The driving force behind our investment approach is simple: We believe that opportunities to create an inclusive economy come in all shapes and sizes; therefore a single investment vehicle is not sufficient. We invest across a spectrum of asset classes, ranging from program-related investments to market-rate investments.
Our investment approach leads to a blended portfolio that is maximized for impact and weighted for return. As simple as that may read, the execution of making aligned investments can be difficult. The goal of this post is to simply break down our approach into “why” and “how” at each step.
Our investment approach leads to a blended portfolio that is maximized for impact and weighted for return.
The mission of Access Ventures is to see inclusive economies emerge where individuals and communities can flourish. The Rockefeller Foundation defines an inclusive economy as “opportunities for more broadly shared prosperity, especially for those facing the greatest barriers to advancing their well-being.”
Building inclusive economies is an aspirational goal, as most are, and we view our role to deploy programs and investments where we believe our mission is advanced. In order to expand opportunities for those facing the greatest barriers, we must be open to investment options of all kinds. For example, most people shy away from investments in restaurants yet we have two in our portfolio. Why? Because they have a mission to help people with severe barriers to employment in a sustainable way.
In an effort to be open to opportunities of all shapes and sizes but also go deeper within the problem areas we seek to impact, we constructed a portfolio with five areas of focus:
This narrowing of focus was essential for us to pursue impact without stretching ourselves across too many verticals. Additionally, these areas allow us to build a specialized experience that can help our portfolio companies, while also allowing for a portfolio that isn’t homogenous.
Just as opportunities to create an inclusive economy may look different, so does the method in which you may finance them. We invest across a spectrum of asset classes, ranging from program-related investments to market-rate investments. Below is an illustration of the spectrum of asset classes in which we invest:
The type of financing on the left-hand side are considered program-related investments. These investments have the primary objective of helping us achieve program goals of our 501(c)3, with a financial return not being a significant consideration in the process of approval.
One example of a program investment is a grant to Kiva in order to bring their micro-lending platform to communities throughout Louisville, Kentucky and Columbus, Ohio. This partnership allowed us to grow small-business access to capital, which is a distinct program of Access Ventures and was made in the form of a grant.
Another example of a program investment would be our Growth Loan, specifically designed to address an access gap for small businesses in our community. This is similar to our work with Kiva in helping us accomplish a program goal, however, this investment generates a small financial return as we charge below-market interest rates to borrowers.
The type of financing on the right-hand side of the spectrum are considered market-rate investments. As the name implies, we seek returns that match the risk associated with each asset class. One difference between our firm and some others is that we do not make any market-rate investments that are not first inspected for mission fit.
With our direct investments, this is fairly straightforward. However, with public investments, it can get tricky which is why we have asset managers such as Collaboration Capital and Ethic, that help maintain our mission focus amongst opportunities in public debt and equities.
An example of a market rate investment directly into a portfolio company would be Bright Funds, which is part of a Technology for Social Good area of focus. Bright Funds, shown above, is a single platform that unlocks generosity and funnels it to some of the most impactful social sector providers in the world, each seeking to improve a cause excluded by the public and private sectors.
When we combine our work across numerous areas of focus and the recognition that there is no single way to invest into opportunities to create inclusive economies, we end up with a blended portfolio of industries, companies, assets, and avenues for return.
We invest across a spectrum of asset classes.
The blended portfolio leads to maximum impact in our areas of focus since all of our investments are made with the same societal end goal in mind. The challenge is to balance our portfolio for financial return.
For our work to continue we must see a financial return from our market-rate investments. Therefore, we have chosen to invest in high-risk, high-return vehicles such as venture and private equity. One reason we have chosen these type of opportunities is that it allows for the values of Access Ventures to inform the values of our portfolio companies, thus creating cascading impact.
Another reason we have chosen these specific asset classes for our investment approach is that, if successful, we are able to generate higher returns on a lower amount of capital invested than a simple public portfolio would allow. Why is this important? Because it allows our fund to allocate more capital to program-related investments, most of which need high-risk capital in order to see the change in the world they desire.
Every investment we make into a business or community must be something we are proud of, something we ourselves support, and something people will love. If you are involved with an organization, initiative, or idea that you believe fits in our areas of focus then we’d love to meet you and learn more!
Written by TJ Abood @aboodtj10