Impact investments are made at the intersection of business and social value, marrying positive, measurable change with financial return. The scale of impact investment is significant and growing fast. Today in the United States, 24% of all assets under management – about $12 trillion – fall under the category of investment for social responsibility and impact.1
Upstart Co-Lab, a sponsored project of Rockefeller Philanthropy Advisors, is funded by foundations and donors committed to innovation, impact investing, and the arts. Upstart views the creative economy as, in the words of British author John Howkins, "a way of thinking and doing that revitalizes services and retailing through a focus on art, culture, design, and innovation."2
Laura Callanan founded Upstart Co-Lab in 2015. She wanted to see socially-motivated capital move toward creative ventures with the same focus and energy that has driven trillions of dollars toward other priorities such as clean energy, education, microfinance, and health.
One of the first questions Upstart Co-Lab set out to answer was why impact investors were, seemingly, not prioritizing investment in the creative economy. Did investors feel there were no significant opportunities for financial or social return in the creative economy? Were there no art lovers among the impact investing class?
Upstart Co-Lab's research uncovered that impact investing in art, design, culture, and heritage has been happening, but that it has not been "named and framed" as the creative economy.
Investors backing overlooked and under-appreciated groups of entrepreneurs, such as women and people of color, hadn’t noticed that, often, these innovators were launching creative economy businesses. Or that companies receiving impact capital, because of their environmentally friendly practices, were in the ethical fashion or sustainable food sectors. So the investment opportunities were there.
"We're not creating something new," Callanan says. "We're just making it easier for impact investors to target their capital to art, design, culture and heritage – and for creative entrepreneurs to find investment for their purpose-driven businesses. And, for now, we're the only ones doing what we do, so anyone looking to deploy or receive impact capital in the creative sector gets sent to us."
In 2018, Upstart Co-Lab joined forces with the Local Initiative Support Corporation (LISC), the largest and oldest community development finance institution in the United States, and created the NYC Inclusive Creative Economy Fund. The fund raised $6.2 million of capital from individuals, family foundations, donor-advised funds, private foundations, and endowed cultural institutions. Fund proceeds help finance affordable workspace in New York City so that creative businesses can get started and grow – generating jobs for low and middle-income workers in the process.
Callanan says the partnership just made sense. For forty years, LISC has deployed over $140 million into creative places and businesses as part of its comprehensive community development strategy. But there had never been an option for investors to target LISC’s work focused on the creative economy. By launching a dedicated fund, a whole new universe of impact investors who cared about maintaining the creative character of New York City was brought on board to LISC's mission of strengthening low-income communities.
Upstart Co-Lab continues to work with non-profit and mission-driven, for-profit partners, exploring new investment vehicles to make it easier for impact investors to put capital into the creative economy. For example, they are working on a socially-themed exchange-traded fund (ETF) of public equities, and a global working capital fund for artisan businesses.
Upstart Co-Lab started with research to make a case for impact investing in the creative economy. They proved the concept through the fund with LISC. Now the next phase is about building a strong coalition of like-minded investors who will demand more impact investment vehicles focused on the creative economy.
Upstart Co-Lab is building a community of member investors who are passionate about the arts and understand the potential for creativity to deliver social impact. Upstart Co-Lab will source and screen opportunities to invest in the creative economy aligned with the investment, social, and environmental goals of its members. Upstart Co-Lab will track the financial and social success of members' investments, collecting proof points to attract future impact investors to the creative economy.
Upstart is aiming big. Callanan reports that more than $58 billion is controlled by the United States’ top museums, libraries, performing arts centers, artist-endowed foundations, and schools through their endowments. But this money is not yet engaged in the impact investing conversation. Upstart Co-Lab wants to move the capital of cultural organizations off the sidelines and reconcile it with these institutions' purported values and missions focused on stewardship, community, and access.
Callanan is well-suited to lead the vanguard. She has worked on Wall Street and with the United Nations. She spent six years as associate director for the Rockefeller Foundation, where she co-led the Foundation's early impact investing experiment, which included two investments connected to arts and culture, gaining an understanding of what was possible. Add to that five years at McKinsey & Company leading impact investing in their social sector office, and her work as senior deputy chair for the National Endowment for the Arts, which was also focused on connecting artists, impact investors, and social entrepreneurs.
Callanan considers herself fortunate to have long-time personal connections to some of the top writers, composers, and painters in America. People who, Ms. Callanan says, "tick very differently" from her. And that's a good thing, she says, because while foundations and non-profits aspire to better enable creativity to solve pressing problems, discussions have, for too long, taken place in rooms full of people who, like her, went to business school or law school. Homogeneity begets only the same.
To succeed, creative people require the same things as any other entrepreneur: access to networks, markets – and capital. With a pipeline of more than $3 billion in creative economy impact investment opportunities in its sights, Upstart Co-Lab believes now is the time to connect the money that wants to make a difference with the entrepreneurs who think differently.