Catalytic Capital | October 20, 2020

Pay-for-success funds in San Francisco and Colorado raise $10 million for nonprofits

Jessica Pothering
ImpactAlpha Editor

Jessica Pothering

ImpactAlpha, October 20 – Two new funds aim to streamline pay-for-success (sometimes called social impact bonds) and make it easier for nonprofits to raise impact capital to run and expand their programs. 

Impact investing advisor NPX structured place-based funds for the San Francisco Bay Area and Colorado to be payors to nonprofit organizations once their programs achieve their intended impact. The $4.5 million Bay Area Donor Impact Fund, backed by 23 individuals, will support three nonprofits, while the $5.6 million Colorado Donor Impact Fund, backed by 13 philanthropic organizations, including the Colorado Health, Denver and Gates Family foundations, will fund four nonprofits. Both funds will focus on organizations addressing local pandemic impacts and economic mobility in underserved communities.

Here’s how it works: Nonprofits raise capital from impact investors, who get repaid from the donor impact funds when impact outcomes are achieved. 

In the Bay Area, the nonprofits slated for funding include 10,000 Degrees, to help low-income community college students transfer to four-year programs and pay down student debt; Mission Asset Fund, to boost financial inclusion in Hispanic and Latinx communities; and Rivet School, to enroll low-income adult learners in online degree programs. 

In Colorado, funding will support: ActivateIT’s training and placement of low-income adults into high-paying tech jobs; Bridge House’s homelessness-to-housing and work program; CrossPurpose’s job placement of entry-level low-income workers; and LaMedichi Savings Clubs’ financial health and inclusion support for Hispanic and Latinx immigrants.

Last month, Social impact bond architect Social Finance launched a pay-for-success fund to invest in workforce training programs that employ income share agreements for their learners (see, “Blue Meridian, Schmidt Futures back ‘career impact bonds’ via Social Finance’s UP Fund“).