Thursday, October 29, 2009

Good Capital'sTriple Impact on Business, Society, and Environment, Part II

In part I of my story about Good Capital, I focused on what made Good Capital a business innovation, who was involved in the innovation, and how it emerged. In part II, I focus on what is both the short and long term impact of the innovation both on business, society and the environment.

While Good Capital's primary focus is to make available capital to promising and innovative social mission and profit making enterprises as well as to non-profit organizations with earned income, its impact reaches well beyond the organizations it supports in some surprising and unusual ways.

Good Capital invests in businesses, like Better World Books, that have a focus on their double or triple bottom line, that of social impact, paired with environmental and financial returns. Working alongside the management at their portfolio companies, Good Capital’s staff brings expertise, hands-on involvement and knowledge from the diverse worlds of investment capital, philanthropy, technology and entrepreneurship.

The organization is still young, but the results of their first investment in Better World Books has been far reaching. They were directly involved in creating a strategy that placed the business’ environmental mission at the core of the brand, and increased sales. Says Jones, “Those college students understand it. They are starting to buy more from Better World Books. They realize that used things are of more value now. They realize the environmental cost of production.” Good Cap also influenced Better World Books to reduce their costs by partnering with the non-profit literacy organizations Room to Read and Books for Africa, and by fine-tuning their book pricing strategy. As a result, Better World Books has increased its revenue from $17 million to $23 million since Good Capital’s involvement began.

Good Capital’s involvement affects the stakeholders also. They influenced the decision to give Better World Books’ charity partners, Room to Read and Books for Africa, 5% of the founders stock and a seat at the board, making them shareholders and giving them a voice. In so doing, GoodCap wove literacy groups into the fabric of Better World Books, and ensured that the cause had an economic value to the business, and thus survived a potential buyout. This is a fresh concept. As Jones puts it, “Nobody has ever put that kind of constraint on any kind of business.”

Good Capital is realizing a similar impact with their second investment, Adina for Life. Here they are helping create more demand for the sustainably grown Fair Trade and organic brand by creating unique, delicious coffee and juice cooler drinks. Good Capital is excited about the results of investing in a company like Adina. For them, a commitment to Fair Trade enables coffee growers in cooperatives around the world to develop economic self-sufficiency, devoting profits toward the building of schools and clinics, the development of clean water infrastructure, or similar community causes.

But Good Capital's impact goes beyond the investments it makes in these companies. On the whole, Good Capital seeks to fill the important role of icebreaker and trailblazer, educating potential investors about this sector, helping bigger funds come in behind them, and setting a new standard for philanthropically motivated investing, proving it as valuable and rigorous as any other type.Ultimately Kevin Jones hopes Good Capital can change the outmoded mindset that “giving is over here and investing is over there.”

They are committed as well to developing a community of socially-minded and change oriented leaders and have several projects to help and foster interaction between socially conscious business development and socially conscious investment such as the Social Capital Markets Conferences, SoCap 2008 and 2009, and the Hub/Bay Area.

For decades, the San Francisco Bay Area has been a center for some of the most successful venture capital firms, the most innovative social entrepreneurship, and the most generous humanitarian enterprises on the planet. It seems natural that this innovation center would give rise to a fusion of these sectors. And yet rumbles of doubt remain over whether any savvy investor should consider investing in a fund that supports social businesses. Without question, Good Capital still faces steep hurdles in raising both awareness and funding.

Innovative ideas often seem idealistic and unrealistic. Not long ago a concept like micro-lending sounded noble but unproven, just like the profit potential of organic and Fair Trade food looked unrealistic. But Good Capital is determined to succeed in forever changing the financing picture for promising social ventures by developing a communications and support network that can further this mission. In spite of the skepticism, Good Capital is already well on their way. As Kevin Jones says, “By our standard, we have succeeded. But we didn't want to sell for success; we wanted to sell a story that has a catalytic impact.”

Good Capital has a triple bottom line of its own. Not only are they changing the landscape of this sector, they’re supporting change for the environment and for society. Most importantly, their fund is growing. “Actually at this point,” Kevin Jones says, “our returns are doing embarrassingly well.”

Certainly Good Capital has nothing to be embarrassed about and plenty to be proud of.

1 comment:

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