Impact Investing: Finding Resources for CSR Start-Ups
Impact investing is an emerging asset class focused on the flow of capital towards companies that align market incentives with scalable impact. In other words, investing in for-profit companies that are making the world a better place.
It is a paradigm shift away from a bifurcated non-profit vs. for-profit perspective, into a blended approach that seeks to make money and do good. The sector, generally referred to as “social enterprise,” has garnered a lot of attention and interest recently, especially since it represents a way for many to align their careers with their personal values.
After working in impact investing for a short while, I discovered a little secret that people don’t bring up enough: there is actually very little investment being made, especially for seed and early-stage companies.
Reports from JPMorgan forecasted impact investing to be a $400 billion to one trillion investment opportunity over the next decade. However, right now most of that money exists only for growth stage companies, and it is very difficult for start-up entrepreneurs to get the resources they need to launch their companies. The reasons are fairly consistent: aversion to risk, small investments exceed the operational bandwidth of existing impact investment funds, and few examples of social enterprises that have had exits and liquidity events.
However, if there is little investment available for early-stage companies, how will the sector grow and social enterprise jobs be created?
Aligning Impact Investing and Corporate Social Responsibility
To address the lack of capital and resources to early-stage social ventures, Hub Ventures was launched in 2010 out of the Hub Bay Area, a community of social entrepreneurs in San Francisco with over 1,000 members. Hub Ventures is a 12-week accelerator program providing resources and support to seed-stage social ventures.
In order to increase the flow of investment to Hub Ventures participants, we are taking an innovative approach that aligns social responsibility programs of large corporations with the entrepreneurs and companies going through our program.
Recently, Hub Ventures partnered with Lakeland Ventures Development, whose corporate client is in the business of saving lives. Lakeland has committed to put $380,000 into startups focused on ”human health and safety,” which includes a broad array of possibilities including clean water, digital health, and public safety. Lakeland is focused on identifying investment and acquisition opportunities that align with the CSR and core business strategy of their client.
Of the eight to 10 slots for the spring cohort of Hub Ventures, four will be reserved for companies that fit these criteria. Each company will receive $20,000 when accepted and all are eligible for $75,000 at the end of the program.
Most corporate social responsibility focuses on launching green initiatives, giving money to charity, or reducing the footprint of the supply chain. Often these initiatives are just rhetoric, paying lip service to improve the corporate image, and they don’t offer any really substantive solutions to social or environmental challenges.
Lakeland is making investments into companies that are addressing big challenges and that also align with the values of their corporate clients. It is a much more engaged and action-oriented approach to corporate social responsibility, one that simultaneously benefits the large corporations and the small start-ups.
The companies applying to Hub Ventures represent a diversity of sectors including technology for good, civic engagement, environmental sustainability, public health, poverty alleviation, and more.
My hope is that more corporate clients will see the value in supporting these entrepreneurs and their world changing ideas.
This article originally appeared on CSRwire and is republished with permission.
- Opinion: Traditional Philanthropy Gives Way to a New Power
- The Most Important Climate Change Question: How Will Investors React?
- JP Morgan:Impact Investing Offers Trillion Dollar Opportunity
- Sustainability Reporting Group Issues First Standards for SEC Filings
- Social Responsibility in Russia: Yesterday, Today…and Tomorrow?
Tagged as: Corporate Social Responsibility, CSR, Hub Ventures, Impact Investing, J.P. Morgan, Social Enterprise, Socially Responsible Investing, SRI