Investing in “impact” companies is good for business according to Kapor Capital’s recent report. Since 2011, Kapor Capital has invested exclusively in impact companies and, eight years in, the fund ranks in the top quartile of all funds of comparable size, the report says.
What exactly are impact companies? The firm defines impact as “companies committed to closing gaps of access, opportunity, and outcomes for low-income communities and communities of color in the United States.”
According to reports, a lot of VCs continue to steer clear of gap-closing impact companies, incorrectly believing that investing in companies that do good might come at the expense of financial returns. Today’s results strongly refute this hypothesis.
The results were based on the following two standard measurements of portfolio performance:
- Internal Rate of Return (IRR) — 29.02
- The Total Value to Paid In (TVPI) Multiple– (3.0)
By both measures, Kapor Capital’s Impact Portfolio ranks in the top quartile of venture funds of comparable size. Specifically, at 29.02%, Kapor Capital’s Impact Fund IRR outperforms the 75th percentile benchmarks for both Pitchbook (25.96%) and Cambridge (26.50%) for this period. Additionally, it is important to note that these figures do not include major investments, such as Uber and Twilio, where Kapor Capital investment was initiated before 2011. So what does it all mean? Investing in impact-driven companies also leads to a significant Return on Investment.
“We’ve always believed that all companies have some sort of impact in the world—some positive, some negative,” states Mitch Kapor, partner at Kapor Capital. “As investors, it’s our responsibility to nurture only those innovations that make our world more fair, just and equitable. After eight years of impact-only investing, we’re proud to share our results and prove our hypothesis.”
Additionally, the report details the specific impacts that their companies are making in the world by closing gaps in education inequality, helping families access healthy foods, disrupting predatory lenders and so much more.
“At Kapor Capital, we want to disrupt the very way that businesses are evaluated,” said Dr. Freada Kapor Klein, partner at Kapor Capital. “‘Impact’ investing shouldn’t be the outlier; greed-first investing should be the category getting scrutinized. VC 2.0 is the vision of what VCs can be and this excites us tremendously.”