Consider this: Donating to a nonprofit, an organization that is “doing good”, is an investment in the future of the organization and its mission. Used to hire staff and execute the programs that align with the nonprofit’s mission, philanthropy in the US provides over $482Billion in support for nonprofit organizations. Sounds like a lot of money, right?
Consider that in 2021 the total investment in publicly traded companies in the US exceeded $40Trillion, almost 100 times larger.
Now, set aside the word nonprofit for a bit and consider the “doing good” of another organization, SoLo Funds. A financial services company, SoLo Funds’ platform powers a community lending marketplace where members can request and fund emergency needs. Incorporating a social mission into its business model, SoLo Funds makes lending equitable, empowering, and community-driven. Could a donation to a nonprofit have accomplished the same end result? You bet, but likely not at the same scale or as sustainably.
However, consider the risk of building a business model that incorporates everything that it takes to launch a financial services provider. How much fundraising would a nonprofit need to launch SoLo Funds? The answer is $13million, more than most nonprofits can imagine. But because over 20 Angel Investors saw the potential for both financial returns and “doing good” SoLo Funds was launched. And, because it was launched with a sustainable business model, SoloFunds can continue to scale their impact.
What if we were to give these organizations that “do good” access to investors in addition to philanthropy? That is the role of Impact Investing.
While the Greater Cincinnati region has a robust ecosystem of support organizations and resources for entrepreneurs, access to capital remains a significant challenge. This is especially true for underrepresented entrepreneurs and impactful ventures.
So, you might be wondering:
- What types of organizations benefit from impact investing? Any organization that is “purpose built” to deliver financial returns to investors and social or environmental impact to their stakeholders.
- What stage are they in? Although these “impactful ventures” can be at almost any stage in their growth, Angel Investors are focused on organizations that are still proving their business model. Past the “idea stage”, these organizations are at a stage where they are ready to receive capital to accelerate their growth.
- How is impact investing different from “traditional” angel investing? It really isn’t. Impact Investors perform the same due diligence and seek the same expectations for financial return. However, an Impact Investor adds another layer of inquiry, asking “How will this investment create a social return on people or planet?”
How does one get started with impact investing?
- It starts with education and there’s no better place to get that than the Angel Capital Association, an association of angel investors with great resources for impact investors.
- Next, “learn by doing” and there’s no better place to do that than Queen City Angels where members work with entrepreneurs to screen and perform due diligence on potential investments.
- Impact investing are best done as a group activity. That’s why in my “faux-tirement,” I and my fellow Queen City Angels member, Sue Baggott, are on a mission to build a network to both educate investors about Impact Investing and connect these investors with impact-driven entrepreneurs. Called ElevateImpact, we invite you to:
We hope you will join us as we ElevateImpact!
Bill Tucker is an Entrepreneur In Residence for the John W. Altman Institute of Entrepreneurship at Miami University.
A former executive in the commercial printing business where he held a variety of leadership positions at RR Donnelley, Bill transferred his talents to the social impact sector in 2011. As Executive Director of Flywheel Social Enterprise Hub, a Cincinnati, Ohio nonprofit, he guided the agency as it builds the capacity of startups that harness power of the marketplace to achieve social and environmental good.