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Balancing Attractive Returns with Positive Effect

by trusted insight posted 3years ago 12174 views
Josh Cohen, Managing Partner, City Light Capital: Impact investing is a very important form of socially responsible investing. We are strong believers in the opportunity to generate attractive financial returns while at the same time achieving a significant net positive effect from a social and environmental perspective.
How did you end up getting involved in impact investing?
I have been making impact investments since 2004, before the term existed. At the time, this began as an experiment. We set out to find entrepreneurs using technology to prevent the next 9/11, but we didn’t know what we would find, if we could make money, if we were any good at it or if we liked it. Over time, we honed the thesis, built a team and raised a formal fund.
Prior to Impact Ventures I was investing on behalf of family offices, worked at a technology company called Mobility Electronics and began my career as a technology banker in San Francisco at Deutsche Banc Alex Brown.
Was there an “aha” moment when you knew that you were destined to be part of an impact strategy?
The pace of innovation in the late 90s tech scene was a good catalyst, and I think the seminal moment for me and my partners was probably 9/11. The market meltdown and global uncertainty post facto really was a call to action for our team. We thought about what the world would have said about us if we were in the buildings and didn’t think we had good enough answers. We were already successful entrepreneurs and investors and like-minded in the sense that we did not want to wait for the third act of life (like Dale Carnegie would suggest) to do good deeds upon retirement. We wanted to use our skills and capital to make a different as soon as possible. It makes me feel great to know that I am not waiting to make the world
Impact investing is a bit broad, what are the industries that you are most focused on?
My partners and I have carefully reviewed the market opportunities and narrowed our focus to some key industries where we have significant knowledge and networks. We were also colored by the 9/11 experience and ultimately settled on education, environment, and safety with a focus on companies that use their core technology to effect change with  business model consistent with the implementation of that technology. This lens has allowed us to achieve venture capital returns while simultaneously having a measurable positive impact.
Can you share a big success story with us so that we have a better sense for the types of investment and associated impact?
While we are very proud of many of our investments, I am pleased to share that one of our companies, 2U (Nasdaq: TWOU) went public last year. 2U Inc. is an education technology company that partners with top colleges and universities to bring their degree programs and credit-bearing courses online. We have over 12,000 students in 17 graduate partner programs. This is one of the first times there has been high quality education at scale.   
How did you build your pipeline and how do you manage it?
Like many funds we have the usual traditional sources: our current portfolio entrepreneurs, co-investors, foundations, investment banks, law firms, and our personal networks et al. We do have an edge vis-à-vis peers via our involvement in herox (a joint venture with XPRIZE), City Spark (our seed fund), and the many relationships we have built with family offices – particularly those with a strong interest in impact & philanthropy. With regard to management we are really disciplined in our approach, but as you would suspect we are generally look at 300-400 companies a year (and fund 2-4).
With a new fund on the horizon do you have any specific interests that you think you will spend more time on?
We will spend some time looking at the friction points that exist in education - high school to college, college to employment...There is a real skills gap that exists (especially for liberal arts majors looking for high quality jobs). The numbers in this economic recovery don’t really reflect the facts. Millennials and younger grads are still massively underemployed. We have recently funded Koru (www.joinkoru.com) in a effort to address this problem.
Thanks so much for your time Josh. Please see the City Light Capital profile on Trusted Insight.