Local initiatives create new opportunities for international investors
Twelve years ago, after building a career on Wall Street, I jettisoned the conventional financial wisdom that no longer served me and set down a path to becoming an impact investor. Second to being a mother and a wife, this journey continues to be the most fulfilling endeavor of my life.
Part of my motivation was to honor that voice inside me; the words that would rise into my consciousness whenever a certain investment felt wrong. I no longer wanted to listen to the advisors in the room, however well-intentioned they were, who pressured me to not divest from this company or to allocate more funds to that company, even if that meant fueling businesses that are depleting our earth or exploiting lives. No more. I wanted to go to sleep knowing my dollars were working overtime to propel humanity-focused work. I wanted to wake up, learn about a life-saving technological advancement or new women-focused start-up in East Africa and invest in it. I wanted to lean toward the unknown, the complicated, the progressive. I wanted to be part of the change I wished to see.
I didn’t know if being an impact investor would work — or, at the very least, if it would see any impact in my lifetime. I can now say that after 12 years as the CEO of Beyond Capital, the evergreen impact investing fund I co-founded in 2009, impact investing works. At Beyond Capital, we invest in seed-stage social enterprises striving to uplift communities throughout East Africa and India. For every dollar we invest, we impact at least 28 individuals. That is, to me, the blessing of this work. At times, I don’t feel like an investor as much as I do a facilitator of inspiring founders and their greatest efforts.
Beyond investing, how can we better serve and support entrepreneurs? How can we help to sustain their work to create life-changing services and products?
My experience as an impact investor has spawned larger conversations about purpose, values, and what we each owe to our fellow humans — today and tomorrow. It has sparked communication within myself of how I want to continue to evolve the possibilities impact investing fuels and encourage more justice and inclusion in the world of venture capital and start-ups. When I think of this potential, my thoughts immediately go to the founders. Beyond investing, how can we better serve and support them? How can we help to sustain their work to create life-changing services and products? One answer I have found is equitable venture, a strategy evolving venture capital by giving founders the opportunity to become co-owners in a fund.
Equitable venture is the basis of my new venture fund, Beyond Capital Ventures, and a critical component of expanding the opportunities that drive impactful investments and bolster the critical work of the founders and their teams. First, a little background on how it works: Equitable venture involves giving a profit share to founders in a fund’s portfolio that meet specific milestones. By sharing the upside of the fund with the founders it allows them to become co-owners in the fund. This concept gives them a surge of energy from each end of the financial spectrum: immediate capital to grow their business and long-term stake in what evolves.
I was first inspired by this concept after seeing Teresa Farmaki, co-founding partner of Astarte Capital Partners, and Leila Zegna, general partner at Kindred Capital, employ their own versions. As I witnessed these two pioneering impact investors align this vision into their fund structure while maintaining a traditional allocation model, the reasoning became abundantly clear. Traditionally, a general partner will give a share of profits to their venture partners. So why wouldn’t the founders, those who put their sweat and heart equity into generating the upside, be granted the same opportunity? They unequivocally should be. After all, it is the hard work of the founders that gives a fund its purpose.
In the months since the launch of Beyond Capital Ventures, what I’ve come to value most about the concept of equitable venture is the justice and inclusion it brings to the fold. We want every founder we invest in to be an owner and to return gains into their very own ecosystems. This fuels their agency and creativity and sets them up for further success. Equitable venture also levels the playing field when it comes to autonomy and power. For too long, the venture capital space has been extractive by nature, perpetuating an inequitable model that gives all the power to the “money person,” thus positioning the founder to merely appease and deliver a return. What’s more, after multiple rounds of investment, many founders find themselves diluted down to minute shareholdings in their own companies. Equitable venture evens out this imbalance by sharing the upside and dispersing the influence. I have no doubt that this will lead to clearer communication between investors and founders and more equitable decision-making.
By sharing the upside of the fund with the founders it allows them to become co-owners in the fund.
Creating such change is fundamentally important. This is how we make waves: by challenging the status quo and evolving the transactional models of venture capital. Funding for impact doesn’t merely include specific metrics or checked boxes. It means reworking antiquated structures that benefit only a select group and perpetuate the truth that only 10 percent of female founders get funding. Instead, equitable venture is a means for us to innovate what ‘impact’ encapsulates and to fundamentally alter the structures that have continuously produced inequitable outcomes. It opens the gates to inventing new ways that allow for a dynamic and diverse group of people to have a seat at this inclusive table.
The impact of equitable venture invites us to consider an even broader idea for the future: Everything we do, as investors, business people, and citizens of the world, needs to focus on the future. How can we empower the next generation of leaders and leave an equitable place for everyone to thrive? Our Beyond Capital Ventures strategy is focused on this question. We aim to be conscious leaders ourselves in how we deploy our investment strategy and lead by example. Not only are we thinking about our investors, our beneficiaries, or the customers of the companies that we’re investing in, we’re also considering how our efforts affect every stakeholder, as well as the environment. We see this as part of our commitment to holistic impact investing. We want to walk the talk.
Traditionally, a general partner will give a share of profits to their venture partners. So why wouldn’t the founders, those who put their sweat and heart equity into generating the upside, be granted the same opportunity? They unequivocally should be.
Equitable Venture is a new strategy and, like any burgeoning endeavor, it comes with an element of the unknown. The metrics of how it will perform are still long into the future. But to me, that’s what makes it worth the risk. It is a new frontier that honors inclusivity and therefore is ultimately exciting. It is a road to get us closer to where we need to be. Just as my earliest days of becoming an impact investor prove, when you shed the old wisdom that no longer serves and embark on a path that is anchored by the desire to make a change, good will follow.
Eva Yazhari on Climate Change and the Importance of Seeing “Intersectionality”. Watch the Full Program
Regina "Gina" Kline
Founder & Managing Partner, Enable Ventures
October 27 - 12:00 PM EST
Founder & CEO, Acumen
November 3 - 12:00 PM EST
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