The new accelerator for social ventures launched by Points of Light and Village Capital bills itself as the first such national boot camp focused on social mobilization and civic engagement. The Civic Accelerator may also be the only such venture fund that invests in both non-profit and for-profit companies.
The two ventures selected for $50,000 investments from the first cohort of the Civic Accelerator include one non-profit and one for-profit company. Generation Citizen, a nonprofit in New York, teams college students with classroom teachers to teach civics courses in which teens work on problems in their own communities. For-profit Ubelong, based in Washington, D.C., matches individual and corporate volunteers with high-impact international service opportunities.
Jay Cranman, vice president for venture development at Points of Light said the Civic Accelerator is looking for catalytic investments in early-stage ventures, regardless of legal structure. The nonprofits selected have strong earned-income potential and “big scalable solutions,” he said. “Nonprofits have a space in inefficient markets,” he added.
The accelerator’s inaugural cohort of 10 companies was split down the middle: five non-profits and five for-profits. Indeed, the financial instruments for the two kinds of investments are not that different. The Civic Accelerator offers investments of $10,000 in each of the companies selected. For the for-profit companies, the investment takes the form of a convertible note, that is, a loan that converts to equity (with a 20 percent discount) when the next round of financing is closed. Repayment is based on a share of revenue.
For the non-profit organizations, the investments is made in the form of a recoverable grant, basically an interest-bearing loan that is repaid upon hitting an agreed-upon metric of success, such as an earned-revenue target. Not all of the nonprofits were comfortable taking on such debt, Cranman acknowledged.
Antony Bugg-Levine, CEO of the Nonprofit Finance Fund and co-author of the book “Impact Investing,” said the inclusion of nonprofits in a venture accelerator is a sign that impact investors are asking the right question: “‘How can our investment in your organization help you create social value?' not ‘Which forms do you use when you file your taxes?'”
Indeed, commercial capital already flows through Community Development Finance Institutions and other non-profit vehicles and new financing models are proliferating. The Nonprofit Finance Fund, for example, which for decades has financed government receivables with working capital and term loans, is now working on “social impact bonds” and other pay-for-success contracts, as well as warrants on future revenues which give nonprofit investments “equity-like” features.
Seed-stage venture capital-style financing for nonprofits, however, is something new. Using the peer-review model pioneered by Village Capital, the 10 ventures in the accelerator group themselves chose Generation Citizen and Ubelong for the two additional $50,000 investments at the end of the 12-week bootcamp.
“We are excited for the investment, which will allow Ubelong to grow faster, expand its reach and continue inspiring international volunteers and corporations to engage and serve across the world,” said Raul Roman, co-founder of Ubelong.
Scott Warren, the founder of Generation Citizen, said the investment will advance the organization’s growth strategy, which calls for reaching 20,000 students per year by the 2015-16 school year.
The other eight ventures in the Civic Accelerators first cohort were:
- AltruHelp (Boston), which builds software and online communities to increase volunteerism in the Millennial generation.
- Bould (Denver), which helps students get the experience needed for green careers.
- CareerVillage (Boston), which helps working professionals provide career information and advice to students.
- GivKwik (San Francisco), a social, mobile and web platform for “impulse philanthropy.’
- HopeMob (New York), which unites strangers to rally behind people with pressing needs.
- Moneythink (Chicago), a financial literacy program for urban 11th and 12th graders.
- MyMaryland (Silver Spring, Md.), an online town hall.
- Smallknot (New York), a community crowd-funding platform for small business.
Village Capital has provided more than $2 million in capital using the peer-selection model in more than a dozen programs in the U.S., United Kingdom, Kenya, India, Brazil, and China.
Likewise, the Civic Accelerator continues Points of Light’s expansion into social ventures from its mostly volunteer service activities. With affiliates in 250 cities, the organization says it engages more than four million volunteers in 30 million hours of service each year.
The Civic Accelerator itself has backing for at least three cohorts of ventures, from PwC Charitable Foundation and the Starbucks Foundation.