We focus on private income-generating impact investments.
Let’s break that down piece-by-piece.
We focus on private Regulation CF – better known as crowdfunding – investments because they’re widely available to the public. You don’t need to be a wealthy accredited investor and the minimum is usually between $100 and $500 to start.
We believe these private investments have a bigger impact than public securities.
When you buy a stock or bond, you’re almost always buying from another investor in the secondary market. It’s true you may be adding liquidity or boosting a share price, but you’re not putting dollars in the pocket of the issuer.
On the other hand, when you buy a private investment, you’re usually buying directly from the issuer. You’re putting dollars in their pocket.
There’s also more “additionality” in private markets. You’re making an investment that may not otherwise have occurred without you.
Income-generating investments tend to be less risky. After all, a business must be profitable to pay shareholders a dividend. You’re not betting on a startup that needs months to develop a product or relying on valuations for a big exit in the distant future.
It also happens to be much easier to value a business that distributes its earnings via dividends than trying to project equity growth. You can more reliably use a technique called discounted cash flow analysis to determine an investment’s fair value in today’s dollars.
And finally, income-generating investments appeal to a larger investor base. In particular, individuals in retirement are often looking for a safe source of monthly income – not the next Google. And some type of fixed income has a place in everyone’s portfolio.
We look for investments making a real impact.
While ESG funds exclude companies that externalize environmental or social costs, impact investments have a negative externalized cost. In other words, they go beyond excluding oil companies and actively push them out of the market with cheaper solar power.
Some areas we focus on include renewable energy, affordable housing, sustainable agriculture, and small businesses. Within small businesses, we specifically focus on lending to business owners that may not have access to the credit they need to grow.
Finally, we consider these investments – not charity (although we donate separately to charity). We’re looking to earn market returns or ideally better. In practice, that usually means taking on higher credit risk but spreading out investments to diversify away that risk.
The Bottom Line
We believe that our focus on private income-generating impact investments provides a win-win for investors and society. And we hope to make it something people consider for 10% of their portfolios.