Funding the Future: Marcia Dawood on Investing with Impact (Part Two)

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Speaker 1: Forbes Books presents the Startup Science Podcast with Gregory Shepherd, 2 - > brought to you by Startup Science dot Io. Greg is 3 - > an entrepreneur who's built and sold twelve businesses, a recipient 4 - > of four private equity awards, featured ted X speaker and 5 - > Ben Bella Publishing and Penguin Random House author. Here's Gregory Sheppard. 6 - >

Speaker 2: I'm back here with Marcia Dahwood, an early stage investor, 7 - > author of Do Good While Doing Well, ted X speaker, 8 - > and host of the Angel Nextdoor podcast. She shared our 9 - > journey from attending her first Angel Investor meeting in twenty 10 - > twelve to chairing the Angel Capital Association and advocating for 11 - > diverse founders. So, Marcia, you've invested in over fifty startups 12 - > and funds. That's a lot of investments. Does anything surprise 13 - > you anymore? 14 - >

Speaker 3: Sometimes? Sometimes? Well, you know, it would be really nice 15 - > if we if the m and A market started to 16 - > come back and we can get a couple more exits. 17 - > I feel like it's been a while, so you know, 18 - > I'm a big fan of funds. I really haven't made 19 - > that written that many checks. That includes exposure that I 20 - > have to companies through funds, right, So I'm a big 21 - > fan of that because you can write one check and 22 - > you could get exposure to sometimes ten, fifteen, twenty companies. 23 - > And I especially like that for new investors because that 24 - > de risks their portfolio almost immediately, you know. I tell 25 - > a story in my book about two people who were 26 - > in my angel group and both of them at supper 27 - > Times wrote three checks to three companies, but they were 28 - > different companies. The one person had a great return, like 29 - > two of the companies exited within like two years. They had, 30 - > you know, made a bunch of money. They thought angel 31 - > investment was the greatest thing. Ever, the other person lost 32 - > all their money, like within a year. I thought Angel 33 - > investment was the worst thing that happened to them. And 34 - > so here you have two examples that are kind of extreme, 35 - > and neither of them are really great examples that you'd 36 - > really want the population as a whole to think is 37 - > angel investing. So to me, when you have that diversified 38 - > portfolio and you invest through funds, that is a way 39 - > that you can start to say, Okay, I understand the space. 40 - > I can now be connected to these companies. And maybe 41 - > sometimes a lot of people don't have time, you know, 42 - > so they want to make a more passitive investment, and 43 - > they can do that through a fund. And then the 44 - > fund manager is the one who's kind of organizing everything, 45 - > keeping up with all the companies. And then they always 46 - > let the investors who are in the fund kind of know, Oh, 47 - > this company is looking for this or that or needs 48 - > this kind of help or that kind of help, and 49 - > if you can help, you can help, can't. I just 50 - > think the whole fund model is a good one. 51 - >

Speaker 2: I want to talk about your book. First of all. 52 - > You know, I came from a poor family, right and 53 - > I fought my way up, and so I love the 54 - > idea of doing good while doing well, Like this is 55 - > the title of your book is exactly because I felt guilty, 56 - > you know, when I had my first exit, I felt guilty, 57 - > and I was like, wait a minute, why am I 58 - > feeling so bad? You know, And so the concept of 59 - > doing good while doing well is just beautiful. What inspired 60 - > you to write the book and who did you write 61 - > it for specifically? 62 - >

Speaker 3: So I wrote it because I personally, I was getting frustrated. 63 - > I was seeing how hard it was for entrepreneurs to fundraise, 64 - > especially women and people of color, and I thought, wait 65 - > a minute. I meet people and I would say to them, well, 66 - > you could be an investor too, and they would say me, no, 67 - > I can't be. I can't be an investor because that's 68 - > just for rich people. I have to have a finance degree, 69 - > it have to be invited. Da da dah. They have 70 - > all these myths, and I thought, no, no, no, that's not true. 71 - > But it's so hard to just kind of explain, and 72 - > there's so many things, and that, oh, you could start 73 - > with equity crowdfunding even because that you can invest for 74 - > like one hundred dollars or two hundred dollars. You didn't 75 - > even have to put up you know, thousands of dollars 76 - > or millions of dollars. Like there's this perception that an 77 - > angel investor is like this person who kind of sneaks 78 - > into the room and then quietly drops millions of dollars 79 - > onto a company and then quietly leaves, and then all 80 - > of a sudden, the company does super great and then 81 - > they end up with all this money. Well, that's not reality, right, 82 - > So I was trying to write a book that would 83 - > be how do we demystify this whole thing? How do 84 - > we get it to a point where people could actually 85 - > say to themselves, you know, I would like to help 86 - > with XYZ change that I want to see in the world, 87 - > and how do I do that? Well, here are the ways, 88 - > because Marshall told me so. 89 - >

Speaker 2: I've read your book from the first time we met, 90 - > and I think it's amazing, and especially in contrast to 91 - > some of the other books like Venture Deals, right where 92 - > you know when. 93 - >

Speaker 3: You write a different books the Venture Deals, Yeah. 94 - >

Speaker 2: Yeah, right, if you're a founder and you try to 95 - > read this, you're like, what is going on? And it's 96 - > written specifically for those type VC type investors. But your 97 - > book is way way different. First of all, it's way 98 - > easier to read. It explains things in a very you know, 99 - > it's accessible, right, So I'd like you to talk a 100 - > little bit about sort of how what's in the book 101 - > and how the book relays this information to the reader, 102 - > because I found it to be I was like, oh, 103 - > finally somebody wrote a book about this that you know 104 - > isn't like a math problem. 105 - >

Speaker 3: Well, okay. First of all, Venture Deals is one of 106 - > my favorite angel investing books, and I have copies of 107 - > I think I have three copies of my house because 108 - > I have to keep one in every room because it's 109 - > such a great reference guide. But to your point like 110 - > it also, I think if you have insomnia, sorry Brad, 111 - > but if you have like you could probably read parts 112 - > of it. I think he even says that in his 113 - > course because it is very dense, it's very a little 114 - > heavy and all that kind of stuff. But I do 115 - > love it. It's a fabulous, fabulous, fabulous book. But I 116 - > also found that there's there were books out there are 117 - > books out there on angel investing, and but why would 118 - > somebody pick up a book like that if they don't 119 - > even think angel investing is for them? And then as 120 - > I talk to other people and I would say, hey, 121 - > you know, you could try this, and they'd be like, ah, 122 - > like it just seems scary, like it's overwhelming. Oh the 123 - > things that you do are so different. I don't think 124 - > I even know where to start. And so that I 125 - > don't know where to start thing is where I got 126 - > the idea that hey, wait a minute, we have to 127 - > make this like much much simpler and make it approachable 128 - > so that people aren't so scared by it and that 129 - > they do feel like, hey, this could be for me too. 130 - > And I just I literally just had a conversation recently 131 - > with Witty Nice. He runs the crowdfunding associate group, and 132 - > he has just a wealth of knowledge. He's basically like 133 - > the godfather of crowdfunding. And we were talking about how 134 - > I just really believe that crowdfunding is so great for 135 - > new investors, and it's also so great for entrepreneurs and 136 - > being able to get that kind of gap funding that 137 - > they need from their idea to actually getting some more 138 - > sophisticated investors into their company. And so all of these 139 - > things are the biggest reasons why I thought, Okay, if 140 - > we can just kind of get people past that initial 141 - > fear of like, Okay, this isn't really so hard, it's 142 - > not so scary, maybe we will get more people who 143 - > will want to do it. And the more and more 144 - > people that we get to do it, the easier it's 145 - > going to be for entrepreneurs. 146 - >

Speaker 2: So you're doing good by doing well or doing well 147 - > by doing good yourself. Yeah, that's that's really beautiful. I mean, 148 - > I just loved it. I mean I just I was 149 - > reading and I was like, Okay, this is accessible. You know. 150 - > I know I've referred venture deals to so many founders 151 - > and they come away and they go well. Once I 152 - > woke up, I was able to sit down with a 153 - > spreadsheet and start trying to figure out what this guy 154 - > is saying. You know, that's from a new founder's perspective, right, 155 - > So yeah, I mean for somebody that's got a little 156 - > more experienced the book is a bible, right, But I 157 - > found your book to be way more accessible, and it's 158 - > something that now I'm referring instead of venture deals to 159 - > early stage you know, angels, you know where like, how 160 - > does this work? What do I do? And You're right, 161 - > a lot of them say, I don't know about it? 162 - > What do you do? Well, I invest into my four 163 - > to one k et cetera, et cetera. Right, Well, maybe 164 - > you should look at this as a different asset class. 165 - > It's got high returns, high risk to traditional algorithm. But 166 - > I I'm just a huge fan. So I wanted to 167 - > spend a little time on it because I think that 168 - > if you're listening and you're an early stage investor or 169 - > a founder, this is a book you should absolutely buy 170 - > and read. It's fantastic. So let's move on to the 171 - > next question. So I wanted to ask you, so, going 172 - > back to these investors, and you look at these early 173 - > stage investors, how do they align their portfolio to their 174 - > values without sacrificing the returns. 175 - >

Speaker 3: Oh, such a good question. So I have this kind 176 - > of love hate reli relationship with the word impact because 177 - > I really believe that you can invest where you want 178 - > to see change and get financial returns. But there's this 179 - > connotation around the world impact and they and that people think, oh, well, 180 - > if I invest for impact, that means of basically making 181 - > a donation. I shouldn't expect any financial returns. It's just 182 - > you know, we don't. We don't really do that. That's 183 - > that's for other people. But I do believe that you 184 - > can do both. But I think you have to be 185 - > looking in the right place. You have to do your diligence, 186 - > and you have to think about what are the things 187 - > that truly are my values? What is it that I 188 - > care about? So in the book, I have a worksheet 189 - > that people can fill out. It's one page. It's super easy, 190 - > But the questions they might not be super easy to 191 - > like think about, because it's asking you, like, what are 192 - > the things that I care about? Where do I want 193 - > to put my money? Do I where do I even 194 - > want to start? You know, in a lot of cases, 195 - > what about the stock market and the people that we're 196 - > investing in? Through the stock market. Do we know all 197 - > of their values? Do we know the company's values, do 198 - > we know what they're you know, looking at or what 199 - > they have been thinking about? So I think, well, okay, 200 - > if there are startups out there that we can be 201 - > investing in, then we could actually be doing good by 202 - > investing in these companies. And if we're really thoughtful about 203 - > how we're going to help them to grow and scale, 204 - > well that way we can do well too. 205 - >

Speaker 2: So on that note, how can founders better position themselves 206 - > to attract mission driven investors? 207 - >

Speaker 3: So that's a very good question too. So when it 208 - > comes to mission driven, like, I don't necessarily identify myself 209 - > as an impact investor again because I was just like 210 - > I just explained of this little bit of a love 211 - > hate relationship with that word. I do like to invest 212 - > for impact, But I think what companies need to do 213 - > is they need to be very very clear, again back 214 - > to the problem that they're solving. If they can be 215 - > super clear about the problem that they're solving, and that 216 - > problem does involve some type of good for the world, 217 - > which you know in a lot of cases, there's a 218 - > lot of companies out there doing that, especially to pick 219 - > any company in healthcare. Of course, they're working on something 220 - > that's better for the world, you hope, or for people 221 - > the planet, And so how they position that versus how 222 - > they're talking about the company they have to go hand 223 - > in hand. But at the same time they have to 224 - > really show that this is a company that is going 225 - > to be built to grow and scale. And that's the 226 - > one thing that I think is the biggest differentiator between 227 - > an investor who is just maybe looking at, you know, 228 - > some kind of small business and a startup. So when 229 - > people ask me what does it mean that you're investing 230 - > in a startup, we're talking about scalability and that word 231 - > alone is what differentiates a small company or a small 232 - > business to a startup or scalable business, because you want 233 - > to be able to see that they can grow at 234 - > a rapid rate and actually get enough of the market 235 - > share who will want to be customers, who will want 236 - > to buy the product or service, and then you're going 237 - > to see the returns back to the investors. 238 - >

Speaker 2: So on this impact word investing, what do you see 239 - > in the future of impact investing? I mean, considering there's 240 - > a lot of political turbulence, things have been stripped away. 241 - > I mean, you know, so people are like pulling back 242 - > on this. You know, so, what do you think the 243 - > future of impact investing is and is there one right 244 - > now anyway? 245 - >

Speaker 3: Well, I think it all again goes back to the 246 - > problem that we're solving. If it's a problem that's big enough, 247 - > take all of the words out of it, the diversity 248 - > or whatever it is. If it is a problem that's 249 - > being solved for community or group of people, you know, 250 - > that's going to be needed regardless and no matter what 251 - > kind of labels we put on it or anything like that. 252 - > So I think that it's really important that we think 253 - > about again, what are the problems we're solving, but what 254 - > is the solution that people are going to actually pay for? 255 - > That is probably the number one question when I talk 256 - > to entrepreneurs and they're like, oh, I have this great idea, 257 - > and they go on and on and on, and then 258 - > I'll ask them, well, how are you going to make money? 259 - > And they're like, oh, yeah, that yeah, that little thing, 260 - > that little thing. Yeah, Well let me let me think 261 - > about that. You know. So there's a lot of companies 262 - > out there that have nothing to do with impact that 263 - > can't make any money. So you got that too. You know, 264 - > there's every extreme I think. 265 - >

Speaker 2: So let's hop back to the founder's side a little bit. 266 - > So what qualities do you look for in we were 267 - > talking about the horse and the jockey. What qualities do 268 - > you look for in founders when you're deciding to invest, 269 - > when you're looking at that jockey. 270 - >

Speaker 3: Yeah, again, I don't know that it's necessarily that single founder. 271 - > It really does have to be the team. And if 272 - > it's so early that you're just talking to the founders 273 - > or founder, then I think it's what's the plan and 274 - > do they have the you know, emotional IQ and the 275 - > intellectual IQ to know who it is that they need 276 - > on the team in order to balance out what they 277 - > don't have. So I think one of the biggest things 278 - > that I've seen has really made an entrepreneur successful is humility. 279 - > And you don't see it very often. And it's a 280 - > little bit of a balancing act because remember, entrepreneurs, they 281 - > have to be visionaries. They have to be ready to 282 - > go and just take it all the way to the 283 - > end and they've got it right. But at the same time, 284 - > if they're a little too overzealous, if they're a little 285 - > bit too big for their breches, then you know, in 286 - > a lot of cases, I don't see them succeed. So 287 - > that level of like, hey, I only know what I know, 288 - > and I know that I have to surround myself with 289 - > smarter people who also can get done what I want 290 - > to get done. That is where I start to see success. 291 - >

Speaker 2: I can't agree more. I was to help you. There's 292 - > no room for arrogance and entrepreneurship. 293 - >

Speaker 3: That's right. 294 - >

Speaker 2: My mom used to tell me. She used to say, 295 - > my mom was amazing. She was my mentor, and she 296 - > said to me, if you are the smartest person in 297 - > the room, you're in the wrong room. 298 - >

Speaker 3: That's exactly right. 299 - >

Speaker 2: I find I love what you're what you're relaying. Let 300 - > me move on to you know. So we talked a 301 - > little bit about founders and how they communicate to you 302 - > and how you can perceive that communication to make a decision. 303 - > How can founders effectively effectively communicate their vision and mission 304 - > to investors? Like, how are there any tools or any 305 - > advice you could give to the founders when they're talking 306 - > to investors on how to do that. 307 - >

Speaker 3: So one of the things that I've seen entrepreneurs try 308 - > to do is they try to just get as much 309 - > information out of their mouth as fast as they can 310 - > to just try to make sure that they're hitting all 311 - > the points because all of it to them is so important. 312 - > It's almost like they don't have a filter. They just well, 313 - > then they're just trying to get all that information out. 314 - > So think about every time that you're talking to somebody 315 - > as being the opportunity to get the next time that 316 - > you're going to talk to that person. It's not about 317 - > them making a decision to invest in that minute or 318 - > three or five that you have with them or whatever 319 - > it is. You're just trying to get to the next step. 320 - > So think about the things that are the most important. 321 - > For example, So I remember one time I was in 322 - > a pitch listening to a company and the entrepreneur was 323 - > talking about whatever the company did. Okay, now this is 324 - > very typical, So entrepreneurs out there you should know this. 325 - > Like you're pitching, there's a room full of investors. You're 326 - > going to have an investor if you're not hooking them 327 - > at the beginning with you know, something juicy, We're thinking 328 - > about what's for dinner tonight, and like I really have 329 - > to go do my laundry later, you know, like all 330 - > the things right, and so all of a sudden, about 331 - > three to five minutes into the pitch, the person says, yeah, 332 - > we just signed this contract with Walmart or whatever it was. 333 - > And I'm thinking to myself, why can you lead with that? 334 - > Like maybe I would have paid a little bit more. 335 - > So the first like the beginning of it was just 336 - > like want, want here we are you know, so, like 337 - > I think you really do need to get out what 338 - > it is you're doing, what's so important, what's the big 339 - > problem you're solving, and what milestones have you already hit. 340 - > If you can just start with a couple of those things, 341 - > you will get an investor's attention that could then possibly 342 - > lead to other meetings. But you know, just trying to 343 - > be like we're doing and too fast, too much. 344 - >

Speaker 2: So we talked about diversity, and I'm wondering for those 345 - > that are listening right, how how do you get the attention? 346 - > How would you go about going to funds, angels, what 347 - > have you that are open to diversity? Like what is 348 - > is there a screening? Is there a way you can 349 - > find them? What is the what are the keywords? 350 - >

Speaker 3: You know? 351 - >

Speaker 2: Impact? Like, how do if you're a female founder or 352 - > a black founder or Hispanic founder, how do you find 353 - > the money from people that are open to investing into diversity. 354 - >

Speaker 3: Yeah, there's no easy answer to that. On the Angel 355 - > Capital Association's website, we do have a listing of all 356 - > the angel groups in the country in the US, and 357 - > and we talk a little bit about, you know, what 358 - > their thesis is, what they invest in. So there are 359 - > places that you can kind of look around and search 360 - > for that. But I always encourage entrepreneurs to be having 361 - > conversations with potential investors and people that could potentially help 362 - > you with your business way way earlier than you think. 363 - > So don't wait until whatever you're building is like so 364 - > shiny and new and wonderful, then show it to people. 365 - > You want to be building these relationships and starting to 366 - > have these conversations early on, because then as people get 367 - > to know you, and they get to know what you're building, 368 - > and they get to know your company, then they will 369 - > start to open the doors to the other networks that 370 - > are out there. 371 - >

Speaker 2: That's fair. One last question for you, and I don't 372 - > usually plug books this much, but I'm just a big 373 - > fan of yours in particular, what is one key takeaway 374 - > you hope readers get from your book? 375 - >

Speaker 3: So, I, like I said, I wrote the book hoping 376 - > that I would encourage more people to be investors. But 377 - > I'm finding that to your point, there are a lot 378 - > of founders out there who have read it and they've said, hey, there, 379 - > you've kind of opened my eyes to the ways that 380 - > you can invest. And one of the things I'm particularly 381 - > hot on right now is using philanthropic capital to invest 382 - > in a for profit company. So, as we talked about before, 383 - > there there are ways that you can actually build your 384 - > philanthropic checkbooks. So in a lot of cases it's through 385 - > a donor advice fund, which I talk about in the 386 - > book exactly how it all works. It's not very complicated, 387 - > but what it can do is it can help for 388 - > profit companies in the meantime, and then as those companies 389 - > do well, which you hope that they will, that money 390 - > can go back into your charitable fund and then potentially 391 - > help even more five oh one c three charities in 392 - > the future. So to me, this is like such a 393 - > win win where remember I talked earlier about like how 394 - > can we get the nonprofits and the for profit companies 395 - > to kind of work together to solve these problems. This 396 - > is one of those ways. So I'm hoping that people 397 - > will look at this and say, hey, Okay, I don't 398 - > know about investing. I've talked to a lot of people, 399 - > especially women, who will say, you know, investing is kind 400 - > of scary. My husband really does that that kind of thing. 401 - > But you know, philanthropy is something that a lot of 402 - > people they do all the time. How can we make 403 - > it so that it's easier for somebody to actually use 404 - > their philanthropic capital to help a startup company, and then 405 - > potentially that could even mean there's more dollars for the 406 - > charities down the road. 407 - >

Speaker 2: It's beautiful. I really appreciate your time and your energy 408 - > and your knowledge. Thank you so much for joining the podcast. 409 - >

Speaker 3: Thanks for having me, Greg You're welcome. 410 - >

Speaker 2: And that's it for another episode of the startup science 411 - > podcast Founders. As a thank you for leading the change 412 - > in our world, I'm offering free access to the startup 413 - > science platform Visionaries by Gregory Shepherd. It's a one stop 414 - > shop with everything you need, an Academy, investors, grants, and 415 - > a pitchfinder. Go to Gregoryshepherd dot com and use the 416 - > code Founders All Capital for free access. Check it out 417 - > for yourself. Until next time, I'm mistay my friends. 418 - >

Speaker 1: This startup science podcast with Gregory Shepherd is brought to 419 - > you by Startupscience dot Io. Can log on to startupscience 420 - > dot io and use code Forbes to get free access. 421 - > To connect and find out more about Greg go to 422 - > Gregory shephard dot com. The startup Science Podcast is a 423 - > production of Forbes books.