Nonprofit Opens a Financial Pipeline for Women-Led Social Ventures

Armed with a $1 million challenge gift from a female donor, a financial-services nonprofit has set out to raise $3 million more with an eye to boosting women entrepreneurs.

The potential $4 million in fundraising will support RSF Social Finance’s Women’s Capital Collaborative, a new venture to help create “a more inclusive economy,” said Deb Nelson, the organization’s vice president of client and community engagement.

San Francisco-based RSF provides money to nonprofits and businesses that create products and programs that serve social and environmental goals, such as eco-friendly disposable diapers. It has loaned or granted hundreds of millions of dollars since 1984, primarily in the fields of food and agriculture, education, and the arts.

The Women’s Capital Collaborative will start distributing money next year to about 20 organizations and businesses across the United States, providing what RSF say is a rare pipeline of capital for chronically underfunded female entrepreneurs and nonprofit founders.

In a telephone interview with The Chronicle, the $1 million donor said she hopes the model serves as an example for like-minded ventures. (She asked that her name not be used for privacy reasons.) Because RSF provides a mix of grants, loans, and investments, it’s a more sustainable way to support women entrepreneurs than traditional philanthropy alone, the donor said, adding, “If we can change the way we do business, there’s a higher likelihood it will be picked up by others and replicated.”

Capital Hard to Find

Companies run by women receive less start-up help than those run by men, according to Peter Roberts, a professor at the Goizueta Business School at Emory University in Atlanta.

His research on more than 2,000 applications to participate in business-accelerator programs shows that all-male teams of entrepreneurs attracted an average of $7,005 in equity in the 12 months before they applied, and $14,814 in overall prior-year financing. For all-women teams, the figures were $2,203 in equity and $10,147 overall.

That may be due in part to the fact that members of all-women teams tend to have less experience than their male counterparts, the research shows, but Mr. Robert said “there is no strong evidence that women underperform” as business leaders.

It’s that funding discrepancy that inspired the RSF donor to back the Women’s Capital Collaborative. “Women are not equally invited at the discussion table,” she said. “Their knowledge is not engaged, and therefore there is a real loss in our society.”

Following what RSF calls an “integrated capital approach,” collaborative recipients will get 50 percent of their financial support in loans and loan guarantees, 25 percent in equity investments, 15 percent in grants, and 10 percent in mentorship programs and workshops for donors and entrepreneurs. Until the money is disbursed, it will be invested in vehicles that focus on women’s inclusion, Ms. Nelson says.

The donor backs this blended approach as a sustainable way to support social-good ventures, with the seed money from RSF serving as a catalyst to draw larger grants, loans, and investments from other entities. For example, when RSF created a program for 50 sustainable-food start-ups in 2012, it distributed about $4 million from donors and subsequently attracted about $20 million in additional financial support.

“Investment at the forefront can have a multiplier effect down the road,” the donor said.