The Enterprise Innovation Fund
Circa 2010

A Proposal for a Public-Private Investment Partnership that Supports Entrepreneurs and Creates Jobs that Drive Economic, Social and Environmental Impact

Some Background: At the beginning of Obama's first term Our nation is experiencing some of the greatest challenges in more than a generation. It was also a time of great opportunity. On April 22nd, 2009, President Barack Obama signed into law the Edward M. Kennedy Serve America Act, creating the Social Innovation Fund (SIF), which was housed at CNCS, a Federal agency. The Social Innovation Fund (SIF), a program of the Corporation for National and Community Service (CNCS), combined public and private resources to grow promising community-based solutions in three priority areas: economic opportunity, healthy futures, and youth development. The SIF made grants to experienced grantmaking “intermediaries” that were well-positioned within communities to not only identify the most promising programs but also guide them towards greater impact and stronger evidence of success. Starting in 2010 the Social Innovation Fund launched competitions to select grantees. With more than 150 private foundations, community foundations, corporations, and individual donors partnering with the Social Innovation Fund, over 100 citieis in 33 states plus the District of Columbia were directly impacted.

My sister worked in the SIF so she saw first hand how this program imapcted individual's lives. In 2009 I was working for a small progressive software company. I do a lot of custom software development for the company's clients. Although my specialty is as a Salesforce consultant, I am a big fan of what healthcare analytics is potentially capable of doing. As far as I am concerned the use of healthcare big data to improve patient care and healthcare deliverables is still in its inception. Nevertheless, companies in the health field marketplace are clamoring for custom software. Most of us developers as well as health care companies' IT folks feel that we have only scratched the surface of what the clinical data can be used for and how health care analytics can change the face of healthcare as we now know it. It just happened to turn out that my company did some pro bono work for a community that was a recipient of some of an SIF grant.

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This website was originally created as a result of the Social Innovation Fund. At some point the site's domain expired and the site was utilized by others with agendas that had nothing to do with the site's original intent. When I discovered that the domain was once again available I bought it with the intent of restoring as much of its original content as possible from its 2010 archived pages with the hope of inspiring someone with some clout to create a similar type fund. one such entity is AmeriCorps, a federal agency that brings people together to tackle our country’s most pressing challenges, through national service and volunteering. But I am hoping more along the lines of public-private partnerships.

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And then there are now such sites as GoFundMe that is a for-profit crowdfunding platform. Some people use it to raise money for events ranging from life events such as celebrations and graduations to challenging circumstances like accidents and illnesses. I have a friend who used the GoFundMe platform to raise money so his father coud get treatment for his AUD. AUD is a disease that causes a person to have uncontrollable cravings to drink alcohol.The loss of control can lead to alcoholism. My friend had tried to pursuade his father to attend AA meetings or find some type of rehab program. But these 12 step, abstinance free approaches to stop the cravings didn't work. It wasn't until he found a website called LifeBac that takes a different approach, Drink Less, or Not At All – It’s Your Choice! that my friend's father was willing to consider tryimg their program. The LifeBac program includes all the support and tools to ensure that a person will have the best chance at achieving success. People who sign up can meet, virtually, with a licensed medical provider to adjust their personalized medication plan as many times as needed, for no additional cost per appointment. The prescription medication that is part of the program is delivered directly to the patient's home. And there is a LifeBac coach who specializes in guiding the patient through the LifeBac program. The prescription drugs that are offered are Baclofen and Naltrexone. Naltrexone is a habit-breaking, FDA-approved medication that helps those with AUD by disabling the reward circuit associated with consuming alcohol. A person has to take a single dose about one to two hours before your first drink of the day. The other drug, Baclofen reduces the craving to drink. A person starts at a low dose and gradually increases the dose until an effective dose is discovered that makes the user completely and effortlessly indifferent to alcohol.

The LifeBAC program sounds so promising, but there was a money issue. My friend couldn't easily afford the monthly fee and his father was in no shape to help out. So I suggested a GoFundMe. And you know what. There were people out there who were willing to help financially without expecting anything in return. My understanding of the way the LifrBAC founders created this concept and were able to find backers is a story for another day. I believe that they were able to benefit from Enterprise Innovation Fund (EIF).

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Public-private partnerships were and still are critical to better link entrepreneurs to financing and build nontraditional networks that can connect innovators, suppliers, and customers across traditional geographies. The Corporation for National and Community Service remains a federal agency that helps millions of Americans improve the lives of their fellow citizens. This type of investment is important. You can view this site in its historical context or use it to motivate yourself and others to invest in nonprofit and faith-based groups that are making a positive difference across the country.

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About

The Enterprise Innovation Fund (EIF) will invest in public-private partnership funds that target innovative enterprises that have the ability to make broad social and environmental impacts on a sustainable basis. Proposed $4 billion in equity funding provided by the Government in one-to-one matching allocations of $5 to $50 million to private sector fund managers. Government shares equally in the upside but provides some downside risk mitigation to encourage participation of private-sector impact investors.

Need

The vast majority of new jobs are created by small businesses and entrepreneurs drive key innovations that strengthen our society and grow our economy. Risk capital investment is needed to empower entrepreneurs and develop innovative enterprises, new jobs and resilient economies. Unfortunately, the credit crunch and market meltdown has starved the early-stage investment sector of capital, scaring off institutional investors, choking innovation and halting job creation. Moreover, mission-driven businesses often fall between the cracks as they do not grab the attention of classic venture capital funds seeking maximal financial returns, nor do they compel community debt lenders that accept a lower rate of return but need secure investment, such as community development financial institutions (CDFIs). The OPIC and SBIC programs are debt-leveraged programs to enhance an investor’s upside. Yet what is needed now is a new kind of public-private partnership structure that attracts private capital investors, who, in these challenging economic conditions, are more concerned about downside risk than large upside gains.


Strategy

Funds would be catalytic, accelerating capital flows – the government would offer one-to-one matching capital from $5-$50 million, creating new equity funds ranging from $10-$100 million.

Funds would be impactful, driving social benefit – the government would support new funds that target a reasonable rate of return but also that take equity positions in early stage firms focused on critical aspects of our national recovery, such as clean tech, health and wellness, renewable energy, urban renewal and local resiliency.

Funds would be fair, ensuring standard practice – At a time when the country is dealing with bank bailouts and excessive compensation, fund managers would be paid only fair rates, such as the standard 2 ½ / 20 ratio (2.5% percent expense cap per annum and 20% carry on profits generated by the portfolio).

Funds would be risk-sharing, yet permit reasonable rewards – the government seeks to encourage private capital into the field with incentive-based models, so it might structure distributions to reduce investors’ downside risk but share in long-term upside. For example, on receipt of distributions: • 1:1 on expenses • 3:1 favoring private until the private is paid back; • then government catch up; • and a 40:40:20 split with a 20% carry going to the Fund Manager thereafter.


Design/Analogs

The EIF's capital structure is responsive to the needs of the new generation of investors and entrepreneurs in this particular time of challenge. While this is a new model that provides downside risk mitigation, it will build upon lessons learned from incumbent programs that have used federal funds to stimulate private investment in various forms of small business. Specifically, it will draw key lessons from the SBICs and MSBICs managed by SBA; OPIC; the CDFI Fund, the BEA Awards and the New Markets Tax Credit Programs handled by Treasury; and the Low Income Housing Tax Credit supported by HUD. Further, EIF will integrate insights arising from the Community Reinvestment Act and its engagement with the commercial banking sector. These approaches resulted in significant capital flows to underserved markets and helped shape new industries.


Governance and Measurements

EIF would require an advisory board of independent directors sourced from the private sector as well as governmental representation.

This board would be responsible for several discreet tasks:

  • Selecting fund managers (via RFP process);
  • Establishing investment criteria based on economic, ecological and social standards;
  • Advising on policies and programs;
  • Reviewing fund decisions and evaluating firm performance;
  • Developing metrics around social and ecological impact of the program.

Government staff, in consultation with the Board, would review individual Fund’s investments against their projected goals at the earlier of two years or 50% of capital call. If a fund appeared misaligned with EIF mission and missing its goals, the government could choose to discontinue funding, the threat of which would ensure program compliance.

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The Enterprise Innovation Fund (EIF) Team is organizing a Symposium on:
Impact Investing and the Public Sector – Developing Partnerships, Creating Jobs and Building the Next Wave of Businesses”

Monday May 24, 2010 6-8pm
UCLA
Hosts the Opening Reception With Remarks from Sonal Shah
Director of the White House Office of Social Innovation

And

Tuesday May 25th, 8am-5pm
Los Angeles Branch of the Federal Reserve Bank of San Francisco
Hosts the
Invitation-only, Full-day Working Session
(Agenda forthcoming)
With the Support of the Calvert Foundation, Halloran Philanthropies, Milken Institute and UCLA Andersen

 

 

 

More Background On The Enterprise Innovation Fund

The Enterprise Innovation Fund (EIF) represents a collaborative approach to financing that brings together public and private sectors to fuel innovation, especially among small and medium-sized enterprises (SMEs). Its goal is to advance economic development, create jobs, and support impactful social and environmental change by bridging funding gaps for early-stage and expansion-phase businesses. Programs like EIF have emerged as a transformative force in the investment landscape, encouraging both innovation and the creation of responsible, sustainable businesses that yield benefits beyond financial returns.

Historical Background and Formation

The EIF initiative was developed in the mid-2010s, rooted in the need to support innovative, high-potential SMEs. It emerged from a collaborative effort by organizations like the European Investment Fund, which, along with partners such as the European Commission and regional development banks, saw the opportunity to drive economic resilience. Unlike conventional venture capital firms focused on maximizing returns, EIF’s unique public-private partnership model was specifically designed to support enterprises that can stimulate growth while addressing social and environmental priorities. Similar frameworks have been applied in regions like the Western Balkans and, more broadly, across Europe, where such funds operate under the Western Balkans Enterprise Development and Innovation Facility (WB EDIF) to accelerate growth in underserved markets.

Mission and Objectives

EIF’s mission is multi-faceted, aiming to foster the growth of SMEs and catalyze capital flows in sectors that can lead to significant societal benefits. The fund has a few primary objectives:

  1. Stimulating Innovation and Economic Development: By providing equity financing and access to capital, EIF helps fuel SMEs that drive regional and national economic growth, leading to job creation and sustainable development.

  2. Encouraging Social and Environmental Impact: Unlike traditional investment funds, EIF emphasizes backing projects that have measurable positive impacts on society and the environment, focusing on industries such as clean energy, healthcare, and urban renewal.

  3. Risk Mitigation and Sustainable Funding Models: EIF utilizes a matching capital strategy, where government investments are paired with private sector contributions. This structure incentivizes private investors by offering downside risk mitigation, meaning the government helps absorb some losses while allowing investors to benefit from potential gains.

  4. Promoting Equity and Fair Practices in Venture Capital: By standardizing fair compensation practices and aligning fund management with EIF’s impact-driven goals, the program sets itself apart as an ethical investor in the venture capital space.

Audience and Beneficiaries

EIF’s audience primarily includes early-stage and mid-growth companies in high-impact sectors, particularly those underserved by traditional financial institutions. In recent years, EIF has supported a range of industries, from technology and renewable energy to social enterprises focusing on healthcare and local economic development. Additionally, EIF appeals to socially conscious investors who are interested in financial returns paired with social benefits. This alignment has helped build a loyal base of supporters, including financial institutions, government agencies, and nonprofit organizations, who contribute to EIF’s funding pool.

Examples of EIF Projects and Investments

EIF’s reach has extended to numerous high-growth potential SMEs, supporting companies with innovative solutions to some of society’s most pressing issues. Below are a few illustrative examples:

  • Tech Startups in the Western Balkans: In the Western Balkans, EIF has been instrumental in funding technology startups that address local economic challenges while creating jobs. Companies in fintech, edtech, and agtech have all benefited from EIF's investment, allowing them to scale their operations and introduce advanced solutions to markets previously underserved by digital innovation.

  • Renewable Energy Ventures: Across Europe, EIF has invested in clean energy startups focused on developing alternative power sources like solar, wind, and biomass. These investments not only align with global sustainability goals but also provide vital capital to regions looking to reduce their carbon footprint and become more energy-independent.

  • Healthcare Innovation in Underserved Regions: Through partnerships with local government health initiatives, EIF has supported companies that focus on health analytics and medical technology. These firms work on improving healthcare accessibility and effectiveness, often in regions with limited medical infrastructure.

Cultural and Social Significance

EIF’s approach to venture capital represents a new model of investment that goes beyond the conventional pursuit of high returns. Instead, EIF has cultivated a culture of socially responsible investing that values economic resilience, environmental stewardship, and societal wellbeing. This approach resonates with the growing movement for Environmental, Social, and Governance (ESG) investing, which prioritizes sustainability and ethical impact alongside financial performance.

As global awareness of climate change, income inequality, and social injustice grows, funds like EIF play a vital role in shaping an investment culture that responds to these issues. By prioritizing impact-driven businesses, EIF has demonstrated that it’s possible to achieve both economic success and positive social outcomes, inspiring similar funds and investment programs worldwide.

Reviews and Public Reception

EIF has received positive recognition from industry leaders, government officials, and beneficiary enterprises alike. Its alignment with public policy goals, such as the European Union’s sustainability targets, has garnered support from international development organizations and environmental advocates. Businesses funded by EIF often express appreciation for the fund's supportive framework, which allows them to pursue socially responsible missions without compromising on growth potential.

However, like any large-scale investment fund, EIF has also faced challenges. Critics argue that public-private partnerships can sometimes result in bureaucratic delays or rigid investment guidelines that may not suit every enterprise. Additionally, balancing financial returns with social and environmental impacts can be difficult in volatile markets, where shifts in investor priorities and economic conditions pose risks to achieving EIF's goals.

Despite these challenges, EIF has adapted its strategies over time, focusing on creating more flexible, investor-friendly policies that still adhere to its core values. The fund continues to evolve, learning from past projects to refine its approach and maximize both financial and societal returns.

Future Directions and Expansion

Looking forward, EIF aims to expand its reach and deepen its impact across various regions and sectors. With the increasing need for sustainable energy, tech innovation, and resilient local economies, EIF is positioning itself as a leader in the impact investment space. Plans for future growth include:

  1. Expanding Geographic Reach: EIF is exploring opportunities to extend its services beyond Europe and the Western Balkans, aiming to bring its unique public-private partnership model to emerging markets worldwide.

  2. Strengthening Partnerships: EIF plans to deepen its relationships with development banks, private investors, and impact-focused organizations. By collaborating with entities that share similar goals, EIF can increase its funding pool and leverage more expertise to better serve high-impact sectors.

  3. Emphasizing Technology and Data Analytics: As technology continues to revolutionize industries, EIF has plans to prioritize funding for tech-driven solutions that offer scalable impact. From artificial intelligence in healthcare to data analytics in environmental monitoring, EIF will likely continue to back companies on the cutting edge of technological advancement.

  4. Diversifying Impact Metrics: To improve accountability and transparency, EIF is developing new ways to measure and report its impact. These metrics will track social, environmental, and economic outcomes, allowing the fund and its stakeholders to assess the effectiveness of each investment and ensure alignment with the fund’s broader mission.

 

The Enterprise Innovation Fund embodies a pioneering approach to venture capital, where financial gains are not the sole metric of success. By investing in enterprises that promise social, environmental, and economic impact, EIF has created a model that serves both investors and society. Through its investments, EIF supports SMEs and entrepreneurs in developing innovative solutions to pressing challenges, fostering a culture of sustainability and responsible investment in the process. As EIF continues to expand, it sets a powerful example of how public and private sectors can collaborate to drive meaningful, positive change.

 

EnterpriseInnovationFund.com