ImpactAlpha, July 31 – The San Diego-based private equity firm has carved out a niche, investing in lower middle-market companies and working with them to improve the quality of their jobs. The thesis: Better workplace practices attract and engage better employees, which increases enterprise value.
The firm has applied its “gainful jobs approach” to more than 40 companies across three funds with $300 million in assets. HCAP’s fourth fund, which closed at $150 million, attracted limited partners including the Ford Foundation (as part of its $1 billion endowment carveout for mission-related investments), family offices and financial institutions.
Founded in 2000 as Huntington Capital, HCAP makes growth-stage mezzanine debt and equity investments in technology, healthcare, services, and manufacturing in the western U.S.
‘Good jobs’ is emerging as a compelling impact investment thesis (see, “Impact investors have a quality jobs agenda”). “The more jobs and high-quality jobs, the better,” Ford Foundation’s Roy Swan told ImpactAlpha in an earlier podcast, arguing that superior companies engage employees in a superior way with superior human capital investment.
Lack of such engagement costs American companies more than $500 billion a year in lost productivity, according to Gallup, which has attracted private equity companies targeting job quality.
HCAP’s approach keys on five attributes of a “gainful” job: Opportunities for advancement, sustainable livelihoods, broad-based participation, paid sick days and wellness initiatives. HCAP’s portfolio companies employ 9,00 people; half of them are women and more than 60% are people of color.