After teaching in the New York City school system, Joy Anderson realized that she wanted a career where she could make a broader social impact. She had never imagined working in finance, but as she explored her options, it became clear that that she could make a difference by bringing capital to social enterprises.
Co-founder of Good Capital and Criterion Ventures, Anderson is now CEO of the Criterion Institute. Speaking at Yale SOM at a February 19 event sponsored by the Entrepreneurship Club, she discussed the early days of impact investing and how the lessons she learned still apply to entrepreneurs in the space today:
When we started what became Good Capital’s Social Entrepreneurship Expansion Fund, we wanted to solve a problem, not be a thing. We didn’t know we wanted to launch a venture fund. We wanted to be an organization that moved capital to do social good. But when we did a basic assessment, we realized the thing we could actually move forward most readily was a venture fund. And so we raised $6 million, and we were the first expansion capital in the impact investment space. David Berg had Underdog Ventures, but we were one of the first funds talking about expansion stage capital in social enterprises.
We were closing a gap within the capital markets, saying what needs to happen is to expand organizations that can’t get expansion capital. And so we looked at maybe 600 organizations to find the ones that were ready to take expansion capital. And five years later, we’re one of the first funds working through successful exits.
What was really clear to me all the way through was that nobody had all the answers. I wasn’t plugging into a system, like a kind of cog in a machine, saying, all we need to do is build a fund like the last fund. There were huge gaps. All the infrastructure that exists now in impact investing didn’t exist. One thing that interests me—and it’s an important thing to pay attention to as entrepreneurs—is that I didn’t see myself as being facilitated by a system to accomplish my goals. We were building the system that would facilitate goals.
I think one thing that entrepreneurs lose sight of is that the system isn’t set up to enable social change. There was a time when we all believed we were going to use the tools of the market to scale social good. We were going to work within traditional business models and change the world by doing business. I still do believe in all of those things a little bit.
But one small problem remains: market systems are not designed for social good. They’re not set up that way. They don’t efficiently get small amounts of capital to inefficient places. We had to build systems that did that. When individual social entrepreneurs show up now and say, “Why isn’t the system facilitating my idea?” I want to say, reposition yourself. Where do you sit within the social change agenda? Because it wasn’t set up to facilitate your ideas, you have to take some level of responsibility for paying attention to the system.
The problem is, most conversations about entrepreneurship tell you to focus on your business activity and don’t get distracted by systems stuff because you have to execute on the operations directly in front of you. But I believe that as social entrepreneurs, we actually don’t have the luxury of focus. If we focus too much, we often just end up creating the same externalities and unintended consequences that the last plan did.