Abstract
In January 2011, the U.S. Small Business Administration (SBA) announced its one billion dollar Impact Investment Initiative, which will match private capital raised by investment funds that focus explicitly on making impact-oriented investments in small businesses. Reaction to the announcement has been a combination of excitement and skepticism, and it has raised myriad questions: What brings SBA to the impact investing space? Why now? How is it going to work? How does SBA fit into this space? This essay aims to answer those questions. We start by recognizing that SBA is a relative newcomer to the impact investing space and that it approaches this new investment realm from a very different starting point than the organizations that have been studying and investing in this space for years. SBA has broad experience with entrepreneurs and small businesses, and with investment funds and capital markets. This experience has led to three key conclusions: • There are meaningful opportunities and untapped potential in domestic impact investing. These opportunities exist over and above traditional areas of impact investing, such as microfinance or community development finance— that is, in the private equity industry. • The current economic environment creates both a great need for more impact investment and a formidable set of challenges to making it happen. • Finally, public-private partnerships can play a critical role in catalyzing investment, but creating these partnerships will require entrepreneurial and innovative approaches to how we attempt to stimulate more entrepreneurship and innovation.
Highlights
In January 2011, the U.S Small Business Administration (SBA) announced its one billion dollar Impact Investment Initiative, which will match private capital raised by investment funds that focus explicitly on making impact-oriented investments in small businesses
Small businesses employ over 50 percent of U.S workers, and they generate the bulk of the net new jobs created in the economy.[1]
One study by the SBA Office of Advocacy found that small firms produced 13 to 14 times more patents per employee than large firms, and these patents were cited in applications more often than average patents.[3]
Summary
In January 2011, the U.S Small Business Administration (SBA) announced its one billion dollar Impact Investment Initiative, which will match private capital raised by investment funds that focus explicitly on making impact-oriented investments in small businesses. Reaction to the announcement has been a combination of excitement and skepticism, and it has raised myriad questions: What brings SBA to the impact investing space? Prior to joining the SBA Greene was the founder and CEO of Away.com, an online travel company that he sold to Orbitz. He was a cofounder of Rock Creek Ventures and LaunchBox Digital, a seed-stage investment firm in Washington, D.C. Previously, Greene was a management consultant with McKinsey and Co
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