Decision Vision

Decision Vision Episode 98: Should I Make Social Impact Investments? - An Interview with Mark Crosswell, Community Foundation for Greater Atlanta

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Decision Vision Episode 98:  Should I Make Social Impact Investments? – An Interview with Mark Croswell, Community Foundation for Greater Atlanta

Mark Croswell leads the social impact initiative for the Community Foundation for Greater Atlanta. He joined host Mike Blake on this edition of “Decision Vision” to address factors to consider in making social impact investments, investing to maximize impact, and much more. “Decision Vision” is presented by Brady Ware & Company.

Community Foundation for Greater Atlanta

Since 1951, the Community Foundation for Greater Atlanta has been connecting the passions of philanthropists with the purposes of nonprofits doing that work. With 66 years serving the 23-county Atlanta region and a robust team of experts, the Community Foundation manages the behind-the-scenes details, empowering our donors to focus on the joy of giving. The Community Foundation is a top-20 community foundation nationally with approximately $955 million in current assets and is Georgia’s second largest foundation. Through its quality services and innovative leadership on community issues, the Foundation received $124 million from donors in 2019 and distributed $133 million that same year to support nonprofits throughout the region and beyond. Go to the CFGA website to learn more.

GoATL Fund

The GoATL Fund is designed to accelerate and sustain social outcomes in our community through impact investing, the concept that strategically invested capital can achieve both a positive social impact and a financial return. This innovative fund will provide cost-effective loan capital to address our region’s most critical needs, from healthy, safe housing for every family to new schools for 21st-century learners and more equitable access to living-wage careers. The purpose of the fund’s investments will be to support causes and enterprises that provide sustainable, long-term benefits to the community, while also achieving capital preservation and a measurable financial return. To learn more, go here.

Mark Crosswell, Managing Director, Social Impact Strategy & the GoATL Fund at the Community Foundation for Greater Atlanta

Mark Crosswell leads the Foundation’s social impact initiative, designed to accelerate the pace of social innovation in Atlanta by connecting capital to causes we care about. With a background in banking, corporate finance and M&A, Mark is an entrepreneur at heart and has started, invested in, and managed numerous businesses. In 2015, he joined Points of Light to lead strategy and venture development for the Civic Accelerator, which trains, scales and invests in innovative social ventures around the country.

With passions for youth development, education and the environment, Mark has been active in the non-profit community in Atlanta for decades. In his spare time, Mark enjoys backpacking, trail running, biking, skiing, fishing, and coaching youth sports. Mark graduated from UNC-Chapel Hill and he and his family live in Sandy Springs, GA.

Mike Blake, Brady Ware & Company

Michael Blake is the host of the “Decision Vision” podcast series and a Director of Brady Ware & Company. Mike specializes in the valuation of intellectual property-driven firms, such as software firms, aerospace firms, and professional services firms, most frequently in the capacity as a transaction advisor, helping clients obtain great outcomes from complex transaction opportunities. He is also a specialist in the appraisal of intellectual properties as stand-alone assets, such as software, trade secrets, and patents.

Mike has been a full-time business appraiser for 13 years with public accounting firms, boutique business appraisal firms, and an owner of his own firm. Prior to that, he spent 8 years in venture capital and investment banking, including transactions in the U.S., Israel, Russia, Ukraine, and Belarus.

Brady Ware & Company

Brady Ware & Company is a regional full-service accounting and advisory firm which helps businesses and entrepreneurs make visions a reality. Brady Ware services clients nationally from its offices in Alpharetta, GA; Columbus and Dayton, OH; and Richmond, IN. The firm is growth-minded, committed to the regions in which they operate, and most importantly, they make significant investments in their people and service offerings to meet the changing financial needs of those they are privileged to serve. The firm is dedicated to providing results that make a difference for its clients.

Decision Vision Podcast Series

“Decision Vision” is a podcast covering topics and issues facing small business owners and connecting them with solutions from leading experts. This series is presented by Brady Ware & Company. If you are a decision-maker for a small business, we’d love to hear from you. Contact us at decisionvision@bradyware.com and make sure to listen to every Thursday to the “Decision Vision” podcast.

Past episodes of “Decision Vision” can be found at decisionvisionpodcast.com. “Decision Vision” is produced and broadcast by the North Fulton studio of Business RadioX®.

Visit Brady Ware & Company on social media:

LinkedIn:  https://www.linkedin.com/company/brady-ware/

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Show Transcript

Intro: [00:00:02] Welcome to Decision Vision, a podcast series focusing on critical business decisions. Brought to you by Brady Ware & Company. Brady Ware is a regional full-service accounting and advisory firm that helps businesses and entrepreneurs make visions a reality.

Mike Blake: [00:00:21] Welcome to Decision Vision, a podcast giving you, the listener, clear vision to make great decisions. In each episode, we discuss the process of decision making on a different topic from the business owners’ or executives’ perspective. We aren’t necessarily telling you what to do, but we can put you in a position to make an informed decision on your own and understand when you might need help along the way.

Mike Blake: [00:00:41] My name is Mike Blake, and I’m your host for today’s program. I’m a director at Brady Ware & Company, a full-service accounting firm based in Dayton, Ohio, with offices in Dayton; Columbus, Ohio; Richmond, Indiana; and Alpharetta, Georgia. Brady Ware is sponsoring this podcast, which is being recorded in Atlanta per social distancing protocols. If you like this podcast, please subscribe on your favorite podcast aggregator and please consider leaving a review of the podcast as well.

Mike Blake: [00:01:09] Today’s topic is, Should I make social impact investments? And the topic of social impact investing is not necessarily new. But I do think it’s receiving more attention, certainly in the coronavirus environment, but I think also in the last ten years as models for promoting social welfare in government and through the foundation nonprofit sector are being challenged. I think also business models for investing are being challenged. I think business models for charitable or socially oriented organizations are being challenged. It’s becoming harder to – I don’t want to say harder, but there are a lot more questions that are being asked about whether organizations that take in money, process money, and then allocate and donate it is really the right model. And I don’t think that that’s going away any time soon. But I think that there is a lot of interest in the potential for a force multiplier when you add an investment dynamic into promoting social practices.

Mike Blake: [00:02:31] And I actually saw a lot of this when I worked for the Soviet Union shortly after the fall of the Berlin Wall. It’s amazing. It’s almost 30 years ago now. But even back then, what funding organizations wanted to hear, if you’re trying to raise money, was, what is the sustainability model? And they wanted to hear it because, you know, even back then, it was hard to sell a nonprofit model or a social product model that says, “We need you to give us money so that we can give other people money. And then, we’re going to come back to you next year for more money so we can give more people money.” Even back then, that’s a tough model to sell. And it’s, of course, a tough model to sustain because you’re basically always fundraising at that point.

Mike Blake: [00:03:24] And so, this notion of social impact investing where you harness the tremendous power of capitalism – and I’m by no means one of these guys who think capitalism is perfect and doesn’t need tweaking, adjusting, et cetera – but there’s no denying that capitalism has delivered the goods, if you will, in a lot of ways to pretty much everybody on the planet that has allowed capitalism to function. And so, it’s only natural that we kind of look at, “Well, how can capitalism that has been so effective at driving innovation, for example, and has been effective for the most part in persistent increases in standard of living? How can we harness that for social impact as well?” And so, you know, it’s a very interesting model.

Mike Blake: [00:04:22] And you also hear these terms of something called a double bottom line or a triple bottom line where, you know, investments are judged not purely on the financial return – although a financial return is required or you’re not sustainable – but also looking at what is the social impact, what is the environmental impact both from an ecological and an economic standpoint? And so, you know, that sort of is out there and I think it’s a really interesting topic. And, again, I think with the coronavirus pandemic, I think it takes on a certain additional importance that maybe it did not have heretofore.

Mike Blake: [00:05:06] So, we are very fortunate to have Mark Crosswell, who is joining us today, who is Managing Director of Social Impact Strategy of the GoATL Fund at Community Foundation for Greater Atlanta. Mark leads the Community Foundation’s Social Impact Initiative, designed to accelerate the pace of social innovation in Atlanta by connecting capital to causes we care about. With a background in banking, corporate finance, and M&A, Mark is an entrepreneur at heart and has started investing and managed numerous businesses, we’re going to talk about that. In 2015, he joined Points of Light to lead strategy and venture development for the Civic Accelerator, which trains, scales, and invests in innovative social ventures around the country. With passions for youth development, education, and the environment, Mark has been active in the nonprofit community in Atlanta for decades. In his spare time, Mark enjoys backpacking, trail running, biking, skiing, fishing, and coaching youth sports. Mark graduated from the University of North Carolina Chapel Hill. Mark, thank you for coming on the program.

Mark Crosswell: [00:06:10] Thank you, Mike. I appreciate the chance to join you.

Mike Blake: [00:06:13] So, before we really dive into this, you’re also involved in the Georgia Social Impact Collaborative, and I want to make sure that we have an opportunity for you to talk about that and educate our listeners on it. What is the Georgia Social Impact Collaborative and why is it so important to you?

Mark Crosswell: [00:06:34] You know, even before I joined the Community Foundation and launched our Impact Investing work, we realized that Georgia, just like many of the states in the South, is lacking in capacity for impact capital or creative capital that’s focused on social outcomes. So, a group of us, a number of leaders from various sectors, launched – we’ll go with GSIC – Georgia Social Impact Collaborative as a way to connect and educate stakeholders of all kinds. We work with investors from private sector, philanthropy, public sector, as well as social entrepreneurs, and accelerators, and incubators, and all the stakeholders who are trying to draw capital to social causes. So, it’s been at work for four years and it’s been important for developing the ecosystem for impact investing.

Mike Blake: [00:07:30] So, tell us about the Community Foundation and why it wanted to get into impact investing.

Mark Crosswell: [00:07:40] You put it out in your commentary, Mike, that impact investing has been an increasing trend for the past ten plus years, and that’s absolutely true. In fact, it’s been double digit. Community foundations tend to be some of the more critical ecosystem level support organizations for nonprofit communities and in place based settings. And Community Foundation for Greater Atlanta is the same, been around for 70 years. We happen to be in tune in donor capital that we manage. And then, we grant about $140 million a year to the Metro Atlanta area nonprofits.

Mark Crosswell: [00:08:28] The leader of the foundation, Alicia Philipp, and the board had decided that we needed to do something different and needed to bring a different kind of product if we really wanted to scale the philanthropy we’re already putting to work. So, we launched into the Impact Investing work as the first stage of that.

Mike Blake: [00:08:51] Then, let’s drill down a little bit further. So, you’re managing the GoATL Fund, and, I think, you also founded it, correct?

Mark Crosswell: [00:09:00] That’s correct.

Mike Blake: [00:09:01] So, what’s the origin story? What’s the origin story? How did that idea come to you? And how did you go from idea to making it a reality?

Mark Crosswell: [00:09:13] So, I have been working in Social Venture Acceleration for two or three years with the National Nonprofit, and helped run venture development for an accelerator program. It was distinctly focused on civic and social outcomes. In that process, we developed an impact fund that was really focused on early stage investment in those early state ventures. That pilot fund kind of led me into understanding, “Okay. This is really what it takes to get new types of creative capital into these ventures. A lot of times, you just can’t find the money.” So, when I was in conversations with the Community Foundation, they also determined, “Okay. There’s a real need here.” And with the capacity that the foundation has, it made a lot of sense to use them as an anchor institution to launch this, because it’s really the first impact debt fund in Georgia. So, they brought me onboard in 2017. We spent a year building the concept on how we want to invest capital and then we launched the GoATL Fund in 2018.

Mike Blake: [00:10:32] So, in your own origin story, there’s something that I find fascinating that I’d like to explore with you, if you’re willing. And that is, you know, you started out in investment banking, and I’ve been in investment banking as well. And, you know, investment banking, I think it’s fair to say, is one of those fields that looks like on the surface it’s about as far away as you can think of from going into community development and even socially impactful investing. And I would love to hear and I think our audience would love to hear how is it that you’ve got from there, investment banking, to here with the GoATL Fund?

Mark Crosswell: [00:11:19] That’s a good question. I think you pointed out in your earlier commentary, we were talking about the intersection of the business challenges and the social challenges in nonprofits, by nature, just aren’t sustainable. So, a lot of, I guess, my emergence into this world came from the fact that I was very involved with nonprofits in my after hours and volunteer a lot on boards and with organizations that were doing some great things, but they’re having to fundraise every day.

Mark Crosswell: [00:11:53] And then, on the business side, I was in the M&A business, in the lending business, and then invested equity capital in my own ventures. And I just came to realize over time that there are certain business practices that nonprofits could really benefit from if they could infuse them into it. So, I think the other thing I found is, in the nonprofit sector, you don’t tend to have a lot of talents and skills that would lead into an investment type vehicle like this. So, I just happen to have a little bit of both. And there are a lot of people out there like that and that’s a growing trend. So, that whole intersection between business and nonprofit comes together in a lot of ways, not just in capital, but in skills, I guess. And I was fortunate to be in the middle of it.

Mike Blake: [00:12:48] So, the structure of GoATL Fund is something that’s called an impact debt fund. Tell our listeners what that actually means and how is that different from other kind of funding structures?

Mark Crosswell: [00:13:03] Sure. So, our impact fund – and there are a lot of them around the country. There just aren’t many of them in the South – is we’re a private debt fund, very similar to other private debt funds you might see on the market. Some of them focus on early stage and more growth stage in some capacity in larger organizations. So, our debt fund willing, we lend money. So, we are essentially taking capital that lends it into [inaudible] that can pay it back over time, typically four to seven years. We get an interest rate that’s relatively low. It’s in the two to four percent range.

Mark Crosswell: [00:13:48] But what is most unique about it and the real difference is that, we’re focused on the social outcomes. So, our money is designed specifically for a purpose. So, it’s to build affordable housing or health care clinics or charter schools in underperforming districts. And then, we’re specifically looking for the impacts that our borrowers get from that. So, in other words, how many kids are taught in those schools, how many patients are put into clinics, and so forth.

Mike Blake: [00:14:21] So, I’m curious because I’ve been on the boards of nonprofits and I’ve worked in nonprofit like work, in fact, something not too dissimilar from what you’re doing. How do you kind of collect that data and measure? What are the mechanics? Is that something that the funding recipients are required to do from a reporting perspective? Do you help them? Do you have independent audits? How do you go about collecting that data so that you can show your own capital providers that you’re making that desired impact and simply tracking your own performance?

Mark Crosswell: [00:15:00] And that is truly one of the biggest challenges in this business and one that’s still being sort of resolved by investors like myself. But just to put it into a real tangible context, so we’re lending money – so think about a promissory note and a security agreement much that you would see coming from a bank – at ours, while it covers some of the nuts and bolts that those do, it includes things like, “Okay. We want to know the number of affordable housing units that are built. We want to know the average income of the tenants in those units.” Also, for lending for small business development, we want to know the demographics of those borrowers. So, actually, they have to report that to us, just like they report their financial statements to us. And so, over that five year loan period, we can actually see what we’ve created and what we’ve produced over that period.

Mike Blake: [00:16:01] So, I’m fascinated by housing, not that I’m a real estate guy at all. I’m not even very good at Monopoly. But, you know, as I’ve been studying social causes, you know, real estate is so important. It’s not just about not having a job, you can’t pay rent. And I want to focus on this with you for a second because I’m really interested. I don’t know if anybody else interested in the answer to this question, but I am for sure. And that is, the real estate problem is one for which money is only a partial solution, right? My understanding of affordable housing is that the barriers are as much around zoning and simply neighborhoods that don’t want low income housing. And I’m just going to leave it there, even though I get on my soapbox about it. You know, for issues like that where you make an investment into affordable housing, does your organization also have the opportunity to help overcome some of the nonfinancial barriers, such as zoning, such as, I guess, political clout, if you will, or at least influence where you can help reduce some of those nonfinancial barriers as well?

Mark Crosswell: [00:17:26] Yeah. I think you get to some things that are really critical, especially as it pertains to housing, because of the enormous amount of investment and resources it takes to be successful. So, I’ll point out a couple of things, you know, nonprofits can’t lobby and have limited, I would say, direct political influence. However, I would say that there is substantial influence in partners and others that can create a real movement in the public sector. And so, we spend a lot of time with that because it’s critical.

Mark Crosswell: [00:18:02] From our standpoint on the affordable housing side, we especially lean on some policy oriented nonprofits we do business with. And they’re very good at understanding the intricacies of that. Because you’re exactly right, when it comes to housing, you’ve got very ultra local challenges like zoning and issues with MPUs. And then, you’ve got county, state, federal, all kinds of regs that overlap and it’s just very complex. So, the policy factor is really important.

Mark Crosswell: [00:18:42] The other one that I think is just one that we’re really focused on more than ever right now is, those systemic racial issues that have forced some of the, you know, neighborhood disparities that we found in society, especially in cities like Atlanta. So, to break that down, it’s really taking a change in the way people think. So, this is all the noncapital stuff and so there’s a great deal of effort around that. And a lot of people working to make sure that we create some just differences in what has happened in the past.

Mike Blake: [00:19:26] So, as you conceptualized GoATL Fund, were there other initiatives or models that you thought about and ultimately discarded? And if so, why was it that GoATL Fund kind of rose to the top of the other ideas that you were considering?

Mark Crosswell: [00:19:49] Good question. And to give this answer with context, I’ll describe more carefully where we invest. So, we launched the fund with 10 million from the Community Foundation. So, we were seeded with 10 million in, essentially, equity capital. And then, we’ve had our donors invest since then, they’ve added a couple of million. And pretty soon, we’ll be up to about 14 million in size in the fund. Because it’s not a great deal of capital and because we’re relatively lean and small team, we invest in intermediaries. These are community development banks, typically, which are nonprofit banks providing affordable housing, financing, and loans for charter schools and all that.

Mark Crosswell: [00:20:40] In order for us to be effective, we needed to leverage the power of those intermediaries. So, our kind of investing is really effective because what happens is, our partners can take that half-a-million or $1 million we invest, and then they can multiply that sometimes five, ten-fold to bring in other capital for much larger investors to get large projects done. So, the products we looked at that didn’t make sense given our capacity and our experience were things like venture capital. And through early stage venture investing, we didn’t think we could invest equity effectively, especially if we’re investing in some nonprofits, which you really can’t evaluate from an equity standpoint. And then, from a leverage standpoint, we had such little capacity that made a lot of sense for us to make sure we could leverage that money in the market, so that we could bring some other private capital in to drive the productivity of our investment.

Mike Blake: [00:21:49] So, that’s interesting, I did not get this from my research. So, is it fair to say that you guys, the GoATL Fund, is, in effect, a fund of funds?

Mark Crosswell: [00:22:00] It is in a lot of ways. We do invest in direct in some cases. But in others, we will invest into a portfolio of loans or projects that an organization has. And if you think about housing, so we have two very different housing investments that offer a contrast. One is an investment in the largest multifamily lender in our state, that’s a community development bank. They have a relatively large $80 to 100 million portfolio. We invest about $1 million specifically in Metro Atlanta. And so, our goal there is to try to lower their cost of overall borrowing so they can drive better affordability overall.

Mark Crosswell: [00:22:46] In contrast to that, we also invest in a developer that is associated with a community development bank. And that development entity is actually going in and buying vacant and blighted homes in neighborhoods that need investment. And then, rehabbing those and then selling them to first time homeowners with a buydown assistance from grants. And that money is really effective in a replaced based area in the way of home ownership. So, very different investments, but just ways that we invest both direct and through intermediaries.

Mike Blake: [00:23:27] Now, I’m curious – I’m going way off the script here, but I know you can handle it – are any of these investments made to your knowledge, maybe alongside of other programs? And to be specific, what I’m thinking about is, the SBA has certain programs that are designed also – it is designed to be a double bottom line program, a small business administration. We’ve had a podcast on small business administration lending. And I guess my curiosity is that, do you find that either in your direct investments or through the organizations that you support, do they ever work with either other government agencies or even, perhaps, other private funding sources to achieve their goals and create some kind of financial leverage?

Mark Crosswell: [00:24:30] Absolutely. In fact, you bring up the SBA. So, one of our first investments was in a local community development bank called Access to Capital for Entrepreneurs, what is know as ACE. So, ACE is a big SBA lender, and our original investment was into their Community Advantage SBA program. So, it’s where SBA provides a guarantee specifically for loans for minority and immigrant and low-income business owners. So, we put about a-million-and-a-quarter capital into that.

Mark Crosswell: [00:25:06] What’s interesting is, we’re also pretty flexible. When COVID hit, when the pandemic hit, the need for that kind of product just wasn’t very relevant. So, we actually redirected that commitment so they could use that money for COVID recovery. So, that’s one example. Another interesting one is, we just launched a relatively small microlending program through a nonprofit lender called LiftFund out of Texas. And they’ve been in Georgia for about four years. We launched this specifically for COVID recovery. And they’re going to lend zero percent interest loans with our interest bearing money. And the way they can do that is they also used our money to incent foundations to come in with grant capital to lie beside that. So, there’s a 25 percent grant that goes along with that investment that is being used both for the interest buydown and loan loss reserve, if that makes sense. So, the foundation specifically put grant money in so that we can leverage our investment capital.

Mike Blake: [00:26:21] So, I want to switch a little bit to governance here, because, you know, governance of anything like this, I imagine, is different and challenging. But my first question is this, because you operate as a fund of funds, in effect, but the people to whom you are accountable might be a little bit different. Is there a financial accountability? Or how does the financial accountability work to, say, community foundation to put in the first 10 million and then your donors who have also become investors? How does that accountability regime look like? And is that materially different from other accountability regimes that you’ve had to address in your for- profit roles?

Mark Crosswell: [00:27:15] Interesting question. So, we’re just three years old, so when we launched, there was really no roadmap for how we would develop compliance and accountability. And, you know, the auditors at the foundation don’t even know what to do with us, frankly. But nonetheless, we created a sidecar running kind of process where we basically have others in the foundation that are helping us keep up with the accounting of the fund as well as the information, say the reporting we get back from investment partners. So, there’s a compliance effort that looks a lot like what you would see in a bank for a loan fund. And we’re doing that because we know that we’re going to have to create a track record. And it really just adds integrity to the whole fund model.

Mark Crosswell: [00:28:13] And then, in terms of our reporting to investors, I would say, our reporting to our donor investors as well as the foundation looks a lot like the investor relations you’d see coming from a very small public company or from a private investment fund. We provide quarterly updates on the portfolio. We discuss specifically the activity. We also tell them if it’s in good standing or not, and it happens to be. So, we’ve never had an issue with payment. So, we report on specifically what you’d expect to see in any loan fund.

Mike Blake: [00:28:52] So, a question I’d love to get your input on is this, you know, I’ve read data all over the place that there’s a finite, definable tradeoff between social impact investing and profitability – or return, actually, more properly. And I’ve also seen some literature that suggests that socially oriented investing actually generates a higher return than a more conventional investment regime. And my interest is particularly piqued by the fact you’re doing this microlending, because everything I write about microlending programs suggests they have a fantastic track record of success, both financially and socially. So, it’s a long preamble to the short question which is, where do you fall? Do you find that there is a tradeoff between social impact investing in terms of return financially? Or, in fact, do they tend to work in tandem that you don’t necessarily have to have that tradeoff? What’s your view on that?

Mark Crosswell: [00:30:10] Well, I think this is a really important distinction because you see that a lot, especially in the institutional side of impact investing where they’ll say, “Okay. You don’t need to make a tradeoff in order to make returns.” So, that is true. I believe that that exist in the institution, in the market rate side of impact investing. But the reality is, the investor themselves – and in my case, our GoATL Fund – typically have the ability and always should make the effort to draw a distinction right up front what are the values, what are you trying to achieve with your investments? And so, there are cases where you choose, “Okay. Financial returns are just as important to me or more important than social outcomes.” In which case, you can often design around not providing a tradeoff for that.

Mark Crosswell: [00:31:06] However, funds like mine specifically make an intentional decision, we want the tradeoffs. We are choosing to be an impact first fund. We want to see the social outcomes to produce what we’re intending to invest in. And we also would like to get a return on our capital and make sure we get that capital back. But we’re willing to give up, number one, on the returns, so we’re willing to take a lower interest rate. And number two, we know that the sustainability has always been questioned in these areas that we’re investing in. If we really want to create that sustainability, we have to assume some risk. And so, that risk may be at a higher level than what the institutional investors are willing to provide.

Mark Crosswell: [00:31:53] So, it’s intentionality, Mike. It really is. It’s not, you know, you can go in the market and choose one or the other. But if you’re really a strategic investor, you’re choosing upfront what your path is.

Mike Blake: [00:32:08] So, I want to explore that a little bit further too. It seems to me – and you tell me if I’m wrong. This is pure speculation on my part – another potential benefit of an investing model versus a grant model is, I suspect that that imposes a different kind of discipline in terms of deciding which projects to fund, how to fund them, the degree to which you’re going to fund them. You know, thinking like an investor, I mean, even if you are making a social impact, I imagine that there’s just a different thought process in terms of how you evaluate potential investment opportunities. Is that fair?

Mark Crosswell: [00:32:52] Yeah. That’s exactly accurate in a couple of ways. Number one, if you think about how you invest capital or you lend money, you’re going to do specific kind of due diligence around all the financial aspects. We do that same due diligence that you would find a bank doing if you were applying for a loan. On top of that, we also do due diligence around the social outcomes. So, we want to see the history of what they produce, how they’ve done it. We want to see where the projections around what they’ll produce with our capital. How many homes will they build with it, how many families will they house, how many kids educated, we want to know that up front.

Mark Crosswell: [00:33:38] And then, in terms of the actual return on the capital, you know, there’s discipline built in there because they have to do that in a way that they would provide reporting to a bank or to any other investor. So, there’s disciplines up and down. And then, how we evaluate those outcomes, there’s also an advantage from the investment standpoint. You talked about accountability before, we can be accountable because we’re keeping up with a great deal of data on the investments we make.

Mark Crosswell: [00:34:12] But I don’t want to discount the value of philanthropy because, as you noted, there are advantages to impact investing. Number one, it’s a great deal more capital, typically, put at work than philanthropy. Number two, you are getting the money back so you can invest it again. And then, number three, because you’re driving those outcomes into the future, you’re building sustainability with those investments. But a lot of times, impact investing never happens without philanthropy. So, it often is the bridge that creates opportunities for, number one, the nonprofit target to get off the ground in the first place. And number two, the ability to really take our capital and leverage it in different degrees, like I pointed out with the microlending fund.

Mike Blake: [00:35:05] I’m curious also, I want to come to a question about how you raise the initial funding. Before we get to that, I want to like to ask, do you find also that maybe it’s easier to raise money from certain parties for social investment fund because, ideologically, it’s just going to sound better to a certain audience? This is my own view and I’d love you to react to it, but I think that there are people that are happy to write a check to say the united way. They don’t have an investment model as far as I’m aware. It’s purely a grant based model. And then, there are people that want to see capitalism kind of more central to the way that social problems are addressed. And, therefore, even though there may even be no expectation of getting the money back necessarily. But it just sort of sounds better to their ear that they’re putting money into an investment fund as opposed to writing a blank check. Am I off base there or is there something to that?

Mark Crosswell: [00:36:20] No. I think you’re right. Some of this gets back into the intersection we talked about before between business and nonprofit. But I think the other thing is this, when we’re going to raise capital, we’re making justifications to the investor much like any other private fund we do. Plus, we’re talking about the outcomes we’re going to produce from that. And it really gets down to how well you align with that investor.

Mark Crosswell: [00:36:53] But I think the traditional way of doing it is, you know, you go to work, you make your money, you build up your retirement. And, eventually, when you get to a certain maturity in that stage, you begin to spin off a little bit of that into philanthropy. What I think we’re seeing now and what really makes a huge difference is that, people are thinking about those social outcomes much sooner than they used to in the past to where it makes a difference. You know, if they’re drinking clean water and breathing clean air or having to drive through parts of town that they’re just not proud of. There’s just a difference, especially with our younger generations, where it makes a big, big difference in how they put their money to work. And it could be even just where you deposit your checking account and thinking about that as a factor in driving some social change.

Mark Crosswell: [00:37:47] But I just think aligning investor interest with the investment product is so critical. And we spend a lot of time on that because the education is long and hard. But when it comes down to it, when you go to raise money, you’ve got to justify yourself. But you want to make sure that you’re lined up well in terms of what those investors are looking for.

Mike Blake: [00:38:11] So, an observation I have is that one feature that a nonprofit organization, a social venture fund or any venture fund, have in common is that raising that initial seed capital is quite difficult. And I’m sure that any of our listeners that have an interest in pursuing like this would love to hear your story. Can you tell us a little bit about the story about how you secured the initial capital to launch the GoATL Fund?

Mark Crosswell: [00:38:48] Yeah. Thanks, because that was a critical component. Just to get the concept underway, there had to be a real commitment of budget for the startup. So, bringing me on, allowing me to have really a full year to do the discovery and the research and the build of the product. And then, through that year, once we had that startup budget in place, we had to then go back to that same investor, the startup Money which was the foundation, and essentially talk them into investing 10 million in seed money. The good news is I only had one investor to sell. The tough news is, this was dramatically different than anything the foundation have done in its 70 year history.

Mark Crosswell: [00:39:40] However, we had the leadership team behind us, we had the board behind us, and it just fell into place. Since then, we have 600 or 700 donors that we take the fund out to. Today, I think we’ve got between 25 and 30 investors. So, that’s gone a little bit slower. But I think the reality is, the more our donors realize, “Okay. I can put this capital to work, get a return, and continue to make grants, then we’ll have more success with that fundraising.”

Mike Blake: [00:40:16] We’re talking with Mark Crosswell of the GoATL Fund, and the topic is, Should I practice social impact investing? And we’re running low on time here, but what I’d love to ask you here is, you know, what have you learned along the way with the GoATL Fund? You know, what has worked in terms of successfully achieving your mission and what hasn’t worked that might be a cautionary tale for somebody else pursuing this?

Mark Crosswell: [00:40:54] Yeah. Well, we’ve been fortunate and most of our investments have turned out to be very successful. I would say we feel very good about our investments in affordable housing and the fact that we are moving the needle slightly there. In small business development, I would say the same is true. I would say we have found it more difficult in some other areas, such as education and health care specifically. And it has nothing to do with the fact that there’s a substantial amount of need in both of those areas. It has a lot to do with how ready the market is for this kind of capital. And in that respect, we need partners and intermediaries and strong intervention partners. Nonprofits that are actually doing the work in order to help us find investable kind of entities on the other end. So, some of these markets are taking longer to develop from that standpoint.

Mark Crosswell: [00:42:02] I would say the other big thing that we’ve learned is that, in less than three years, we’ve invested almost all of our capital. We have nearly 11 million invested in the next couple months. So, we’re about out of money. So, we realized there’s a constraint capital wise. We have to scale. And we’re going to continue the success at this rate. We can’t be a $10 or 15 million fund. We need to be a $50, $75, $100 million fund. So, we’re looking very closely next year and the years beyond in terms of really taking this thing to a whole different level.

Mike Blake: [00:42:44] You know, it strikes me, I think there’s a lot of things there that are consistent with other nonprofits. That initial funding is, of course, very difficult as we just talked about. But, also, I’ve been linked at least to the nonprofit world, either directly or indirectly, a theme that has been there and continues to become more prominent is partnerships. It’s increasingly difficult in any capacity to raise money for sort of a cowboy fund, if you will. And you really only see those happen, I think, you know, by the Arthur Blanks and Bernie Marcus’ of the world and so forth that can just go alone because they can write their own check. But my impression is that, you know, what you’re talking about in terms of finding the right partner, that’s now becoming, I think, almost necessary best practices for the success, not just of your fund, but really any philanthropic exercise of any scale. Do you agree with that?

Mark Crosswell: [00:43:53] Absolutely. There is no way to do it without partners. And the first thing I’ll say there is that, if you’re operating in the impact investing world, which is very close with the nonprofit world, it’s extremely collaborative. So, there’s not a sense of competition. There’s a lot of complementary type investing and strategy work that goes together. And so, it’s very easy to do business in this market. Nobody turns down your phone call and you’re willing to see just about everybody. And then, in terms of actually using the partners back and forth, we do a great job, I think, of leveraging that. I think looking at how we build the capacity of our partners is critical. We’re not just interested in growing our fund. But if we don’t see our investment partners and our intermediary partners grow in the same way, then we don’t think we’re getting anywhere because we can’t do it alone. So, it’s absolutely critical. And the good news is just it’s a very collaborative environment.

Mike Blake: [00:45:00] So, I’m curious, how has your private sector experience helped and informed you in this journey that you’ve been on to create and now run and, we hope, scale the GoATL Fund?

Mark Crosswell: [00:45:18] Well, I think that’s a big part of it from the standpoint that, like you, Mike, I’m a capitalist, but also understand there are flaws there. And as we have seen the world change and there be a higher demand from consumers and from businesses. And then, of course, those that are providing resources to nonprofits are realizing sustainability is not going to happen, which is creating capital. It’s just become more and more meaningful, I think, to understand both the business side, which I had in my private sector, and how that can really play a part in driving that sustainability in the nonprofit side.

Mark Crosswell: [00:46:05] And the good news is, it’s got positives for both. I think there are people that are making more money who were in the low income or impoverished kind of areas of the spectrum. And then, there are investors that are realizing, “Okay. We can actually make something good happen here and get our money back.” So, you know, it’s been telling the story around that. As you can imagine, it’s not very easy sometimes. So, having the private sector experience and being able to couple that with understanding the nonprofit sector has been very fortunate for me.

Mike Blake: [00:46:45] Mark, this has been a great conversation. We’re touching all of, probably, the surface of what we could touch, certainly. But, you know, time is, of course, limited and we need to get you back to helping people get housing, because that’s really important. If people have an interest, if our listeners have an interest in exploring building something like this for themselves or maybe participating or supporting what you’re doing, how can they contact you for more information?

Mark Crosswell: [00:47:15] Yeah. Thanks, Mike. The easiest way is by email, it’s mcrosswell@cfgreateratlanta.org. That domain, cfgreateratlanta.org, is also our website, and you can go find GoATL information on the fund. And then, Twitter is @ATLImpact. So, @ATLImpact is how we use the social channels. And Georgia Social Impact Collaborative is gasocialimpact.com, and that’s where you can pick up general information on impact investing.

Mike Blake: [00:47:58] Well, thank you. That’s going to wrap it up for today’s program. I’d like to thank Mark Crosswell so much for joining us and sharing his expertise with us.

Mike Blake: [00:48:06] We’ll be exploring a new topic each week, so please tune in so that when you’re faced with your next executive decision, you have clear vision when making it. If you enjoy these podcasts, please consider leaving a review with your favorite podcast aggregator. It helps people find us that we can help them. Once again, this is Mike Blake. Our sponsor is Brady Ware & Company. And this has been the Decision Vision podcast.