Capital for Social Entrepreneurs

I have written before about the importance of creating a social capital market in order to truly make social innovation possible.  A social capital market provides the same depth and breadth of financial vehicles to social entrepreneurs (both nonprofit and for profit) that traditional businesses enjoy.  This means that financial vehicles such as debt, growth capital, seed funding, equity deals and so on would be in ready supply to those organization’s whose business model includes a social impact component.  The upcoming Social Capital Markets Conference (the second annual this September in San Francisco) is a step in the right direction by bringing philanthropists, social investors, social entrepreneurs and others together to talk about how we bring such a market to fruition.

But there are many other examples of entities that are already out there experimenting with new financial vehicles.  Investor’s Circle is one of these.  Investors’ Circle is a network of over 200 angel investors, professional venture capitalists, foundations, family offices and others who are using private capital to promote the transition to a sustainable economy. It is the largest and oldest network of early-stage investors dedicated to funding mission-driven companies. Since 1992, Investors’ Circle has facilitated the flow of over $130 million into 200 for-profit companies and small funds addressing social and environmental issues. Investors’ Circle members have been behind Zip Car, TerraCycle, United Villages, and Verdant Power among others.

Investor’s Circle is an exciting example of what a social capital market begins to look like.  The capital investments that these investors make are different than traditional angel or VC investments.  For these investors, the social impact is critical, so they are willing to be patient about the financial return in order to make sure that it comes with social return.  As one of their investees, Jere Kolstad, CEO and President of Montana Renewables, has said:

IC Members are…investors who share our vision for more sustainable industry, and who express their commitment with patient, long-term investments.  It’s about more than money for this group—they want you to succeed financially, but not at the cost of forfeiting your social and environmental values.

Investors’ Circle is currently doing a Call for Applicants for its Fall Conference and Venture Fair to be held November 15th – 17th, 2009 in Washington, DC.  If you are an early or expansion-stage companies whose business addresses significant social or environmental issues and are in need of capital submit an application by July 31st. Companies that are selected to present to the investors receive:

• Pre-event coaching on your presentation from IC investors
• The opportunity to present to 150 angel and institutional investors interested in socially-responsible deals
• Extensive formal networking opportunities with investors

It’s a pretty great opportunity.  And a great model for bringing more capital into the social innovation space.  I’d love to see more groups like them, especially in the Southwest.

Tags: Investors Circle, Montana Renewables, Social Capital Markets conference, social entrepreneurs, TerraCycle, United Villages, Verdant Power, Zip Car

The Convergence of Social and Finance

If you are interested in the dramatic shifts the economy is currently undergoing and what it means for the long term, take a look at the article “Notes from the Leading Edge of Social Finance,” in the Fall issue of Green Money Journal written by Don Shaffer.  Don Shaffer is the CEO of RSF Social Finance, a 20+ year-old, leading-edge, San Francisco foundation that makes loans and grants to nonprofits. He is also the former interim head of Investors Circle, a 200+ member giving circle of venture capitalists who invest in businesses working towards a sustainable economy (social and environmental issues). Don gives a very interesting overview of where the economy is heading, and I think he is right on.

He argues that we are no longer content with an economy focused solely on individual gain, rather there is a new convergence of financial, social and environmental gain, where what is good for the investor is also good for society as a whole. Ultimately he sees the new economy “harnessing the striving energy and entrepreneurial drive of the American people to move more towards collaboration and partnership, instead of maximum individual gain, while honoring the power of free markets.” Here’s an excerpt:

International microfinance is drawing a lot of interest this year from U.S. investors. For good reason, it’s great to see direct investment going to small, growing entrepreneurial ventures in the developing world. But what about our neighbors? As the wealth divide continues to widen in this country, both in urban and rural areas, we are asking ourselves at RSF, “How can our clients best support small and medium-sized, privately held companies in the U.S. that have strong community development and ecological sustainability goals?”…We are creating a learning community that asks hard questions about money and how we use it, acknowledging that money is simply a form of energy that creates a relationship between human beings. What is true wealth…What is the right balance between investment and philanthropy…What does it look like to re-imagine money to serve our highest aspirations? What, specifically, will it take to develop a network of risk and liquidity appropriate financial vehicles that are completely different from the products of Wall Street?

These thoughts and questions are very similar to the conversations that were going on at the Social Capital Markets Conference earlier this month and that are going on around the country.  We are witnessing a pretty dramatic shift, and it is fascinating.

Tags: Economy, Green Money Journal, Investors Circle, RSF Social Finance, Social Enterprise, Social Finance, Social Investing, venture capital