Impact Investing-as-a-Service
Building an Impact VC Fund
Have you heard of 'Circulate Capital,' 'touchdown ventures'?
Let's talk about Circulate Capital first. It is a USD 106 million investment vehicle dedicated to financing innovation, companies, and infrastructure that prevents the flow of plastic waste into the world's ocean while advancing the circular economy.
Do you know it's a first-time fund with no prior history? How did they do that?
They did something interesting while fundraising for the fund, they didn't raise the impact fund from usual suspects - foundations, endowments, fund of funds, family offices, multi-laterals, development banks, or HNIs. Instead, they create a blue ocean strategy and raised money from big corporates who are responsible for ocean plastics. Their founding investors include PepsiCo, the first investor, and Procter & Gamble, Dow Chemical Co., Danone, Unilever, The Coca-Cola Co., and Chevron Phillips Chemical Co. LLC.
Let's take a break from 'Circulate Capital' and spend some time looking at the Touchdown Ventures.
Touchdown partners with leading corporations to manage their venture capital programs. Many in the industry call it Venture Capital-as-a-Service (VCaaS) or Corporate Venture Capital Platform (CVCP), which provides an optimal mix of capital and business value to startups through corporate fund networks.
So, what on earth is VCaaS or CVCP? It's a platform that provides venture capital and private equity services to corporates, who are increasingly looking to put their capital to use by supporting new and innovative ventures by using the power of their balance sheets. The platforms like Touchdown Ventures, collaborate with corporations to help them build successful venture programs and strong reputations as investors.
But why corporations give money to external investors to manage on their behalf? The reason is simple; it's not their core competency. As Scot Lenet of Touchdown Ventures said in of the interviews:
“Working with an external manager, whether by being a passive LP or by owning a controlling interest in a third party fund, might be a way to limit financial downside”
Many see VCaaS see as a win-win solution for startups, corporations, and venture capital firms.
Analogical argument: Touchdown Ventures and Circulate Capital
Now, let's have an analogical argument to connect the dots between Touchdown Ventures and Circulate Capital. Circulate Capital unlocks the concessionary capital from the corporations who want to be part of the impact investing ecosystem by using their CSR capital wisely to create long-term sustainable impact and profits. It's Touchdown Ventures for Impact Investing. To be precise, they created a new product - Impact Investing-as-a-Service (IIaaS).
I believe Circulate Capital, created the blue-ocean strategy to fundraise for their impact fund, which has not been done ever before at this scale at such an early stage. It's also vital for the impact investing ecosystem, as it opens the door to unlock more and more private capital and pushes existing corporates to participate in the impact economy and conscious capitalism. I anticipate more and more innovation shortly for impact investing business models such as this.
What do you think about IIaaS?
Curated resources for further curiosity:
[Podcast]: Corporate VC (David Horowitz)
[Blog]: Tapping the benefits of Venture Capital-as-a-Service
[News Release]: Touchdown Ventures Launches New Corporate Venture Capital Platform
[News]: Corporations Are Silently Outsourcing VC To A $600M Fund
I am continuously looking for first-time funds and fund managers, that are looking to create their impact funds with an edge or a differentiated value proposition in emerging economies. If you are building one, please do write to me. I would love to learn more from you and would be happy to help in any way.
With Love,
Sagar
About
"first followers" is founded by Sagar Tandon, a founding member at Moonshot Ventures and venture affiliate at MIT D-Lab. You can reach him at sagar@moonshotventures.org.
Occasionally, he blogs about the responsible investing, tech for good, venture capital, investment thesis, conscious capitalism, collaborative consumption, community, and humane lifestyle.