process we’ve undertaken. It’s been informed by our experiences with founders from our Fellowship program; however, it is still a work in progress and will assuredly evolve as we learn more. For now, I offer up these reflections:

Reflection 1: Establish a foundation of trust by exploring the universe of financing options. 

Given the essential role of capital for social entrepreneurs, financial support from investors is crucial. However, HOW investors launch into financing conversations can influence the type of partnership that emerges. When you (the funder) identify a great venture you’d like to invest in, I’d recommend you explore what types of financing best align with a venture’s mission, risk profile and unique needs. One way to broach this conversation is by inviting founders to use Village Capital’s new Capital Explorer tool, which helps identify financing mechanisms based on a founder’s responses to a series of simple questions. 

Much of the story around entrepreneurship overemphasizes venture capital. However, most social ventures (notably those run by BIPOC, women and nonbinary founders) are significantly less likely to access this type of capital. As an investor, it’s up to you to offer founders this exploration. I cannot stress this enough: the onus cannot be on the shoulders of already marginalized founders. Skewed power dynamics between founders and funders make it very difficult for entrepreneurs to advocate for financing, which risks further alienating them within an ecosystem that already has many barriers to access. 

Expressing a willingness to explore financing options signals to the founder an openness to customizing the investment, laying a foundation of trust for what is (hopefully) a long-term relationship based on mutual benefit. 

Reflection 2: Get into the details about return and control expectations.

The funding landscape is complicated and tough to navigate. Investors may write checks daily, but it's unrealistic to expect founders to grasp the intricacies of every financing mechanism. Funders can and should bridge this knowledge gap.

We collaborated with Astrid Scholz, co-founder of both Armillaria and Zebra Unite, to develop content for our Fellowship program that explains the return and timeline expectations for different types of financing instruments. We then built upon that foundation by delving into the results from the Capital Explorer tool.

However, it’s also imperative that all parties understand the degree to which funders might influence a venture’s business. As an investor, you may seek to influence how a venture grows to safeguard your financial interests, mitigate risks and/or broaden impact. Founders are often uneasy about relinquishing control of their ventures. 

“A lot of the financing discussion is about control. If you're starting a single member LLC, then you are the top dog. Period. No questions asked. Every other governance structure means you have stakeholders. And stakeholders have opinions, if not wants - including investors. Within the financing structure there is a negotiation of control that is happening, whether the parties are explicit or not,” said Aaron Walker, CEO & Founder of Camelback Ventures.

Building a strong foundation of trust at the onset may alleviate some of these concerns, but it is paramount that both founders and funders come to a mutual understanding that respects the founder’s autonomy and the funder’s bottom line. Again, it’s up to the funder to broach this subject and to create a space for honest discussion. This approach transforms the relationship from purely transactional to collaborative. 

Reflection 3: Adjust terms accordingly.

Now that you (the funder) understand a founder’s particular financing needs, and you’ve both mutually agreed to the return and control expectations, all that’s left to do is codify the terms in a funding agreement.

Some may argue bespoke financing terms are too complex and will slow the process of channeling funds to social entrepreneurs. We are currently trying to figure this out within Camelback because it requires changes to how we typically do business, so I understand this concern. However, I believe the extra effort will result in more successful ventures. Tailoring financing agreements means founders can focus on delivering impactful solutions, rather than contorting their businesses to fit a financing template. 

If I’ve convinced you to consider this extra effort, here are some resources to help. For a comprehensive description of different types of financing mechanisms, I recommend reading Aunnie Patton Power’s book, “Adventure Finance.” The corresponding Innovative Finance Playbook includes templates of term sheets for different product types, descriptions of different fund types, and sources of capital for funds. 

While there is a learning curve, there are resources and a growing community of funders that can support you.

We need more organizations to join this movement

Camelback has spent the past 10 years working toward our mission of increasing access to opportunity and capital for social entrepreneurs who are folks of color, nonbinary and women. We have learned the needs and wants of these diverse founders, and have come to better understand the unjust system in which entrepreneurship exists. We have also learned a lot about funders and social impact investors - those who’ve been allies, and those who haven’t. While some are content with the status quo, we are ready to support and accelerate those who have the desire and commitment to make meaningful change - within themselves, their respective institutions and within the funding sector.

Why are we writing a piece about redesigning financing? Camelback Ventures stands out as a funder with a distinct perspective. While we share similar expectations for returns common to any investor, we are acutely aware of the challenges BIPOC, nonbinary, and women social entrepreneurs face as they navigate a financing landscape laden with biases. Given the threat of lawsuits and the decreased funds going to already underfinanced founders, we believe it’s imperative to work with our founders to access the right kind of capital so they can build impactful ventures.

But we can’t do this alone. We need more funders to actively engage in the critical work of reshaping the financing landscape for social entrepreneurs. Furthermore, given that the bulk of impact financing still resides within White-led institutions, it’s absolutely imperative that these organizations actively join the movement toward more equitable financing to bridge the existing financing gaps. 

We are at a pivotal time in our country and in the entrepreneurial ecosystem, and you are in a pivotal position to be part of the solution with us. The movement for more equitable impact financing is growing, and we need as many funders as possible to join if we’re serious about supporting social entrepreneurs to build the ventures the world desperately needs. If you are serious about building a more just funding landscape, complete this interest form to learn more about our work.
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The Capital Collaborative by Camelback Ventures works with white funders and social impact investors who want to deepen their individual and organizational commitment to racial and gender equity in philanthropy — but may not know how. You can learn more about how to get involved by submitting an interest form for the Capital Collaborative’s next cohort or signing up for the newsletter.