Commons Capital: Investing With A Conscience
By Michelle Tsai, VentureWire, April 2, 2001

Most venture capital firms tout a bottom-line of good returns and business-building, but Commons Capital doesn't think that's enough. The Boston venture capital firm, which just announced its first close on $12 million, has a "double-bottom-line" of seeking financial returns with positive social and environmental impact, according to fund manager William
Osborn.

Commons Capital will target companies that address environmental, healthcare, energy, and education problems. "Most other VCs only focus on the one thing: the returns. We focus on that — you've got to have that to attract money — but we think a lot of companies that deserve funding aren't necessarily in the mainstream of the VC river, so to speak," says Mr. Osborn, a venture capital manager at Arete, who has also served at BMW Technologies and Venture Investment Management Company in Boston.

Avoiding the "herd instinct" that he believes venture capitalists tend to have, Mr. Osborn says Commons Capital will make non-traditional yet lucrative investments, and perhaps seize some of the opportunities that traditional VCs have missed. Mr. Osborn points to the California energy crisis and today's high energy prices as signs that the "clean energy" sector is ripe for investment. Companies that provide wind turbines, for example, or solar energy systems that don't pollute would interest Commons Capital. Other possible investments are healthcare companies that provide inexpensive communications access between doctors and patients, or education tools for teachers.

"The fund is targeting niches that we've been active in for several years," says Steve Moody, who manages the private equity portfolio for Calvert Group. Calvert, a limited partner in Commons Capital, is known for its own socially conscious mutual funds. "There are a lot of trends converging in sector areas like life sciences, distributive energy generation, e-learning," he says.

Other limited partners in Commons Capital's first close included 40 individuals, environmental groups Jessie Smith Noyes Foundation and General Service Foundation, and the Odyssey Fund. Commons Capital expects a final close in August at $30 million. Mr. Osborn says he will approach both existing investors and new investors, including foundations and pension funds, to complete the fund. The firm may also apply for an SBIC license. Terms of the fund include a 20% carry and a management fee of 2.5%. Nixon Peabody is the fund's law firm.

Four venture fund managers sit on the fund's investment advisory committee: Bart Holaday, former managing director for private equity of UBS Brinson; Henry Newman, general partner of Solstice Capital; Ann Partlow, manager of the Odyssey Fund; and Bob Shaw, president of Arete.

In February, Commons Capital made its first investment, $250,000 as part of a larger Series A round for CellTech Power, an early-stage fuel cell company based in Westborough, Mass. Scott Racky, president of CellTech Power, says the company received a warm response from the venture capital community. "We got offers for more money than we wanted," he says.

If the fund stays at its current size, Mr. Osborn predicts Commons Capital will invest in a dozen companies over the next four or five years, and twice as many companies if the fund tops out at $30 million. Investments will range from $250,000 to $1 million. First, though, Mr. Osborn, plans to recruit another partner or associate to manage the healthcare and education investments. A Web site, too, may be coming, (www.commonscapital.com) but for now the phone or email is best: (617) 739-3500; [email protected]

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