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Makisha Boothe, founder of Sistahbiz Global Network, helps new entrepreneurs at the Sistahbiz Spring 2020 Bootcamp. (Provided by Sistahbiz Global Network)

Back in 2014, the Colorado Health Foundation made an unusual decision. The philanthropic organization, known for helping nonprofits, put its money into a for-profit startup, myStrength, a behavioral health app.

It was neither a grant nor a donation. And it wasn’t quite venture capital, where multimillion-dollar investments often aim for tenfold returns. Technically, it was a program-related investment — an impact investment — that was called “groundbreaking” at the time and the foundation’s first.

For Denver-based myStrength, the low-interest $1.5 million loan was enough to help it expand beyond mental-health tools and reach deeper into underserved populations in Colorado. And while the founders had explored venture capital, the impact investment led to direct connections with the local health community.

“What we really liked about the impact investing is that it was a very clear alignment to mission,” said Matt Sopcich, who bootstrapped the early days of the company with co-founder Scott Cousino. “It also provided favorable terms for the company.”    

Six years later, the Colorado Health Foundation has made its money back and then some — at a 43.2% return. It’s used the proceeds to reinvest in other companies in Colorado and continues to look for investments with community impact. That’s a better outcome than many venture-backed businesses, where data shows the majority fail to deliver any return. 

Impact investing has been around for decades as investors sought socially conscious companies and rid their portfolios of those dabbling in tobacco, alcohol and even fast food. The niche is seeing new momentum from people concerned about environmental, social and governance (ESG) issues. They want more than a financial return. And impact investing is attracting younger investors as well as foundations like CHF and philanthropists previously focused on charitable giving. 

Sistahbiz Global Network
At the Sistahbiz Global Network Spring 2020 Bootcamp, Black female entrepreneurs are offered training on how to scale their business. The Denver company, founded by Makisha Boothe, has had a hard time attracting investors and obtaining capital. (Provided by Sistahbiz Global Network)

Just last week, the Women’s Foundation of Colorado named two recipients for its first impact investing giving circle. The program was more than two years in the making, prompted by a report from Lilly Family School of Philanthropy on how women and men give differently — and how that affects female founders. The circle of women wanted to help female founders and accepted 116 applicants who applied the week between Christmas and New Year’s. The circle chose two: Sistahbiz Global Network, which helps Black female entrepreneurs, and The Village Institute, which helps women refugees.

Makisha Boothe, founder of Sistahbiz Global Network. (Handout)

Makisha Boothe, whose Sistahbiz offers free and low-cost training camps for Black female founders, said she is still in shock that she was picked and said she’s been turned down by numerous banks and other foundations. “I’ve definitely been underfunded. The market I serve is an underserved market. We’re not as sexy to funders.” 

She’s grateful for the low-interest loan and plans to put it into clinics for coaching and connecting to accountants, marketers and other specialists. She’s also working on a paid membership program. The money generated will provide ongoing revenue for the nonprofit.

The Women’s Foundation approached impact investing differently. The 37 participants donated $2,000 each. That allowed women who aren’t accredited investors to join and learn more about impact investing. No one will get their $2,000 back. But when the loans are repaid with interest, the money goes back into the pot for reinvestment by the giving circle. 

It’s just a different way of thinking about how to have impact with money you were going to donate anyway, said Colleen LaFontaine, the foundation’s director of development. 

Even if the women’s circle gets back only half of the money, “we’ve doubled our opportunity,” LaFontaine said. “It’s about impact first, return second.”

The Valley of Death

Negative return is a term used by Stephanie Gripne to make her point. Gripne started the nonprofit Impact Finance Center in Denver in 2012 to educate potential investors about impact investing. She often talks to philanthropists who are used to charitable giving. 

When they give money away, they get a 100% negative return, she said. 

But if they split the money between a mix of grants and investments into social-good and sustainable companies, they stand to break even and earn a profit that can be reinvested.

Stephanie L. Gripne, founder and CEO of Impact Finance Center, CO Impact Days and Impact Investing Institute. (Handout)

That’s difficult for philanthropists to wrap their head around, Gripne said. While training donors participating in the Women Foundation’s giving circle, Gripne mentioned the for-profit, female-founded Silvernest, which helps older adults rent out empty rooms in their homes. 

“I said (Silvernest is) raising $1.3 million. How many of you would invest $25,000 right now?’” she asked. “And they said, ‘Stephanie, we’re donors. We’re not investors.’ And I said, ‘OK, well can we pretend Silvernest is a nonprofit? It’s women-led, aging, intergenerational connectivity, affordable housing, it’s impact. How many of you would donate $25,000, and they raised their hands.”

Many fast-growing startups seek venture capital, even if terms seem restrictive and owners must give up equity. Venture capital’s reputation exists for a reason. It’s a risky investment. 

According to CBInsights’ analysis of 1,100 companies backed by venture capital from 2008 and 2010, 67% had failed or provided lackluster returns by 2018. That means venture capitalists counted on three out of every 10 to survive to make the entire fund worthwhile.

The CO Impact Days event held in Denver March 2019 attracted philanthropists, investors and curious folks interested in impact investing. (Handout)

“Venture capital is in the business of finding outlier performance and outlier returns,” said Natty Zola, a venture capitalist at Matchstick Ventures in Boulder. “I don’t believe that you have to have a burn-out, crazy culture to build a great company and generate great returns. I would personally separate those two. But frankly, all good VCs are looking to maximize return.”

He said there are changes going on in the venture ecosystem, such as some firms offering revenue-backed financing so founders can retain more equity and pay back investors as revenue grows. There’s also a growing effort to address the industry’s lack of diversity and inclusion, which Zola added, “has probably contributed to a lot of our societal challenges.”

But Gripne’s theory is that if donors and investors approached beneficial companies as keepers, instead of expecting just one or two to hit it big, that could prevent what she calls venture capital’s Valley of Death, where growth expectations are so high, most startups can’t — and don’t — deliver. They fail in the Valley of Death. Instead of a hockey-stick growth curve, Gripne pushes for a steady growth curve over time so founders aren’t running ragged to meet that 10X return.

She recalls listening to a stressed-out Colorado founder lamenting that her employees didn’t want to work nights and weekends. But that was how the female founder believed she’d reach that elusive 10X return for investors.

“So I said, ‘Tell me the end of the story,’” Gripne said. “You push culture to the Nth degree, you’re stressed out, you’re at 8X, your staff is being pushed. What happens when you win? You sell the company for $200 million. How much does the founder get? $1 million to $5 million on a $200 million sale. So, how much do the workers get? Zero to $500,000. What about the local investors, $20 million?

“So this company’s going to leave Colorado. You don’t want to run it anymore because you don’t own it. And $180 million of $200 million is going to leave Colorado, and everybody’s kind of left feeling like they got stepped on.”

The returns of impact investing

An estimated $502 billion is being managed in impact investments around the globe with over 50% of the active organizations making their first investment in the past decade, according to the Global Impact Investing Network.

They’re probably growing in popularity because they’re still expected to provide a financial return. But there’s been a perception that they have lower returns than traditional investments. So, Morgan Stanley, which formed its sustainable finance group in 2009, studied the performance of 10,723 mutual funds between 2004 and 2018 

In its 2019 Sustainable Reality report, Morgan Stanley’s Institute for Sustainable Investing found no significant difference between returns of sustainable funds versus traditional funds. In fact, sustainable funds had a 20% lower market risk.

“At the end of the day, clients are financially rational and sustainable investing as investments need to hold up with anything else that somebody might put in their portfolio,” said Matt Slovik, head of Morgan Stanley’s Global Sustainable Finance Group. “I think that perception is still out there but an increasing body of evidence, whether it’s from Morgan Stanley’s Institute for Sustainable Investing, Harvard or elsewhere, is continuing to disprove that fear.”

Slovik said there’s definitely more interest from younger investors and investors at all income levels. That’s led to companies becoming more mindful about their own social practices and also more investors putting their money where their hearts are. Morgan Stanley had set a  five-year goal to have $10 billion in impact assets under management by 2018. That was, apparently, too low. 

“We blew through that and announced, instead of $10 billion, that we crossed the $25 billion threshold,” he said. “And it has continued to continue to grow from there.”

Social movements have affected the venture capital industry too, such as the outcry a few years ago about the few female venture capitalists and too little funding for female-led companies. Change is slow but some firms are committed to doing better. 

At Matchstick, for example, about a quarter of its companies are led by women, including Soona’s Liz Giorgi, who created the Candor Clause to promote gender equity. Matchstick took steps this month to support Black founders by setting goals. By June 2021, it will develop five more relationships with groups to increase the number of Black founders in its pipeline, add an adviser to its board who is Black, help 30% of its portfolio companies do the same and fast track Black candidates into open jobs. It plans to report its progress quarterly.

“We hadn’t seen many funds do more than just a statement of support, which is obviously a great start,” Zola said. “We thought maybe we could be leaders in showing that ‘Hey, it’s not that hard to make changes.’”

More: $1 billion has flowed from venture investors to Front Range companies this year

How to invest in impact

Financial services firm Morningstar introduced its Sustainability Rating in 2016 to help investors evaluate a company’s social, environmental or other impact. Morgan Stanley has its own tools available for investors of all income levels. Others are being developed. 

Over in Highlands Ranch, another startup CoPeace created a holding company to acquire interest in companies making a positive impact on the environment, social justice and other causes. 

As a certified B Corp., CoPeace must do something beneficial for the world or lose its B Corp status. It’s launching a crowdfunding campaign next month to raise $1 million for impact investments, and because it’s crowdfunding, this opens up access to non-accredited investors. 

“We won’t invest in a company if we don’t see how it makes the world a better place,” said founder Craig Jonas, who said his past investments in traditional firms “never really felt it was feeding my soul.” 

More: Colorado’s newest billion-dollar B Corp is part of a movement to make a social impact — and profits

Another method is Gripne’s. She suggests assigning a value of potential return to everything — from 10X to negative one. If philanthropists followed this full-spectrum approach, then more money would be steered to social-minded businesses aligned with an investor’s personal beliefs. It provides a financial return, helps good companies and makes an impact, she said. 

“We should have a spectrum of capital, but we have either philanthropy or your 10X. Why not have the full spectrum of capital and look at the impact on everything?” Gripne said. “That way, if we organize the money in full-spectrum clubs versus angel clubs, then an impact company can go, ‘Hey, we’re hugely impactful and right now we need negative (50%) money. We’re going to save the world. And we’re going to share our company with our workers.’” 

She points to myStrength as one of impact investing’s local success stories.

Ben L. Bynum, Portfolio Director of Program Related Investments at The Colorado Health Foundation. (Handout)

As myStrength was paying back its loan a few years ago, the Colorado Health Foundation restructured the loan to get stock instead of cash payments, said Dr. Ben L. Bynum, portfolio director for the foundation’s program related investments. 

“In terms of impact, we saw myStrength go from one to two engagements with our local community health providers to serving over half a dozen. And that’s both in metro areas and in rural areas,” said Bynum, who came aboard after the myStrength investment. “From an impact perspective, we think we returned miles over what we initially invested.”

Last year, myStrength was acquired for $30.1 million by Livongo, a Mountain View, California, company that helps people with chronic conditions, according to Livongo’s regulatory filings. Livongo kept myStrength’s base in Colorado and is expanding in Denver.

The $1.5 million loan turned into a return of $2.1 million. And CHF continues to invest in program-related investments. Since Bynum joined three years ago, CHF has made 30 investments valued at $55 million. There have been no defaults and the foundation expects to be paid back.

“When myStrength was eventually acquired by Livongo at an increased original stock purchase price, that was something that allowed us to capture some additional dollars to put back into the community,” Bynum said.

IndieDwell, a modular housing manufacturer, plans to open a 100,000-square-foot factory in Pueblo in July 2020. The company plans to build affordable homes that are sustainable and energy efficient. Pictured is Model 9, which was installed in Richmond, Va. (Provided by indieDwell)

Some of those returns likely landed in indieDwell Colorado, which is opening a 100,000-square-foot modular-home factory in Pueblo next week. The Boise, Idaho, company received a $1.5 million loan from CHF to set up the Pueblo operation. It expects to hire 180 to 200 people and pay full benefits and livable wages. The factory will produce steel-framed, sustainably built modular homes that are net-zero energy ready. A two-bedroom house, which can be built in 13 days, is priced at $85,000, excluding land and site costs.

“The Colorado Health Foundation was critical to getting indieDwell to Colorado,” said Bruce Hoyt, board chair of indieDwell Colorado, who left his job at managing impact investing at Gary Community Foundation, another indieDwell investor, to guide the new venture. “They got them to commit to coming to Colorado and bring that fantastic impact. Pueblo may be the headquarters, but the impact is going to be statewide in terms of the affordable housing that will be created around the state.” 

At the indieDwell factory in Boise, Idaho, workers complete an affordable housing module. The company is expanding to Pueblo in July 2020 and plans to hire 180-200 workers and build affordable, energy-efficient homes. (Provided by indieDwell)

IndieDwell, a certified B Corp., is looking to raise another $12 million. With its growth trajectory, the company could very well attract traditional venture capital. But as a company with a triple-bottom line that wants to do good by its employees, customers and investors, it won’t accept just any funding.

“We’ve built a compelling financial story. Our pipeline has grown to over half a billion dollars of affordable housing projects. There are 10 cities that are actively in dialogue with us to please open factories in their communities,” Hoyt said. “We have a story that could be a pure venture capital story but it’s important, again, for us that we have that mission alignment. And the good news is, with the rapid development of the impact investing industry, there are a substantial number of venture capital and private equity companies that are all impact companies.”

Tamara writes about businesses, technology and the local economy for The Colorado Sun. She also writes the "What's Working" column, available as a free newsletter at Contact her at, or or on LinkedIn at in/gadgetress/