New investment platform Social Venture Connexion (SVX) connects impact investors with local ventures.
By Adam Spence, Associate Director, MaRS Centre for Impact Investing
A seismic shift is occurring in how the world approaches both problem solving and investing. A growing group of social entrepreneurs is building business models to tackle our most pressing problems, from poverty to climate change. We see these innovative approaches through enterprises like Bullfrog Power, d.light Design and Oliberté. Unfortunately, many of these ventures have difficulty securing financing, beyond family and friends, to grow or scale their impact.
A growing group of investors are looking for both a financial return and measurable means of knowing their capital is going to support a better world. From foundations and family offices to major financial institutions and everyday investors, many are choosing to invest in affordable housing, renewable power, sustainable food and enterprises employing persons facing barriers to employment.
They are leveraging what has come to be known as impact investing, which is based on a simple premise: investments and enterprises can be both socially beneficial and profitable. By supporting social or environmental ventures with private capital, we can produce financial returns and achieve change beyond what’s possible with strictly philanthropic giving or traditional investment models.
Filling the Impact Investing Market Need
With an overflowing tap of innovative approaches to societal challenges, and interest in impact investing on the rise, there is no shortage of opportunity.
On the investor side, capital is increasingly and actively scouting out mission-related investment opportunities. The impact investing marketplace in Canada, for example, is valued at approximately $5.3 billion today and expected to grow to $30 billion in the next decade. And on the venture side, nonprofits, co-operatives and social-purpose businesses are seeking tens of millions in mission-aligned capital.
But one thing has been missing in the effort to mobilize private capital for public good: a trusted gateway between impact ventures and investors. Busy investors often do not have the time to identify and research innovative new ventures they would like to support. Meanwhile, individuals running these impact ventures lack the time and resources to raise capital.
This market gap motivated Ontario’s MaRS Centre for Impact Investing to collaborate with TMX Group, the Ontario Ministry of Economic Development, Trade and Employment and many others in creating North America's first fully registered, online impact investing platform: Social Venture Connexion (SVX). This single access point connects local investors looking to make a positive impact with social enterprises that have a proven social, cultural or environmental impact—as well as the potential for financial return.
The platform also allows investors to learn about and connect with screened investment opportunities, reducing the time and costs of conducting due diligence and providing ventures with increased access to capital and financial expertise. We like to think of it as matchmaking between money and meaning.
A Calculated Approach to Investor-Venture Connections
From the very beginning in 2007, we knew that a trusted platform—and fully vetted opportunities—would be necessary to attract investors. We met with local government, leaders in social innovation, capital market experts and leaders pursuing similar work around the world. We put together a team of expert advisors in securities law, exchange listings, governance, capital markets strategy and social finance.
By the time we launched in September, 2013, at the Toronto Stock Exchange, SVX had already identified and conducted due diligence on a variety of small and medium social ventures and impact funds, each with a clear mission: earned revenue and proven impact. These Ontario-based organizations are working toward a range of goals, including increasing access to affordable housing, advancing environmental education, providing renewable energy, growing sustainable food and reducing waste. Each has less than $25 million in revenue and is looking for $100,000 to $10 million in debt and/or private equity financing.
The Value of a Local Approach
Ontario’s track record and growth trajectory in impact investing make it a natural location for this new initiative.
The region itself was more than ready, having recently found high-profile success in impact investing with the $1 billion Regent Park Revitalization Project. This ambitious plan by the Toronto Community Housing Corporation to provide more than 6,000 mixed-income housing units and other facilities was partly financed by $450 million worth of market-rate bonds sold to institutional investors. Regional investors saw the very real possibility of earning a market-rate financial return coupled with demonstrated social impact.
The motivation to invest locally is also remarkably strong. Just as folks want to give where they live, they also want to invest where they live. Imagine the opportunity to invest in a local organic food company up the road, an affordable housing project in your community or a renewable power project in a First Nation or rural centre.
Measuring Impact Begins Now
With the SVX now up and running, the Ontario region has a new conduit for directing capital to tackle climate change, poverty and other challenges. During our pilot period, we plan to attract at least $2.5 million in new capital for investment in 10 ventures. Imagine the impact these funds can generate in the region and beyond.
And this is only the beginning.
As citizens and major market players around the world realize the value of linking capital with social ventures, we can truly achieve change by mobilizing capital to demonstrably move the yardsticks on our most pressing problems.
About the Author:
Adam Spence is founder of the SVX and Associate Director, Venture and Capital Programs, at the MaRS Centre for Impact Investing. Opened in late 2011, the Centre for Impact Investing provides a national hub to increase the awareness and effectiveness of social finance to catalyze new capital, talent and initiatives dedicated to tackling social and environmental problems in Canada. MaRS Discovery District (Twitter: @MaRSDD) | SVX (Twitter: @theSVX)