The Nature and Type of "Social Investors"

Acumen Fund

Brian Trelstad
April 2009

Overview: This note seeks to outline the rise of the social investors and touch on a number of key points where they diverge from traditional profit-maximizing venture investors. Professional venture capitalists may disagree with the fundamental assumptions of social investing—that you can do well and do good—but it is important to understand what role they play in the venture capital ecosystem.

Publication Preview: “Over the last decade, a new breed of venture capitalists has emerged: social investors. These so called “impact investors” seek to combine financial returns with social impact by using the tools of venture capital to make principal investments in private, high-growth companies that have the potential to deliver some measurable social or environmental benefit. Building on the success of microfinance in demonstrating the commercial viability of an overlooked asset class, social investors believe that you can achieve a commercial or quasi-commercial return and outsized social impact by betting on innovative entrepreneurs addressing underserved markets. For the social investor, the hockey stick is not a company’s valuation, but the liters of clean water delivered, the cases of malaria prevented, the tons of CO2 emissions averted, the lives changed.”