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The State of Philly’s Impact Investment Scene, According to Investors’ Circle

June 10, 2015 Category: Funding

The term “impact investing” has been revolutionized on a national scale, according to Philadelphia Investors’ Circle president and Robin Hood Ventures managing partner John Moore. Take clean tech for instance. Moore said that 20 years ago, the industry was considered an exclusively impact investor breeding ground.

“It was pretty unclear that there was going to be a financial return associated with that risk, but there were people that did it anyway,” he said. “That’s partly because they knew more about it than other people, but also because it was something that they were motivated to move forward.”

Now that mainstream investors have caught on to just how lucrative clean tech can be, it’s no longer considered exclusive territory for impact investors. Those mainstream investors have realized that they can not only make money by funding clean tech startups, but they can also have a tremendous social and environmental impact as well. That’s mostly due to clean tech’s decades–long track record, which has yielded legitimate financial data that people can now analyze and understand.

Hence, the adoption of sustainability and responsibility that has become a trend in corporations across the board. Before small social enterprises can assert their validity in mainstream investment groups, it’s the job of impact investors to take that first step by risking capital.

But social entrepreneurs need to take that initial step, and that can be difficult.

“There’s a suspicion that you need to sacrifice returns to be a social enterprise,” said Tom Balderston, managing principal at Sustain VC and member of the Board of Directors at Philadelphia’s Investors’ Circle branch. “That’s not the case.”

Philadelphia’s Investors’ Circle has an incredibly diverse portfolio, including Wash Cycle Laundry, sustainable retailer United By Blue, open data platform Versa, prison education platform Jail Education Solutions and persona diagnostics startup Genomic Expressions.

“[Our portfolio] is very diverse, but a lot of that has to do with the diversity of the group,” said Moore. Investors’ Circle invests in what each angel has experience in and the areas that they drive forward. Moore personally connected with Wash Cycle Laundry. For United By Blue, they have another angel with retail experience in the group that validated the other members’ confidence in being able to understand the business and invest in it intelligently. The same goes for every other enterprise in the group’s portfolio — which continues to grow.

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“We’re looking at companies all year,” said Moore. “We spend about 45 minutes with each company getting to know their business pitch, asking questions, trying to dig in to see if it’s something we’re interested in taking forward.”

According to Moore, once the group does their due diligence, they look to initially invest anywhere between $250-500k. Over time, they try to invest $1 million in each company they fund.

Moore said Philadelphia enterprises need to capitalize on their strengths — such as ed tech and health IT — but focus on building up its weaknesses. Overall, Moore says the impact investment scene in Philadelphia is flourishing. Balderston agrees.

“There’s a nice fabric that’s getting stronger and stronger,” he said. “The scene will take some time to become institutional. Venture capitalists will want to see proof that impact investing is effective and profitable.”

In order for the scene to continue to grow both nationally and locally, actual impact needs to be measured. Balderston said there’s a trending focus on doing just that. In the Philadelphia region, those studies are being carried out by B Lab, Halloran Philanthropies, Wharton Social Impact Initiative and ongoing research into the impact of Ben Franklin Technology Partners investments in partnership with the Economy League of Greater Philadelphia.

But first, Philadelphia needs a stronger social impact community. It needs supporters to rally behind it. Social entrepreneurs and impact investors cannot go it alone if the market does not have adopters and consumers.

“I don’t think it’s solely on the social entrepreneurs, but the community in general,” said Moore. “There’s a whole bunch of different components to this ecosystem and they’re only one part of it.”

Moore said entrepreneurs in Philadelphia, outside of the realm of social enterprise, have done a good job of coalescing through Startup PHL and Philly Startup Leaders.

“Impact entrepreneurs have to self-select and connect and network,” he said. “I think putting on that loudspeaker and broadcasting to the world that your business is not only about making money, but about making a difference — that’s a valuable thing.”

Image via Flickr user Mihai Bojin


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