Impact Investing
Big Path Capital

Big Path Capital: Impact Investing’s Investment Bank ... This boutique investment bank connects socially sensitive companies with investors interested in making money while doing good.

Burgess COMMENTARY
It is encouraging that initiatives like Big Path Capital exist, and I like to hear of companies like this. But they are tiny relative to the whole of the socio-enviro-economic system that has been dangerously and increasingly dysfunctional for most of my adult life (around 60 years!). While profits and financial capital have grown enormously , things like human capital, social capital and natural capital have been depleted. I argue it is impossible to make good decisions in a complex system like our socio-enviro-economic system simply by maximizing profit (albeit in a responsible way) when everything is computed based on profit, stock value and GDP growth is always the fall-back position to describe a healthy society. We can do better. We must do better. Peter Burgess ... http://truevaluemetrics.org
Peter Burgess

Big Path Capital: Impact Investing’s Investment Bank ... This boutique investment bank connects socially sensitive companies with investors interested in making money while doing good.

Big Path Capital is a boutique investment bank focused solely on socially responsible companies. To understand how it acts as a matchmaker in the growing field of impact investing, look no further than what the small firm did for former hip-hop shoe-company executive Larry Schwartz.

Schwartz, 63, began exploring impact investing after he sold shares in his beloved company, Jack Schwartz Shoes, eight years ago. A few years later, he invested “six figures” with SJF Ventures, an impact venture-capital fund, after an event put on by Big Path Capital, which specializes in connecting impact-investing VC and private-equity funds with investors, family offices, and foundations.


Michael Whelchel, co-founder, Big Path Capital. ILLUSTRATION: BIG PATH CAPITAL

Schwartz has since gone to dozens of different kinds of Big Path events to uncover more investment opportunities and to meet “fellow travelers” who care about impact investing. Periodic “impact capitalism” summits fill Big Path’s other objective: education. (The next one, billed as “The Summer Davos of Impact Investing,” will take place on Nantucket on July 19-20.) The summits are designed for a select group of investors to learn and network, says Michael Whelchel, Big Path’s co-founder, who is based in Asheville, N.C. “Most who come to the [summit] won’t invest, but they’ll meet with companies and funds to better understand what this whole world is about,” he says.

Last year, Schwartz attended a summit to find a financial advisor focused on impact investments and to diversify his impact portfolio with debt, hedge funds, and other asset classes. He’s also a direct investor and board member at Vital Farms, which specializes in pasture-raised eggs. The summit allowed Schwartz to meet several advisory firms from across the country, which he says was “just an efficient use of time.” Not only did he ultimately meet his future advisor, Athena Capital Advisors, he also met managers employing various types of impact strategies.

One of Big Path’s goals is to introduce investors to the idea that “you can make a competitive return across asset classes,” Whelchel says. “So many don’t know that’s possible.”

As an investment bank and conduit for investors to impact funds, Big Path fills a niche for values-minded investors looking to navigate the still-nascent, yet rapidly growing, impact realm. The firm, which has been involved in transactions totaling more than $1 billion in the past three years, was formed after Whelchel was introduced in 2008 to Shawn Lesser, a veteran of international equity sales with Morgan Keegan and Deutsche Bank.

Lesser, 48, had started a firm representing U.S. socially responsible companies seeking investors in Europe, while Whelchel, 50, formerly a private equity investor focused mostly on middle-market manufacturing, had just formed a firm to support similar companies with U.S. investors. Their initial partnership idea was a periodic event called the Five Fund Forum, essentially a roadshow to introduce investors to impact funds.


Shawn Lesser, co-founder, Big Path Capital. ILLUSTRATION: BIG PATH CAPITAL

As of today, Big Path has worked with some 120 private-equity and venture-capital funds; has held 20 fund forums, several summits, and other education-focused events; and has represented 35 companies raising capital. “We’re looking for companies and funds that are maximizing impact and maximizing return,” the Atlanta-based Lesser says. “That’s the way we think it scales.”

Traditional Medicinals offers a good example of how this all works. The small, privately held company, which makes medicinal-grade herbal teas, raised about $10 million, its first capital-raising in 42 years. It had rebuffed private-equity funds drawn to the growing natural-products industry for years, preferring to purchase and retire shares from shareholders ready to sell, says CEO Blair Kellison. But the company, with sales of less than $100 million, was growing and in need of a way to create a liquid market for minority shareholders.

So Kellison turned to Whelchel, whom he had met years ago at a natural-products event, recognizing that via Big Path, he could find investors aligned with the company’s mission. After a five-month process of attending forums and networking, Traditional Medicinals fielded 17 offers before agreeing to a minority investment from one individual and a larger amount from The Builders Fund, a $30 million asset private-equity fund closing in July that’s focused on “high-growth, purpose-driven” businesses.

The fund has a special interest in food and agriculture, as well as health and wellness. “It was the perfect example of the kind of company we want to invest in,” says Tripp Baird, a co-founder and managing partner at the Builders Fund. Investors include family offices, multifamily offices, and a Boston endowment fund. To Baird, a one-time investment banker for socially responsible companies, Big Path Capital’s greatest strength is drawing companies, funds, and investors together, “building the ecosystem, the community.”

Schwartz similarly considers Big Path’s founders to be “pioneers,” innovating and creating different vehicles for people to connect and learn. But they face challenges from bigger players, such as UBS, TPG Capital, and Bain Capital, who are entering the ring as impact investing gets more attention. Big Path’s Lesser believes their immersion in the sector gives them a competitive advantage over a big bank juggling lots of different kinds of strategies. “We’re in the middle of this nexus,” he says. “We see what the companies do, we see what funds are doing, and we see what the investors are doing.”

Ideally, the impact-investing space will grow to the point where it can absorb investment banks of all shapes and sizes.