Do Good While Doing Well

Leveraging DAFs to Get More Capital to Women

Early in her career, Alisha Griffey was an innovative entrepreneur working to improve areas she cared about, like clean energy and health care. Alisha and I got to know each other through the ACA, and in February 2023, she was a guest on the Angel Next Door podcast. On the show, she explained that she became an angel investor because of her frustration at the lack of funding going to women and people of color. However, she didn’t want to approach investing in the typical manner, as she believed there were a lot of strong businesses that were overlooked by equity investors because they weren’t chasing hypergrowth. She founded Daintree Capital, an investment firm that provides working capital loans to underrepresented founders to fund growth investments that drive near-term revenue.

Alisha initially considered the traditional route of raising a fund but realized that this approach would shift her focus away from helping early-stage companies that needed relatively small investments to fuel growth. Instead, she sought an alternative path that was less widely understood or expected. An offhand comment from one of her portfolio companies mentioning a loan from a DAF piqued her interest. This prompted six months of intensive research, leading her to discover innovative approaches within the DAF space that could creatively harness charitable capital for investing in for-profit businesses.

Alisha identified three main issues: the underfunding of women and people of color compared to other founders, the overlooking of certain business models by venture capitalists, and the disparity in women-founded companies surpassing the million-dollar revenue threshold.

Venture capitalists tend to prioritize companies seeking a ten-times return or a billion-dollar valuation within five years, often overlooking sustainable, strong businesses that do not chase mega markets or hyper growth. Alisha noticed that women-founded companies were less likely to break through the million-dollar revenue barrier. These women-led businesses offered products or services that customers valued but often struggled to gain momentum to cross into higher-revenue success where more investment options become available.

Daintree Capital targets companies with revenue ranging from $100,000 to $2 million. Since its inception in 2020, Daintree Capital has granted eighty-three loans, maintains a less than 1 percent default rate, and plans to expand further. Daintree has mainly funded companies to increase inventory quickly when demand exceeds supply. Loan sizes range from $10,000 to $75,000 and commonly span nine to twelve months. This model suits companies that can use a small amount of capital to generate a significant increase in revenue within six to twelve months.

The DAF approach may be confusing to grasp initially because it involves the understanding that donors don’t necessarily get back the returns on their investments. Remember, these are funds they designate as gifts; the DAF essentially allows them to operate their own charitable foundation with no more difficulty than investing in a mutual fund. With that firmly in mind, donors can view returns on their investments as further opportunities to give. And once a donor places money into a donor-advised fund, they get a tax write-off. Although they lose direct control over the funds, they can still advise how the money is utilized and, importantly, can invest that money with all returns on that investment accruing back to the DAF, not the individual.

An investment in Daintree’s Impact Fund provides funding to start-ups through loans. When that investment is made through a DAF, the principal and interest are paid back to the investor’s individual DAF. From there, the investor can use that money to donate a 501(c)(3) organization of their choice or reinvest it back into the Daintree Impact Fund. The money, however, cannot be transferred back to the investor’s bank account.

DAFs open new possibilities not only for nonaccredited investors but also for those who may be hesitant to invest in early-stage companies. These individuals might be more comfortable with philanthropy and can now explore investment opportunities in causes they are passionate about through their donor-advised funds.

Overall, DAFs offer an innovative solution for kickstarting risky or capital-intensive ventures that might not attract funding from traditional investors. By leveraging unallocated DAF money, it’s possible to create momentum in areas that need it the most, ultimately creating a more significant social impact.