Impact investing: Making more than a profit in Rochester
By: Kristopher J Brooks
Ian Macdonald and Maggie Tobin own a small Rochester company that makes food trucks and disaster relief vehicles.
Last fall, the company landed a major subcontract with Rochester’s Public Market and saw an abnormally high number of orders. Tobin and Macdonald were operating out of a 1,800-square-foot space on Emerson Street making one food truck at a time. Tobin quickly realized M Design Vehicles didn’t have enough space or manpower.
A few months later, the couple visited PathStone Corp., a nonprofit regional community development and human service organization. They needed money to buy materials and, more importantly, hire staff. PathStone gave them a $150,000 loan.
“Since we’ve been funded by them, we’ve hired four guys,” Tobin said.
Hubert VanTol, PathStone’s senior director for economic development, said M Design Vehicles got the loan because the company filled all the major criteria. The company is in Rochester, wanted to create entry-level jobs and the owners weren’t able to get a loan from conventional lenders.
“PathStone’s mission is to provide support for underserved people and communities,” he said. “We see supporting small businesses unable to get credit as an important part of that mission.”
Tobin’s story is a real-life example of how businesses benefit from impact investing, a practice within venture capital that is gaining more and more attention.
In essence, impact investing is lending or donating money to a business that’s trying to solve a societal ill, such as homelessness, poverty, poor education or housing inequality. The practice is akin to social entrepreneurship. Social entrepreneurship is creating and operating a business to solve a societal ill while impact investing is providing capital to aid the cause.
Like any business investment, the person giving money wants financial return. However, an impact investor is equally as interested — and sometimes even more interested — in seeing a company help the greater good.
“The main difference is that impact investors invest for long-term systematic change and impact,” said Bala Mulloth, a University of Virginia public policy professor with expertise in social entrepreneurship. “They are driven primarily by purpose and meaning more than short-term monetary gains.”