The purpose of this study is to provide insights on the case study titled “DBL Partners: Double Bottom Line Venture Capital” by Shawn Cole, Mark Kramer, and Tony He from the Harvard Business School.

Background

The company was formed by Nancy Pfund, who was contemplating her next step in the venture capital. The initials of the DBL stood for “double bottom line.” The first bottom line was financial performance, while the other encompassed the social, environmental and economic impacts of the funds invested in various parts of the globe. The company was one of the biggest impact investing firms in the world. Among the companies in the investment portfolio of the company included Tesla Motors, Pandora, and Solar City. Through selecting and nurturing portfolio companies, Pfund and her colleagues hoped to generate profits. Additionally, the partners at the DBL firm believed that they could adopted a double tactical approach to the investment markets by pursuing high net worth investments and driving constructive social change at the same time. Pfund was keen to expand the investment portfolio for DBL having raised about $400 million through a fundraiser in June 2015.

The investment portfolio for the company would be guided by the desire to institute social change while making the best from the economic incentives availed in the economy. One of the investment portfolios the company considered investing in was a solar powered business in Tanzania. DBL would consider investing in a company by the name Off Grid energy solutions located in the mainland Tanzania. The service was to sell energy to consumers who would them pay using a mobile transfer platform. Various uncertainties for the emerging markets were evident, for example, whether the economic times in the country were stable enough to guarantee a return on investment.  The investment company also considered the growth opportunities for the sector. Such investment opportunities had worked out in the past, but it was impossible to determine if the move would be a success in this particular undertaking. However, the DBL Company banked on its previous experience working with start-up energy ventures to push through the investment opportunity successfully.

Accumulating Funds

Nancy Pfund engaged the help of Mike Dorsey, a former classmate and colleague at Hambrecht & Quist to help her raise funds for the Bay Area Equity Fund. The fund was dedicated to helping the disadvantaged areas in the United States improve their economies through creating new jobs and attracting start-ups to the region. Together, they managed to garner early donations from the Ford Foundation amounting to about $2 million. The investment commitments for Pfund and her team accumulated to $75 million at the end of 2004. The team also adopted a laid-back approach when selling the concept of impact investing to the limited capital prospective customers. At the time, the construct of impact investment was widely misconstrued as sacrificing the financial returns of the potential investors.

The Bay Area Equity Fund headed by Nancy Pfund ultimately invested in eighteen companies. The majority of these companies were in the solar energy, sustainability, and healthcare sectors. The organization managed to generate over 15000 job opportunities within the short period; it made the decision to indulge in impact investing. Additionally, it helped secure the investments connecting its portfolio companies with the local community. For example, they helped build knowledge base of the low-income neighbourhoods by teaching the residents there to adopt financial literacy.

Building the Portfolio

The DBL organization reviewed over 600 potential investment opportunities by the end of 2014. Almost two-thirds of them involved energy and sustainability, while the other one-third involved organizations dealing with information technology. By this time, DBL enjoyed better empathy from business firms. Many firms were keen to align their business ventures with a partner who was oriented towards achieving a particular mission. Consequently, many firms were eager to work with DBL engaged them because they were keen to make a difference within the social circles and build great companies. At the same time, the increased awareness and acceptance of the business model championed by DBL attracted a significant number of women investors. By December 2015, 17% of the portfolios in the DBL II were wither funded or led by the female gender. Nonetheless, the specific impact programs which the company invested depended on the donor companies.

Advocacy and Metrics: DBL Competitive Strategy

The Pfund team was keen to grow the impact investment community. As the company had been in existence for a significant number of years, it has successfully formed a number of impact investment coalitions. Therefore, DBL was one of the founder members of the global impact investment network, an alliance formed to build a network of investors to create awareness and promote the idea of impact investment.  Consequently, the organization developed the Global Impact Investment Network (GIIN) and used the coalition to build networks and build infrastructure for impact investments. Also, the two entities collaborated to develop a metrics methodology and measuring the investment opportunity in the Low-Income Areas. Therefore, DBL acted on a temporary advisory capacity for other small and medium-term companies as they developed or transitioned to impact funding. It is along this vein that the DBL company identified the Off-Grid business operating in Tanzania and subsequently decided to undertake the investment opportunity.