Should You Take Money from Investors Who Don't Share Your Values?

Take what you can get or is life too short?

For most founders, fundraising is a struggle.

Only a small minority of people are born into the kinds of connections and life paths to provide them instant access to capital. The rest have to work super hard to create access for themselves, build trust and win investors over. That may come with the headwinds of bias working against you—conscious or otherwise.

So when you finally do get an offer to invest, the temptation to not question where it comes from is understandable.

A lot of people make their money in ways that you wouldn’t necessarily feel great about. Would you take a check from a corporate raider whose private equity dollars come with mass layoffs and union-busting? What about someone who made their money running a for-profit prison?

But hey, maybe some of those folks want to do some good with their cash for a change?

Is there a line you would draw?

How about an investment from the Sackler family—the pharma family in the middle of the opioid crisis.

How about a Middle Eastern Prince that kills journalists (directly or through a Kushner)?

Drug kingpin?

(Morality aside, I’d say given the inherent riskiness of startups, I’m not sure this would be a great addition to your cap table. You don’t want to have to go into witness protection just because you couldn’t get your app to go viral.)

In all seriousness, this week’s headlines—the likely reversal of Roe vs. Wade—have brought a new front to this ethical battle. Would and should you take money from people who don’t align with your values—values like privacy and bodily autonomy?

I’d argue that the answer is no, but that’s easy for me to say, right? I’m a straight white dude who grew up in NYC and worked in finance. I’m the on-paper poster child for “who can get VC dollars”.

There are two big problems with taking money from people who don’t align with your core values. One is that they don’t hold their opinions in separate box cordoned off from their business affairs. However they came to their opinion—whatever it is that makes them think the way they do—is who they are. It’s not just who they are at the voting booth or with their political donations.

It permeates everything about them.

An investor who doesn’t support a woman’s right to make her own healthcare decisions isn’t likely to trust women with incredibly difficult decisions in general. You might feel like you can overlook their anti-choice stance when you’re at the end of your rope in a lengthy fundraising process but what you’re really doing is kicking this problem down the road for when the stakes are even higher.

What’s that investor going to be like in a board meeting when you as a female founder need their support or worse, actually their vote? What happens when you miss your milestones—which is inevitably going to happen?

No company is up and to the right the whole time.

Do you think whatever misogyny is driving their paternalistic approach to women’s health is going to somehow morph into a vote of confidence for you in the face of criticism from other board members?

Highly doubtful.

Will the money have been worth it if you find yourself out on the street, fired from your own company, just a few years later—replaced by some guy that was in the same fraternity as your lead VC?

In fact, their “I know better than other people this affects more directly” attitude probably doesn’t just stop at women. You think men are going to be immune from their willingness to be all up in other people’s personal choices?

Not only that, consider how much more of a factor these kinds of associations are becoming for talent.

How competitive is your company going to be in the race to recruit the best women on the market (women—the segment of the talent market who hold the majority of new college degrees) when your lead investor is a top donor to an anti-choice org?

If prospective employees didn’t do this kind of research before, they almost certainly will now.

I mean, I’m sure your company is very special and all, but when studies show that 68% of college graduates (with that number higher among women) support a woman’s right to choose, can you afford to take that chance?

But back to the question of actually turning down money. Polly Rodriguez, the fantastic Co-Founder of Unbound—someone whose drive and persistence I deeply admire—wrote this:

Not only do I fundamentally disagree with this statement given everything I wrote above about the concessions of taking on unsupportive capital—but I think this oft-quoted stat obscures how much of the pie women are actually raising in first rounds.

Mimi Aboubaker writes more about this in Techcrunch:

In 2021, $330 billion in venture capital was deployed, and only 2% of that number went to companies founded only by women and 15.6% to teams with both women and men on their founding teams, according to PitchBook data.

In my view, the correct statistic is about 18%, not 2% — as we should take into account deals that had mixed-gender founding teams. Eighteen percent of $330 billion translates to $59 billion, or 25% of all venture transactions (e.g., deal count), and these three figures are the numbers that should be reported.

It is disrespectful to exclude founding teams with both women and men from women-founded company fundraising statistics, period. Doing so ascribes all the fundraising success and the leadership work underpinning it to the founders who are men, effectively propagating gender bias.

Not only that, but the number gets better when you take into consideration first round financing—the balance that women face the first time they raise.

According to Mimi:

PitchBook-NVCA data shows that in 2021, women founders (defined here to include mixed-gender teams) pulled in 24% of first-financing venture deals that disclosed founder identities. (Of 4,375 deals, 3,659 disclosed founder identities, and 895 were either women-led or led by individuals of both genders.)

I’ve always sought to remind people that mega-raises that skew these numbers. To me, raising hundreds of millions of dollars in a Series H versus just selling the company or going public—was a fundamentally big dumb male idea. I’d so much rather be an investor in StitchFix which only needed $76mm before IPO’ing.

When we’re quoting numbers about who gets the money, we spend a lot of time telling a story that women are failing at fundraising when I think at least part of the story should be that women are succeeding at running more profitable companies and doing so more efficiently. Let’s not discount this.

I’m not saying there’s no bias in fundraising. I’m not saying there’s equal access to networks of capital. I’ve written before that bias exists in fundraising while at the same time it’s not the only explanation behind why most founders can’t raise.

What I am saying is that when one out of four first financings has a female founder on the team, especially when we’re not sure how this squares with what percent they make up out of all pitches), the idea that women have nowhere else to go just doesn’t square. I just don’t agree that anyone has to accept checks from people with value sets that fundamentally disrespect their right to autonomy over their own body and that there’s no substitute capital to replace those checks.

If you have raised $500k from people, there exists, somewhere in the world, another $500k that will go into your company.

What we also don’t know is how much capital was offered to women. These numbers are only what was closed. In my own experience, of the four oversubscribed deals I offered checks to from my fund that I couldn’t get into, two were male founded companies and two were female founded companies. Both of the female founded companies had their choice of who to take money from—so even when only one quarter of the capital is going to women, we don’t know that there wasn’t an extra 20% or so that couldn’t get into these deals because the founders didn’t want to overdillute themselves.

This further pushes against the “Women need to take what they can get” narrative that I will always disagree with.

I will die on the hill that life is too short to have misogynistic asshats on your cap table—even if it takes you longer to fundraise.