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

Forbes Books presents The Startup Science Podcast with Gregory Shepard, brought to you by startupscience.io. Greg is an entrepreneur who's built and sold 12 businesses, a recipient of 4 private equity awards, featured TEDx speaker, and Ben Bella Publishing and Penguin Random House author. Here's Gregory Shepard.

I'm back here with Marcia Dawood, an early-stage investor, author of Do Good While Doing Well, TEDx speaker and host of the Angel Next Door podcast. She shared her journey from attending her first angel investor meeting in 2012 to chairing the Angel Capital Association and advocating for diverse founders. So Marcia, you've invested in over 50 startups and funds. That's a lot of investments. Does anything surprise you anymore?

Sometimes, uh, sometimes. Well, you know, it would be really nice if we, if the M&A market started to come back and we could get a couple more exits. I feel like it's been Wow. So, you know, I'm a big fan of funds. I really haven't made that— written that many checks. That includes exposure that I have to companies through funds, right? So I'm a big fan of that because you can write one check and you could get exposure to sometimes 10, 15, 20 companies. And I especially like that for new investors because that de-risks their portfolio almost immediately. You know, I tell a story in my book about 2 people who were in my angel group, and both of them at separate times wrote 3 checks to 3 companies, but they were different companies. The one person had a great return, like 2 of the companies exited within like 2 years. They had, you know, made a bunch of money. They thought angel investing was the greatest thing ever. The other person lost all their money, like within a year, thought angel investing was the worst thing that ever happened to them. And so here you have 2 examples that are kind of extreme, and neither of them are really great examples that you'd really want the population as a whole to think is angel investing. So to me, when you have that diversified portfolio and you invest through funds, that is a way that you can start to say, okay, I understand the space. I can now be connected to these companies. And maybe sometimes a lot of people don't have time, you know, so they want to make a more passive investment. And they can do that through a fund. And then the fund manager's the one who's kind of organizing everything, keeping up with all the companies. And then they always let the investors who are in the fund kind of know, oh, this company's looking for this or that, or needs this kind of help or that kind of help. And if you can help, you can help. If you can't, you can't. I just think the whole fund model's a good one.

I want to talk about your book. First of all, you know, I came from a poor family, right? And I fought my way up. And so I love the idea of doing good While Doing Well. Like, this is the title of your book is exactly, because I felt guilty, you know, when I had my first exit, I felt guilty and I was like, wait a minute, why am I feeling so bad? You know? And so the concept of doing good while doing well is just beautiful. What inspired you to write the book and who did you write it for specifically?

So I wrote it because I personally, I was getting frustrated. I was seeing how hard it was for entrepreneurs to fundraise, especially Women and people of color, and I thought, "Wait a minute! I meet people, and I would say to them, 'Well, you could be an investor too,' and they would say, 'Me? No, I can't be. I can't be an investor because that's just for rich people. I have to have a finance degree. I'd have to be invited. Da da da da. They have all these myths, and I thought, 'No, no, no, that's not true.' But it's so hard to just kind of explain, and and there's so many things, and oh, you could start with equity crowdfunding even because that you can invest for like a hundred dollars or two hundred dollars. You don't even have to put up. you know, thousands of dollars or millions of dollars. Like there's this perception that an angel investor is like this person who kind of sneaks into the room and then quietly drops millions of dollars onto a company and then quietly leaves. And then all of a sudden the company does super great and then they end up with all this money. Well, that's not reality, right? So I was trying to write a book that would be, how do we demystify this whole thing? How do we get it to a point where people could actually say to themselves, you know, I would like to help with XYZ change that I want to see in the world. And how do I do that? Well, here are the ways, because Marcia told me.

So I've read your book from the first time we met, and I think it's amazing. And especially in contrast to some of the other books like Venture Deals, right? Where, you know, when you read that book—

It's a very different book than Venture Deals.

Yeah, right? If you're a founder and you try to read this, you're like, what is going on? And it's written specifically for those type VC type investors. But your book is way, way different. First of all, it's way easier to read. It explains things in a very, you know, it's accessible, right? So I'd like you to talk a little bit about sort of how, what's in the book and how the book relays this information to the reader, because I found it to be, I was like, oh, finally somebody wrote a book about this that You know, isn't like a math problem.

Well, okay, first of all, Venture Deals is one of my favorite angel investing books, and I have copies of— I think I have 3 copies in my house because I have to keep one in every room because it's such a great reference guide. But to your point, like, it also— I think if you have insomnia, sorry Brad, but if you have, like, you could probably read parts of it. I think he even says that in his course because it is very dense. It's very legal heavy and all that kind of stuff, but I do love it. It's a Fabulous, fabulous, fabulous book. But I also found that there's, there were books out, there are books out there on angel investing. And, but why would somebody pick up a book like that if they don't even think angel investing is for them? And then as I talked to other people and I would say, hey, you know, you could try this. And they'd be like, ah, like, it just seems scary. Like it's overwhelming. I don't, oh, the things that you do are so different. I don't think I even know where to start.

Hmm.

And so that, I don't know where to start thing is where I got the idea that, hey, wait a minute, we have to make this like much, much simpler and make it approachable so that people aren't so scared by it and that they do feel like, hey, this could be for me too. And I just, I literally just had a conversation recently with Woody Neese. He runs the crowdfunding associate group and he has just a wealth of knowledge. He's basically like the godfather of crowdfunding and We were talking about how I just really believe that crowdfunding is so great for new investors, and it's also so great for entrepreneurs and being able to get that kind of gap funding that they need from their idea to actually getting some more sophisticated investors into their company. And so all of these things are the biggest reasons why I thought, okay, if we can just kind of get people past that initial fear, Yeah. Of like, okay, this isn't really so hard. It's not so scary. Maybe we'll get more people who will want to do it. And the more and more people that we get to do it, the easier it's going to be for entrepreneurs.

So you're doing good by doing well or doing well by doing good yourself. Yeah. That's, that's really beautiful. I mean, I just loved it. I mean, I just, I was reading and I was like, okay, this is accessible. You know, I know I've referred Venture Deals to so many founders and they come away and they go, well, once I woke up, I was able to sit down with a spreadsheet and start trying to figure out what this guy is saying. You know, that's from a new founder's perspective, right? So yeah, I mean, for somebody that's got a little more experience, the book is a Bible, right? But I found your book to be way more accessible.

Yeah.

And it's something that now I'm referring instead of venture deals to early-stage angels, you know, where like, how does this work? What do I do? And you're right, a lot of them say, I don't know about it. I don't, I, what do you do? Well, I invest into my 401, et cetera, et cetera. Right?

Right.

Well, maybe you should look at this as a different asset class. It's got high returns, high risk, traditional algorithm. But I was just, I'm just a huge fan, so I wanted to spend a little time on it because I think that If you're listening and you're an early-stage investor or a founder, this is a book you should absolutely buy and read. It's fantastic. So let's move on to the next question. So I wanted to ask you, so going back to these investors and you look at these early-stage investors, how do they align their portfolio to their values without sacrificing the returns?

Oh, such a good question. So I have this kind of love-hate relationship with the word impact because I really believe that you can invest where you want to see change and get financial returns. But there's this connotation around the word impact in that people think, oh, well, if I invest for impact, that means I'm basically making a donation. I shouldn't expect any financial returns. It's just, you know, We don't really do that. That's for other people. But I do believe that you can do both, but I think you have to be looking in the right place. You have to do your diligence, and you have to think about what are the things that truly are my values? What is it that I care about? So in the book, I have a worksheet that people can fill out. It's one page, it's super easy, but the questions They might not be super easy to think about because it's asking you, what are the things that I care about? Where do I want to put my money? Where do I even want to start? In a lot of cases, what about the stock market and the people that we're investing in through the stock market? Do we know all of their values? Do we know the company's values? Do we know what they're looking at or what they have been thinking about? So I think, well, Okay, if there are startups out there that we can be investing in, then we could actually be doing good by investing in these companies. And if we're really thoughtful about how we're gonna help them to grow and scale, well, that way we can do well too.

So on that note, how can founders better position themselves to attract mission-driven investors?

So that's a, that's a very good question too. So when it comes to mission-driven, like, I don't necessarily identify myself as an impact investor, again, because I was just like, I just explained, I have this little bit of a love-hate relationship with that word. I do like to invest for impact, but I think what companies need to do is they need to be very, very clear, again, back to the problem that they're solving. If they can be super clear about the problem that they're solving, and that problem does involve some type of good for the world, which, you know, in a lot of cases, there's a lot of companies out there doing that, especially if you pick any company in healthcare. Of course, they're working on something that's better for the world, you hope, or for people, the planet. And so how they position that versus how they're talking about the company, they have to go hand in hand, but at the same time, They have to really show that this is a company that is going to be built to grow and scale. And that's the one thing that I think is the biggest differentiator between an investor who is just maybe looking at, you know, some kind of small business and a startup. So when people ask me, well, what does it mean that you're investing in a startup? We're talking about scalability. And that word alone is what differentiates a small company or a small business to a startup or scalable business, because you want to be able to see that they can grow at a rapid rate and actually get enough of the market share who will want to be customers, who will want to buy the product or service, and then you're going to see the returns back to the investors.

So on this impact word investing, what do you see in the future of impact investing? I mean, considering There's a lot of political turbulence. Things have been stripped away. I mean, you know, so people are like pulling back on this, you know. So what do you think the future of impact investing is, and is there one right now anyway?

Well, I think it all again goes back to the problem that we're solving. If it's a problem that's big enough, take all of the words out of it, the diversity or whatever it is. If it is a problem that's being solved for a community or group of people, You know, that's going to be needed regardless. And no matter what kind of labels we put on it or anything like that. So I think that it's really important that we think about, again, what are the problems we're solving, but what is the solution that people are going to actually pay for? That is probably the number one question when I talk to entrepreneurs and they're like, oh, I have this great idea, and they go on and on and on. And then I'll ask them, well, how are you going to make money? And they're like, oh yeah, that.

Yeah, that little thing.

That little thing. Yeah. Well, let me think about that. So there's a lot of companies out there that have nothing to do with impact that can't make any money. So you got that too. There's every extreme, I think.

So let's hop back to the founder's side a little bit. So what qualities do you look for in, we were talking about the horse and the jockey, What qualities do you look for in founders when you're deciding to invest, when you're looking at that jockey?

Yeah, again, I don't know that it's necessarily that single founder. It really does have to be the team. And if it's so early that you're just talking to the founders, um, I— or founder, then I think it's what's the plan and do they have the, you know, emotional IQ and the intellectual IQ to know who it is that they need on the team in order to balance out what they don't have. So I think one of the biggest things that I've seen has really made an entrepreneur successful is humility. And you don't see it very often, and it's a little bit of a balancing act because remember, entrepreneurs, they have to be visionaries. They have to be ready to go and just take it all the way to the end, and they've They've got it, right? But at the same time, if they're a little too overzealous, if they're a little bit too big for their britches, then in a lot of cases, I don't see them succeed. So that level of like, hey, I only know what I know, and I know that I have to surround myself with smarter people who also can get done what I want to get done, that is where I start to see success.

I can't agree more. I always tell people there's no room for arrogance in entrepreneurship.

That's right.

And my mom used to tell me, she used to say, my mom was amazing. She was my mentor. And she said to me, if you are the smartest person in the room, you're in the wrong room.

That's exactly right.

I find, I love what you're, what you're relaying. Let me move on to, you know, so we talked a little bit about founders and how they communicate to you and how you can perceive that communication to make a decision. How can founders effectively communicate their vision? and mission to investors? Like, how, how, what are there any tools or any advice you could give to the founders when they're talking to investors on how to do that?

So one of the things that I've seen entrepreneurs try to do is they try to just get as much information out of their mouth as fast as they can to just try to make sure that they're hitting all the points because all of it to them is so important. It's almost like they don't have a filter. They just blah, blah, blah, blah, blah, blah, blah. And they're just trying to get all that information out. So think about every time that you're talking to somebody as being the opportunity to get the next time that you're going to talk to that person. It's not about them making a decision to invest in that minute or 3 or 5 that you have with them or whatever it is. You're just trying to get to the next step. So think about the things that are the most important. For example, so I remember one time I was in a pitch listening to a company and the entrepreneur was talking about whatever The company did. Okay. Now this is very typical. So entrepreneurs out there, you should know this, like you're pitching, there's a room full of investors. You're going to have an investor if you're not hooking them at the beginning with, you know, something juicy. Um, we're thinking about what's for dinner tonight and like, I really have to go do my laundry later, you know, like all the things, right?

Mm-hmm.

And so all of a sudden, about 3 to 5 minutes into the pitch, the person says, Yeah, we just signed this contract with Walmart or whatever it was. And I'm thinking to myself, why didn't you lead with that? Like, maybe I would have paid a little bit more attention to the first, like, the beginning of it was just like, wah wah, here we are, you know? So like, I think you really do need to get out what it is you're doing, what's so important, what's the big problem you're solving, and what milestones have you already hit? If you can just start with a couple of those things, you will get an investor's attention that could then possibly lead to other meetings. But, you know, just trying to be like, we're doing blah, blah, blah, blah, blah, and it's too fast, too much.

So we talked about diversity, and I'm wondering, for those that are listening, right, how do you get the attention? How would you go about going to funds, angels, what have you, that are open to diversity? Like, what is, is there a screening? Is there a way you can find them? What is the, what are the keywords? You know, impact, like, how do, if you are a female founder or a Black founder or Hispanic founder, how do you find the money from people that are open to investing into diversity?

Yeah, there's no easy answer to that. On the Angel Capital Association's website, we do have a list of all the angel groups in the country, in the US, and we talk a little bit about, you know, what their thesis is, what they invest in. So there are places that you can kind of look around and search for that, but I always encourage entrepreneurs to be having conversations with potential investors and people that could potentially help you with your business way, way earlier than you think. So, don't wait until whatever you're building is like so shiny and new and wonderful, then show it to people. You want to be building these relationships and starting to have these conversations early on, because then as people get to know you and they get to know what you're building and they get to know your company, then they will start to open the doors to the other networks that are out there.

That's fair. One last question for you, and I don't usually plug books this much, but I'm just a big fan of yours. In particular, what is one key takeaway you hope readers get from your book?

So I, like I said, I wrote the book hoping that I would encourage more people to be investors, but I'm finding that to your point, there are a lot of founders out there who have read it and they've said, hey, you've kind of opened my eyes to the ways that you can invest. And one of the things I'm particularly hot on right now is using philanthropic capital to invest in a for-profit company. So as we talked about before, there are ways that you can actually build your philanthropic checkbook. So, and in a lot of cases, it's through a donor advised fund, which I talk about in the book, exactly how it all works. It's not very complicated, but what it can do is it can help for-profit companies in the meantime. And then as those companies do well, which you hope that they will, That money can go back into your charitable fund and then potentially help even more 501 charities in the future. So to me, this is like such a win-win where, remember I talked earlier about like, how can we get the nonprofits and the for-profit companies to kind of work together to solve these problems? This is one of those ways. So I'm hoping that people will look at this and say, hey, okay, I don't know about investing. I've talked to a lot of people, especially women, who will say, you know, investing is kind of scary. My husband really does that, that kind of thing. But, you know, philanthropy is something that a lot of people, they do all the time. And how can we make it so that it's easier for somebody to actually use their philanthropic capital to help a startup company? And then potentially that could even mean there's more dollars for the charities down the road.

It's beautiful. I really appreciate your time and your energy and your knowledge. Thank you so much for joining the podcast.

Thanks for having me, Greg.

You're welcome. And that's it for another episode of the Startup Science Podcast. Founders, as a thank you for leading the change in our world, I'm offering free access to the Startup Science platform, Visionaries by Gregory Shepard. It's a one-stop shop with everything you need, an academy, investors, grants, and a pitch finder. Go to gregoryshepard.com and use the code FOUNDERS, all Check it out for yourself. Until next time, namaste, my friends.

The Startup Science Podcast with Gregory Shepard is brought to you by startupscience.io. Founders can log on to startupscience.io and use code FORBES to get free access. To connect and find out more about Greg, go to gregoryshepard.com. The Startup Science Podcast is a production of Forbes Books.