By Deborah Jackson, CEO, Plum Alley
If you and everyone you know invests even $1,000 in a start-up business or contributes any amount to supporting a crowd-funding campaign, consider the extraordinary impact it would have on job creation and entrepreneurial growth.
Is this a radical idea? We are already a generous society. In recent years, individual Americans, corporations and foundations have contributed an estimated $300 billion annually to charities of all sorts. Imagine the impact if even one percent of the $300 billion was delivered to small businesses and crowd-funded projects.
“There is a glut of money out there,” Claire Costello, philanthropic executive at U.S. Trust, recently told a reporter. In fact, living donors set a record for giving in 2013—with the median gift being an astonishing $86.1 million.
If the world is awash in money, here’s my challenge: for the next six months, instead of making one charitable donation, put the money to work in the private sector by providing angel money to a company that is focused on providing an innovative solution to a problem you want to solve.
Here’s how it works: Everyone has a favorite cause. Find an early stage company that is focuses on that cause or find a company where you believe in the founder and want to see her have the fuel she needs to build a company.
Find a venture you like, invest in the company or make a creators dream come true by going on to PlumAlley.co and contribute to a rewards-based crowd-funding project that will have huge impact in the world. Talk about getting more bang for the buck—this is the way to do it.
One advantage of direct investment is the absence of overhead and administrative expenses. Charities allegedly spend $8 billion a year just on marketing and design expenses, according to Good Magazine blogger Matthew Manos.
I’m not negative about philanthropy; I believe you can do good and also make a return on your investment and then reinvest it for even greater impact. I’m both an active contributor and serve on the board of many non-profit organizations. The focus of my MBA was on non-profit management along with finance.
Charitable giving is ingrained in American society. Donating money to non-profits makes us feel good and furthers our values, but I know that you could find some business out there where you can have an even greater impact by recycling your money.
I applaud groups like Women Moving Millions, which was created to foster million-dollar giving by women. In 2009, during the depth of the Great Recession, WMM raised $182 million and focuses on causes related to women and girls.
If women who want to make the world better for women and girls also invested in companies founded by women, we would achieve a number of important outcomes. We would move the needle on funding for female founded start up companies that now receive less than 10 percent of all funding.
When women start companies, they tend to address problems and issues women care about. Yet, most female founded companies are starved for the necessary cash they need to prosper and grow. If female founded companies are underfunded they have a tougher time achieving success. And, if women are not early stage investors in companies (especially ones that offer products to women or serve women) they will will not reap the economic upside when companies go public.
Consider two recent examples: Facebook and Twitter. Both companies went public and have women as their primary users and yet no women were among the early investors. If you are not an early investor, you are left out of the massive wealth that was created by a platform favored by women.
Just think that if half of the early investors in those two companies were women, then women could invest even more in their favorite charitable causes. They would have even more money to plow back into new start ups for innovation and job creation. And we wouldn’t have to worry about getting women on corporate boards–they would already be on the board of these companies by nature of their investment.
A final thought: if just one percent of the amount given to philanthropy last year went to provide funding for early stage companies, $30 billion would have flowed into promising companies, creating jobs and spurring innovation. Even a handful of successes would have a big impact on the world.
Deborah Jackson is the Founder and CEO of Plum Alley, an e-commerce and crowd-funding site for women’s innovation, and a Co-Founder of the Women Innovate Mobile Accelerator– an accelerator investing in women-founded mobile-tech companies. http://www.PlumAlley.co