ImpactAlpha, Nov. 16 – Creating the tools and technologies to move more than 100 million low-income Americans comfortably into the middle class with new skills and quality jobs is a large and growing investment opportunity.
JFF Ventures (formerly ETF@JFFLabs) has been one of the most active venture investors in “inclusive workforce” from its position within Jobs for the Future, a 40-year-old national nonprofit with deep expertise in workforce and edtech.
Led by veteran impact investor Yigal Kerszenbaum, the fund has deployed nearly $30 million in equity, debt and debt-like investments in dozens of companies, including category leaders such as Care Academy, Factory Fix and Charger Help.
Another portfolio company, San Francisco-based Forage, inked a deal on Wednesday to embed its job simulations into Pearson’s educational materials, which are used by more than 18 million US students and 3,700 universities.
To scale up, the fund is spinning out.
Now a for-profit entity, JFF Ventures is raising a $50 million second fund. The firm is targeting a $15 million first close for the equity fund in January, with many of the early backers coming on as limited partners.
The venture firm will remain wholly owned by Jobs for the Future and draw on the resources of the experienced nonprofit. Now operating independently, the fund will distribute returns to limited partners and provide a carry to the general partners.
“We have landed in a place that we call ‘strategically aligned, operationally independent,’” Kerszenbaum, previously with Rockefeller Foundation and Developing World Markets, told ImpactAlpha. Joining the fund is Sabari Raja, the founder of edtech company Nepris, one of what was then ETF@JFFLabs’s earliest investments (PSG Equity acquired Nepris in 2021).
The general partners’ carry will be tied to impact targets, such as the percent of portfolio founders that are racially and gender diverse (eight in 10 founders in the current fund are women or people of color). A portion of that carry will flow back to Jobs for the Future, providing a new source of general operating funds for the nonprofit.
Kerszenbaum says the structure will allow JFF Ventures to “operate as a best-in-class impact first venture fund,” aligned with “the leading adult education and workforce development nonprofit in the country.”
Nonprofit venture
Traditional nonprofits like Habitat Humanity and Unicef in recent years have spun up venture arms to engage market-based solutions and scale their impact. Foundations and other philanthropic investors have provided seed funding with grants and program-related investments. The Walmart, Rockefeller, Kellogg and ECMC foundations, for example, all backed JFF Ventures’ demonstration phase.
Driven by opportunity (having proven an investment thesis in a high-impact sector) or conflict (challenges attracting talent, managing portfolios, raising commercial capital), the parent nonprofits have often chosen to separate the funds into independent entities.
The JFF Ventures partners have studied similar efforts, including that of fintech venture firm Acción Venture Labs, which came out of nonprofit microlender Acción. Others include Acumen America and ALIVE Ventures (and others), which spun out of Acumen, and edtech investment firm Reach Capital, which launched out of nonprofit edtech fund NewsSchools Venture Fund.
While most have ultimately found success, there have been “pain points,” says Kerszenbaum. Even after spinning out, fund managers have faced challenges with investment and operational decision-making, ‘equitable’ compensation, branding, and whether the organization or investment team retain the track record.
As it separates from Jobs for the Future, Kerszenbaum and Raja are determined to keep the nonprofit close, while structuring the fund to better align the incentives of the nonprofit with those of the team, the founders and limited partners.
Mission lock
Creating a funding mechanism to meet the needs of tech startups bridging economic mobility gaps is important to Kerszenbaum and Raja, both immigrants to the US whose families experienced first-hand the importance of access to opportunity.
Raja, who grew up on a coconut farm in southern India, spotted a workforce pipeline gap, specifically a STEM pipeline gap for minorities and girls, during her time at Texas Instruments.
“Technology wasn’t playing a role in connecting communities,” she says. Raja started Nepris, which virtually connects teachers and students with career professionals, “because of the impact and the possibility of really bridging this gap.”
Raja had trouble financing the business, until she met Kerszenbaum, who himself was born to an Argentinian family in South Africa, before moving to Israel and eventually to the US.
Kerszenbaum told Raja, “We want to balance impact and growth and scale. We want to support first time entrepreneurs.” Now with JFF Ventures, Raja says “there’s no better place for me to use my experience of building a company to continue to do this work of helping founders with similar stories.”
At JFF Ventures, Kerszenbaum and Raja will tie their success to delivering impact, and that success to Jobs of the Future.
“We think that that lock is critical for better supporting our founders, better leveraging the ecosystem of JFF,” says Kerszenbaum, “and all in all will generate more impact and scale for both parties.”
