· 7 min read
When Sebastian Klein announced on Linkedin that his startup—Blinkist, a popular app for summaries of books and podcasts—was going to be sold, his DMs were quickly flooded with offers from wealth managers, tax advisors, and private jet charters.
When you go through a major liquidity event like this, you move into a new space in society, and the provisioners of that realm are all too eager to equip you with the luxuries that only denizens of those strata can afford.
In the world of entrepreneurship, companies like Sebastian’s that manage to go public or be acquired are seen as success stories. Usually, that’s where the story ends. But where does that leave passionate founders and early employees who then find themselves with a very concrete opportunity to put their money where their values are?
What if they don’t want to keep compounding returns on an already un-spendable fortune, avoid taxes, or send their carbon footprints into the stratosphere by jetting around in private planes (not to mention rockets…)? What if they want to devote their time and capital to addressing global challenges and align their investments with their values?
This is a dilemma faced by a growing number of entrepreneurs, and while it can feel daunting, people like Sebastian are not alone.
Moving towards impact
Another such leader is Raffi Mardirosian, an early employee of Ouster who was catapulted into the ‘high net-worth’ category when the company went public. Raffi had always cared about topics like community development and climate action, and after their IPO, he wanted to align his investments with the purpose that already drove him. This led him to Accelerate, a program specifically designed to support people like him in understanding their options for impact following a liquidity event.
“It became clear to me that the most consequential impact I could have would be the combination of my entrepreneurial skills with my capital,” Raffi said, reflecting on his experience of the program. “To form new ventures that existing capital markets would not likely fund, such as investment energy enterprises in frontier markets or local journalism.” He went on to do just that, allocating most of his capital towards ventures he considers “catalytic” and founding Izuba Energy, a company focused on developing renewable energy projects in Africa. This puts him among the growing group of people referred to as ‘impact investors’: wealth holders who are seeking not only financial returns when they invest, but also some degree of social impact.
Forging a path
Two decades ago, this territory was even more uncharted. When Charly Kleissner left the Silicon Valley company Ariba after a “hugely successful” IPO and before the crash of 2001, ‘impact investing’ had yet to establish itself.
Charly and his wife Lisa remember the uncertain first steps of their journey well. Once they’d sold their shares, they were full of questions, the central one being: “What are we going to do with the wealth that came our way?”.
“At that point it was still difficult to find products that went beyond negative screening,” Charly recalls, referring to the practice of excluding companies or industries from an investment portfolio, often applied to sectors like oil and gas, tobacco, or arms, “and it was nearly impossible to find intermediaries with the know-how to help us on our journey.”
Entrepreneurial as they are, Charly and Lisa began to lead the way. They started attending all the events they could find that seemed related and talking to everyone that seemed interested in similar things. They began investing directly in social enterprises they believed in, exploring microfinance mechanisms, and experimenting with negative and positive screens. They launched a startup accelerator for impact entrepreneurs in India and began supporting social entrepreneurs not only with capital, but also with their business expertise and connections.
By 2006 they had moved from Silicon Valley to Big Sur and were officially committed to using 100% of their portfolio to foster positive impact. They helped pioneer a “total portfolio strategy” in which they sought to generate “impact returns” across all asset classes, from equities and commodities to venture capital and real estate. And, they shared their notes. They exchanged with others who were also experimenting with impact portfolios and lay the groundwork for what would become Toniic, a global impact investing network that has since become ground zero for private investors in the space.
In the end, it took the Kleissners seven years to move all of their assets into impact. Since then, the impact niche has grown into a significant segment of the investing market, thanks in part to initiatives like Toniic and Accelerate. Charly is happy to report that now, investors following in their footsteps “can move to 100% impact much faster.”
More than just money
For Elisabete Miranda, positive impact was always front and center. She built a successful business offering culturally relevant translation services in the healthcare industry and grew it from a two-person enterprise to a thriving multi-million-dollar company. Growing up in rural Brazil, investment and wealth management were “not part of the reality” for those in her community, but as her business took off, they increasingly became part of her world.
When her daughter Naiana attended a sustainable finance program in Zurich, (Impact Investing for the Next Generation, run by the Center for Sustainable Finance and Private Wealth, a research and training institution based at the University of Zurich and also one of the key organizations behind Accelerate) she took a closer look at Elisabete’s portfolio, which at the time was managed by a leading U.S. bank. “Naiana was the one who called my attention to the fact that one of my investments was in tobacco,” Elisabete recalls. She was shocked. “It was at that moment that I realized I had to apply my ‘sustainable and inclusive’ life philosophy to my finances. I needed to take control of where my money goes.”
Elisabete sprang into action, immediately contacting her bank and instructing them to divest her tobacco shares. This led to important conversations with her wealth management team about her commitment to use her funds to support “positive social and environmental transformations”, and it marked the start of her impact investing journey.
Now, she and her family have adopted a “highly deliberate approach” both to considering potential investments and to choosing partners and suppliers for her business.
“Our commitment to reducing the wealth gap and providing opportunities to underserved communities has become a matter of utmost importance to us,” Elisabete says. “When we invest in diverse communities, they will reinvest locally and the impact it creates is the decrease of wealth gap.”
With this in mind, she and Naiana have also started their own impact investing firm with a focus on funding women, environmental solutions, and people from marginalized backgrounds. A long-time member of many networks dedicated to fostering diversity and inclusion, Elisabete sees giving back to these communities as a key part of her role, and as a unique facet of her personal impact strategy.
“I had many doors opened for me and now it is my duty to share what I learned, so that the doors stay open for as many diverse entrepreneurs as possible to follow in these footsteps.”
Doing what you can, with what you have, from where you are
Even before the Blinkist deal, Sebastian had set up his own investment holding, Karma Capital, to engage in impact investing and back enterprises that he saw doing good things. After the sale, he chose to move over 90% of his assets to Karma Capital and restructure it into a foundation so that all of the money could be used for funding climate action and environmental protection.
“Excessive wealth is a problem,” explained Sebastian. “It's a symptom of a system that desperately needs an update. Since I'm concerned that larger political changes could still take a while, I wanted to show that we can take some things into our own hands, at least to a certain extent.”
The Center for Sustainable Finance and Private Wealth (CSP) works at the intersection of research and training, bridging scientists, wealth owners, and investment professionals in order to generate knowledge and to mobilize capital toward impact. This article has been edited by CSP Team members Anastasia Linn and Sara Rodriguez. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
