NOT YOUR TYPICAL INVESTOR
Leveraging OPM via P3s
Yes, we use very strong advocate / activist type language on our home page bolstered by references to SROI, community organizing and more; however we are in fact experienced investors as well. Forgive us for being long-winded but we believe that the best way to truly understand our firm is to understand our view of the investment and social impact ecosystems as a whole.
Leveraging OPM (Other People's Money") via P3s (Public-Private Partnerships) captures the core strategy behind our investment thesis. The majority of other investment firms raise capital from High Net Worth Individuals, Institutions, etc (also known as Limited Partners or LPs) and then take responsibility for achieving an expected rate of return over a 7-10 years period. The discriminatory actions, biases and usurious investment terms that many of these investment firms have come to be known by are all driven by their fiduciary obligation to make money for their LPs. For example, within the arena of venture capital, we believe that all the very public conversations about less than 1% of investment capital going to BIPOC entrepreneurs could be immediately solved if those LPs demanded that their money be invested equitably. Instead, under-served entrepreneurs feel forced to beg and plead for a fair shot while those laments fall on deaf and disingenuous ears. Regardless, none of this relates to the SoTech Ventures investment thesis, however it does explain why we aren't interested in running with that particular crowd of investors.
SoTech Ventures did not raise a fund from LPs, therefore we do not answer to anyone but ourselves. We can invest whenever, however and in whomever we choose. As noble as this sounds, there is a drastic down-side to not raising a fund from LPs; we aren't flush with cash. This is a dilemma that we believe many of our well-intention peers have faced at one point or another. They speak out against "the system" while also asking the system to back them so that they can invest in a way that the system clearly doesn't support. Meanwhile, the alternative is to be like us, speak out against the system, refuse to "bend the knee" to the system and then remain an unfunded outcast as a result. So what do we do? Well, we felt it was only fair that we do for ourselves what most investors demand their portfolio companies do; bootstrap and innovate until you figure something out.
So... how does an investment firm that can't get LPs invest?
Well, we started by getting rid of the need for LPs altogether. First, we committed to investing our own capital little by little (emphasis on little). We were not wealthy, we had no inheritances, in fact, many of us began investing while we were unemployed. $100 in stocks here, $50 in a crowd=funding campaign there, etc, etc for years. Simultaneously, we also began piloting our non-LP investment model. We worked with startups, real estate developers and anyone who would give us a chance and leveraged our expertise in philanthropic capital markets (also known as grants; the closest thing to free money there is) to secure equity in various projects in exchange for our ability to help those projects get grant dollars. Similar to investment bankers on Wall Street, we negotiated small allocations of equity or revenue-shares in projects if and only if we successfully raised grant dollars for the project itself. More often than not, this meant we put in sweat equity. We worked for free on the hope and prayer that these projects would produce.
Over time, the $100 investments in stock added up, the small ownership interests in projects added up, the personal investments in real estate added up, etc. Now we have a legitimate portfolio.