Venture capitalists Josh Becker and Benjamin Black aim to invest and do good with their new socially responsible venture fund, New Cycle Capital.
The duo kicked off fund-raising in December, hoping to raise $50 million. They say they have already received an undisclosed anchor commitment from the Rappaport Family Foundation, which was founded by August Capital’s Andy Rappaport and his wife, as well as a number of other high-net worth individuals and family foundations.
The New Cycle partners are encouraged by the Anne E. Casey Foundation, which has promised to allocate 2% of its $3 billion in holdings to socially responsible investing, and the W.K. Kellog Foundation, which has said it will put $100 million into such funds.
Co-founders Becker and Black have experience in entrepreneurship and venture capital. Black helped build Harris Interactive with his father and also worked for private equity firm Rosewood Capital and venture firm Maveron. Becker was an early employee at EarthWeb and spent time at DCM and Brentwood Venture Capital, which later became Redpoint Ventures.
The partners have been investing for the past six months using their personal finances, hoping to build a track record that will lure limited partners. They have invested undisclosed amounts in four startups so far: inner-city retailer Sneaker Villa, energy efficiency company Positive Energy, carbon-offset company TerraPass and domain name fraud fighter CitizenHawk.
The market for socially responsible ventures has exploded in the last year, Becker says. “The perception was that the management wasn’t there, the teams weren’t there and the returns weren’t there.” But that’s changed now, due, in large part, he says, to the boom in cleantech investing.
Despite the socially minded agenda that Becker and Black are pushing through the portfolio, Becker is quick to make the distinction between New Cycle Capital and a specifically mandated do-gooder venture firm.
“We don’t look at ourselves as double-bottom line investors that have confined themselves to certain constraints, such as a regional focus fund,” he says. “It’s hard enough to make money in the traditional role of venture capital.” The firm’s goal is to return from 6x to 12x on its investments, he notes.
Some institutions, such as JPMorgan and other large banks, have federal mandates associated with the loans and investments they make. They have turned on occasion to double-bottom line venture-style investors to help fill those requirements. For example, that’s how JPMorgan launched Bay Area Equity Fund, its venture arm that invests in socially beneficial startups.
Bay Area Equity Fund last year scored a significant exit when it sold PowerLight, a solar panel producer that employed middle-income residents of Berkeley, Calif., to SunPower (Nasdaq: SPWR) for $330 million. The fund had invested $5 million in PowerLight’s $15 million Series C in August 2005. But the future of BAEF is unknown as JPMorgan, which has been casting off private equity divisions since 2006, said that it would spin off the do-gooder fund.
It is unknown if JPMorgan will return as a limited partner in a reconstituted BAEF. The first fund counted 10 banks, seven foundations and a handful of retirement plans among its limited partners.
We don’t look at ourselves as double-bottom line investors that have confined themselves to certain constraints, such as a regional focus fund.
NEW CYCLE CAPITAL
Location: San Francisco
Fund target: $50M
Team: General Partners and co-founders Ben Black and Josh Becker
Early stage venture investments. Aims to be the first institutional investor and make investments ranging from $500K to $2M. Expects to invest in 12 to 15 companies over the life of fund.
Investments: Black and Becker have personally invested undisclosed amounts in inner-city retailer Sneaker Villa, energy efficiency company Positive Energy, carbon-offset company TerraPass and domain name fraud fighter CitizenHawk.
Investment Committee: Andy Rappaport, general partner at August Capital, and Anne Martin, who manages venture investments for the Yale Endowment.
Limited Partners: Has received anchor commitments from the Rappaport Family Foundation and undisclosed family foundations and high-net worth individuals.
Source: VCJ reporting