DBL Investors News
DBL Investors News
Capital, social returns focus of Bay Area Fund
May 17, 2006
By Alex Davidson - 17 May 2006
NEW YORK (Dow Jones) - Managers of the Bay Area Equity Fund LP, a $75 million venture-capital fund based in San Francisco, have two bottom lines: one on capital and another for social and environmental improvements.
Managing partners Nancy Pfund and Michael Dorsey said that they provide market-rate venture-capital returns while investing in private, socially responsible companies that, through successful business models, provide social and environmental improvements in low- and moderate-income neighborhoods.
"What we try to do is diversify by sector," Pfund said. "We try to reflect the strength of our region."
The fund closed its first round of seeking investors in January 2003, with its second-round closing in June 2004 - the year the fund made its first capital investments.
Managed by JPMorgan Chase & Co. (JPM), the fund invests in companies across all industries, with a focus on those with a strong presence in the Bay Area, including technology, health-care and consumer products, and services companies. The double bottom line is realized as the companies succeed financially and, thus, provide social and environmental improvements in communities.
According to the fund's promotional materials, "the social and environmental practices that young companies choose to adopt can be significantly beneficial to the fiscal bottom line both via direct benefits of cost savings and value creation, and via indirect benefits of creating goodwill with their market, customers and community, and enhancing employee morale and retention."
Companies that the Bay Area Equity Fund invests in include natural-health pharmacy retailer Elephant Pharmacy, software company ReShape, and solar electric company PowerLight Corp., which Pfund said is its largest investment. Recently, PowerLight has worked on projects such as installing solar technology at Oakland International Airport.
Investors in the Bay Area Equity Fund include major banks, insurance companies, foundations, corporations and private individuals. Dorsey said 90% of the fund is dedicated to co-investments with others involved in private equities.
Pfund and Dorsey said the fund's affiliation with JPMorgan means that companies in its portfolio receive benefits that they wouldn't get if they were on their own, including access to JPMorgan's investment committee, as well as its marketing and networking services.
JPMorgan benefits from this relationship because it is able to secure the business of young growth companies early that, once established, are more likely to stay with JPMorgan.
Among the aforementioned companies that have benefited from the Bay Area Equity Fund's involvement is Elephant Pharmacy.
Pfund, who sits on the board of Elephant Pharmacy, said the fund invested in the company because it is a training ground for the area's alternative practitioners of yoga, acupuncture and nutrition.
"We're (the fund) not just about creating the most jobs, we want to create a diversity of jobs," Pfund said of Elephant Pharmacy, which reflects the fund's goal of creating social, as well as financial, diversity.
Other companies in which the Bay Area Equity Fund has invested in are XDx, a molecular diagnostics company; Five Prime Therapeutics, which develops and discovers therapeutic proteins and antibodies; PhotoTLC, a provider of personalized photo gifts and digital photo restorations; and Labcyte, a laboratory instrumentation company.
Pfund and Dorsey said their fund's model is unique and that other similar players exist, but are less focused on market returns.
"It's a very new field, there's a lot of enthusiasm," she said.
Building on that sentiment, Pfund and Dorsey said they hope to start a similar fund focused on the California economy.
"We've contemplated putting together a second fund that uses this model and expands the geography," she said.
Of the Bay Area Equity Fund's performance, JP Morgan said that although there aren't metrics to compare it to others yet, it is hoping to be able to compare the fund to its peers in the future.