For many investment is no longer purely about generating profit. Certain groups of investors now consider social impact and environmental concerns along with return on investment. There are two different approaches. First of all, there is ethical investing where investments are selected against certain social criteria. Then, there is Social Venture Capital for early-stage investment in companies tackling social issues. Of the two options social venture capital has greater potential for social change so let’s review it in more detail.
What is Social Venture Capital?
SVC is a form of investment that provides capital to companies or organisations whose primary purpose is creating positive social impact. SVC actively seeks to improve society through investment in companies attempting innovative solutions to social and environmental challenges. As such, the goal of SVC is to not only generate financial returns, but also drive change by addressing key social issues.
How does Social Venture Capital differ from venture capital?
SVC funds chose to invest in businesses with a social mission, such as sustainable agriculture, renewable energy, health care, and education. These businesses often operate in underserved markets and have a focus on creating positive social change.
Why is Social Venture Capital investment important?
SVC investments have had a significant impact on the social sector. They have enabled social enterprises to access capital and resources that would not be available through traditional venture capital, allowing them to grow quickly and efficiently.
What successful companies received Social Venture Capital investment?
Some well known companies that received SVC investment include:
- Warby Parker. An eyewear company that has raised over $360 million in venture capital funding since its launch in 2010.
- Beyond Meat. A plant-based food company that has raised over $350 million in venture capital funding since its launch in 2009.
- Airbnb. The world’s largest home-sharing platform, having raised over $4 billion in venture capital funding since its launch in 2008.
- Impossible Foods. A plant-based food company that has raised over $750 million in venture capital funding since its launch in 2011.
- Kiva. An online microlending platform that has raised over $50 million in venture capital funding since its launch in 2005.
From little things, big things grow...
Despite accounting for less than 1% of venture capital, SVC investments have already made a significant social impact. SVC enables social enterprises to access investment capital and resources that would not be available through traditional venture capital. SVC investments also provide an avenue for entrepreneurs to drive social change and create sustainable business models. Additionally, these investments have raised awareness of the potential of social enterprise and increased the flow of capital into the sector.