Where do venture capitalists and Angel investors invest in promising startups created by founders from a low-income/impoverished backgrounds?

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I do a lot of work with programs such as Founder Institute, DivInc, and The Bunker so I can confirm that in no uncertain terms, they do.

This is a critically important question though as the answer to the challenge seems to lie not in what VCs & Angels do but what we all can/need to do to enable entrepreneurs.

Ideal or not, investors are pretty cut and dry. They’re seeking a substantial return on investment. Frankly, they’re looking for a potential 30x return on their capital through an exit – 30x is substantial! That potential is so great in their expectations because, keep in mind, MOST startups fail. Investors have to deliver a positive return on their portfolios which are absorbing complete losses of capital.

Personal circumstances of the founders are contributing factors only in as much that they affect those returns. There is nothing more to it than that.

Challenging all entrepreneurs is that there are usually three things that matter MOST in delivering a substantial return. These three things are, in my experience, most overlooked or disregarded… er go, no investment in such companies:

  1. Is the founder committed NO MATTER WHAT? Since most startups fail, the first sign of opportunity for an investor is that the team will not quit. It will succeed – some how.
  2. Is the company customer or market oriented? Most startups are customer oriented – they focus on Sales, their narrow market, and driving more revenue. Such startups create competitors and struggle to scale to a substantial market share. Is Marketing the first priority or is it how the business drives leads?
  3. Is there a team of a couple or more founders, advisors, and capable execution? Founders alone never find success.

We can all work to better support low-income community’s focus on those three things. Appreciate, “promising” startup or being low (or high) income has nothing to do with investors’ circumstances; it’s a question of achieving those returns.

When you say promising startup, in most cases I find that means promising business or that they have customers. A successful business, with customers, warrants a bank loan, not investors; without focus on those three things, startups are generally unfundable.

Challenging improverished communities, where we can all help, is that those 3 things are difficult to achieve. Being committed no matter what is costly – what will the founders do when they really just have to make ends meat? How do the founders access/afford marketing experience and a team of advisors? We can all address that. We must.

Interestingly, you’ll notice that startup Accelerators tend to be found in expensive, urban cores – precisely where unattainable to economically challenged founders. Developing such programs where they can have an impact on the founders in need would have an immeasurable impact on the fundability of companies that emerge from such communities!

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