I’ve been following this winter’s fascinating debate about impact investing. Kevin Starr says it’s either philanthropy or commercial. Kusi Hornberger argues for the “messy middle.” The Kapors find no need for trade-offs in return and impact. Aunnie Patton Power, Katie Boland and Brian Boland emphasize stewardship and durable ownership. And the Delta Fund cautions us to examine the extractive nature of what we do.
After raising just over $20 million in equity and $35 million in concessionary-rate debt for my fintech social enterprise Funding U, I have a different take, not on who’s right in the debate, but on what actually helped me as an entrepreneur navigate it.
The breakthrough for me came when I stopped trying to fit what I thought investors wanted and started getting really honest with myself about what I was actually building.
I wasted so much time early on. Depending on the room, I’d emphasize different parts of our model, social impact and exit strategies. That quickly became untenable. So, I attempted a unified pitch, but the same week brought conflicting feedback from two self-described impact investors. One criticized me for “leading with too much mission and not returns,” while the other’s feedback was that I had “not clearly articulated my social impact priority upfront.”
For me — and for other entrepreneurs I’ve watched succeed — life got easier when I got more honest with myself. So, I wanted to share five questions that helped me get there. Maybe they’ll help you too. I’d love your feedback on what I’m missing.
1. What returns can I actually deliver, and on what timeline?
This was the hardest one for me to get honest about. I believe that our company can deliver venture-scale returns. But I’ve learned that the timeline to build it the right way for our customers, namely low-income students locked out of traditional credit products, is different from what I expected.
What helped me: Realizing that early “hockey-stick growth” isn’t the right way to build a company that lends to vulnerable populations. Fast, initial growth in consumer finance for low-income, young customers can become irresponsible fast, and it can tank the company. We’ve grown steadily, responsibly, putting credit quality and rigorous data science first. That’s by design, not by accident.
What I learned: Be transparent with the earliest stage investors on my cap table when I had new information, and be direct with those considering joining in later rounds, saying “Yes, we will get there. And here is specifically how you will realize a return on investment. But, we’ve learned there is a right way and a wrong way to get there.” The investors who understood that the population we serve requires a different framework became our investors.
2. How does making money actually create impact in my business?
Early on, I’d talk about impact as this separate thing we measured. But I realized that if your impact and your profit aren’t the same mechanism, you’ll be forced to choose between them eventually.
What helped me: Asking myself: “Could we make more money serving different customers? If yes, what stops us?” If the answer is just “founder values,” that’s fragile. If the answer is “Our entire business model only works for this population,” that’s alignment.
What I learned: Real alignment means you can’t separate the two. Our profitability requires serving our target customers well. When that clicked, the pitch got so much easier.
3. What would our customers have without us, and is our solution meaningfully better?
Asking “what’s the alternative?” was easy for me, but the deeper question: “What’s the counterfactual?” was much more challenging.
What helped me: Actually asking customers what they used before us or what trade-offs they made in their education journey before finding our product. Their answers were way more compelling than my assumptions.
What I learned: If you can’t clearly articulate what does and doesn’t exist now, and how that void is harmful to your customers, you’re not ready to pitch. Do that work first.
4. Will impact grow with the business, or am I kidding myself?
This one scared me because I realized some growth strategies would not just dilute our impact but could be harmful to our target market.
What helped me: Modeling out: If we get 10 times more customers, does our impact grow by ten times? What has to stay constant for that to be true? What would break it?
What I learned: Some paths to growth and exit work for impact; others don’t. Being clear about this helped me say no to the wrong opportunities.
5. Who benefits when we succeed — really?
Delta Fund’s writings on the inherently extractive nature of investing hit me hard. I had to ask myself, “Are we extracting value from a community or genuinely creating value for them?”
What helped me: Looking at our model and asking: When we exit, who gets wealthy? Just investors? Or are employees, community members and customers building wealth too?
What I learned: There’s a spectrum here. We’re not perfect, but we are making changes to share value more broadly. It’s ongoing work.
Why I’m sharing this
I don’t have it all figured out. I’ve made mistakes on all of these questions. But getting clearer on them made fundraising easier. It made our strategy clearer. And it made conversations with investors more honest and productive.
The entrepreneurs I’ve seen struggle most (including past me) are the ones trying to be everything to everyone. We morph our pitch depending on the investor. We’re exhausted trying to fit frameworks and diligence models that don’t quite fit.
The entrepreneurs I’ve seen succeed are clearer. Not rigid. But clear about what they’re building, what returns they can deliver, who they’re serving and what capital actually fits.
To my fellow entrepreneurs
If you’re feeling the exhaustion of trying to be everything that investors want, I feel you. I’ve been there.
My suggestion: Take a step back and get really honest with yourself on these questions — not to pitch better, but to understand what you’re actually building.
Then work tirelessly to find investors who want that. They exist, and recently many have publicly revealed where they sit on the spectrum. But you can’t find them if you’re not clear yourself.
To impact investors
When entrepreneurs are honest about returns, timelines, customers and who truly benefits, the capital fit problem becomes easier to solve. Investors being equally clear would help just as much.
Some practical suggestions from the entrepreneur side:
Explicitly share your constraints early. In initial conversations or public materials, clearly state required timelines and return profiles, covering both impact and financial yield.
Clarify your view on business models for underserved populations. If a business serves vulnerable populations responsibly, its growth trajectory may (should?) differ from that of businesses that traditional investors will support. If this difference doesn’t align with your goals as an impact investor, communicate it so entrepreneurs can self-select out and avoid wasting time, both theirs and yours.
Detail your approach to scale, profit and impact. I believe investors have as much responsibility as entrepreneurs — and perhaps more — to pressure-test that your model does not treat these things as separate deltas.
The entrepreneurs I know appreciate investors who are as clear about what they are building as we are, and as honest when we’re not a mutual fit.
In return, the entrepreneurs best positioned to help you meet your goals are committed to honesty about what returns they can deliver, how profit and impact align, whether impact scales with growth and who truly benefits from success.
If we can all strive for better matches and better outcomes, that will benefit investors and founders and, most importantly, the communities counting on both of us to get this right.
Jeannie Tarkenton is the founder and CEO of Funding U.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.
