Impact Investment and Impact Trading Poised at the Gate!
One of the toughest start-ups to sustain is a social enterprise. SE’s are for-profit businesses that aim to solve social problems: education issues, global poverty, clean water, climate change, world hunger, gender empowerment…just to name a few! The difference between a non-profit entity with a social mission and a social enterprise is that the SE is not a 501c3 and therefore not tax-exempt. With the exception of L3C corporations (hybrid model combining for profit and non-profit), social enterprises are typically C-Corps or S-Corps.
Good-b (Good Business International) is an example of a vibrant social enterprise. We are an early stage media company dedicated to putting “trust” back into business. In other words, we report on and support a model of incorporating integrity, transparency and accountability into business and finance. Our entrepreneurial CEO, Monika Mitchell, worked in the Wall Street search industry on the institutional debt side (the bond market baby!) and was there when the system collapsed. Her response was to create a research center and think-tank dedicated to building better business for a better world.
In the past two years, Good-b has morphed into a state-of-the-art news journal for environmentally sustainable and socially responsible business. We are growing by leaps and bounds and supported by thousands of enthusiastic readers. Yet maintaining economic sustainability is an on-going challenge. (Good-b will be raising funds through social networking platforms when SEC rules are established: stay tuned!)
One of Good-b’s bloggers and impact investing experts Laurie Lane-Zucker, founder of Hotfrog, a global social activism platform, is struggling to raise investment capital for the innovative company’s launch. To date, there are only limited options to raise capital through pledges and donations a social networking sites like Kickstarter, Indiegogo and Rockethub.
Impact investment: capital infusions for enterprises that make a positive impact on the world offers promise and hope for early stage start-ups like Good-b. A brand new social enterprise investment site Impact Trader has created a unique solution to a consistently frustrating problem: how to sustain enterprises whose fundamental business model is to make the world a better place. Read on and find out more about it…
New Chicago Start-Up Invents IMPACT INVESTMENT Vehicle!
At least one new effort is taking advantage of the law to create a trading platform for for-profit and nonprofit social enterprises. Called Impact Trader, the Chicago-based startup, which was formed in November, aims, in the words of co-founder John Jordan, “to create a capital marketplace for social enterprise projects…It will be a place where people can buy stocks and bonds to fund individual projects that create an environmental or social benefit of some kind,” he says.
Jordan and co-founder Josh Hibben plan to do that in two phases. First step is to allow organizations to issue “impact bonds” to fund their projects. Then, starting next year, after the SEC irons out the many questions still left to be determined by the JOBS Act, they hope to move to the next phase, allowing the creation of “impact stocks”. Both will be transferable, which means they can be bought and sold among others on the platform.
By the end of the month, Jordan says they plan to have up and running a way for enterprises to list their projects and for individuals to make investments. Again, that will be aimed at impact bonds initially.More about the bonds. They’ll be zero interest, zero return on investment. So, you put your money in and get it back, much as you would with a site like Kiva.
The initial plan is to focus on funding specific projects, the better to “break things down to as small a level as possible, so it feels more like a living, moving organization,” according to Jordan. (The model is government-issued bonds used, say, to fund construction of a new highway).
A for-profit might want to finance expansion of its manufacturing plant, say, or a nonprofit might seek to dig a better irrigation system in Nicaragua. (In the latter case, the nonprofit might start an L3C, which would issue the bonds). Investors would buy the bonds, which would sell for $25 each. Then the enterprise would, say, build the irrigation system, generate revenue and buy back the bonds over time. At maturity, investors could reinvest the money, if they so chose. Or, they could not wait and start trading before that.
With impact stocks, investors will be able to get an actual return. (Also, for-profits might be more likely to list the entire organization, not just a project). And, they will be able to engage in trading. The details have yet to be ironed out, however, since the SEC still has a considerable number of issues to provide guidance on before that capability can be launched.”
Reprinted from Forbes by Ann Field