An Investor Co-op?

A

In the world of social responsibility, co-ops are a corporate form that stands out as an functioning design. Consumer co-ops are a well-worn form for grocery stores (PCC and a dozen others here in Washington State), for retailers (see the multi-billion dollar REI), producers (see Organic Valley and Equal Exchange), and savings (see any credit union).

Expanding that cooperative ethos across the table to impact investors, are there any investor co-ops?

What would such a structure look like? What benefits would it have over individual investors, foundation PRIs, and impact funds?

Looking back at the consumer co-ops, the cooperation is amongst buyers, to band together for better prices from vendors. For producer co-ops, the cooperation is in capital equipment and sales. For savings, it’s an ability to pool capital to make loans and earn a market-rate return on those savings. For impact investors, the cooperation needed is for deal flow and aggregation of capital, to return better returns to the investors.

Angel groups fit that definition. They cooperate to produce better deal flow, to pool resources for due diligence, and to aggregate funds. However, they do all this as dues paying individuals, not co-owners of an organization. The analogy is Costco vs. your local food co-op. Anyone can pay to be a “member” at Costco, but that doesn’t make you an owner of the business. It doesn’t give you the same say over management as being a member of REI or PCC or a vote for the board like at your local credit union.

For venture capitalists, the most common pattern is to invest into syndicates, with the lead VC often introducing entrepreneurs to other VCs to complete the syndicate. This again somewhat fits the definition, but until one VC steps forward as a lead, or until they pass on a deal (e.g. when it’s not a fit for their focus), they don’t share their deal flow with their competitors.

In my continuing journey from traditional/tech investing to impact investing, I’m looking for embedded assumptions that need to be brought forth and reviewed, avoiding impact investing from becoming a blind copy of past traditions. Given the ethos of impact first, fiscal return second, it seems like we should be sharing deal flow between funds, to spread the impact as well as spreading the risk and return.

More successful funds will beget more impact investing, enticing more impactful entrepreneurs, and down the chain to more impact.

If you run an impact investment fund or impact-oriented accelerator, let’s talk about create the first impact investing co-op. Or if you think this a mad idea, add your comments below.

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