Social Capital Partners launches new fund to combat rising wealth inequality and increase business ownership

Social Capital Partners (SCP) has launched a new fund to combat rising wealth inequality and business ownership concentration. 

Modest in size, but ambitious in scope, The Ownership Fund will invest $2 million on behalf of SCP’s partners using an “ownership lens” to increase economic opportunity for people facing systemic barriers. Its end goal is to create sustainable asset ownership for those who wouldn’t otherwise have access to capital.

The newly announced fund has already made investments in eight organizations, including Indiegraf, Apis & Heritage Capital Partners and Blackstar Stability. It hopes to invest in a total of 20 businesses over the next 18 months.

Jon Shell, SCP partner and managing director, said the goal is to create a demonstration model that distributes property and business ownership in a broader context. “The idea behind ownership lens investing comes from asking, ‘what are we trying to attack here?’ And I think what we’re all trying to attack is the concentration of ownership that we see.”

He pointed to Indiegraf — a platform enabling journalists to self-publish and create revenue generating publications with little up-front investment — an example of an ownership driven business.

“You can think about it kind of like a franchise,” said Shell. “Franchises normally require a certain franchise fee up-front that limits people’s access to ownership. But if you had a franchise that didn’t require capital up-front, and was more revenue based, that expands the ability of people to be owners,” he said.

As an “impact first organization,” SCP is willing to take larger risks in exchange for the possibility of outsized social returns such as employee ownership, Shell said. The fund is open to loans, as well as direct equity investments, if companies meet certain criteria.

SCP is looking for ideas that are scalable or replicable, he said, but added the search for scalability comes with the awareness that some issues require “tailor-made” solutions to address localized or industry-specific issues. Investees also need to present ideas that lower barriers to ownership, such as up-front cash payments, credit, financial sophistication and systemic sexism and racism.

One of the organizations The Ownership Fund hopes to invest with in the near future is the San Diego-based Mission Driven Finance.

“There’s really only two ways to break intergenerational cycles of poverty through asset ownership,” said David Lynn, co-founder and CEO of Mission Driven Finance. “One is home ownership — which has certainly been a big focus over many years — and the other is business ownership.”

He said the so-called “silver tsunami” presents a real opportunity to shift wealth and reduce inequity through transfers of ownership. “You have a lot of retiring business owners that may want to leave a legacy in a different way or support employees that have been with them for many years. And so how do you do that without just selling out to a bigger company?”

Shifting wealth takes an emotional desire on the part of business owners, as well as effort, planning and capital, Lynn said. And while more businesses are considering moving to employee ownership than ever before, the overall number making the transition continues to represent a “drop in the bucket.”

Shell added financial inequality can’t be solved by addressing income disparity alone. “You have to go after wealth inequality, which means going after ownership,” he said. “We don’t see enough solutions out there to broadly distribute ownership.”

Going deeper into the fund’s underlying philosophy, Shell said one has to look at the issue of competition more generally and the problems associated with having too much ownership consolidated in too few hands, such as wealth inequality.

“And that’s why we think it’s really important that the idea of ownership lending, ownership investing, becomes a much bigger part of impact investing overall,” he said.

Most of The Ownership Fund’s investments will range from $25,000 to $100,000. And while SCP is looking to make a return on its investments, they don’t have any specific targets.

“Some of our investments are debt, some are equity, some of our investments are a combination. So it’s hard to have a target,” he said. “But we do expect a return on these investments, however, we are willing to trade-off return for higher impact.”

The fund will not deploy capital in the form of grants or donations, he said. But it will work with potential investees to structure investments in ways that meet the objectives of all stakeholders.

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