Impact Investing: A Positive Paradox. Inspiration for the New Year.
This time of year many of us are stepping back to review 2019 and looking toward the New Year. Where would we like to make a difference? I’d like to share how one firm I’ve gotten to know well has made impact creation their daily focus every year since their founding. We all want to have impact, to leave our legacy. This means different things to different people. What is your story going to be? I hope this one can inspire yours.
Doing Well by Doing Good.
Last fall, I was asked to interview John Replogle, Partner of One Better Ventures for the Harvard Alumni Association (see Lessons in Leadership: The importance of culture, goal setting, and doing well by doing good). This year, continuing the theme of doing well by doing good, I led a fireside chat with Dave Kirkpatrick, co-founder and a Managing Director of SJF Ventures, a leading impact venture fund. The rapt audience held on to every part of our discussion. At the conclusion, one serial entrepreneur who recently retired shared, “Dave inspired me to want to do more.”
To find your calling is to find where your greatest joy and the world’s greatest needs intersect.
Dave has been known to share this Frederick Buechner quote when speaking to students. When he graduated from Duke with thankfully no debt as he had attended college on full scholarship, Dave chose not to go to graduate school or join a company right away. He gave himself the luxury of space to retreat and to discover his calling. He was interested in energy and by stepping back and giving himself thinking time to explore his passion, he founded his first venture, a solar company, SunShares.
Listen to the quiet.
He encourages allowing a little space or breathing room to “listen to the quiet.” He shared that some of his greatest inspirations have come from this.
In the years to come, as he followed his interests, Dave met his co-founder, Rick Defieux, a successful investor with Edison Partners, cleantech pioneer and environmental scientist. They decided to start Sustainable Jobs Fund (SJF) together.
From its founding two decades ago as a community development financial institution (CDFI) focused on job creation, SJF evolved in subsequent years to become SJF Ventures, an impact venture fund. Dave and Rick realized to do the greatest good, they needed to leverage the funds from conventional venture capital and co-invest with them, while adding their impact edge. That is, SJF’s companies would produce strong financial returns as an integral part of creating positive societal change.
Dave has attracted dedicated and thoughtful talent to SJF’s team, creating a flat organization where each is given reign to build on their expertise and passion, creating their focus investment areas which include energy and mobility, food, education, health, and enterprise and consumer software.
Still a lot of work to do.
The firm celebrated a big anniversary this year – 20 years of investing in high growth, positive impact companies. $260 million raised across four funds. As of year end 2018, SJF had invested in 63 companies and created 9,282 jobs across the portfolio. The companies are mitigating climate change, accelerating transition from fossil fuels to clean energy sources, advancing education access and outcomes, conserving natural resources, improving health, growing sustainable foods, and creating greater economic access. Infographic of 20 Year Metrics.
When I asked his keys to success, Dave paused and said that while their companies and their fund have helped to affect change, he doesn’t feel successful yet. As there is still a lot of work to do. A lot of impact still to be made. There is even more inequity and pollution now than when he first started. This is one of the reasons he was a driving force in helping to start Impact Capital Managers, 47 impact funds in the U.S. and Canada and growing representing over $11 billion in impact-focused capital, which he now co-chairs. Their kick-off meeting was hosted on the campus of Harvard Business School in early 2017. He believes they can better impact change together.
Impact Investing adds to Returns.
A recent Harvard graduate, Brent Westbrook, said the theme that stood out most to him was Dave’s conviction that SJF and other impact funds can generate strong, venture-style returns by investing in companies that are both high growth AND have a positive impact on job creation and the environment. Many investors first ask how impact investing detracts from returns.
Dave, on the other hand, truly believes that their model is additive and the opportunities SJF now sees are equally or more compelling than conventional venture investment opportunities. Dave’s belief is now backed up with data. A research paper, published at the end of last year, The Alpha in Impact shares case studies, including several of SJF Venture’s portfolio companies, that collectively demonstrate how operating with an impact objective can add financial value for investors.
Brent went on to share that it seems there is increased appetite for impact investing across the board, as some traditional PE shops such as KKR, Bain Capital, and TPG, are starting to raise impact funds. And that the space has gained momentum over the last several years. Dave shared how SJF has received over 750 applications for open roles on their investment team and their fund sizes have increased meaningfully over time. They are investing out of their 4th fund which they raised in just one quarter. With a target of $100M and hard cap of $125M, they were quickly oversubscribed and raised $125M. This rapid fund raising is based on the tremendous success, financial and impact, of SJF’s earlier funds.
Rick Waechter, HBS ’88 was struck by Dave’s comments that there seems to be so much money out there chasing deals, which can make it harder for smaller funds that try to be rational to compete. We are clearly in a “boom” period for VC.
Paradoxes alongside Impact Investing.
Kathryn Shah, HBS ’10 commented on a number of paradoxes we see in the world today such as more interest in impact investing and “do good” companies at the same time many large corporations seem solely focused on shareholder value without regard for other stakeholders. She also noted that governments are not necessarily doing their part for the world’s benefit, particularly the environment, so the private sector has to step in. But in many cases, we can’t trust what the private sector is doing.
It is refreshing to hear from an impact investor who is walking the talk of doing well by doing good. The very engaged audience shows the positive reaction to Dave’s message and the SJF Ventures story.
We cheer on Dave and SJF’s efforts toward both positive impact AND positive returns. Here’s to the New Year AND the next 20 years!
About the Author
Grace Ueng is Founder & CEO of Savvy Growth, a boutique management consultancy whose mission is to help companies and their leaders achieve their fullest potential.
Ueng and Savvy’s Managing Director, Rich Chleboski, a clean tech veteran, develop and implement strategies to support the growth of impact focused companies. Their expertise spans all phases of the business from evaluation through growth and liquidity. Savvy works with your team from discovery through implementation to ensure the success of your venture.
Savvy supports senior executives and investors at impact focused for profit companies as well as non-profit organizations. They are hired by the board of directors or the CEO of companies at inflection points. They become an extension of the C-suite and develop and implement growth and transition strategies. Savvy Growth has served 200 clients from emerging growth to the Fortune 1000.