13 May Kachuwa Impact
Interview with Blake Jones, Founder & President of Kachuwa Impact Fund
Erik Schultz, a fellow financial activist, Just Economy Institute colleague (formerly the RSF Integrated Capital Institute) and philanthropic colleague at Arthur B. Schultz Foundation introduced me to Blake Jones and Kachuwa Impact Fund. Erik has since refocused his efforts on the SK2 Fund, a creative capital fund, building on his Schultz Foundation experience building the ThriiveCapital portfolio of grantees who pay it forward. Erik is a philanthropic innovator dedicated to creating a 100% mission aligned foundation portfolio.
Jen: How was the Kachuwa Impact Impact Fund created?
Blake: I founded Kachuwa 15 years ago. It began with the purchase of our first commercial property, for another cooperative enterprise that I co-founded called Namaste Solar, and then it steadily grew from there. It started as my own personal portfolio of impact investments in real estate and privately held companies, and then colleagues, friends, and family wanted to join in. I’m a self-described “cooperative geek,” so we converted Kachuwa to a cooperative. We then assembled a board of directors and started growing the cooperative in terms of both scale and sophistication.
Jen: How are your investment funds catalytic in a way that is different from other funds?
Blake: We’re unique because of our cooperative structure, thereby making us one of the few investment cooperatives in the country, and we go out of our way to be accessible and inclusive of non-accredited investors. We are also focused on long-term investing. When someone invests in our cooperative, we make sure people know they are investing in a longer-than-average investment timeline of at least seven years, and ideally longer.
The structure of our board of directors is also unique in that all board members and advisors are all volunteers. Since we don’t use third-party management, there is no profit motive for managing the portfolio, and there’s also no management fee like you typically see in venture capital, private equity, hedge, and mutual funds. Instead, all of the cooperative’s net income is divided among our member-investors in accordance with cooperative principles. The cooperative still has to cover its expenses, and while we know that there will come a day when we’ll have to hire staff and specialized professionals to manage the cooperative as it continues to grow, we are not there yet.
Jen: How do you describe the kind of non-financial returns the fund offers?
Blake: We measure our non-financial returns based on how aligned our investments are with one or more of our stated impact themes, some of which include environmental conservation and stewardship and full/majority ownership by employees, women, and/or people of color. For example, a renewable energy company, that is also a certified B corporation and is led by women, would receive what we call a “triple word score” because they align with three of our impact themes. Our first step in considering any investment is to ensure that there’s alignment with one or more of our impact themes, and then we can move forward with a full evaluation.
Jen: Can you describe how you use integrated capital to do your work?
Blake: One of our goals is to offer long-term, mission-aligned, and non-controlling investment capital to support entrepreneurs in starting, sustaining, or converting their ventures to the impact company model. We coordinate investment capital and non-financial resources like technical expertise to support things like: employee ownership, LEED certification, renewable energy, and B Corp certification. Ultimately, we want to help our investees and tenant-partners to sustain their impact company model without having to compromise their mission.
Jen: What is transformational about the businesses that you invest in?
Blake: I believe impact and transformation can overlap, and yet a company can have impact but not necessarily be transformative. For example, Organic Valley, a 40-year-old farmer cooperative, may not necessarily be transformative because cooperatives and organic are not new, but they definitely have high impact so we’re very happy to support them.
Jen: How do you address racial justice, income inequality, and/or gender justice through your products and services?
Blake: In an effort to diversify our portfolio, which we noticed did not have as many companies that are owned by women or people of color (POC) as we would like, we created our “Impact Asset Loss Reserve.” At its discretion, our board of directors can apply the loss reserve to cover 50% to 80% of any potential losses that might result from an investment in a women- or POC-owned company. It therefore allows us to make more investments in these companies than we’d otherwise be able to, partly because of the historical and system disadvantages for women and POC entrepreneurs that might make such investments appear to be more risky from a conventional investment perspective.
Jen: What does a foundation or investor need to understand in order to invest in transformational businesses?
Blake: That they’ll be getting so much more than just a financial return. They’ll also be getting a non-financial return that can come in many forms such as having positive impacts for society, for the environment, for local communities, for the employees, and for so many other stakeholders. I also think there its easy to underestimate the positive implications due to transformational investments being aligned with the foundation’s or investor’s own mission and values. It may not sound like much, but in my experience its been quite the opposite.
Jen: What do you tell people who think your fund is risky?
Blake: I tell people that we agree, investing in our cooperative does indeed have risks! That being said, we help to mitigate those risks by diversifying our portfolio with investments in real estate, private company debt, and private company equity. Our portfolio currently contains five impact real estate assets and 45 impact company investments. Also, most people, especially non-accredited investors, are typically only invested in publicly traded companies on Wall Street. Our cooperative allows our member-investors to diversify outside of Wall Street because all of our investments are privately held. They’re also much smaller in size, adding another layer of non-correlation with Wall Street. Last but not least, we believe that our portfolio includes some additional risk mitigation, diversification, and resiliency due our impact themes
|Investment thesis / What is your rationale for your approach to investing?||Provide privately held impact companies with mission-aligned, long-term, and non-controlling capital; operate impact real estate that supports impact companies, non-profit organizations, and small businesses; and operate for the holistic benefit of its members and stakeholders rather than for profit maximization.|
|Geography||United States, concentrated in Colorado (one international fund – Sarona)|
|# of Investments||50 (5 commercial properties and 45 debt and equity investments)|
|Funds Raised||$10 million with $23 million in assets|
What’s on Blake’s Mind?
|Book||Dark Matter: A Century of Speculative Fiction from the African Diaspora. I love science fiction and fantasy, and I’m really enjoying this collection of short stories, written by Black authors, and centering Black characters and narratives.|
|Song||Amazing Grace. My 11-year-old son is learning to play it on his viola, and we’ve been listening to different renditions of it from the internet – what a beautiful song!|
|Podcast / Film||A close friend recently turned me on to Brené Brown’s “Unlocking Us” and “Dare to Lead” podcasts, and I’m learning so much from both of them.|