The Entrepreneurial Free Agent and Dejobbed Small Business R&D Lab
By Lee Weisbecker
DURHAM -- If most venture capitalists shoot for a Jaguar bank account, David Kirkpatrick likes to ride the bus to work.
If most venture capitalists spend the majority of their time gazing at the bottom line, Kirkpatrick gauges success according to how many economically disadvantaged people he can help.
The 39-year-old co-founder of Durham-based Sustainable Jobs Fund (SJF) invests in companies that have a social purposes -- to create a decent jobs, to lift up depressed city neighborhoods, to protect the environment.
"Don't get us wrong," says Kirkpatrick. "We'd love to have an IPO. We like to make money.... But our motive is to bring economic benefit to folks who've been left out."
SJF's criteria for investing from $100,000 to $1 million into companies is that they are not Internet related; they use the money to add manufacturing workers, pay them above minimum wage and provide them with health insurance; and that they are environmentally friendly.
"But jobs is more core to us than the environment," says Kirkpatrick, whose organization is one of about 20 socially responsible VC groups across the country. "Many of the companies we look at wouldn't have access to venture capital if it wasn't for (groups) like this."
If all this seems, at first glance, pie-in-the-sky, Kirkpatrick and his colleagues are showing that a socially-responsible VC organization can achieve its goals. Created in early 1999, the fund set out to raise a $15 million war chest to finance its first round of investments in the eastern U.S.
This past April, after months of beating the bushes, Kirkpatrick announced the fund had exceeded that goal. SJF closed on $17 million, with money coming from some big name investors including First Union Corp., Bank of America, Deutsche Bank, Metropolitan Life Insurance Company, Citibank, the John D. and Catherine T. MacArthur Foundation, the Dakota Foundation and Community Development Financial Institutions Fund of the U.S. Treasury Department.
With its initial war chest full, the fund is searching for new companies to put money into while keeping a close eye on its primary goal of creating 1,500 new jobs.
If SJF -- headquartered in the Bull City Business Center in downtown Durham, is far out of the mainstream of most get-rich VC funds, it's a reflection of the intellectual journey its president took as a student at Duke in the early 1980s.
A Columbia, S.C., native and Air Force brat who moved around most of his early life, he arrived at Duke a Reagan conservative interested in physics.
"Then something happened," Kirkpatrick says. "Most of my classmates went corporate, but for a small group of us, we asked "Is there something else?"
While at Duke he threw himself into physics courses, but also steeped himself in post-reconstruction Southern History and religion courses.
And it's the history lessons rather than the quantum mechanics that seem to have left the greater impression on Kirkpatrick, who says, "I came to believe we should give something back."
After graduation in 1982, he worked as a carpenter for a while and moved into a dilapidated house on Wilkerson Avenue with a group of ex-Dookies that included Ruffin Slater, who went on to found the Weaver Street Market; Grace Nordoff, who created and runs Mad Hatter Bakery; and Ray Bunnage, now a techie in Seattle.
"We looked for alternatives to the status quo," explains Slater, another ex-history student. "We looked for ways of pushing the envelope in places where we could be effective. That's what David is doing in VC; he's pushing people who have the money to invest this way rather than in something else. Of course, they'll go on and invest in the something else as well."
In 1983, Kirkpatrick, along with Bunnage, started SunShares Inc., a community- based enterprise that created 50 jobs and provided curb-side recycling services in Durham, Cary and rural Orange County. Billed as the first curbside recycling program in the state, at its height it brought in $3 million in annual revenues. In 1994 Kirkpatrick left the business, which subsequently was acquired by Tidewater Fibers in 1998.
For the next three years, he devoted his time to KirkWorks, an economic development firm that, among other things, organized recycling investment forums.
Kirkpatrick drew the attention of Anne Claire Broughton, then editor-in-chief of Recycling Today, a trade publication.
"I liked the way he applied business thinking to recycling issues," says Broughton, who subsequently joined Kirkpatrick to become an SJF associate.
During his KirkWorks days, Kirkpatrick also met Richard Defieux of Philadelphia, a traditional venture capitalist with ties to Edison Ventures and Allegra Ventures. Defieux -- a man concerned about the trend toward welfare-to-work legislation as well as the need for environmentally friendly investing -- worked with Kirkpatrick to set up SJF and continues to donate his time and talents to the organization.
To date, SJF -- which also maintains a two-person office in Philadelphia -- has four investments under its belt.
They include a $67,000 infusion in Everett, Mass.-based emPower Corp., which makes electrically powered scooters. The company was recently acquired by Zap World. com, leaving SJF with a small slice of publicly traded stock.
At R24 Lumber Co. in Charlotte, SJF invested $150,000 to help leverage a small business loan of equal size. The capital infusion has helped grow the company -- which fingerjoints and glues 2-by-4 scraps into reusable wood products -- from eight workers to 15, with five additional jobs proposed.
It's far too early in the life of SJF to tally up the final wins and losses from these or any other investments. Right now, it takes roughly $10,000 in VC to create a single new job.
As for Kirkpatrick, he says he's glad the fund raising part of his job is complete and that he's eager to get on with the process of finding new companies in which to invest.
"It was by no means clear that we would be able to raise enough money to sustain this effort," he says. "The fact that we've closed on $17 million now gives us a chance to prove our concept. And we hope our legacy will be that there will be a lot of folks with jobs who wouldn't have them without us."
The article reprinted by permission.
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