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How the heavy hitters behind the newly formed ImpactPHL want to revolutionize capitalism

Philadelphia. June 15, 2016 Category: FeatureFeaturedFundingLong
Philadelphia likes to talk. Not just about sports or divisive tax policies, but about how we aspire to become the hub of something: The B Corp Capital of the World. The Greenest City in America. The Birthplace of Innovation or whatever.

Regardless, Philadelphia’s hopes of becoming a social entrepreneurship hub won’t happen until private and philanthropic dollars are aligned, and that requires action — not just talk.

Creating action is the first priority for Philadelphia’s brand-new impact investing advocacy organization, ImpactPHL, comprised of Philadelphia venture capitalists, business leaders, nonprofits, academics, entrepreneurs and philanthropists and founded by the following:

  • John Moore (Investors’ Circle)
  • Tom Balderston (Balderston Capital, SustainVC)
  • Dermot Murphy (Halloran Philanthropies)
  • Ajay Raju (Dilworth Paxson)
  • RoseAnn Rosenthal (Ben Franklin Technology Partners of Southeastern PA)
  • Christopher Rasmussen (Threshold Group)
  • Steve Wray (Economy League of Greater Philadelphia)
  • Richard Binswanger (A Way To Donate)

It took nearly two years of organizing behind closed doors — we reported on the partners at play a year ago — but ImpactPHL has finally galvanized. Next month, founding partners will officially begin working to codify regional interest in a burgeoning investment strategy that has been making waves across the venture capital and philanthropic sectors alike.

From our Partners

Impact investors, often venture capitalists like Moore and Balderston, expect financial returns on their investments. But they also expect their entrepreneurs to deliver positive social outcomes, and they can be just as hard-nosed about impact metrics as they are financials.

How do you measure the holistic impact of one day worked by a Wash Cycle Laundry employee? The big-picture impact generated by a week’s worth of total MilkCrate use?

That’s the challenge.

We’re revolutionizing capitalism,” Moore said. Just earlier this year, Moore stepped down from his post as president of impact investing network Investor’s Circle, though he is still a member.

The sector has been gaining traction nationally since the Recession, and despite the recent activity from mainstream VC firms and financial institutions, impact investing will always have a cherished history in Philadelphia, and the city remains a leader in the sector thanks to ImpactPHL stakeholders.

For them, this has been a long time coming.

“We all have a relatively narrow slice of the pie,” said Moore in reference to the roles each partners’ organization plays in the social impact space. What ImpactPHL has now is a great start, but “for this region to really blow this ecosystem out in a big way, we all need to be associated with one common initiative.”

The players at the table to boot are a healthy start and represent a number of sectors. As of now, six out of eight founders are white males. That’s no fault of the founders, but rather a reflection of the industry. As impact investing gains traction locally, more POC and women representation will be crucial to the health of the space.

A number of advisers have been helping guide ImpactPHL, including:

  • Jacob Gray, director at Wharton Social Impact Initiative (WSII)
  • Garrett Melby, cofounder of GoodCompany Ventures
  • Hardik Savalia of B Lab
  • Maari Porter, executive director of Philanthropy Network
  • Claire Marrazzo Greenwood of the Chamber of Commerce
  • Sylvie Gallier Howard of the Commerce Department, City of Philadelphia

Let’s get one thing straight: This is not an impact investing fund. It’s an advocacy organization. ImpactPHL is registered as a nonprofit and is housed within Ben Franklin Technology Partners, allowing the organization to collect seed funding from philanthropic investors. Those dollars will be used to support action around ImpactPHL’s five goals: advocacy, convening, education, product development and internal capacity building.

Organizing people around a shared understanding of what impact investing means can get a little tricky, depending on who you ask. ImpactPHL will be advocating investment in for-profit social enterprise. That’s still somewhat unexplored territory for local philanthropy.

Not all that long ago, Melby’s definition of impact investing was limited specifically to seed stage venture capital invested in social enterprise. Now, the former SafeGuard Scientifics investor and social enterprise OG said he recognizes how a broadly encompassing definition could open the funding flood gates and accommodate varied interests.

But is there a place at the table for area foundations?

Yes. Impacting investing has been a mainstay in the foundation conversation for a few years, and despite all the talk, only a handful of local foundations (Patricia Kind Family Foundation and Untours Foundation) have used endowment money to make low-interest loans to or buy equity in a social enterprise (Untours has made six such investments).

Here’s the appeal: Private foundations are required to grant out at least five percent of their endowments every year, and many choose to invest the remaining 95 percent in the market and gradually accrue wealth. The problem? That money is not mission-aligned. It’s not making any social impact.

Last year, WSII released a report that concluded impact investing can achieve financial returns comparable to public market rates while still retaining social mission. That should be music to mission-concerned foundations’ ears.

In due time.

Porter said there’s nothing abnormal about area foundations’ hesitance to make impact investments. Investing in community development financial institutions like Reinvestment Fund could be on the horizon, she said, though likely in the form of a low-interest loan rather than equity.

It’s important to remember, Porter said, that foundations don’t want to stray too far from the nonprofits that rely on them.

“I still think there is some way to go for foundations to invest in the for-profit model,” she said. “But I think for foundations, they’re really invested in the nonprofit sector, and we want to make sure when we’re doing impact investing that it goes to the nonprofits as well.”

What about the rest of the region’s venture capitalists? How will they feel about taking a chance on financial returns to make a social impact?

“VCs are aware of it and they like the idea of it,” said Ben Franklin Marketing Director Jason Bannon. “But when you get to more traditional investors, they don’t necessarily understand how to get into it.”

Funders on the fringe will need a safe point of entry where they can learn how impact investing works and connect with social entrepreneurs. That’s a job well-suited for ImpactPHL and its metaphorical impact investing pie.

“That means making existing players stronger and creating capacity where there’s a missing piece,” Melby said. “Ultimately, this is all about supporting the entrepreneurs and having them succeed here.”

It’s a lot of talk about making Philadelphia a pioneer in impact investing, but ImpactPHL is backing it up with action already: Next month, the nonprofit will release an Economy League report on impact investing in tandem with the organizational launch.

They’re also working with B Lab and the Chamber to identify the city’s most socially impactful companies for a B Lab marketing campaign called Best for PHL.

OK, now we’ve got some action.

“One of the things you get into with impact investing is that there are a lot of things you can talk about, think about, even pontificate about,” Moore said. “But in the end, nothing changes unless you do it.”



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