Flatiron Launches Fund, Foundation –

NEW YORK – Flatiron Partners in early April launched the Flatiron Future Fund, with the goal of encouraging social entrepreneurship. At the same time, it also launched a separate charitable foundation, the Flatiron Foundation, with the same goal, said Cathy Clark, the managing director of both the fund and the foundation.

Flatiron’s three partners put up a total of $5 million for the fund and the foundation, but it has not yet been determined how the capital will be divided between the two. A closing date for the fund has not been set, nor does it have a target size, she added. The size of the fund will ultimately depend on the amount of money received from outside investments, she said, adding the size of the foundation will also depend on outside contributions.

Flatiron focuses exclusively on early-to-mid stage Internet investments. The firm is an affiliate of Chase Capital Partners, which provides all of the funding for Flatiron’s investments.

The specific goal of both the new fund and the new foundation is to prepare children for the digital economy, encourage entrepreneurship among women and minorities and to help create a new social awareness among entrepreneurs. Despite Flatiron’s exclusive Internet focus, Clark said the new fund would invest in any business at any stage that matches with the vehicle’s social mission. Likewise, the foundation will make grants to non-profits it believes are working to further these goals. “On the fund side, this could mean investing in an educational Web company, while from the foundation’s perspective, this could mean investing in a non-profit that provides Internet/Web training programs,” Clark said.

Average fund investments will range between $500,000 to $1 million at all stages of development, but it remains unclear how large the foundation’s grants would be. Most of the deal flow will be weighted slightly toward New York, the firm’s home base. Clark joined Flatiron in early April from the Markle Foundation, a non-profit organization that promotes the development of communications industries to run the fund and foundation. She decided to create both the fund and the foundation, rather than simply having one vehicle. “I wanted to get entrepreneurs to address social problems from a capital markets perspective, but without the foundation we would have been isolated from the non-profit sector and the people in that sector who have experience with trying to solve some of these problems,” she said.

Besides the capital provided by Flatirons’s partners, the fund currently has no additional limited partners. “We are hoping to generate interest in the fund and foundation with the launch announcement,” she said. Flatiron is launching the vehicles because its partners felt that it was time for successful Silicon Alley entrepreneurs to follow the lead of entrepreneurs in Silicon Valley and Seattle and begin to give something back to society and work for good causes.

The fund will have what Clark described as a typical carried interest structure. She said the fund’s social mission will probably lead to lower returns for the vehicle than would be expected from a traditional fund. “This will probably have a two times return rather than a ten times return. We are relaxing some hurdles for a good cause,” she said. Depending on its size, the fund may also have a management fee, but Clark said it had not yet been determined what amount of capital would trigger a management fee.