Why this Radnor-based VC firm thinks impact investing is on the rise

You can choose to use the power of capitalism for social change.

It’s the sentiment at the foundation of impact investing, which local investors Tom Balderston and Eric Chapman of firm SustainVC say has grown in popularity in recent years. The idea isn’t new, but for various reasons, impact investing is on the rise, the duo says.

“Part of this is driven by millennials who are interested in making a difference with their work,” Balderston said. “Part is the sentiment that government funding and philanthropy can’t tackle everything.”

SustainVC, based in Radnor, has three categories of companies it considers when investing: climate and sustainability, equality and empowerment, and health and education.

The firm, started in 2007, fund in early-stage ventures, often right after the “family and friends” round of fundraising. Investments can be anywhere between $250,000 and $1 million, the pair said.

SustainVC is deeply connected with the nationally admired Philly chapter of Investors’ Circle, a network that brings connections, money and expertise to entrepreneurs, impact investors and stakeholders, Balderston and Chapman said. It also has good relationships with local investor Ben Franklin Technology Partners and impact investing advocate ImpactPHL.

SustainVC often hears about startups or ventures through these networks and chooses ventures to invest in based on the business opportunity and the ability to have real impact, Balderston said.

“We want to see a company that’s really in a position to change lives, that’s really motivated from a mission point of view,” he said. “Does their impact grow as the company grows? Is it really ingrained in the business?”

The firm’s most recent investment was in New York City-based Ultranauts Inc., which recruits neurodiverse candidates for software testing and data analytics. About 75% of Ultranauts employees are on the autism spectrum and work remotely for the software consulting company, per a press release.

SustainVC and the New York-based Disability Opportunity Fund led the company’s round, raising $3.5 million in Series A funding earlier this month.

Chapman said there’s also a concerted effort to invest in local companies, pouring an estimated $10 million into about two dozen companies over the years.

One of its most recent ventures is Philly-based Kickup, an educational software company that aims to improve the professional development experience for teachers and help school districts measure improvement in classrooms.

“There’s an awareness on a part of people who want to work in settings that make a difference and investors who say, ‘Wait a minute, I do my philanthropy out of this pocket and investing out of this one, but what if I think about all the capital I have as one thing that can make a difference?'” Balderston said.