NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, May 12, 2015

For years I have heard those involved in impact investment moan about the extent to which experienced venture capitalists (VCs) are “taking over”: bringing values which will destroy the very essence of the movement.

As someone who spent the better part of ten years as a conventional VC, perhaps I am being a little sensitive and taking this criticism too personally, but recent developments have brought me to reflect on the reality of this situation and its consequences.

One of ClearlySo’s Non-Executive Directors (NXD), Tim Farazmand, has just stepped down as Chair of the British Venture Capital Association (BVCA). Tim made impact a central pillar of his tenure at the BVCA and has been interested in this sector since I first met him around 2000. Significantly, Tim’s first new role since stepping down from his post at the BVCA is as NXD of the Ethical Property Company, a leading enterprise generating substantial social impact and a pioneer in using UK investors to raise tradable share capital. One imagines that there may have been quite a few options for such a person – the fact that he chose a values-led business is very significant.

This migration of VCs into impact investing is a well-trodden path. An old friend, Stephen Dawson, was one of the founders (together with Nat Sloane) of Impetus (now Impetus PEF), the venture philanthropy investor. Partner and head of social sector funds at Bridges Ventures Antony Ross is a sector heavyweight. He was previously at 3i, along with another 3i alumnus John Kingston – the driving force behind CAF Venturesome, and an early pioneer in impact investment. Doug Miller, who used to raise money as a placement agent in private equity went on to found the European Venture Philanthropy Association.

Of course, the best known ex-VC in the field is Ronnie Cohen, a previous chair of BVCA and also chair of the original Social Investment Task Force (SITF), as well as the founder of several impact firms including Bridges Ventures and Social Finance. Ronnie has been a leading advocate for the sector, the first chair of Big Society Capital and was most recently chair of the G8 SITF. His influence within UK governments of all colours and with decision makers across the western world has been an important factor in UK pre-eminence in this space.