For investors with a conscience, options grow
With $10,000, ethically minded investors can help fund budding companies devoted to community development.
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Instead of "accepting the field of public companies that's out there, and screening them," the way mutual funds commonly do, "here's your chance to kind of create some new things," such as companies that bring new energy sources to market or hire thousands of workers on the hurricane-ravaged Gulf Coast, Kirkpatrick says.Skip to next paragraph
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"That's the promise," he adds.
Investors are sometimes drawn to the challenge. Jay Baldwin of Cambridge, Mass., for instance, jumped on board with SJF Ventures about a year ago with the minimum investment of $100,000.
"It puts you on the cutting edge of where technologies and this [environmental] movement is going," Mr. Baldwin says. "I've always been an entrepreneur myself, so I like to support those efforts."
On the social side, venture investing leaves little to chance. Influence is far more direct than that which investors have through socially responsible mutual funds that add their voice to a chorus of others at shareholder meetings.
Example: TRF Private Equity in Philadelphia provides human-resource consulting to local companies owned through its two venture funds. In this way, financiers directly shape management's policies, from wage-setting to benefits allocation in strategies intended to minimize turnover. The firms take advice well, says managing director Linda DeJure, because their investors have what is known in the industry as "skin in the game," that is, assets on the line.
"To have influence is to take risk with them," Ms. DeJure says. "If you're on the board with them, that means something."
Some argue investors pay a premium for social clout in this domain. Brookline, Mass., venture capitalist Henry Newman, for instance, says social criteria make an already difficult investing challenge even harder.
"There's only a certain number of options out there, and to put an extra restriction on it is limiting," Mr. Newman says. "You're heading toward suboptimal returns."
But Baldwin takes the opposite view, noting that ethically minded investors like Kirkpatrick might instead beat the bushes for investments that turn out to be rare gems.
"I think he's putting capital in places where others might not be looking" because they're focused on big cities or technology "plays" such as software, he says. Retaining a social standard "is going to expose you to opportunities that others would pass over quickly."
Handicapped or not, venture funds tend to attract true believers, whether their hearts lie with particular business models or a geographic area. Ray Moncrief, for instance, is looking this fall for accredited investors who share his confidence in the Appalachian countryside.
"The traditional venture capitalist says there are no deals to be done in rural America. I disagree with that," says Mr. Moncrief, fund manager at Kentucky's Meritus Ventures. It is about halfway to its $10 million target. To support his point, he cites an 18- percent average rate of return over the past 21 years at Kentucky Highlands Investment Corp., the nation's first community development venture fund (est. 1968).
Even so, maximizing returns is seldom the primary draw to this sphere. Even a 10 percent payoff would satisfy Charles "Kip" Moore, a Portland, Maine, investor who has $250,000 in a fund from that city's Coastal Enterprises Ventures. He says he gets plenty of exposure to higher fliers in his technology holdings, which stand to reap the biggest returns. With Coastal Enterprises, he likes knowing his cash stands to grow at a respectable rate while it helps employ, for instance, 15 seafood canning workers at Look Gourmet Foods on the Maine-New Brunswick border.
"This has diversified my portfolio, and it's done it in ways that to some extent are just fun," Moore says. "Learning about canning lobster, and making fertilizer out of the debris from canning lobster and mussels and everything else, is fun."