Social Innovation Forum
The Social Innovation Forum (SIF) launched its 4th annual Social Business Accelerator on January 19, kicking off 12 intense weeks of programming for the six social impact businesses in the cohort. Curious about what goes on in an accelerator? Interested in learning more about impact investing? We’ve launched this blog series, Insights into Impact Investing, to offer a glimpse inside our Social Business Accelerator and share some of our learnings from our work in the emerging field of impact investing.
On Tuesday, February 22, SIF hosted a panel of speakers featuring David Boghossian, founder of Private Market Impact Fund, and Chat Reynders, Chairman and CEO of Reynders McVeigh, for the sixth session of the 2016 Social Business Accelerator. Both speakers have extensive experience within the field of impact investing and were able to share their personal and professional insights with our 2016 Entrepreneur cohort.
David Boghossian started collaborating with SIF in 2012 as a mentor for the first Social Business Accelerator cohort. His new endeavor, Private Market Impact Fund, provides investor access to a vetted and diversified multi-manager portfolio of private funds earning competitive returns on social and environmentally focused businesses, and just closed its first round of $15M.
The importance of financial returns, however, does not necessarily mean that there will be a social impact tradeoff.
Throughout his career, Boghossian has worked with many early stage entrepreneurs, and he advised our cohort businesses to present themselves as “finance first” investments. According to Boghossian, it is important to make solid financial cases in order to attract investors. The importance of financial returns, however, does not necessarily mean that there will be a social impact tradeoff. Boghossian explained that for-profit social businesses are traditionally viewed as mission-focused endeavors with concessionary financial returns. This longstanding belief is deteriorating as highly profitable, mission-driven businesses emerge without compromising the best of both worlds.
Chat Reynders’s work at Reynders McVeigh, a financial advisory firm that helps clients reach their long-term financial goals, also reflects similar beliefs. The portfolios at Reynders McVeigh are focused first on investment value, but these portfolios are also socially focused. The firm’s approach has attracted many clients, and Reynders McVeigh now manages over $1 billion in house and advises on an additional $4 billion in assets at major trust departments around the country, which speaks to the strength of the firm and the people there.
As Chat described his work, he made it clear that he acts as gatekeeper for his clients, who have a wide range of interests. Some are passionate about putting their money towards particular social missions, and Chat and his team must try and move them more towards “the middle,” so they have the opportunity to get their money back and invest it again in another cause. Other clients are more concerned about financial returns, and if there happens to be social impact that’s a plus. Reynders McVeigh advises for families and individuals across the country, and is interested in businesses addressing everything from health care access through low cost medicines to climate change through new energy efficiency projects.
Chat had two big pieces of advice for the entrepreneurs, beginning with the importance of understanding the market in a way that can educate others, including investors. Secondly, he underscored the importance of understanding your own financials. This, Chat explained, is one of the “core, foundational principles that you need before walking into any room of investors.”
A robust conversation followed as David and Chat further discussed financing options and the topic of valuation, the process of determining the current worth of the company. For example, the speakers discussed the tradeoffs between taking on debt and equity as an early stage entrepreneur. Although debt requires cash flow consideration, it is cheaper and faster than equity. In the “capital stack,” debt sits at the top of the stack and gets paid off first. However, taking on debt may make getting equity investments more difficult later. When it comes to valuation, a lot depends on what the market will pay. If you have four interested investors, you will inevitably have a better valuation than if you have one interested investor. Also, it is a better mistake to have a conservative valuation early on. If you have a downward trend line in value, you will have to explain too many hurdles and it will be harder to raise a second round.
About the Speakers
David Boghossian is a serial entrepreneur and business builder with over 25 years of deep expertise in technology, strategy, and entrepreneurship all focused on the efficient use and allocation of resources -- human, capital, and natural. He is the founder of several successful start-ups including StoryStreet Technology and PowerSteering Software, Inc.
In addition to his career as an entrepreneur, David has an abiding commitment to social enterprise and the power of businesses and markets to drive real progress. He has acted as mentor to numerous mission-driven Harvard and MIT start-ups, presented and mentored to entrepreneurs in the US and internationally, most recently for Mercy Corps in Ramallah, Palestine, and was the founding instructor for the initial six teams to go through the Root Cause Impact Investment accelerator. David has helped source capital for many of these enterprises and has experienced the challenges of the impact capital markets firsthand.
David holds AB and MPA degrees from Harvard University, where he was a nationally ranked oarsman. He also held a year-long appointment as a Lucius Littauer Fellow at Harvard's Kennedy School, focused on business and government interaction. He currently serves on a number of corporate and non-profit boards, including Opportunity Space, Inc. and The Community Charter School of Cambridge.
Chat Reynders brings more than 20 years of experience in investment management and social venture investing to Reynders, McVeigh Capital Management. His passion for forward thinking investment strategy rooted in fundamentals has provided a guidepost for his success to date. In addition to his leadership in the traditional investment management world, Chat has structured and funded public/private partnerships that have brought more than $150 million in revenues to leading cultural institutions around the world – projects that have won numerous awards. In this vein, he has for decades produced socially oriented IMAX films including Dolphins, which was produced in conjunction with the National Wildlife Federation and garnered an Academy Award nomination in 2000, and Coral Reef Adventure, which received the largest grant in the history of the Informal Science Division of the National Science Foundation. Prior to launching Reynders, McVeigh, Chat served as a senior officer and director of new business at Lowell, Blake & Associates. He oversaw growth in assets under management at that firm from just over $200 million to nearly $700 million, and worked as a senior equity strategist to lead key institutional relationships, advising on more than $1 billion in outside assets.
About the Author
Jackie Rothmeier was the Social Innovation Forum's Program Co-op from January to June of 2016. In this role, she worked closely with the Manager of Strategic Partnerships and the Senior Manager of Development and Communications to support Social Innovation Forum's programming, communications, and events.