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Articles - May 2014
Monday, April 28, 2014

II. The social venture capitalist

BCorp carlkiilsgaard OBM Carolyn-Duncan 062Carolynn Duncan started her career as a social worker, serving at-risk teens in the nonprofit and government sectors. She soon became overwhelmed by the scope of the problems she encountered. “I thought: ‘I can help 10 kids at a time and it will do absolutely nothing because there are millions of kids with these issues.’” So Duncan’s career took a sharp left turn; she started working in business development and venture capital, sourcing deals for Epic Ventures, a Salt Lake City-based firm, developed an entrepreneurial finance program and ran LivePitch events for FundingUniverse (now Lendio). 

“It was awesome — all about scale and how do you grow from zero to $100 million in five years,” she says. “To do that, you have to have a level of discipline. But then I was like, ‘I’m going to become an asshole,’ and that’s not what I wanted either.”

Today Duncan is the CEO of TenX, a for-profit business accelerator that runs financial literacy programs for entrepreneurs and business leaders. She is also the founding partner of the Northwest Social Venture Fund, a $20 million fund that invests in technology startups with a social mission and less than $1 million in revenue. The fund itself is owned by a nonprofit foundation, the Northwest Social Venture Foundation.

These three entities fall at different points along the blended capital spectrum, Duncan notes. But they share a single objective: “to alleviate suffering in the world through scalable social entrepreneurship and impact investing.” Impact investing, investments that seek to deliver positive social or environmental change (impact), has been in play for over a decade; what distinguishes the Social Venture Fund is the focus on high-risk, early-stage startups that could be acquired or go public.

“Like any other venture fund, we look for something that can scale and can provide investment-level returns. But differently than other venture funds, we invest exclusively in impact companies. There has to be a core humanitarian thing in the world that is being solved because of what they’re doing.” 

The fund recently selected its first two investments: InStove, a Cottage Grove company that manufactures biomass cookstoves for developing countries, and Seattle-based Litesprite, a gaming platform that helps people manage anxiety and depression. 

Both the Social Venture Foundation and TenX — an entity that co-hosts the Social Venture Society’s Hacking Social Impact “unconference” — embody similar blended principles. The business accelerator has volunteers; most for-profits do not. Meanwhile, the fund is housed under the foundation, a bureaucratic decision that “makes us put our money where our mouth is,” explains Duncan. Foundations are legally required to distribute a certain percentage of investment assets each year to charity.

“We’re not branding ourselves as impact for purpose of attracting a different set of investors who like us more because they are philanthropically minded. We have operating contingencies to do certain things with our capital.”

Merging corporate and philanthropic structures and staff involves a bit of a learning curve, Duncan acknowledges. “It’s a bilingual problem. A business calls personnel their ‘team’; nonprofits call it ‘staff.’ It’s the exact same thing. Nonprofits talk about ‘earned income.’” For profits call it ‘revenue’ — same thing.”   

“What I hope will happen is there will be formalization around a hybrid entity in which you blend the best practices of both, people speak both languages and there are legal structures that house you as both.”



 

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