The Feel-Good Investment

Why socially responsible companies are more attractive to investors
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This story appears in the September 2009 issue of Entrepreneur. Subscribe »

The Feel-Good Investment

Socially and environmentally responsible companies are looking a lot more attractive to today's venture capitalists, who are seeking to align their investments with their own personal values. Some VC firms have explicit social missions, and many individual investors are consulting portals such as Social Investment Forum and Green VC for advice on how to identify companies that operate responsibly.

In April, Nuventix of Austin, Texas, rode the socially responsible investing wave to $8 million more in funding commitments, completing the company's Series C round. (It has raised $32.5 million since its inception.) Nuventix, which makes energy-efficient cooling fans for LED-light fixtures, sought the funding for research to bring new fans to market quickly. CEO Jim Balthazar says he wanted to move fast to take advantage of increased public awareness of the need for energy efficiency.

Boston-based Braemar Energy Ventures committed $3 million to the recent funding round. Since its founding in 2005, Braemar has gained a reputation for focusing on companies that are bringing energy-efficient products to market. Braemar managing partner Dennis Costello says the firm was attracted by the fact that Nuventix already had successful products on the market and that its fans are the only ones engineered to last as long as the LED fixtures.

Balthazar estimates the size of the cooling-fan market at $6 billion and says his advanced products could halve the energy requirement for cooling LED lights. The products' longer lifespan will also keep more fans out of landfills. "This is my third startup, and in every one, I felt the technology had to have a socially redeeming aspect," Balthazar says. "That's how you get good market receptivity."

Go Big or Go Local?
A firsthand look at corporate and community banking for small business

Corporate Banks
"Not all big banks are good, but they have a lot of resources and can offer you great deals. I went to a small bank before, and for any international business I actually had to go through Chase. So I just decided to bypass the middleman. I prefer to bank with Chase because I think they're trying to cater to smaller businesses. They have small business advisory councils that ask you about promotions and services you want to see, and will pay you for your time. I also have a dedicated banker. So even though community banks are known for their ability to offer close relationships, there's at least one big bank that can do that, too."
--Ashley Hunter, president of HMRiskGroup, Austin, Texas

Community Banks
"The representative at the big bank we used to finance the purchase of a new building said he would see about getting us more business referrals, but four years later, we haven't had a single referral from him. Some community banks we don't bank with give us work weekly. Also, these larger banks change their business representatives so often that they just don't have that old-school, I-know-my-banker mentality. I personally bank with a smaller bank, and now we're shopping around for when the renewal comes up on our five-year [business] loan. We're only looking at smaller banks. They grow at a much slower pace, but it's a controlled speed, and then they're better equipped to handle your money responsibly."
--Thomas Doneth, CEO of Office Installations, Plymouth, Mich.


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