The World of SOCAP: The Challenges as the Lollapalooza of Impact Investing Grows Up

How This Impact Investing Conference Is Grappling With Its Values Going Mainstream

SOCAP 2016 Fort Mason Center

The 2016 SOCAP impact investing conference drew more than 2,5000 social entrepreneurs, impact investors and other attendees to talk about and plan the future of impact investing.
Photo by Sumit Kohl, Sreel Photography

Christian Birky perched on a picnic table and surveyed the scene. The Golden Gate Bridge jutted through the mist as people gathered in the fading light along San Francisco’s waterfront. The crowd, clad in fleece and khakis, exuberant African dress and hippie duds, juggled glasses of sustainably made wine as they discussed plans to eradicate poverty, combat climate change and close the wealth gap.

Birky sported sunglasses and a neat white T-shirt, the centerpiece of the ethical clothing line he co-founded, Lazlo, that is made in Detroit by former inmates. “Being an entrepreneur in Detroit, I feel like I’m often out of the loop,” says Birky. “I came here to get energized and connect with as many people as possible.”

He came to the right place. The waterfront event was the kickoff party for Social Capital Markets (or SOCAP for short), an annual impact investing conference that brings together social entrepreneurs and impact investors. The conference, which will mark its 10th year in 2017, has been called the “Lollapalooza of impact investing,” “Burning Man meets Wall Street,” or, as SOCAP co-founders Kevin Jones and Rosa Lee Harden put it, a “swirling, energetic hopeful madness.”

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The 2016 conference drew more than 2,500 attendees to San Francisco’s Marina District, including powerful investors, passionate entrepreneurs, financial advisers, fund managers, government officials and others with a desire to change the world — and $1,495 for the registration fee.
The event is a microcosm of the evolving impact-investing field, with all its messiness and contradictions. SOCAP provides a setting for the cat-and-mouse game played by scrappy entrepreneurs looking for startup dollars and the well-heeled investors who dole them out.

A whiff of privilege permeates this impact investing conference. Until recently, the mostly white male investors lavished funds on the African continent, overlooking challenges facing African-Americans at home. Businesses in disadvantaged U.S. neighborhoods had a harder time raising money than those on distant, disadvantaged continents. SOCAP is attempting to be more inclusive — racial equity was a dominant theme in 2016 — though it has a ways to go.

The event is expanding in other ways. As the notion of triple-bottom-line business grows, established investment firms, such as Goldman Sachs, Bain Capital and BlackRock, have begun muscling their way in. The conference billed as “the intersection of money and meaning” is coming to terms with the inclusion of traditional capitalists and Wall Street culture.

One point of conflict infuses almost every conversation: Do impact investments need to deliver market-rate financial returns to be successful? Or does positive impact have value of its own that balances the financial returns? And what the heck is market-rate return, anyhow?

“We have achieved what we’ve been aiming for,” says SOCAP curator and producer Lindsay Smalling, “but are we being absorbed, or are we revolutionizing finance? Is it about market-rate returns or changing the definition of what the market is and the notion of value? That tension is where the creativity lies.”

Funding Social Entrepreneurship: It’s All About the Benjamins

The SOCAP conference sprawls across the 13-acre Fort Mason Center, a former military base that is now part of the Golden Gate National Recreation Area. Main-stage events and 150 breakout sessions — covering themes from clean energy and urban renewal to sustainable agriculture and inclusive entrepreneurship — stretch across three days. But the real action takes place in the hallways, in the breakfast buffet line and at the boisterous after-parties. Budget-conscious “attendees” have been known to skip the pricey conference fee and park themselves at a picnic table outside the main building.
For the uninitiated — and about 30 percent of attendees each year are first-timers — SOCAP can be overwhelming. And it can sometimes feel like a tale of two conferences. VIPs hobnob at exclusive parties or over vegetarian power lunches at Greens, a farm-to-table restaurant on the premises. Most attendees help themselves to the free buffets, food trucks and happy-hour hors d’oeuvres. “You meet people in the food line and talk about racial equity,” says Birky.

SOCAP networking

SOCAP attendees network at picnic tables outside of the main building at the Fort Mason Center during the September 2016 impact investing conference.
Photo by Sumit Kohl, Sreel Photography

That’s where the social entrepreneurs spend their time. They’re a focused bunch, intent upon making the most of their proximity to so many progressive people with checkbooks. They extol their fledgling ventures and hustle to make connections. Sometimes, they go home with a fat check. Amid the seeming abundance, that can be a challenge.

“The amount of money in the room is crazy,” says Gordon Carver, co-founder of Silverleaf Academy, a chain of affordable private schools in Tanzania. But, he says, “No one seems to care about education.”

Jessica De Clerck, a first-timer who heads Potential Energy, which distributes cookstoves and charcoal briquettes to women in Uganda, noticed a tangible divide. “There are clearly people who are the entrepreneurs and clearly people who are the investors,” she says.

Birky, De Clerck and Carver were among 150 entrepreneurs, culled from more than 800 applicants around the globe, awarded 2016 SOCAP scholarships. The awards cover registration for the impact investing conference, accommodations in a former-barracks-turned-hostel on a hill above Fort Mason, and a one-day accelerator program for entrepreneurs the day before SOCAP.

At the conference, about 30 of the entrepreneurs were invited to promote their social enterprises at an afternoon pitch session. De
Clerck was one of the lucky participants. SOCAP was her first formal effort pitching Potential Energy to investors. She figures the company needs at least $500,000 to get her Uganda operations off the ground.

The morning of the session, De Clerck practiced in her bunk bed at the hostel, in a room shared with six others. She had considered a hotel room, but $400 a night could buy a lot of stoves. “It wasn’t ideal,” she says, “but I’m glad I got to pitch.”

De Clerck didn’t get any firm commitments from investors, but she made contacts she feels could prove helpful down the road.

That was more luck than Carver was having. “I’m just wandering around and feeling useless because I’m not meeting the right people,” he confides over New Belgium beers at a party for entrepreneurs hosted by the Blackstone Foundation. He says he wavered between “anxiety and indifference and wanting to go to Napa Valley and drink some wine.”

Impact Investing Proponents: No Longer Mainstream Rejects?

When Jones and Harden first hosted SOCAP in the midst of the 2008 financial crisis, their aim was to validate the idea that business could be a force for good and that well-meaning investors could simultaneously achieve both financial and social returns. At the time, explains Jones, professional investors had “two pockets, one for investing and one for giving.” They would profit from their investments, then give away money to solve the global problems that their investments helped to create. “We had to create a space between giving and investing,” he says.

As early investors and the social-capital movement gained traction, so did SOCAP — from 600 attendees in 2008 to the more than 2,500 people who came from more than 70 countries in 2016.

SOCAP Mission Brand Panel

From left: Kristin Richmond, of Revolution Foods, Eric Ryan of Olly and formerly of Method, and Richelieu Dennis of Sundial Brands discuss branding a company’s mission during a SOCAP panel.
Photo by Sumit Kohl, Sreel Photography

“We have always been a gathering of mainstream rejects and new-market opportunists, visionary capitalists and 21st century socialists,” blogs Jed Emerson, a longtime SOCAP attendee and impact-investing author and adviser.

Impact investing does have a proven, albeit short, track record for delivering social and financial returns. Many impact funds have outperformed traditional funds and have surpassed market-rate returns. To that end, Matthew Weatherley-White, managing director of the Caprock Group, suggested in his talk that mainstream options, such as 401(k) plans, should default to beneficial investments, and that investors should have to opt out of impact, rather than opt in. His talk prompted a flurry of Twitter activity around the hashtag #ESGOptOut.

The success of the movement has drawn unexpected new participants. Bain Capital, the private-equity firm co-founded by Mitt Romney, and Blackstone Charitable Foundation, the philanthropic arm of another huge private equity firm, were lead SOCAP sponsors in 2016. This invasion of Wall Street leviathans has caused hand-wringing and reflection among SOCAP veterans. Some wonder whether the conference is selling out. “It’s mainstreaming impact investing,” says Michelle Long, executive director of the Business Alliance for Local Living Economies (BALLE). “But there’s plenty of opportunity for greenwashing as well.”

Others see it as a natural progression. “The space is being professionalized,” says Fran Seegull, executive director of the U.S. Impact Investing Alliance, a project of the Ford Foundation and Omidyar Network. “That said, as the field mainstreams, it’s important for us to guard against impact dilution.”
Jones is taking it all in stride. “If you look at an ecosystem, the most vibrant but fragile layers are those an inch above and below flowing water,” he says. “The market is emerging at the top end and the low end. It’s emerging at the most fragile layer as well as the layer that says you have reached a level of abundance and mainstream.”

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He’s bullish on SOCAP, but also began producing smaller events focused on community-based investing, called “Neighborhood Economics,” over the past two years. A daylong Neighborhood Economics event held at Fort Mason prior to SOCAP drew nearly 250 people who paid $300 each to attend.
In 2017, Jones plans to expand with a national conference in Washington, D.C. SOCAP will continue the global conversation, while Neighborhood Economics will go deeper on local issues. “Neighborhood Economics,” he says, “could be bigger than SOCAP in a few years.”

The Real Deal Flow at SOCAP

The truth is, SOCAP is a subjective endeavor. But if it brings community-oriented investment and inclusive entrepreneurship from the fringes into the mainstream, that has to be a good thing. “We all have a place in the spectrum,” concludes BALLE’s Long, “so we need this, too.”
For now, SOCAP remains a vibrant mashup, a place for chance encounters with — to use of one Jones’ terms — “valuable strangers.”

Sandra Kwak, CEO and founder of 10Power, a renewable-energy company working in Haiti, got in line for free ice cream at a Ben & Jerry’s truck. Taking a seat at a table, she and her tablemates discovered they all worked in international energy. Among them was a woman with Akon Lighting Africa who expressed interest in Haiti. Kwak offered to show her around. The two are discussing possible collaborations.

“It was a magical moment over ice cream,” says Kwak.

Birky, who has been searching for sustainable materials for his apparel line, had a similar moment when a woman chased after him to tell him about the fiber she is developing for textiles from a type of nettle that grows in the Himalayas.

Deals do get done at SOCAP. Funding flooded in for a new initiative dubbed the Runway Project, which aims to provide early-stage capital to African-American entrepreneurs. But for most attendees, the real payoff was the chance to connect with peers, make new friends and cultivate valuable contacts. Carver of Silverleaf Academy made it to wine country and invited a Swedish entrepreneur to join him. And while Kwak didn’t leave with the large check she was hoping for, she did leave with a stack of business cards and a number of new friends. “I met so many incredibly inspiring entrepreneurs,” she says.

This article originally appeared in the Winter 2016/2017 issue of B Magazine as part of the issue’s Impact Investing Special Section. For more, read the issue’s history of impact investing, which includes links to the rest of that special section’s coverage.

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