Funding for entrepreneurs is at a record high since the Great Recession. Venture capitalists and angel investors are piling into massive funding rounds for startups. Notably, there are now more than 100 venture-backed companies valued above a billion dollars—a jaw-dropping 150 percent increase from July 2014. This boom in startup investment has also impacted the earliest stage of the business funding cycle; we’re seeing multi-year highs in early-stage investments so far this year. All signs point to a surge of capital for early-stage startups.

But is this also the case for social entrepreneurs? The answer is a resounding no. Despite the headlines, social entrepreneurs still struggle to raise early-stage funding. 

This is not a new problem—others have documented the “pioneer gap” and offered solutions for bridging it. Just recently, ANDE’s Genevieve Eden shared how accelerators are “filling the gap” in the developing world. But it’s important to note that mission-driven entrepreneurs solving social and environmental issues in the developed world face the same funding gap.

At Tumml—an urban ventures accelerator for early-stage, mission-driven entrepreneurs—we recognize that access to seed-stage financing is critical to the success of impact startups, allowing them to refine business models and acquire customers. We see two problems persist in limiting the capital access of social entrepreneurs in the early stages:

1. Angel investors do not prioritize mission-driven startups.

Angel investors— high-net-worth individuals who invest in promising startups, typically in the form of equity or convertible debt—are generally the first external investors to support early-stage startups, “filling in the gap” before an institutional funding round. Unfortunately, few of them prioritize mission-driven startups. 

We examined investor profiles on AngelList, a popular platform for connecting angel investors to entrepreneurs, which allows investors to align themselves to specific “markets” that reflect their investment priorities. There are two related markets that focus on mission-driven startups: “Impact Investing” and “Ventures for Good.” As of August 2015, less than 2 percent of the angel investors on AngelList expressed interest in these mission-driven markets. 

Few angel investors prioritize impact investment opportunities. (Courtesy of angel investor directory as of 9/8/2015)

We also found that other major angel investor directories and research arms, such as the Angel Capital Association and SeedEquity, which also track the markets prioritized by angels, do not include any tracking of impact-aligned angel investments. 

This of course doesn’t mean that angel investors never invest in social entrepreneurs, but, in line with our experience, it suggests that the vast majority of angel investors do not prioritize the social impact of a startup as part of their investing strategies.

2. Impact investors have a preference for later-stage investments.

According to the 2015 GIIN and J.P. Morgan study, impact investors allocated only 3 percent of capital to seed and early-stage ventures. Investors confess that one of their major challenges is a “shortage of high-quality investment opportunities with track record.” In essence, impact investors want to see more data points before investing. 

Additionally, we examined investor profiles on EnableImpact, a platform similar to AngelList but tailored for impact investors. Shockingly, only 72 of 1,239 impact investors on the platform (less than 6 percent) say they target early-stage social ventures. 

This evidence reinforces impact investors’ preference for later-stage ventures, but the shortage of funding at the seed stage also makes it harder to develop an investable pipeline for later stage impact investors. And, critically, it indicates that impact investors are shying away from seed investing because of perceived business risk.

So how can social entrepreneurs succeed in this environment?

In working with our 23 startup alumni to raise more than $26 million in seed funding over the last two years, we have noticed some trends. 

First, successful mission-driven entrepreneurs target traditional tech angel investors. Data indicates that most available seed capital is in the hands of mission-agnostic investors, but this does not mean that entrepreneurs should brush social impact under the rug. Traditional tech angels base their decisions on a number of factors, including team, traction, and growth potential. This presents an opportunity for social entrepreneurs to showcase all of those factors, along with a core mission that animates the work of the team and unifies their vision toward growth. Case in point: The majority of funding for Tumml entrepreneurs has come from impact-agnostic angel investors. Many of these entrepreneurs leveraged their mission as evidence of their team’s passion and energy during investor pitches.

Second, successful mission-driven entrepreneurs go above and beyond to “de-risk” their startups for impact investors. They must present compelling pilot data and/or research as a counterpoint to their perceived risk profile—it’s that, or wait to engage impact investors in later rounds, when they will be more comfortable deploying capital. Specifically, several of companies we worked with prioritized launching pilots with paying customers, then rigorously tracked metrics. This traction created strong proof points for potential investors, helping “de-risk” their business models.

Without seed capital, many promising startups simply can’t grow into the successful, mission-driven companies we all want to see in the world. To effectively compete for seed capital, social entrepreneurs must adjust to the realities of the funding landscape, and more often than not, this means targeting impact-agnostic investors in the near-term and working to build a strong business case for impact investors in the longer-term.