Doing Well, Doing Good
Monday, April 9, 2007
And now we have the newest blend of greed and generosity: the high-minded private equity fund. A forerunner in this sector is Good Capital, in formation for the past year. The firm, which operates out of a dingy three-room office in San Francisco’s gritty Mission District, has raised one-third of the $30 million it wants to have on hand by December. Classic American philanthropy has the ruthless businessman–Carnegie, Rockefeller, Ford–squeezing every last penny from the marketplace and then throwing the money back via a foundation. Nowadays the division of labor between making profits and giving them away is not necessarily so sharp: Avarice and altruism can be married in a single investment portfolio.
Witness the growth, over the past several decades, of “socially responsible” mutual funds. Then there is the idea of a for-profit charity, represented by the novel Google (nasdaq: GOOG – news – people ) philanthropy, Google.org. It invests in good causes but sometimes asks the recipients to return the capital for use in other causes.
And now we have the newest blend of greed and generosity: the high-minded private equity fund. A forerunner in this sector is Good Capital, in formation for the past year. The firm, which operates out of a dingy three-room office in San Francisco’s gritty Mission District, has raised one-third of the $30 million it wants to have on hand by December.
This group’s founders have backgrounds in do-good endeavors, although none has been a money manager. Timothy Freundlich, 39, for the past ten years has done strategy work for the Calvert Foundation, the nonprofit arm of socially responsible mutual fund giant Calvert Group. Joy Anderson, 40, heads the nonprofit consultancy Criterion Ventures in Connecticut. Kevin Jones, 56, a Silicon Valley entrepreneur, sold his Net Market Makers for $30 million in early 2000 to then thriving Web data tracker Jupiter Media Metrix, now ComScore Networks. After that sale Jones led a project in Mozambique, where volunteers and malaria experts spent four months distributing mosquito nets and educating mothers’ groups about the disease.
Jones is in charge of evangelizing Good Capital’s idea. “Our goal is to create a totally new capital market,” he says.
Good Capital is structured much like your typical private equity fund. It requires a minimum capital commitment, in this case $250,000. The life of the fund is seven years; small distributions will likely begin in the fifth year. Fees are rich: 2.85% annually and 20% of any profits. The justification, per Jones, is that Good Capital has to analyze social benefits as well as business prospects. Like some venture capitalists, it will do lots of hand-holding for the businesses in which it invests.
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