What People Don't Tell Entrepreneurs About Investors

What People Don't Tell Entrepreneurs About Investors
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founder of S.W. Basics
4 min read
Opinions expressed by Entrepreneur contributors are their own.

I am constantly raising money for my brand, S.W. Basics. At least that's how it feels, and I think many entrepreneurs feel the same way.

If you don't start out with a lot of your own money or a product that rakes in cash from day one, then you are probably raising money all the time. And no one really tells you that ahead of time, so it can be really confusing. I remember during my first trade show for the brand, people kept coming up to our booth and introducing themselves as angels. "That's presumptuous," I thought to myself. Like, what type of person refers to themselves as an angel? I had no idea that they meant angel investors, or people who invest in companies.

Related: Getting Started With Angel Investing

That was in 2011. Today, we've met a ton of investors. Almost all of them have the same profile: male, white, Ivy League educated, rich from inherited money and sometimes investing their own money or sometimes representing other super wealthy people. They're driven by margins, trends and profit and once in a while a little teensy bit of mission. It's not that I'm not grateful for them or that I can't appreciate what they bring to the table. They are all incredibly wise, they have a ton of experience, they're often patient and kind, and let's be honest, I'm not one to laugh in the face of millions of dollars.

And please don't think I'm not aware of the almost cliché question I'm about to ask but: Where is the diversity? Where are the minorities? Where are the people who built empires from nothing? Where are the women? I'd say 1 percent of the people I've met so far fall into any of these categories.  

If I really want for my company to change the world, I don't totally want to turn it over to the same people that have all of the power already. Here are the solutions I've been thinking through lately, though I'm really hoping there are more.

Related: A New Kind of Financing That Doesn't Involve Taking on Debt or Giving Away Equity

Wait for investors who are more diverse.

If possible, seek them out. We keep taking meetings and stalling as much as we possibly can. Not everyone can afford to do that, and I'm grateful for the luxury. But if you can wait, I think you should. If you can network your way to diverse investors, try to do so. 

Put minorities on your cap table.

Give away restricted stock to the employees and people who help you, even if they don't give you money. This can be really scary, and we get a lot of advice to not "clutter" our cap table, but to me this is the most effective way to really change who has wealth, especially should your company succeed. 

Keep up to date on changing laws.

Push your company to be different. There are some amazing tools out there, like the people creating Public Benefit Corporations, or B-corps, which allow a corporation to put the people and environment as part of their bottom line. 

Wealth and success are an opportunity for social change, and mission in the context of your company is not the only way to change the world. The way you structure the flow of your profits and how they are distributed can have as much of an impact as that one-for-one model. (In fact, I would argue it will have a much greater impact.) 

Related: How Angel Investing Is Different Outside of Silicon Valley

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