Finding Investment Capital for Social Impact

RISE finished up late last week.  It was great to see all of the energy and excitement around social entrepreneurship.  Indeed it seems that Austin has caught the tide of interest in social entrepreneurship that is sweeping the nation in the wake of the economic meltdown.  Even the New York Times got on board last week with an article about how social entrepreneurship might be the best business model for some market opportunities.

In all of the interest in social entrepreneurship, one serious hurdle (among others, surely) is investment capital.  Good Capital is planning their second annual Social Capital Markets Conference for this coming September.  This is an opportunity for venture capitalists, philanthropists, social entrepreneurs and others to get together to talk about how we create a marketplace for capital interested in social impact.  SoCap is a great thing, and I’m really hoping it will continue to expand the conversation and get people thinking, talking and experimenting with investing in these new entrepreneurs.

But a social capital marketplace hasn’t hit Austin yet. I do think, however, that there is tremendous potential for some of the wealth we have here to be turned into investment capital for social entrepreneurs. With that in mind I hosted a session at RISE on Wednesday about finding Growth Capital for Social Entrepreneurs.  The session discussed two kinds of investment capital for social entrepreneurs: growth capital that helps an organization grow to scale (however they define scale), and capacity capital that helps an organization increase their capacity and sustainability.  Both types of investment capital BUILD organizations instead of BUYING services.  And both kinds of capital are difficult for social entrepreneurs to find, particularly in Austin.  However,  I laid out a plan for social entrepreneurs that takes them to their boards, major donors and friends to secure capital, much like a traditional business secures investment capital from angels and VCs.  I think there is a lot of potential in this model, which even suggests PRIs (Program-Related Investments) as a vehicle to use to increase the capacity (particularly the fundraising function) of an organization.
The session ended with a comparison of Austin’s versus the rest of the nation in the social innovation movement.:

As you can see, when compared to similar cities, Austin’s use of these new tools is low.  There is tremendous room for Austin to embrace social innovation.  And I think the excitement around social entrepreneurship evident last week at RISE is a great place to start.

Tags: Austin, capacity capital, growth capital, investment capital, RISE, SoCap, social entrepreneurs