Are VC’s more willing to fund businesses that are socially responsible?

More willing? Interesting distinction to ask if you think about it.

Are VC’s more willing to fund businesses that are socially responsible?

Certainly, some are. Others note though are absolutely putting money in socially unresponsible things.

Capital doesn’t have morals. People do. Money doesn’t.

In my experience, sure, VCs are more willing to fund businesses that are socially responsible. More so is a relative and subjective term.

Given the choice between two otherwise equivalent ventures, I’d hazard a guess that 99% will pick the one that is socially responsible.

VC has been getting a bad rap lately for a host of reasons. Some claim VCs want to take over control of your startup. Others say investors are to be held off as long as possible.

Such notions are all idiotic and myopic.

Not only does money lack morals… all capital comes with a cost. ALL capital comes with a cost: whether you are getting capital from customers, grants, or investors, every founder has to evaluate the actual cost. Customers can be costly.

But we’re off track.

VCs have been getting a bad rap lately and that bad rap is rather equivalent, yet intentionally opposite, of your question. It’s a little off base.

A VC is the person who runs a Fund, comprised of others’ money. Just so we’re clear on the type of capital we’re exploring here. VC is not an Angel, your local incubator cutting you a check, nor crowdfunding.

That clarified, VCs ultimately require certain characteristics:

  • You must be a corporation. One can’t invest in a non-profit, and sole proprietorships, partnerships, and LLCs don’t have equity.
  • You must be able to deliver to them an ROI

That’s it.

Simple huh?

The second one is wherein it gets wonky as there are lots of ways you could be capable of doing that getting VCs money back:

  • IPO
  • Get acquired
  • Have a stupidly awesome team that, though the business might fail, the investor wants for some other reason
  • Capably build an incredible market share; valuable to their other investments

Not so easy now.

But, do those things and you’re fundable. Convince them that the team is capable of both.

Does being socially responsible matter?

Fundamentally no. Not at all.

And I say that so bluntly because the reason VCs get a bad rap and the reason you’re even asking this question is because there is a lot of misleading perspective about VCs.

SOME might prefer socially responsible. Some might only invest in socially responsible. Some use words like mission based or conscious to convey those ideals matter but fundamentally, being socially responsible is irrelevant IF those first two points can’t deliver.

Too many founders lately are leading with the other ideal as though those things matter: “we’re a Lean startup!” “We’re mission driven.” “We’re socially responsible!!”

That’s nice. If I give you $1MM can you give me back $10MM in value in 5 years?

If No, you don’t get funded.

Lead with the ROI, not your best of intentions.

There is nothing ill intended by VCs in behaving that way. Capital doesn’t have morals. If they can’t get their ROI, they can’t fund. Period.

Now, of course I hope it goes without saying, none of this means being social responsible might not matter!!

Maybe being socially responsible is your competitive advantage. Maybe it’s how you intent to get acquired. Maybe you should point it out because your competitor is dumping raw sewage in the city water supply…

Being socially responsible is certainly a good thing and may absolutely be an important thing. VCs may prefer to fund you because you are. They will fund you if being so matters to getting their return.

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