Investing in Social Entrepreneurs

Jay Nwachu is in the ideas business.

Over the past three years, his Bal­ti­more-based non­prof­it, Ignite Cap­i­tal, has launched sev­er­al busi­ness­es, including:

• a mak­er of lux­u­ry com­fort shoes;
• a high-qual­i­ty child care operation;
• a cler­gy and choir appar­el com­pa­ny; and
• cre­ators of afford­able home­own­er­ship oppor­tu­ni­ties from con­vert­ed aban­doned properties.

Nwachu invests in entre­pre­neurs of col­or with ideas that aim to improve lives and com­mu­ni­ties but who are light on cash. Enter­pris­es in Ignite Capital’s port­fo­lio typ­i­cal­ly are unable to obtain tra­di­tion­al bank loans or ven­ture cap­i­tal fund­ing. The non­prof­it fills in the gap with an invest­ment pool sup­port­ed by the Annie E. Casey Foundation’s social invest­ments — often referred to as impact investing.

Build­ing Wealth and Social Impact

The Foundation’s invest­ment in Ignite Cap­i­tal is cat­e­go­rized as a pro­gram-relat­ed invest­ment (PRI). These types of impact invest­ments gen­er­al­ly last from five to 10 years at inter­est rates well below the mar­ket. Casey con­sid­ers sev­er­al cri­te­ria for invest­ing in funds, including:

• advance­ment of the Foundation’s mis­sion to strength­en fam­i­lies, build stronger com­mu­ni­ties or ensure access to eco­nom­ic oppor­tu­ni­ty in the Unit­ed States;
• improve­ment of the lives of chil­dren and fam­i­lies in a way that pro­motes improved edu­ca­tion­al, eco­nom­ic and social well-being and health outcomes;
• demon­stra­tion of strong man­age­ment, finan­cial strength and fea­si­bil­i­ty of the pro­posed project or strategy;
• demon­stra­tion of poten­tial influ­ence, inno­va­tion and repli­ca­tion; and
• oper­a­tions in areas of geo­graph­ic sig­nif­i­cance to the Foundation.

Casey’s $237 mil­lion impact invest­ing pro­gram con­sists of 42 invest­ments, includ­ing com­mu­ni­ty and eco­nom­ic devel­op­ment at Atlanta’s Pitts­burgh Yards. Last year, the Foun­da­tion com­plet­ed its com­mit­ment to the East Bal­ti­more Devel­op­ment Inc., which was its largest-ever invest­ment. In addi­tion to com­mu­ni­ty and eco­nom­ic devel­op­ment, the Foundation’s invest­ment pro­gram pro­motes qual­i­ty jobs, afford­able hous­ing and finan­cial inclusion.

“Impact invest­ing is unique and flex­i­ble,” says Tra­cy Kar­tye, direc­tor of the Foundation’s Social Invest­ments team. ​“Social enter­pris­es, busi­ness­es that have a social pur­pose as part of their mis­sion, can be a viable means to build­ing wealth for own­ers and a source for local jobs in addi­tion to their social impact. Invest­ing in Ignite Cap­i­tal enables the Foun­da­tion to con­tribute to build­ing a more robust entre­pre­neur­ial ecosys­tem in Baltimore.”

Each busi­ness in Ignite Capital’s port­fo­lio goes through an accel­er­a­tor pro­gram oper­at­ed by Inno­va­tion Works, its par­ent organization.

Inno­va­tion Works was found­ed by Frank Knott and local Jesuit lead­ers in Bal­ti­more in 2017. The orga­ni­za­tion want­ed to invest in his­tor­i­cal­ly dis­in­vest­ed com­mu­ni­ties. Its mis­sion is to reduce the city’s neigh­bor­hood and racial wealth divide by sup­port­ing lead­ers of social enter­pris­es who work to build eco­nom­ic sus­tain­abil­i­ty in com­mu­ni­ties. Busi­ness lead­ers devel­op their ideas with Inno­va­tion Works’ men­tors assigned to help them nav­i­gate obsta­cles, then they advance to the next step. With Casey’s $500,000 invest­ment, Ignite Cap­i­tal finances the busi­ness­es that are ready to launch.

Advanc­ing Mis­sion-Based Entrepreneurism

Nwachu serves as pres­i­dent and CEO of both Ignite Cap­i­tal and Inno­va­tion Works. He says, ​“Bal­ti­more has seen a sharp increase in mis­sion-mind­ed entre­pre­neurism. Years ago, I watched peo­ple start things and were unable to fin­ish.” Accel­er­a­tor pro­grams like Inno­va­tion Works help social entre­pre­neurs become invest­ment-ready so they can devel­op their mod­els and build trust.

He brought a career in tal­ent acqui­si­tion and man­age­ment to Inno­va­tion Works. The Lagos, Nige­ria, native’s first social ven­ture was an orga­ni­za­tion sup­port­ing social enter­pris­es on the African con­ti­nent. He part­nered with his wife on the project.

Nwachu’s first social enter­prise invest­ment at Ignite Cap­i­tal was Par­i­ty Homes, a res­i­den­tial real estate invest­ment orga­ni­za­tion in West Baltimore’s Harlem Park head­ed by Bree Jones, a young Black woman who brought an idea for neigh­bor­hood revi­tal­iza­tion from New Rochelle, New York. Nwachu said Jones had an inno­v­a­tive idea for a social enter­prise but was unable to get fund­ing and the net­work of resources she needed.

At Inno­va­tion Works, she was matched with for­mer Bal­ti­more Coun­ty Exec­u­tive Jim Smith as her men­tor. She received fund­ing from Ignite Cap­i­tal and is now on a path to ren­o­vat­ing 96 vacant prop­er­ties in a con­tigu­ous 10-block area of Harlem Park.

Nwachu said a high­er goal of Ignite Cap­i­tal is to help social enter­pris­es under­stand and ulti­mate­ly access the wide array of cap­i­tal resources, includ­ing banks, ven­ture cap­i­tal Com­mu­ni­ty Devel­op­ment Finan­cial Insti­tu­tions and microlending.

“We are here to answer the ques­tion of how to put your enter­prise in a posi­tion to attract cap­i­tal in a num­ber of ways — and not just from us,” Nwachu says. ​“Black social entre­pre­neurs need invest­ment from us to get things going and to get to the next lev­el as we work toward our ulti­mate goal of reduc­ing the racial wealth gap in Baltimore.”

Learn More About the Racial Wealth Gap and How to Close It