Joy Anderson writes: Social sector organizations swim in complex economic systems. The goal is to find the appropriate capital to sustain the mission. We are focused on one gap in this ecosystem: risk capital for scaling social enterprises. We are raising capital from investors who recognize that there is a cost of doing good and that therefore market rate returns are not appropriate or to be expected.
What we are finding is that many experienced philanthropists are able to add social investing to their portfolio because they know about how capital moves in organizations today and they understand the problem we are solving is important one for the organizations they care about. They can think about the gaps and what would become possible with risk capital that expected real but appropriate returns. This is one of many opportunities where investors can meet the capital needs of organizations committed to social good. For some people the fund feels like a new kind of investing. For others it feels like a new kind of giving. For still others, it’s nothing new but the institutionalization of something they’ve doing on as needed basis for individual mission focused organizations they support.
Whatever the starting place we are helping the movement of more capital to good places where it is truly needed for serious missions.
If social investing has a for profit component and the degree to which the returns are sub market rate is what makes up the “gift”, might we see the use of derivatives in the future that would allow for splitting the transaction? A donor would make a small gift that was matched with a larger investment. The “donor” would receive no return and the “investor” would receive a market rate return. This might allow social investment opportunities to tap into the huge pool of market rate return investors by leveraging the gifts of donors.