Two years after shifting the focus of its impact investing program, Lumina Foundation is building partnerships that give emerging companies the benefit of the Foundation’s network—multiplying the investment’s value and creating new opportunities along the way.
John Duong, director of Lumina Impact Ventures, said the goal for launching LIV in 2015 was to concentrate on direct investments that would allow the Foundation to partner with entrepreneurs while driving social outcomes in a way that investing in funds could not.
“We value our fund investments and the continued partnership we have with them, in some cases co-investing in their portfolio companies that are well-aligned with our mission,” he said.
“Even so, we felt we needed to supplement our approach, given the short time frame for reaching the goal that drives Lumina’s work: a national postsecondary attainment rate of 60 percent by 2025.”
It’s helpful to think about the difference between investing in a fund and direct investing, Duong said.
“When you’re investing in a fund, that fund may invest in 10 to 15 companies. You’re one step removed from the entrepreneur. So it’s hard to understand exactly what product or service is out there, which is a key driver of our learning return—leveraging cross-learning opportunities between our grant-making strategies with our entrepreneurs to optimize outcome toward the 60 percent attainment goal.”
Direct investing results in closer relationships with the companies.
“They view us as a strategic investor,” Duong said. “It’s not just the money that we put into the company, but also our networks, our brand and how we can partner with them.
“That closer relationship sometimes means that other investors are catalyzed in because of the de-risking perceived with Lumina as an investor, leveraging the initial Lumina investment 10 to 20 times.”
For every dollar Lumina puts in, the Foundation tries to bring in 10 to 20 dollars of outside capital over the course of the holding period, Duong said.
One investment Lumina has made is with Viridis Learning, an early-stage tech company focused on helping community college students match their abilities with the skills being sought by employers.
“After we made the investment, we connected them to folks like City & Guilds, the Dell Foundation, Omidyar Network, the Rothschild Foundation, and Prudential, among others,” Duong said.
“These are major investors with established brands, and three of them are very seriously looking at that company. They might not have ever heard of Viridis or thought of them. But through our introduction, these are potential investment and grant dollars coming into that company.”
Lumina has also invested in Credly, a company that creates and manages digital credentials. As an example of another way Lumina partners with its investees, a $10,000 grant challenge was donated to the investee.
“They figured out a way to leverage that money beyond our expectations. They were able to partner with ACE, the American Council on Education. Now ACE is using the platform to market some of their credit-bearing courses,” Duong said.
The upshot is that Credly was able to leverage a small grant into a partnership with a major postsecondary education association, fueled by the initial collaboration between the two organizations in executing the grant challenge.
“The goal of grant-making has always been to drive positive social outcomes aligned with the mission of the Foundation. And you don’t expect anything else from that,” Duong said.
“But what if you could leverage another tool to drive that outcome and yet get a return from that capital? That’s basically what impact investing is.”
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Lumina Impact Ventures