Impact Investing for Social Enterprises: A New Source of Funding
If it’s not too big for me britches—and by the end of this blog only you’ll be able to decide whether that’s the case—excuse me for uno momento if I take the liberty of including Oliver Russell in the same neighborhood as Patagonia and TOMS.
They’re both national, if not international, brands.
One makes arguably the best and most sustainable outdoor clothing in the world, and is a leader in the environmental conservation movement.
The other is a pioneer in leveraging the buy-one, give-one business model that turns your purchase into a socially good action benefitting an individual in a Third-world country.
And then there’s us, Oliver Russell—a small (but mighty!) branding agency that’s a certified B Corporation based in Boise, Idaho.
It’s not that we share B Corporation status with Patagonia, which we do. It’s not that we’re integrating social impact and CSR into our business like TOMS, which we also do.
There are thousands of other socially responsible companies that can make those claims.
Here’s the deal: Like Patagonia and TOMS, we’re making impact investments outside our core businesses, taking equity stakes in other social enterprises that we believe can deliver social, environmental, and financial returns on our invested capital.
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This is a new wrinkle in what initially was referred to as socially responsible investing and is now becoming known as impact investing. Typically this sort of investing is done by the pros at mutual funds or foundations whose charter is to either invest in companies or loan them capital, with both a social impact and financial return in mind.
What’s happening today is that individual companies are also playing the role of impact investors.
Companies seeking either goodwill in the community or more active strategic change have long made philanthropic donations to organizations that help achieve these aims.
But this is different.
Both Patagonia and TOMS have set up investment funds. Like venture capitalists, these companies are betting they can provide a financial spark to social enterprise startups that are like-minded in mission and will also deliver a financial return.
Patagonia Works, which is the holding company for the apparel maker and other operations, has created “$20 Million and Change.” Patagonia’s investment arm makes impact investments in startup companies that are working to bring about positive benefit to the environment. (The initial capital contributed to the fund was $20 million, thus the name.)
So far, Patagonia Works’ impact investing has funded eight social enterprises, among them California Cropwise, a startup that makes liquid fertilizer from unsold food it collects from grocery stores; Yerdle, a sharing website that keeps products in circulation and out of the waste stream; and most recently, an innovative new clean energy investment with Kina’ole Capital, New Resource Bank, Beneficial State Bank, and Sungevity (all B Corporations) to create a $35 million tax equity fund to help homeowners purchase rooftop solar power systems.
The TOMS Social Entrepreneurship Fund has a mission to invest in the next generation of entrepreneurs using business to improve lives.
Here’s what TOMS looks for in an investment:
So far, TOMS Social Entrepreneurship Fund has invested in 12 portfolio companies, including Thrive Market, a website that sells and delivers healthy foods and natural products; Rubicon, a company that helps businesses save on waste and recycling; and Harvest, a startup that brings fresh, delicious, and affordable meals to food deserts in low-income neighborhoods. (We’ve known Harvest CEO Sam Polk since he started a cool nonprofit called Groceryships—you can learn more about him in his Change Maker interview on our website.
Keep in mind that both Patagonia and TOMS have not abandoned their traditional giving programs or partnerships; these equity investments represent an additional platform for the companies.
These business-minded investments strengthen both companies beyond charitable giving. They extend the reach of their brands, incubate new ideas and collaborations, and diversify business risk beyond their core industries and product lines.
Meanwhile at Oliver Russell, we’re operating at a slightly different scale. We’re in the process of taking our first equity stake in a social enterprise, Works Progress Administration (WPA), a craft brewer that intends to create “progress through beer.”
We’re investing in WPA because it has a solid business model that’s built on brewing modern interpretations of traditional styles, plus includes operating with public benefit as a core principal. The brewery—inspired by the historical Works Progress Administration of our country’s Great Depression—will open later this year and will certify as a B Corporation as soon as it qualifies.
And of course, there’s the beer. We’re simply following Warren Buffett’s dictum of investing in what you know.
You can learn more about the brewery in our case study for Work Progress Administration or by visiting the WPA website.
This all hints at new ways private businesses can effect social and environmental change by investing in other businesspeople. It also opens completely new channels of investment capital that can be accessed by social enterprise startups.
So if you’re a social entrepreneur on the hunt for impact capital, check ‘em out. Patagonia Works accepts applications for funding on its website. Information about applying to TOMS Social Entrepreneurship Fund can also be found on their impact investing website.
And as for an investment from Oliver Russell? Who knows? We’re little, but mighty! Go to our website to learn more about our Call to Action for social impact. Or you can send me an email and let’s talk—I’d love to hear more about the way you’re changing the world and the financial opportunity it represents.
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