Exploring the Possibilities of Social Enterprises

Exploring the Possibilities of Social Enterprises

Living Cities is getting deeper insight into the social enterprise ecosystem through our investment in the Urban Innovation Fund.

Over the past year and a half, we’ve noticed the emergence of what we call “urban serving businesses” – social enterprises and other businesses that are creating jobs as well as delivering products and services, often tech-enabled, that are improving the lives of low and middle income urban residents and bringing innovation to local governments. At Living Cities, we’ve come to believe that these urban serving businesses represent a potential new model for social change, and we’re interested not only in scaling the solutions urban serving businesses create, but also in learning more about how social enterprises impact low-income people, how they create jobs, and how to create an ecosystem that serves them, which is why we’re so excited about our latest investment in the Blended Catalyst Fund in the Urban Innovation Fund (UIF).

The Urban Innovation Fund is a venture capital fund that invests in early-stage social innovators solving critical community challenges in domestic cities, making it the first venture capital fund to exclusively target entrepreneurs with an explicit goal of solving urban problems.

The UIF is also one of the few women-owned and operated venture capital firms in the world, and is led by Julie Lein and Clara Brenner, two women who have proven to be incredible leaders in building the urban innovation space. In 2012, Julie and Clara started Tumml, an urban ventures accelerator with a mission to empower entrepreneurs to solve urban problems. Through their experience with Tumml, Julie and Clara identified a market and impact opportunity that has been doubly overlooked by most other investors: underserved and under-financed markets and entrepreneurs. In a Stanford Social Innovation Review article last fall, Julie and Clara highlighted the “pioneer gap” in the U.S. market, finding that less than 2% of angel investors on the AngelList platform expressed interest in mission-driven markets in 2015. Of those that are in the mission-driven market, a related finding from a study by J.P. Morgan and the Global Impact Investing Network (GIIN) indicated that only 3% of the $10.6 billion impact investments committed in 2014 were allocated to seed and early-stage venture investing globally, with only a fraction of this amount reaching impact-oriented startups. Julie and Clara created the Urban Innovation Fund to fill this gap in the market by providing financial resources to underserved entrepreneurs, who are often women and/or people of color, and to connect them to the knowledge, tools and networks they need to scale their impact across the U.S. Seventy-six percent of the startups Julie and Clara have supported throughout their careers have had a women or person of color on the founding team.

In addition, one of the key reasons we invested in this particular venture capital fund was the UIF’s core belief that the public sector – specifically policy and regulatory issues – can foster or inhibit the scaling of innovations and the success of entrepreneurs. Highly regulated industries such as urban transport, for example, present opportunities for entrepreneurs to create positive impacts, but only if they build their businesses responsibly and engage with policymakers at an early stage. Julie and Clara have a track record of working with government instead of around government, and it’s one of the reasons we believe the UIF can play a key role in unlocking innovation to serve core urban needs.

Chariot, a commuter shuttle service operated in San Francisco, and one of Tumml’s portfolio companies, is a great example of this. Chariot entered into a market with well-funded competitors, but as a result of engaging early-on with city transit authorities and other officials, Chariot decided to focus on using smaller vehicles and prioritizing commuter routes that were underserved by public transportation, eventually surpassing its competition. Chariot is not only an example of how urban serving businesses have the potential to impact public sector innovation, but it also shows the potential urban serving businesses have to improve the lives of low-income people; one of Chariot’s popular routes links a commuter rail station with the Fisherman’s Wharf tourist district, serving low and moderate-income service workers who commute in from the suburbs and surrounding communities. Chariot illustrates how social enterprises can scale solutions, as it was recently acquired by the Ford Smart Mobility.This is also a testament to the strength of the Chariot business model and other urban-focused businesses.

We’re looking forward to discovering more companies like Chariot and to getting deeper insight into the social enterprise ecosystem through our investment in the Urban Innovation Fund, as well as to collaborating with Julie and Clara to share their lessons learned.


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