More Than Money
Issue #35

Money and Leadership

Table of Contents

“Personal Stories: The Road Less Traveled: Investing to Create Social Value”

by Carol Atwood

Quiet leadership isn't always obvious. But it can take the qualities of a leader to follow "the road less traveled" in one's own relationship with money-qualities like courage, vision, perseverance, and the willingness to engage with others. Here, Carol Atwood, a recognized leader in the business world, describes the quiet journey she took to align her private equity, social, and philanthropic investments with her values as she received multiple bottom- line rewards.

Two roads diverged in a wood, and I-
I took the one less traveled by,
And that has made all the difference.
- Robert Frost 1

When I sold my business five years ago, I decided that the time had come to align my private investing with my social values. Expecting great advice from advisors and money managers about how to accomplish this, I was shocked by the reaction I actually got. "That's great; that's noble," they told me. "You can dedicate a portion of your assets to society, but that's your 'other pot.' Asset allocation is one thing. Social giving is another." The bottom line for them was that a social filter would inhibit my returns.

While I wanted to maximize profit and mitigate risk, I was determined to put my money to work based on my personal values. After all, if I were to invest in a for-profit company that was damaging the environment in the course of doing business, wouldn't I undo the good I hoped to do by giving a grant to an environmental nonprofit organization? Rather than canceling my investments out, I decided that my left hand should know what my right hand was doing. So I struck out on my own.

Having little experience with managing money for myself, I really didn't know how to start. I decided that it made sense to use the skills I had developed in the course of running my own business to tackle this challenge. So, I began choosing private equity investments that aligned with my social concerns, looking for both healthy financial and social returns. I discovered that my approach mirrored Jed Emerson's. [See sidebar, p. 27, and www.blendedvalue.org]. Emerson has referred to value as "what gets created when investors invest and organizations act to pursue their mission." As he notes, the conventional wisdom is that value is either economic (i.e., created by for-profit companies) or social (i.e., created by nonprofit or non-governmental organizations). Espousing a Blended Value Proposition, Emerson states that "all organizations, whether forprofit or not, create value that consists of economic, social, and environmental value components-and that investors (whether market-rate, charitable, or some mix of the two) simultaneously generate all three forms of value through providing capital to organizations." 2

As I proceeded on my own with Emerson's words in mind, I happened upon Investors' Circle, a community of socially responsible, private equity investors who changed my whole experience. It felt good that I was no longer alone, as most of IC's members also expected fair market as well as social returns. The more involved I became with the various instruments of finance, the more I realized that the entire spectrum of my pocketbook could be aligned with my values.

Research conducted by the IC Foundation, in collaboration with Harvard Business School and McKinsey & Co., showed that, in fact, favorable market returns could be generated by private investments in social companies. This research examined the financial return realized by the Investors' Circle network, whose 110 members had made investments totaling $72 million. Their research found that, treated as a hypothetical portfolio, IC's investments generated an 8% return for a "buy-and-hold" strategy and a 14% return when there was an additional round of investment and liquidation after a lock-up. 3 Within Investors' Circle itself, the collective experience of its members- investing approximately $80 million in 120 deals over a period of more than 10 years-showed that, as a total portfolio, returns were definitely in line with other venture capital funds.

"To me, leadership is about understanding truth in a way that the mainstream may not yet perceive. Those of us who are engaged in the kind of investing that Carol Atwood describes recognize the truth of what we're trying to do, which is to create economic, social, and environmental value by investing in alignment with our values and mission. The mainstream hasn't caught up with us yet. People like Carol are changing the terms of the conversation around investing and public discussion as a whole."
-Jed Emerson, lecturer in business at Stanford University's Graduate School of Business and senior fellow with the William and Flora Hewlett Foundation and the David and Lucile Packard Foundation

On the philanthropic side, I had been writing checks into what felt like a black hole, giving without knowing much about the organizations or what actually happened to my money. I set out to learn about nonprofits so I could make good decisions about what organizations, projects, and people to support. Then I heard Meryl Bralower, the chairman of Social Venture Partners/Boston (SVP), speak about the engaged venture philanthropy model. Using the same principles I had been using in my private equity investing, she introduced me to a model that leverages each investor's (called a "partner") giving with others who also become engaged, not only as donors but also as advice-givers or as hands-on providers of technical support. Staying involved with SVP's grantees (called "investees") has enhanced their chances of becoming sustainable over the long term and more valuable to their constituencies. This model has been perfect for me, as it has allowed me to financially support the community while maximizing my contributions. I never knew what I was missing until I began aligning my investments with my values. Combining private equity investing, social investing, and philanthropy has taught me that philanthropic pots and private equity pots are not distinct. To the contrary, they are- and should be-inextricably linked. For that reason, I am now as inclined to take an equity position in a company being operated by a business owner in a disenfranchised community as I am in making a grant to a nonprofit organization serving that same community. In addition, connecting with communities of likeminded others has not only enriched my giving and financial investments, but has also made me feel that I am making the biggest impact I can with what I have.


1 From The Poetry of Robert Frost by Robert Frost, edited by Edward Connery Lathem. Copyright 1970 by Leslie Frost Ballantine, Owl Books, Second Revision, 2002
2 From www.blendedvalue.org . Copyright 2003, Jed Emerson. All rights reserved.
3 Research results were published in "The Hard Numbers on Social Investments" by Manda Salls, Harvard Business School's Working Knowledge , November 10, 2003.

Carol Atwood is president and CEO of Spartacus Media Enterprises, a social mission media company. Formerly, Ms. Atwood owned and operated TMG, an international marketing company that focused on programs for Fortune 500 companies. She is the recipient of many awards, including New York City's Entrepreneur of the Year award. In 1997, TMG was named Company of the Year by the National Association of Small Business Investment Companies and was ranked by Working Woman magazine among the top 100 women-owned businesses, placing Ms. Atwood between Martha Stewart and Oprah Winfrey. Ms. Atwood is also a member of Investors' Circle (IC), a social venture capital intermediary whose mission is to support early-stage, private companies that drive the transition to a sustainable economy. Founded in 1992, IC has become one of the nation's oldest and largest investor networks-the only one devoted specifically to sustainability.


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