Re-imagining impact financing with NPX Co-CEOs Lindsay Beck & Catarina Schwab
Speaker 1:0:04Note: this transcript was generated by a beta version of a transcription service. It is not precise (yet)
:0:04If you didn't need the money, would you still show up to your job.? I'm John Weems. I've spent half of my career in the corporate world and the other half in full time spiritual guidance as a pastor. I respect people of all views (unless they are totally closed minded a-holes. I am not here to tell you what to believe. I am here to encourage you to think beyond the check. Welcome to this podcast where we talk about work life and the meaning of our time here. You'll hear from a wide range of business people from multiple backgrounds.
John Weems:0:37Many business leaders talk about doing well and doing good. But my guests today have developed a groundbreaking way to do this through NPX Advisors. The for profit startup they founded together and serve as Co-CEOs. It is my honor to welcome Lindsay Beck and Catarina Schwab to Beyond the Check today.
Catarina Schwab:0:53Thanks for having us. Thank you.
John Weems:0:55So before we get into the extraordinarily compelling journeys and we will point people toward your website and other resources where they can learn more about you. Our hard core financial gurus can do as much analysis as they want. Would love to start out with something that we ask all of our guests which is how you define success and maybe Lindsay if you'd like to start.
Lindsay Beck:1:19Sure. So I thought a lot about this in preparation and. I think I define success by doing what I love the people with the people I love and intentionally not doing the rest.
Catarina Schwab:1:38And I define success as to Live Your Best Life. And by that I mean in an authentic way. Flaws and all. So best isn't perfect, but true to who you are not.
John Weems:1:52Not the curated Instagram life, everything that comes with it.
John Weems:1:56Wonderful and thank you so much for sharing those. So let's work toward how you got to that definition of success and some of the things that you've done now. People seem to enjoy hearing about back in the day so share about your first job as far back as you're willing to go.
Catarina Schwab:2:14So I actually went to boarding school during my high school years but so didn't have. Did some things at boarding school and then when I was home I would always work in the local shops whether it was a ski and sports shop or the flower shop. It was really important for my parents to instill in us the value of work and that they were giving us this incredible opportunity of having a wonderful education high school and college. But then my sister and I were then on your own and they were always there for emotional support but from day one to know that we were going to be supporting ourselves so that was that. That started early in high school but I would say the most meaningful work that I did in high school was actually a volunteer role. When I went on a service trip down to Costa Rica.
Speaker 6:3:06It was in 91 after a massive earthquake there. Actually we were supposed to go to Ecuador but there was a cholera outbreak. So then we moved to overtake Costa Rica and so we lived in you know in little huts for about 6 weeks and it was completely eye opening to me. I had done travelled to Europe that's where my family is from Sweden England but not that type of travel and just seeing how other people lived and. How they how they survived and also really lived and enjoyed themselves too was really I think was the start of my journey to try to really be eyes wide open and try to walk in people's shoes and to and to do what I always can to help.
Speaker 4:3:54How about you Lidsky.
Speaker 7:3:56So my very first job was babysitting. I'm not quite sure that was junior high high school and then my first serious job as lifeguarding. I was a swimmer growing up and so life I spent many summers lifeguarding at the pool and then in college. I ended up working at a homeless shelter which is very random going from you I don't know how I actually found this job. But in retrospect I think I rise. Introverts in a big school. I went to the University of Colorado in Boulder so I was at a big school living in a big sorority house and I was an introvert seeking refuge and a grounding experience and found it in this job at this homeless shelter that I worked every night for the four years that I was there.
Speaker 8:4:45And I think that started my path to impact in moving our lives for either view of Costa Rica or the homeless shelter experience any any moments that stand out or relationships that you built with individuals through those that helped shape you.
Speaker 7:5:04I remember meeting someone at the homeless shelter who said I just got out of jail. You know this is where my transition.
Speaker 5:5:14And I said what sent you to jail. He said murderer. And it was shocking to me that I was standing with someone who said that who had that experience who was that open about their biggest mistake and that at the end of the day we were both human and just that deep human connection that I found it to you over time. And this conversation I'm sure has a common thread throughout my life personally and professionally as I get into that authentic human connection.
Speaker 6:5:51Yes. It was really in Costa Rica was the first time where I was in a completely different community on my own and I had had you know I only had my own experience about my life. And so then to go into another community that was so different and clearly struggling but also see real joy and I think it was because of the community of family and friends. I then have now seen that when I worked at build on a global non-profit that has does international and domestic work. But internationally they're building schools so now I've had the chance to build schools in Nicaragua and Malawi and Nepal with Lindsay most recently and thought the same thing that you go to these Nicaragua I had read in the history books all about it but then you actually go and meet the people that you know lost their sons in the war and then still come together as community and can really see the good in life like it. I was a history major in college and so reading and learning and studying about different perspectives than actually feeling it live in each of those different places has been really additive to my life.
Speaker 8:7:11Having had those experiences early on and we'll work our way toward toward apx of course. How do any of those influence how you parent or how you approach exposure you provide for your children to the world.
Speaker 6:7:24I was so lucky that when I worked at Belad on my second I have a 12 and a 10 year old and my second had just been born. And so she went with me everywhere. So the domestic work is that we have after school service programs in inner city high schools and a lot of you know high school kids wouldn't talk to me wouldn't interact with me if I walked in. But if I had a cute little baby on my lap like they all wanted to hold her and so from day one the kids have been involved and you know we had all these service projects. So my son would come with me to the Boys and Girls Club and in Bayview and so it was. I loved it. Because it was again very authentic. I wasn't saying like OK now we're going to go do this this and you're going to feel this. It was like Here we are this is part of our life. And so really looking forward to actually taking our kids and I know Lindsay is to on these built on tracks and having them have that international experience but trying to do as much as possible here locally.
Speaker 7:8:24You know I think we try to do the same internally within the home and then I start I I have four children ages 4 to 12 and so my oldest has accompanied me to Africa. I'm on the board of an all girls school there called the Rwanda girls initiative and so on her 10th birthday we did a mother daughter trip.
Speaker 5:8:47And it was amazing because all of the things I want to instill in her I didn't have to say.
Speaker 4:8:55So one of the reasons we're excited to have Lindsay and Kelderman with us is they both bring such a breadth of experience. And for Catarina she brings the experience of an investment banker. Venture capital is founder fund raiser extraordinaire. Can you share a little bit about any epiphanies or learnings along the way through those experiences.
Speaker 6:9:16Yes. I will start by saying that from the beginning and still today the career that I really would love is a photographer. So if you're sitting listening to this as a high school student you know really anything is possible. And what you might do in two years five years 10 years 15 years is probably going to be wildly different than you thought. But I'm really pleased with with the different careers that I've done and they've all led me to where I am today.
Speaker 9:9:55I really consider them building blocks to allow me to do the work that I'm doing now and I can just share quickly like each.
Speaker 10:10:02Each career and there have been six careers in 20 years. I actually just gave a talk at my high school reunion and it was entitled six careers and 20 years like crazy or worth it. That conclusion is definitely worth it but.
Speaker 9:10:17So investment banking first job 17 hour days two year training program. It taught me how to work and it taught me how for profit companies access capital through IPOs mergers and acquisitions.
Speaker 10:10:31Venture capital was the next stop. I worked at a firm called Arts Alliance in London and New York and that taught me how to invest in companies and not only to invest in them and that whole process of how you choose that but then how you support their growth and it was across you know helping them with hiring and business development marketing. So really really getting it was an early stage venture firm so we got very involved. The next stop I actually went and worked at one of our portfolio companies which was a tech company and there and that was now back in the Bay Area. There I learned how hard it is to build those companies and really I went there because I had been on the investing side telling companies what to do and I hadn't actually done it myself.
Speaker 9:11:17I do think there is a benefit in seeing a lot of different companies looking at the whole portfolio you see best practices and can share learnings. It's very it's an important role as a as a venture capitalist but it was great to actually do the work. And I also learned firsthand and this is something that you know in venture capital. But this company was too early. And so you know they always say that some companies a lot there are lots of great ideas out there and some are just too early in. And so I learned that firsthand. I then went and actually started my own retail business here in Pacific Heights. That was Flicka and that was Flicka.
Speaker 10:11:57It was Swedish by background My mom born and raised in Stockholm and I always I mean I think I think maybe even before photographer I used to say I wanted to be an international business woman so I'm still one of our investments had done well while at the venture firm so I had some capital of my own capital to start my own business and I thought you know I love everything about Sweden and fashion and design. And so I met my first co-founder and Chou a Swedish woman who just graduated from Stanford Business School and we both share that same passion but also very business focused. We had an advisory board. We were very focused on having a successful retail venture which is really hard.
Speaker 9:12:40And so what I learned there is that I knew everything about the business because it was my own. I knew every number and all the spreadsheets. When I was 22 I I understood the concept but I didn't mean the numbers didn't mean as much to me. So I learned I knew everything about that business but it was exhilarating. I also learned I think this was really my first passion job I didn't think that you could connect work with your passion. And I worked 24 hours a day seven days a week that's what retail is but I loved it so it didn't feel like work. I feel the same way now. And really I have felt the same way in a career since then. So it taught me that you could combine those and then the next job which are incredibly important to what we're doing now.
Speaker 9:13:27I actually worked at a non-profit for five years as the head of development. I would not have guessed that when I was 22 that I would work at a non-profit. I had done a lot of work as a volunteer but it was really important that I did and I actually recommend that most people have that stop on their career because again I was really passionate about the mission of build on. But I really couldn't believe how I had to raise money and so I felt that pain point for months of the year I was planning a party we just talked to someone recently who said I can't believe I have to plan my own wedding every year. And that's truly what it felt like not to say that it's not great to gather your supporters and that is a real community. But if that's the only way or the dominant way to access capital it just seemed backwards to me. And so I learned how hard it is for nonprofits to raise money. And that led directly into Peake's split.
Speaker 8:14:27So Lizzie I know we have a shared experience I think of working for a tech company that didn't quite work out around that 99 2000 bubble. For those who don't know your story can you share a little bit about that and just other types of adversity that you faced early in life.
Speaker 11:14:43Sure. Absolutely. So my first run of my first jobs out of college was to start up an Internet boom. Of the. Late 90s in the Bay Area. And I think I was a very early employee. One of the first employees I started out and I watched them and I was the most junior right I was the one who were they would say run to pitch the venture capitalists today come sit at the table and don't say a word you just want to look bigger than you are. But I got to see everything. And I watched in a year and a half and wrote the business plan raised the money execute the plan and go bankrupt and grow out of business. And in doing that there was tremendous learning. And I got to edit the business finance and then then you were a businessman look like it has tremendous exposure across the board and it's I fell in love with business for sure and realized that I love the problem solving that I love breaking big ideas are big solutions down into baby steps and knowing how to use them.
Speaker 12:15:54And so the next stop for me was I was diagnosed with cancer shortly after college and during these jobs and in that journey I saw a void in the treatment of patients and a business opportunity there. And so I started a non-profit to solve that problem and so at the time young adult cancer patients were being sterilized without their knowledge and permission. So chemotherapy radiation and sometimes surgery can be sterilizing the patients weren't being told that. And more importantly a solution existed so often in the same hospital that you could freeze embryos freeze eggs or free sperm and patients weren't being told that.
Speaker 11:16:39And that was very confusing to me on a number of levels both as a patient but also from a business standpoint. I think the hospital would make more money off you if they made the referral it didn't make sense on any anyway.
Speaker 13:16:54And so having just seen the I mean the nonprofit world is you write the plan you raise the money you spend all the money and you start over right away that's what you do. And I had just seen that in the startup world. And so I wrote a business plan. I raised the money and I started a nonprofit called Fertel hope to solve that problem. And so my goal with the organization was to remove cancer as a barrier to parenthood and put the organization out of business in 10 years or less by solving two problems one and making sure that every patient was informed of their risk and then to making sure that everyone had access to treatment. So insurance coverage or financial assistance for fertility preservation and the last line of the business plan said if we are successful the market will not sustain us if the problem doesn't exist perpetuity is failure for us it means we're not solving the problem. So if we are successful the market shouldn't sustain us it should not support us. And I'm proud to say after nine years we got there and the organization was acquired and now it is standard of care to advise every patient of the risks. And if you're not advise it's malpractice. So we change that and insurance benefits have improved and there is financial assistance available so Kamens solve the problem and left.
Speaker 8:18:31Now you you both between the two of you we have more than 10 careers at least we could tally those up yet. You obviously run very fast in life when you know when adversity comes towards you. You started an organization to address the problem. Do you ever slow down. How do you stay centered. How do you find peace with so much going on and that will transition with Labov to share with Leicesters.
Speaker 9:18:55Much more about MP X you know I think we both really do. We see the benefits of slowing down and reflect and reflection. It's not easy. We have to remind each other we're continually sharing tips with each other. We often talk our conversation of late has been about how for the last couple of years even longer probably people have been running around saying like I'm so busy I'm so busy. And that's really seen as a badge of honor. And in order for us honestly to get our work done and to be great parents and wives and friends like we can't be running around just busy all the time like chickens with our heads cut off like that's not going to get us where we want to be. So we actively have removed busy from our vocabulary and even talk about how to be busy is a choice.
Speaker 9:19:51And I actually just got back from Sweden. Was sharing with Lindsay how if you told someone in Sweden that you were busy they would be perplexed and say like that's on you like you have. You have to set up your life in a system that works because really they are much more I think practical and how they see like OK there's times of day and you just need to set up a system that works for you. So you relate to to say though that that is really hard. And so we are always working on it with each other but we prioritize our health and doing exercise. I love doing yoga and have found that it's not only physical which is obviously great but also mental and a lot of. And I think increasingly in yoga classes now they're sharing excerpts from books or poems and are saying. And it's often like what has been happening that week so I can bring it back into our work or into raising children and so it's been I wish I did it more I probably do it a few times a week but I think it's an incredible practice to have in your life.
Speaker 8:21:01It was you. You mentioned meditation on your ACSA I'd encourage our listeners to go to MP x advisers dot com and Elermore but you'd mentioned meditation as a passion of yours. Yes so it has become a daily practice for me.
Speaker 14:21:15For about the last five years. I'm not an advisor and I say a wise man. Right after graduating from business school and he it was shocking to me. He was as finance executive. One of the pioneers of private equity we had this amazing lunch where we were really finance and business focus and at the end he turned to me and said Your energy is all off. I couldn't believe those words came out of his mouth and I was like What do you mean. And he said I can just feel it. You need to start meditating here's a certain type you need to do.
Speaker 12:21:55And I sort of blew it off and then as happens in life three or four people over several months suggested that same type of meditation to me and different types of contacts and so I thought well I better give this a try.
Speaker 5:22:10What type of meditation did you suggest Transcendental Meditation T.N. and so as you may know that you have to take a class and learn how to do it and get a mantra. And so I did. And I had tried other types of meditations I had read books and I always felt like I was failing like can't call my mind and I was really frustrated because I couldn't.
Speaker 12:22:32And the whole situation was making me more frustrated and more anxious than I've wanted it to and I thought meditation was first. And with T.M. it just referred me to raise someone described it to me was. If you imagine the ocean. And you're at the deepest part of the sea and there is a huge storm and there are a hundred foot swells at the top at the very bottom the deepest point in the same moment in the same day the same place of the ocean it's calm.
Speaker 14:23:06And that that is the same with your mind and you live in the storm any moment even when you feel like you're in the highest swell. The crazy storm that calm quiet place that is at the bottom of the sea is also in your mind and T.M. is a way to get you there fast. And I'm very Experion drawn so there's a lot that I want to believe and I felt like I was trying to believe that meditation would work until I did. I almost had two trains of thought in my head I thought this is crazy. This isn't going to work. I don't like this mantra. Why am I doing this. And then all of a sudden I was in a quiet place. And I experienced it and that was it. I was hooked. So for me everyday to go to that quiet place for 20 minutes a day has a positive experience and I can tell the difference in my children my husband maybe even Kadry. I can tell the days when I meditate versus what I don't like. It.
Speaker 15:24:08Changes in my demeanor for the day makes me sharper more focused more efficient and calmer and maybe lighter. And so. I it's something it's very easy for me to do everyday because I see and feel and experience the benefits well and to have that pointed out initially by private equity that is not where you would expect.
Speaker 8:24:34I know that you never know who out there maybe sensing your energy beautiful any any exposure to spiritual frameworks or religion growing up that informed you good or bad.
Speaker 9:24:51I was raised Lutheran all Swedes. I think a body 9 percent who threatened my dad was Church of England. Interestingly my parents did not attend church with us. They did on Easter and Christmas and it was very much our education and it was a wonderful church and it was really the specific church and this specific pastor I think we read to kill a mockingbird at my confirmation class. And I think it it honestly was you know part of the reason that I then studied history in college because I'd like the religious history. I'm not currently going to church I would say in my church is probably going to yoga or going on these tracks with belt on or doing service. And I think that what I what I kind of brought from the religious experience and what I'm talking about now my new church is more about community coming together and helping each other and and again just being bigger than yourself and so that's that's been my experience.
Speaker 12:26:04I grew up daughter of two divorced parents who both were raised Catholic including going to Catholic school and being hit by the nuns at the ruler you know in school and they were naughty and so they were like rebelling against all of that and chose to raise their children not with no religion no religious exposure and so I had to sort of find my own spiritual an unfaithful path along the way. And it's it's an art gallery. I haven't found that necessarily in a church with an affiliation. But do you feel very spiritual but in kind of how you ask the question around are there any frameworks that you found useful. One book that I read had a really profound effect on me which was the surrender experiments. And I feel in my journey with cancer with infertility with motherhood with business. I've had to surrender to lots. And I used to see that as weak or helpless. And that book gave me a framework to find power and strength in surrendering has been really helpful.
Speaker 8:27:23Well if you listeners if you were in the room here there is good energy there is selflessness and Grace coming in spades from lending Catarina. Which leads us to talk to NPR X.. You both bring incredible credentials you have done many things why NPR acts and then we'll get through that too. What is next.
Speaker 9:27:43I think we're going to we can answer that in different ways. But I wanted to just touch on that. Why. And Piak from me right now is very much born out of my experience that built on. And I think it's helpful to even go back to investment banking I chose investment banking because I was I was joking that I wanted to be a photographer. Then I was met with. OK well you're going to support yourself and you want to live in a city and have an apartment. And how is that going to pay the bill it became very clear that I needed to get a job that could afford the life that I wanted at that point. And so I made that decision. And then when I left and actually moved to Europe to then join the venture capital firm I I took probably about three months to really figure out what I wanted to do next and I was really just thinking in like five or maybe even less like three year increments at that point.
Speaker 9:28:38And I've always done that between Currier's. So I think it can be very daunting to try to see much beyond like a five year period. And to really look at what you've learned from your past job or job is what you can build on what you're so curious about. I mean there was there was I was so clear and I think this is how we met. A friend introduced us because I said that I kept saying people thought I would go work at another non-profit. I said I'm not going to work at another nonprofit until we figure out how they can raise capital and for it to be connected to impact and really unlock all this impact data because I was trying to run around figuring out best practices in the nonprofit sector and figuring out partnerships and there was just no structure for that. So I was very clear on what I wanted to do next so that someone said Wait Lindsey's talking about the same thing. You should meet so why MP X is really trying to solve the problem of how nonprofits raise money but it was it was you know I can ask like why did I do the retail why did I do that. There was always sort of a set of. It was a situation that then I really took the time to figure out so that I could fully dive in.
Speaker 15:29:53LINDSAY I think for me there are two answers to the why and extreme wrong is sort of the macro it gets me out of bed in the morning and the other is the micro and the very practical. And so. The macro is because I want to solve this problem and the way we fund nonprofits is broken and it is holding back our nonprofits and it is at the cost of human lives and the environment. It's a multitrillion dollar industry.
Speaker 11:30:32And it's inefficient and money is being wasted and to be clear when I say that nonprofits are not wasting the money they have to raise money in an inefficient way. Hosting a dealer has a cost of capital of 50 percent. No for profit company raises money and 50 percent cost of capital. And so in order to unlock the true potential of non profits and let them empower them to do the work the system needs to be fixed.
Speaker 15:31:01And so that to back up a little bit up front I started my nonprofit Fertel hope. I saw a problem. I saw a solution. And every day that I didn't fix it I knew that cancer patients were being sterilized when they could have.
Speaker 11:31:22Gone downstairs in the same hospital their sperm and I couldn't live with myself not sharing that secret and solving that problem. It was not nothing new. Even you didn't invent it. We just needed to change people's behavior. And when I think about. Why and yes the same thing. So I've lived this problem. You know I ran a nonprofit for 10 years. I experienced the broken system. And we have now developed a new solution. So here again nothing Noonans to be treated. There's a problem. There are new better ways and we just need to change people's behavior to get there. And the idea of working on something else leave you with that feeling of life every day nonprofits cannot achieve their full potential. And the people who are benefiting cannot get the most robust services because we're funding them wrong. And again I feel like I know the secret.
Speaker 15:32:20Many people haven't worked in a non-profit or don't know the intricate details of that. And I know there is a better way and I feel that drive to change and I guess that at the micro level it's very practical for right. And X choosing to be an entrepreneur and choosing to do it with an amazing co-founder. Those are birth to deliberate choices and they allow me to work at my highest level professionally. And they also allow me to the whole person sir. To be and President Ngige mother with my four children to be have a focus on health and fitness and to be an engaged wife and family member.
Speaker 12:33:18The flexibility that comes from being an entrepreneur I can work really hard but I can work from my own schedule and serve my secret sauce with four kids.
Speaker 15:33:27I can grow to ballet at 4:00 in the afternoon because I don't have to have face time in an office. And they really control that. And so. The practical realities also are really for me as an individual.
Speaker 8:33:45So in our previous episode people had a chance to hear from the last mile and we'll talk more about that mama. But for those who are just learning about apx walk us a little bit through the model and I know how does it how does it work. What do returns look like somebody out there with access to strong capital who funds other traditional profits. What do they need to know.
Speaker 16:34:09Yeah we can we can maybe tag team on this but so our vision is to expand how nonprofits are funded and it comes directly out of our experience of how difficult it is for nonprofits to access capital. And so we developed a new financial product called the impact security. We wrote a white paper on it a few years ago and the impact security is a nonprofit government supernational issued FCC exempt debt security. Those are the financial wonky terms.
Speaker 17:34:46But what it what it does is it brings together donors and investors to fund nonprofits based on their impact.
Speaker 13:34:57I would say that as he was working before they're re re funded nonprofits is really undermining the causes we law. In fact we want them to have. And there is one fundamental flaw and that is that money is not linked with impact performance. And so whether you donate 10 dollars or 10 million dollars you have one tool in your toolkit.
Speaker 15:35:23And that is to do varying levels of due diligence donate. And the hope for Imber. And that is a problem. So we have developed a new way to link Capral with impact performance and believe that in that small change and there are many ways to do that the way we've developed is only one. But we have to fix that fundamental flaw. Money has to follow performance. One example to bring that to life is that in 1970 the top five nonprofits in the U.S.. Are still the top five nonprofits today. If you compare that with the S&P 500 it's not the case right. We do not have the creative destruction that comes from. Knowing having robust information flow around what works and what doesn't and funding accordingly and we need to bring that transparency accountability and free market principles to the non-profit sector.
Speaker 8:36:36So using the last mile example one of you might change a little bit for those if you didn't get a chance to hear Chris and Beverly and Kenyata please go back and take a listen. You can learn in more depth you will among other things they are not traditional nonprofit leaders. They've started many successful businesses. But tell us a little bit what the last mile is and how the impacts impacts model has been deployed there.
Speaker 9:36:59We actually met Beverly briefly through just in passing and then she came to me and held a nonprofit for him a few years ago and I remember her sitting in the front row with a big grin on her face and then she wrote us an email afterwards and she said Wow you have completely reinvented fundraising for nonprofits. So that was that was the start of our relationship with Chris and Beverly and they are they are bold. They are our first deal our first nonprofit and the impact security deal. They are bold in the work that they're trying to do. They're teaching computer coding to inmates as a form of workforce development and what they what the deal that just launched the first Ampex security deal in May of this year was raising capital to fund the first ever web development shop inside a prison it's inside San Quentin where Lindsay and I you can see us often these days.
Speaker 9:37:58That's a whole other topic to discuss but highly recommend for anyone if you have the opportunity to go into prison to do that. So they said the details of the deal are they real. They they built to use the proceeds. We worked with them. They needed eight hundred thousand dollars to prove if there. If this model would work. And so they issue that impacts security to investors. There are 11 investors and this deal led by Omidyar Network that 800. So the investors by 800000. They then on day one put that capital into the last mile and the last mile gets to work to try to achieve impact. At the same time we've raised nine hundred thousand dollars in a donor fund from 16 donors. And that that Capitol sits there and as impact is achieved it's measured on an annual basis by an outside auditor the corresponding it's actually hours worked in the dev shop so it's fifty dollars per hours worked that's all you know work that we've we've done to get to those numbers. But that corresponding dollar amount that is deployed from the donor fund to the last mile an hour to the investors. So essentially the nonprofit is issuing performance based debt that is repaid over time from donations. So obviously those 800000 from the investors and 900000 from donors that difference then that hundred thousand is the potential financial return for investors for putting that upfront risk capital to work.
Speaker 8:39:39And in terms of return. What what ranges are investors looking up.
Speaker 12:39:45So this first had a maximum return of 12 and a half percent but 100 percent risk exposure. And it's really important to note that that. That return doesn't come from paying extra. So the donors aren't paying more for impact they're paying for more impact. So the only way investors get repaid and debt that 12 and a half percent is if more in fact happens. So everything is really explicitly aligned around impact and we have lost in the shoes of donors nonprofit executives and investors understand intimately they're paying plans into a redesign of this program and this model to really have a unified opposition force.
Speaker 8:40:37So obviously a prominent and incredibly impactful deal with the last mile. How big is your vision for impact. I don't want to put numbers in your mouth. I've heard big numbers but what do you see. And how can our listeners and others help get there and take advantage of what you're creating.
Speaker 9:40:53Yeah I'll just say a little bit more about the last mile deal because it was a historic transaction in that it was the first we joke that I mean you heard we have 11 investors and 16 donors. It would have been simpler had there been one investor and one donor. But actually we're thrilled at how it turned out because there are now 27 ambassadors for this new model and we really call them the pioneers. There are a lot of people that say they're pioneers these these are pioneers and they include Richard Branson's Virgin Unite San Francisco Foundation giving pledge members Gordon and Luli Gund Omidyar Network former CEO of the New York Stock Exchange Duncan Niederauer former CEO Charles Schwab David Pottruck. So it's an incredibly sophisticated group of donors and investors who chose to try this model. I just think that's important to note that that group of people and the other thing I would add and we always forget to hire if this is really important is that.
Speaker 12:42:01We use the term donor and investor I strip mine a lot of people conflate the two. A donor is not an investor investor is not a donor. Yes. And so when we say don't remain someone who donates for a write off. Yes and when we say investor we mean someone who wants a financial return. A lot of people will say oh really bringing together donors and investors too.
Speaker 8:42:24But they mean they all donate so break it down predicative somebody is participating in the last mile deal as a donor. They're transferring funds to last mile or not to. OK.
Speaker 16:42:35The investors are coming OK and the investors put their capital into the nonprofit. OK. All right. With the potential return coming from the donors. So our big vision it's big and it's simple and it's kind of where we started with Catarina said around our vision is to transform how nonprofits are funded and.
Speaker 11:43:00We are ready to making that happen. But there are many paths to getting there.
Speaker 15:43:05And as any entrepreneurs are exploring many of those paths to see what the world is ready for and in what order so that could practically look very different over the years but we really dream of an efficient capital market that funds nonprofits in a way that allows them to achieve their full potential.
Speaker 9:43:31And specifically what we're working on right now post impact security is talking to donors and either talking directly to them or we meet with a lot of private wealth advisors who their clients are donors. We're talking to them about Okay think about a new better way to donate. And so instead of doing maybe it's doing one deal to benefit one nonprofit.
Speaker 16:43:59But we really see that there are urgent issues right up right in front of us. Homelessness in San Francisco climate change reproductive rights. Access to education. I mean the list goes on. And so we've seen in the marketplace a number of donor funds. There are 35 donor funds out there. And all that means is is donors coming together to pool their capital and then try to and are usually around one issue area. But it's the same traditional model of varying levels of due diligence donee and hope for impact. And we think that we're in such an urgent State right now with so many of these issues that we're talking to them about let's create a donor fund that say 100 million education fund and instead of doing it the old way let's deploy that capital through impact security where donations don't leave unless and fight happens.
Speaker 16:44:52But your pledge catalyzes a whole new pot of investment capital. It sets a nonprofit up for success because now they'll have the Capitol that they have determined they need over a longer timeline. A year is really difficult to get anything done and that's really the timeline in in fundraising right now. So more capital over longer periods of time. And most importantly it's focused on impact so everyone can be working towards the same goals. So donor funds is what we're dreaming of right now and having lots of great conversations with again more pioneers because this is still relatively new. But getting a lot of traction.
Speaker 8:45:34In any surprises any pushback and people who just you know what do you say to people who just don't get it. So.
Speaker 18:45:45There's a lot of there's a lot of noise out there. So it's hard to get it. I think. It's rising to me.
Speaker 13:46:00But actually also is what happened in my workout for all hope is that behavior change is hard. No matter what industry you are and how great your product and solution is. And so what we've found is really are we have three customers donors investors and nonprofits and two of our customers don't have to change their behavior in one does. And so. But if you look on paper. The biggest value proposition is for the one that has to change their behavior. So on paper you would think donors would love this. Nonprofits do not want to be measured on impact as what people are used to say to us and investors why would they want to take on this risk. And what we found in practical. And the practical world is the opposite. So investors love these deals because they know how that impacts they take risk all the time they're compensated for that risk.
Speaker 13:47:04They have processes and procedures in place to bring and deal flow of those details and make decisions. And this is just another deal in that mousetrap. And it's very easy nonprofits know how to raise money. Right. And this is just another way to raise money and of course they want access to more money. The rich donors. This really is a way to make a success based donation that is different. You are. Only donating if in fact that sort of impact does not happen. You keep all of your money and you redeploy it elsewhere. That is an unparallel option for a donor but it's very different than today's option which is write a check and forget about it. And so that mindset shift and that behavior change we have found any behavior change requires education socializing the idea.
Speaker 12:48:09Execution trust building it together as we go and so that's been an interesting journey.
Speaker 8:48:18What profile are parameters for some of listening who may want to be an investor or a donor or a nonprofit who's interested in large scale partnership. What parameters are you looking at at this point.
Speaker 9:48:31I would say so as Lindsay said all three are our customers. But really right now we are focused on securing the donors. AKA securing the capital and then when we know who the donors are what the issue area then we will need to do a landscape analysis and figure out who the nonprofits are that we should start doing due diligence and figure out if we can structure an impact security for them. And then once we do that then we need to secure investors. And so. Even though right now we are laser focused on donors. We are still meeting with nonprofits and investors to keep them up to date. A good example with nonprofits there they are so hungry for this and and really see this as another tool in their development toolbox that they hear us that we need the donor capital there because if the nonprofit is our client which the last mile was you can see how pretty quickly we would become their fundraising arm and it would it would just be a longer a longer path.
Speaker 9:49:43And so so a lot a lot of the nonprofits have started thinking OK well we understand that you need the donors. We have some donors that are innovative and might like this and our peer organizations they also have some donors so maybe we'll bring the donors to you when we say Great so that. So we continue talking to nonprofits similarly with investors. We don't want to structure deals that investors don't want to buy. So we are continually you know over the years when we've worked on different deals shown them the deals gotten their feedback as Lindsey said We are committed to our great vision but not to how it's done. We're eyes wide open that we can tweak this and you know wanting that feedback. I have to say though having done the first impact security now in May with this group you know with many are doing their due diligence and are legal.
Speaker 9:50:36Now we have a standardized financial product because before that we thought oh we can tweak this product maybe this isn't what the market needs but they did it was the right product. We now have standardized templates for the all the legal contracts for investors and donors and that feels really good because we we now that set we don't need to recreate the wheel so we have that that is the template. And now now we really just have to engage donors who are talking about this and are excited. So we're we're optimistic. Yes and I would say for the listeners.
Speaker 12:51:14Probably falls into two camps. One is you are looking to make big banks effect measurable change and catalyze more capital into areas that you're passionate about and really want to act now and implement innovative philanthropic strategy. We should talk. And everyone else the messages sort of hold tight as we find and be working with those people we will then have to present to you to purchase at varying levels. But right now we are laser focused on securing major donors who want to.
Speaker 15:52:01Come alongside us and pioneer new way.
Speaker 8:52:05So I have heard consistently throughout this conversation does not sound like work and life are some compartmentalized pieces at odds with each other. Is that accurate anything for those who maybe feel that way who feel like work and life are these compartmentalize segments. What would you say to them through the experience of what you're what you already have built and what you're continuing to build here.
Speaker 10:52:28It's really interesting because Lindsay I think it's really good to compartmentalize like this is my work. These are my working hours these are my home hours.
Speaker 9:52:36Lindsay has has double as many children as I do. She has been four and she is really good at creating systems and setting boundaries. I've learned a lot from her. We're looking at each other now because even if you set up the best system and are really good at that like when you're an entrepreneur it's it's in your thoughts all the time and we're connected even when we're not right next to each other we're talking we're always you know we feel so passionate about what we're doing. But I do think it really helps to separate work and life and so that you can really show up and be good at that. But I wanted a little bit related to this question but I wanted to tell your listeners that if you're lucky to find someone to do that passionate work with like there's so many horror stories about partnerships that have gone wrong and are as I think is an example of one that's gone really right and we couldn't we couldn't do this without each other. We established early on our own superpowers and we helped each other identify that sometimes you don't even know and it's evolved over time and we take on something that Lindsay's are really good at.
Speaker 10:53:47Now I'm trying to do more of and vice versa. And so I think it also allows that when one person goes on vacation the other one is right there to take over. So that we can be really present in our home life so I think finding a business partner and we purposely call ourselves coach CEOs. It's a funny story actually when we were deciding who should be CEO. We were calling the table. Do you think you'd be good at it. I know you'd be good at it and we would then have like for these reasons I think you should be.
Speaker 9:54:16And then we thought you know what together we are the right CEO for PIAC.
Catarina Schwab:54:20So if you can find a great business partner do it!
:54:26I think so many people look at what you're seeing over her life her passion and her career. That decision is binary and I think you have to do one or the other. And I think what you're saying is we found a way to do both. And I think. There are many ways to do that and a lot of what people will think Gosh I'm in this finance job. It's not like it's my passion so I want to grow a nonprofit. And that seems too big of a leap to make. But I see it very differently and I think a few themes through my life that come together in this are one to really have a strong why that motivates you. So what do you want to do. Probably if you want to have more impact than you're currently having.
Speaker 12:55:17Know that why is it maybe you don't want to have impact maybe you want to be more creative than you currently are. What is your why. And then to be very clear about your practical needs. You're what you need at 22 versus single versus 45 with a family might be very different both in terms of structure and compensation etc. But be very clear on that and then look at well what are all the ways to achieve that. So again you could say our goal is to transform how impact is fine. Well Virgin that one why we've chosen entrepreneurship and we've chosen the risks and rewards and the flexibility that come with that. That decision might be awful for other people but you could achieve that role in many other ways so you could be a philanthropic adviser a giant bet. And have infrastructure and benefits and compensation that Roath for you and have that you could work on impact investing firm. You could be a program officer at a foundation and control how capital goes out. And try and make those incremental changes that you want to see. So I think instead of seeing a binary launch or the other and.
Speaker 19:56:35Gosh how do I get there. It seems like such a leap is to really hone in on. What you.
Speaker 20:56:42Want to accomplish and all the ways that you can get there. And. I don't know that we've ever seen scenarios where.
Speaker 19:56:49There isn't one that marries the two. You know. You really can buy. That. Ability to do both or see a path to get. To get you there. It's less scary doesn't seem like a big challenge.
Speaker 3:57:02Next year. So we'll close there encouraging our listeners to consider what is your strong why again. Lindsay and Catarina, thank you for joining me here today and to our listeners please continue to keep living beyond the check. Thank you.