A new impact investing platform is launching this week and its first offering—a financially self-sufficient global nonprofit—signals the type of innovative social enterprises it aims to help.
The funding platform, SVX.US, is a three-way collaboration between Cutting Edge Capital, the Bay Area-based community capital consulting firm, Bequia Securities, a broker-dealer, and SVX Canada, an impact investing platform based in Toronto. The new site will handle a broad range of offering types, from Regulation Crowdfunding and Regulation A under the JOBS Act to private placements. As a broker-dealer, SVX.US will curate and vet offerings with an eye toward financial strength as well as social impact and practices.
The first issuer on the platform is TechSoup, a 30-year old nonprofit that that provides discounted software, hardware and IT services to validated nonprofits across the globe (pictured above). The San Francisco-based organization is looking to raise $11.5 million via a Regulation A offering to help it expand and scale its impact.
TechSoup is a rare nonprofit to seek investment capital and is believed to be the first nonprofit qualified by the SEC to conduct a Reg A Tier 2 offering. The organization generates 95% of its operating budget from earned revenue, which totaled about $32 million in its most recent fiscal year.
With additional capital, TechSoup sees an opportunity to reach more nonprofits, especially as they grapple with fast-changing technology such as artificial intelligence, blockchain and cloud computing.
“We’ve distributed around $11 billion worth of resources to 1.1 million NGOs,” says Rebecca Masisak, TechSoup’s CEO. “But there are 12 million out there and instead of closing the gap, they are falling further behind.” The nonprofit has also cultivated a global network of partners and service providers to support civil society.
When she set out to raise money, Masisak knew little about securities laws. But she was determined to raise money in a way that aligned with the organization’s values. Just as TechSoup democratizes access to technology, could it raise money in a more inclusive way? Could it move beyond the dominant model (and treadmill) of grant funding for nonprofits?
“Marketplaces must assume a new role today, one that stewards and curates offerings that connect to a healthier future – all of our futures.” – John Katovich
As she asked around, Masisak was steered to John Katovich of Cutting Edge Capital, and a match was born. “I felt like it had a cultural fit with how we think about the work that we do,” says Masisak of the direct public offering approach. “It allows us to engage our community and make our work more impactful. I’m looking forward to having people understand us better and have an opportunity to join in the process.”
TechSoup is offering three tiers of investments to accommodate different types of investors and risk profiles: a community investment note with a $50 minimum investment that is open to all investors; a patient capital note with a $2,500 minimum also open to all investors; and a risk capital note with a $50,000 minimum for accredited or institutional investors. The 5-year notes carry interest rates from 2% for the community note to 5% for the risk capital note.
“Launching with TechSoup is an ideal way to showcase what the SVX.US platform represents—a capital market that values fairness, justice, and community as equal to returns received,” said John Katovich, who founded Cutting Edge Capital after serving as general counsel for the Pacific and Boston Stock Exchanges. “Marketplaces must assume a new role today, one that stewards and curates offerings that connect to a healthier future – all of our futures.”
Underscoring that shift, SVX.US is planning an opening ceremony on the steps of the old Pacific Stock Exchange (now a health club) in San Francisco on Thursday morning.
The SVX partners have other social ventures in the pipeline, but they are deliberately taking it slow—especially in light of high profile impact investing implosions like ImpactUS, an investment platform launched with backing from major foundations.
“We want to take a step-wise approach,” says Adam Spence, the founder and CEO of SVX Canada. “We’re not looking for a huge bang, we want to be modest and manage growth and expectations accordingly.”
Indeed, SVX.US has been years in the making. Katovich and Spence have discussed a collaboration for several years, but only recently did the right pieces, including the partnership with Bequia, fall into place. “No one can accuse of us moving fast,” jokes Katovich.
Building on Experience
SVX.US will build on the experience and insights of SVX Canada, itself a partnership of MaRS, TMX Group (which owns the Toronto Stock Exchange) and the Government of Ontario. Since its official launch in 2013, SVX—which stands for Social Venture Connection—has raised more than $100 million in financing to date for more than 200 social ventures, including Lucky Iron Fish, Windmill Microlending, and First Nations’ Bank of Canada. “We found that to be a successful platform intermediary, you need to build a range of services from education all the way to management,” says Spence.
SVX.US plans an end-to-end service, from curating issuers to helping them build out investment campaigns and materials, comply with regulations and market the deals, including via in-person roadshows. It will also manage the transaction process, subscription agreements and post-investment activity.
Spence also sees an opportunity for cross-border collaboration. Canadian companies regularly go south of the border to tap into the larger U.S. capital markets, he notes. “We can open that channel up. We’ll look at our partners in Mexico, the U.S. and Canada… how do we create cooperation and better capital flow? Sharing across borders and the idea of learning from one another—we’re really excited about that.”