Posted: July 10, 2014
Answering the access to capital question
$62 million Colorado Impact Fund launchesGigi Sukin
A $62 million Colorado Impact Fund – the state’s first private equity fund specifically designed to provide growth capital to entrepreneurs who drive both social and financial returns – has officially launched.
"[Colorado] is a state where we believe our bold capitalistic aspirations can be in harmony with our obligations to our fellow man, and the Colorado Impact Fund exists to do exactly that,” Gov. John Hickenlooper said in a statement, calling the fund unprecedented in Colorado and around the country.
The prospect of unifying these goals inspired co-founders Jim Kelley and Ryan Heckman, who joined forces about a year ago.
“How can we make Colorado a true destination for entrepreneurs and innovators?” said Kelley, managing director and co-founder of New York-based private equity firm Vestar Capital Partners, at the July 8 launch event at the governor’s mansion.
He and Heckman began fundraising this January, and within eight weeks exceeded their original $50 million goal by more than 20 percent. Colorado investors completely financed the fund, which is managed by Vestar Capital Partners on a pro bono basis.
“It validated that there was interest in our strategy,” Kelley said. “I don’t think people want to be outcome-neutral. What we tap into here is peoples’ interest in this community, investing where they really understand what the impact is.”
Targeting investments of $2 million to $6 million, the fund focuses on the areas of community health, natural resource conservation, workforce development and economic development and education.
Kelley described the fund’s model as an “integrated infrastructure. We make capital available but also provide advised relationships to help these guys scale their businesses. There’s a lot of intellectual capital in this state. It has the potential to drive market-based solutions to social and environmental challenges.”
Ken Lund, executive director of the Colorado Office of Economic Development (OEDIT), worked closely with the Impact Fund team.
“So many young entrepreneurs are flowing into Colorado," he said. "With this powerful influx of talented entrepreneurial sorts, they need more access to capital.”
A 2013 study by the World Economic Forum revealed that next-generation investors consistently ranked impact performance as their primary investment benchmark, ahead of return. As such, big names in the financial services industry including Goldman Sachs and JPMorgan Chase recently announced plans to establish or augment activities around impact investing.
The Colorado Impact Fund is expected to fund 10 to 15 companies in the next three to five years, Kelley says. No company specifics have been announced.
"What is so compelling about the CIF is that it is by Colorado and for Colorado," said Kim Coupounas, co-founder of Colorado-based company GoLite and now director of B Lab Colorado. "By supporting promising, innovative impact-focused Colorado companies, the CIF will be a major contributor to a future for Colorado that is better for workers, the community and the environment."
Part of the fund's strategy will be to leverage the collective experience, resources and networks of the founders and the Fund’s Advisory Council to help Colorado entrepreneurs create sustainable value and contribute to the well-being of the state. Hickenlooper called the mentorship component of the Fund its “secret sauce.”
Council members include Whitewave Foods CEO Gregg Engles, Vail Resorts CEO Rob Katz and Celestial Seasonings founder Mo Siegel, among others.
Heckman said the economic development component of the fund in terms of full-state support.
“When you look at the Western Slope, there’s a lot of entrepreneurial activity,” said Heckman, a former Olympic ski racer who spent his childhood in Steamboat Springs. “We want the opportunity to invest in the whole state and develop areas that may not have access to real capital. The small business owner who’s providing quality jobs in those communities – that meets our criteria for adding positive community impact to the state.”
How will they know they’ve been successful?
"(If) we can attract incremental capital in the state, that’s the bigger idea here,” Kelley said. “There’s been a temporary inefficiency in the market. But I think we can truly close the gap between the intellectual capital we have already and the investment infrastructure we need.”
Gigi Sukin is an Associate Editor at ColoradoBiz. She can be reached at email@example.com.