Building a Sustainable Future with Patient and Integrative Capital

Part 2 of a 3 part series.

Now is the time to explore the role patient and integrative capital to advance positive impact. Unlike traditional investors focused solely on financial returns or VC expectations, impact investors such as Sage Growth Capital, Flexible Capital Fund, RSF Social Finance, and ICA Fund have placed a strong emphasis on using financial tools that are better aligned to the growth goals of social entrepreneurs. While this approach is not entirely new, its importance and urgency are growing. However, what remains less understood is how to apply patient and flexible capital approaches to the Reproductive Justice movement.

When considering the needs of the economy and society the way money moves and with what expectations is a central consideration. It is time to question the underlying assumptions of the Venture Capital model, including that half of the portfolio will fail while a few successful ventures will compensate for the losses, or that 3-5 year expectations for getting your money back are reasonable for a non-tech company. This model perpetuates both gender and racial disparities, particularly when entrepreneurs are expected to deliver a 10x return over 3-5 years rather than a consistent 3x return in 7-10 years.

Consequently, the misalignment in venture structures, both in terms of timeline and return potential, combined with the failure of banks to lend effectively to small businesses means that high impact companies working to advance many causes including Women’s Health Equity are starved for money and either unable to grow their impact or even worse have to shut their doors and close down.

Let’s Take a Step Back - What is Impact Investing?

To address these challenges, Spring has been actively working to increase the accessibility of private equity in the Canadian landscape. Through training hundreds of investors and supporting over 2,700 entrepreneurs, Spring has not only educated individuals about impact capital but has also facilitated its deployment. Since its establishment in 2014, Spring has catalyzed over $47M in impact investments. As Spring expands into the US market, one crucial question arises:

How can we better meet the needs of entrepreneurs in vital sectors such as women's health equity and climate, ensuring they have access to capital that aligns with the growth potential of their organizations?

So what’s the connection to Women’s Health Equity?

Women's Health Equity and Reproductive Justice are often considered areas where philanthropy is the only capital that is incentive aligned. Despite the growing attacks on access to reproductive healthcare and reproductive rights, philanthropic funding is waning, not growing. All while more organizations are in greater and greater need of capital to address the urgent needs of people seeking care.

While some venture capital firms like RH Capital and Coyote Ventures deploy venture capital in companies within this sector, there remains a vast pipeline of organizations that do not fit the venture portfolio criteria. This may be because their growth potential is not rapid enough, there are few values aligned exit opportunities, or the founders' growth goals do not align with the fund's timeline.

Increasing the experience, comfort, and competency of investors in leveraging alternative investments becomes crucial for unlocking the full potential of their portfolios and advancing impact.

Alternative and integrated capital approaches achieve three core objectives that can radically change the flow of capital to create positive impact.

1. Get access to your returns faster.
   Revenue Backed Financing allows for returns to start flowing as early as year 2 of the investment, instead of traditional early stage angel investments where you may not see any money for 5+ years. This can allow you to redeploy your money back into new investments faster increasing the flow of capital in the market and increasing your ability to respond to new trends and information.

2. Unleash more of your portfolio to advance your values.
   Philanthropy used to be the only channel for “doing good” with your money. Impact Investing shifted that so that now there are numerous private equity, public index funds, and even bond portfolios that can help you do well by doing good. Alternative return structures allows you to unlock another aspect of your portfolio to advance your values.

3. Create more impact supporting entrepreneurs who cannot access traditional financing.
   In 2022 Women founders only received 1.9% of venture funding and Black founders received just 1% with both groups receiving far less than they did in 2021. On top of this new legal battles are emerging where Venture firms like Fearless Fund are being blocked from issuing grants to black female entrepreneurs. Revenue Backed Financing provides investors with another avenue for deploying capital that is better aligned to the growth potential of non-tech companies that may want to remain private, profitable businesses.

By embracing the concept of patient and integrative capital, we can foster a sustainable future where financial returns and social impact go hand in hand. It is through these innovative approaches that we can bridge the gap between capital and social enterprises, ultimately creating a more inclusive and prosperous society.

JOIN US ON OCTOBER 18th 3-5PM PST FOR
LEVERAGING ALT-RETURNS FOR
WOMEN’S HEALTH EQUITY VIRTUAL EVENT

In collaboration with Rhia Ventures, Opportunity Main Street, New Founders School, and ICA, we are so thrilled to be hosting a conversation for investors on how to unlock more tools in your financial toolbox to advance Women's Health Equity and Reproductive Justice.

You'll have the opportunity to learn about revenue-based financing, low-interest purchase order financing, and loan guarantees as a way to expand the impact of your portfolio.

This event presents a unique opportunity to connect with other investors who want to advance Women's Health Equity and align their portfolios with their values. If you are not an accredited investor and interested int his conversation, please reach out to Avary at the email below.

Check out Part 1 of the Series Here: