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November 04, 2011
New SJF Ventures Fund Is Designated a SBIC Impact Fund
    by Robert Kropp

The North Carolina-based venture capital partnership receives green light to capitalize a $75 million fund that will invest in cleantech startups in low-to-middle income communities.

Venture capital funding for cleantech increased by 73% during the third quarter of 2011, to $1.1 billion, according to an analysis by Ernst & Young. There were 11 cleantech mergers and acquisitions with a combined value of $222.0 million during the period as well.

The fourth quarter had been underway for only a few days when SJF Ventures, a venture capital partnership headquartered in Durham, NC, announced that CleanScapes, a company in which SJF Ventures invested in 2008, would merge with Recology, like CleanScapes a waste and recycling service provider.

David Kirkpatrick, Founder and Managing Director of SJF Ventures, described the fund's involvement with CleanScapes.

"Our $2 million investment was in a recycling waste management company with very strong employee ethics and engagement, helping Seattle and the Northwest pursue their zero waste strategy," Kirkpatrick said. "CleanScapes was acquired by Recology, a half-billion dollar employee-owned company based in San Francisco, similarly helping the Bay Area pursue zero waste."

"It was a win for us as investors, a win for the employees, and for the municipalities these are companies that are trying to maximize waste diversion, recycling, and recovery," he continued.

The successful investment cycle that culminated in the CleanScapes merger is typical of the investment approach of SJF Ventures, which Kirkpatrick described in a recent blog post as a "capital efficient expansion strategy of cleantech investing." Many of the fund's investments have been in companies that like CleanScapes are engaged in recycling, asset recovery, and reuse.

With a $17 million fund and a $28 million fund already established, SJF Ventures was recently given the green light by the Small Business Administration (SBA) to capitalize a $75 million fund that targets cleantech startups in low-to-middle income communities. Beginning in 2012, SBA's Small Business Investment Company (SBIC) Impact Fund will leverage efforts by venture capitalists, private equity firms, and institutional investors to invest in promising small businesses in underserved markets.

"The Impact Fund targets funds that have both an impact in low-to-moderate income communities, and on environmental results through cleantech. We uniquely fit both of those," Kirkpatrick told

"We've always had a high-growth, positive impact theme," he continued. "The first two funds were certified as CDFIs (Community Development Financial Institutions). For the third fund, for banks to invest in a fund under the Dodd-Frank legislation, it has to be for the public benefit, so there's a clear carve-out for SBICs. SBIC has been around for a long time with a broad small business development impact, not necessarily targeting community development or cleantech environmental results."

The fund is the first with a national scale to receive the SBIC Impact Fund designation.

Although the SBIC Impact Fund program will annually guarantee up to $200 million in debentures for investments, "We think we can raise the capital through private sources, because we're a growth equity fund," Kirkpatrick said. "So we're an unlevered impact investing SBIC, because we don't think we'll need to tap the federal debt leverage."

"What the fund will do is what our other funds have been doing, invest in growth-stage cleantech and tech services firms where there's a strong positive impact," he continued. "It gives the banks that are an important constituency in our investor group the regulatory clearance and the CRA (Community Reinvestment Act) credit to invest in the fund."

In July, SJF Institute, the nonprofit affiliate of SJF Ventures, announced it has merged with Investors' Circle, a network of over 150 angel investors, professional venture capitalists, foundations and family offices which since 1992 has invested over $145 million in more than 220 companies and small funds addressing social and environmental issues.

When the merger was announced, Bonny Moellenbrock. the Executive Director of SJF Institute, said, "We want to build a vibrant capital marketplace to put more impact entrepreneurs on a clear path to strong financial growth and measurable social and environmental impact. We know this is the pipeline that later stage institutional investors are seeking. When this happens, everyone wins: the entrepreneurs, the investors, communities, and the planet."

"The SJF Institute has been our platform for helping scale entrepreneurs in sustainable cleantech through a variety of services," Kirkpatrick said. "On the other side, for early stage angel investment we've been a member of Investors Circle for many years. Our boards had overlap and so it was a natural step forward to merge the two. It's creating a spectrum from entrepreneurial support to angel investment."

"We had our first conference under the combined management in Philadelphia last week," he continued. "It was greatly attended, and had 15 companies present early stage in cleantech, clean energy, and socially responsible products."


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