October 17, 2007
Green Angels: Venture and Private Equity Capitalists Help Sprout a New Generation of Environmentally Friendly Companies
by Anne Moore Odell
Private investors and high-net worth individuals are making a difference--in hopes of making a
profit--by actively recruiting start-up and middle-sized companies dedicated to the environment and
Venture capitalists come in all shapes and sizes, pumping private capital into start-up companies
with the hope that the companies will make it big. However, there is a new and growing group of
venture capitalists who also hope that the new and middle-sized companies in which they invest will
be not just profitable, but also sustainable. "Green angels," these socially and environmentally
forward-thinking investors are sometimes christened.
These investors see real room
for growth in the green and sustainable businesses arena due to, in part, a growing population,
higher energy costs, climate change and an aging infrastructure. Meanwhile, technological
improvements are narrowing the gap between traditional and green solutions with regard to price and
quality. Rising public awareness is also accelerating interest in alternative energy and
sustainable business practices.
Investors' Circle, with offices in Brookline, MA, and San
Francisco, CA, was founded in 1992 to help individual investors, foundations and venture
capitalists to pool their money and invest in sustainable businesses. Over $115 million in 183 plus
companies has been invested to date, with more investments pending by Investors' Circle's members.
"We started as a likeminded group of high-net worth individuals looking to invest in the
next Ben and Jerry's and the Body Shop," said Woody Tasch, Investors' Circle's chairman. "Fifteen
years ago, the terms 'double and triple bottom lines' were not being used, but we were earlier
adopters, looking to be part of the social investment movement."
Investors' Circle was one
of the early supporters of TerraCycle, a Trenton, NJ-based company started in 2001 that packages
worm droppings in soda bottles as plant food. TerraCycle has a 2007 sale's goal of over $5
"I owe endless gratitude to Investor's Circle," said Tom Szaky, CEO of
TerraCycle. "Without their programs and investors my young company may not have survived. They are
probably the only investor group that focuses entirely on environmental and socially beneficial
companies. They realize that there is much more to a company then a bottom line and a profit
Although the most recent return data from Investors' Circle is from 2002, the
numbers are encouraging. As of five years ago, the group had over $72 million in 110 deals with a
return rate of between 5-14%. Besides, TerraCycle, Investors' Circle points to the successful
companies "Organic to Go" and "Virgin Money" that were financed, in part, by early investments by
Investors' Circle members.
Investors' Circle members invest between $10,000 and $5
million in early stage for profit businesses. Investors' Circle is open to new members and also
accepts applications from new green businesses. Members can view dozens of new companies a month
that have passed an initial screening process.
Companies working toward a sustainable
future that have passed a much more through screening are invited to present at the Investors'
Circle Conference and Venture Fair. This twice yearly event, one fall conference on the East Coast
and a spring conference on the West Coast, attracts over 210 of Investors' Circle members
interested in the environment and social issues. One day of the Conference is dedicated to
education with panels on organics, alternative energy, and other subjects of interest to socially
responsible investors. On the second day, businesses present themselves to potential investors.
Green companies that have moved beyond the start-up stage also have drawn the interest of
private capital. Environmental Capital Partners (ECP) and the New York Private Bank & Trust announced at the
end of September they have $100 million to invest in middle-market green companies.
are many funds devoted to venture investing within the green industry," Christopher Staudt,
Principal at ECP. "We saw a void in the middle-market with few, if any, firms devoted exclusively
to investing in established environmental companies. Generalist funds are a source of competition,
but our industry experience and contacts give us an advantage in sourcing, evaluating, and
adding-value to portfolio companies."
ECP's diverse team brings with it a range of
first-hand academic, non-profit and commercial experience with regards to environmental issues
including: Dr. Stephen Kellert, Partner, a senior professor at Yale University's School of Forestry
and Environmental Studies; William Staudt, Managing Partner, board member of a leading middle
market engineering and consulting/remediation firm; and Michael Richter, Partner, board member of
Although ECP is an environmental firm committed to the values of
sustainability, Staudt told SocialFunds.com, "we are first and foremost a for profit entity and our
investment decisions all rigorously tested against traditional private equity financial standards."
ECP looks for growth equity in companies or buy out transactions with target equity check per
transaction of $10-$25 million, with capacity to lead larger deals.
capitalists are, by definition, forward looking people. However, green venture investors are
forward thinking with a vision of a sustainable future as an achievable goal.
Investors' Circle Chairman Tasch told SocialFunds.com: "What we are really talking about is the
evolution of capitalism, a more mature capitalism that takes into account biodiversity and place.
One of the most important things our species has done is invent capital, and now the question is,
can we invent what comes next? It has to be businesses helping drive these changes. Governments
alone are not enough to solve the issues."