One of the challenges of impact investing is that there is no commonly understood meaning for the term. Instead there is a Babel-like profusion of meanings and practices, ranging from philanthropy applied to capacity-building to negative and positive global public market screens to regional or even neighborhood (re)development, just to name a few. At Reinventure we applaud all those who are working to put to rest the notion that investments can’t or shouldn’t be expected to both deliver the intended financial performance and serve a larger purpose.
That said, Reinventure capital has a very specific definition of impact investing:
We aim to generate nonconcessionary returns by investing equity and debt capital in early-growth-stage companies led by people of color and women.
If you find yourself nodding in agreement, please skip to the end — or just stop here and drop us a note to let us know how we might collaborate.
If you’re wondering how that qualifies as impact investing, please read on.
Going straight at the problem.
Entities as diverse as the Kauffman Foundation and McKinsey have issued reports in recent years indicating that young growing companies account for most or all of job creation and most or all of wealth creation in the US over the past 20 years. During that same period, only a sliver of investment capital has been directed to companies led by people of color or women.
People of color and women continue to face a steep asymmetry in access to capital, consistently encountering additional obstacles beyond those faced by their white male peers.
Leaving aside causal factors for the moment, the effect of this asymmetry is both an economic and social ill. As women and people of color have been largely overlooked by mainstream capital, they have also missed out on the benefits of wealth and job creation. The result is increased inequity and decreased economic vitality across the United States.
Our approach to impact investing is to go straight at that problem and begin to break the pattern.
Reinventure Capital is building on Ed’s exemplary track record with UNC Ventures* to direct investment capital specifically to high potential founder teams who are overlooked by mainstream capital. The bad news is that there is no way we can eliminate or even fundamentally alter the entrenched asymmetry with a $50M fund. The good news is that there is an even more fertile opportunity pool now than there was when UNC delivered a 32% IRR by investing behind founders of color. There is no shortage of high quality deal flow.
What will success look like?
For Reinventure, success will look like a highly diversified portfolio of 15 or so companies
- spanning multiple sectors
- led by people of color and women
- staffed by diverse team members at all levels
- growing profitably, and
- generating real value for all stakeholders, including our LPs.
Following on the template Ed pioneered with UNC, we expect to make a significant impact not only in the companies where we invest, but through their example to many others besides. Also following on Ed’s pathbreaking approach with UNC, we expect to deliver fully competitive returns not in spite of but because of our focus on working with overlooked entrepreneurs to create and disseminate value.
Please share your thoughts with us: How do you define impact investing? How might we join forces to amplify all of our efforts?
At Reinventure, we’re reinventing investing. We’re proud to be in extraordinary company with others who are also reinventing investing to create a more just and equitable future for all. Please join us.
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*While there’s no such thing as a guarantee in investing and no one can reliably predict the future, Ed’s record at UNC Ventures provides some historical evidence that it is indeed possible to invest for both financial returns and justice, prudence, and value creation. To learn more, please contact us.