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Transform Capital's $100M fund will share returns with non-profits

Ryan Lawler
Apr 4, 2022
Illustration of suited hand handing money to another suited hand
Illustration: Eniola Odetunde/Axios

Venture capital firm Transform Capital is raising $100 million for a growth fund that seeks to inspire more philanthropy in venture capital by committing a portion of returns to non-profit organizations that its LPs choose.

Why it matters: Many investors claim to be "doing well by doing good," but few have built philanthropic giving into the actual structure of their fund.

How it works: Many impact funds seek to make a difference by investing exclusively in mission-driven companies. Transform Capital is taking a different approach.

  • Unlike the usual 80-20 split with LPs, the general partners — former BlueRun Ventures GP Jonathan Ebinger and serial entrepreneur Aihui Ong — are giving up half of their carry and committing 10% of any returns to causes that their limited partners care about whenever there is a liquidity event.
  • "For [LPs], it looks like a 90-10 fund," Ebinger tells Axios. "We moved the 10 points of carry we're donating to the LP side, and we pay that out on a deal-by-deal basis, versus waiting until the entire fund is paid back."

Between the lines: With $100 million expected at the fund's close, its general partners plan to invest in 30 companies and are targeting a 3x return.

  • But you won't see Transform Capital leading investments or taking big, early bets on unproven companies. Instead, it plans to invest exclusively in late-stage companies with a high likelihood of an exit.
  • The firm is looking to invest in companies with more than $10 million in annual revenues in the enterprise software, e-commerce, and fintech categories.
  • "This fund writes smaller checks into larger syndicates," he says. "We're not looking for ownership — we're looking to invest in the best later-stage companies, which have oversubscribed rounds we can get into through the mandate we have around philanthropy."

Transform Capital has invested in companies that include Classy, Eastern Standard Provisions, Jackpocket, Kitman Labs, LeaseLock, NEX, Paro, Passport, Paystand, Urgently, Workspot, and YieldStreet.

  • And while the fund has not closed yet, it's already attracted mission-driven foundations like The National Geographic Society.
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