Ehrenpreis on DBL’s New $400M Impact Venture Fund, the Biggest Ever

Ira Ehrenpreis, managing director at DBL Partners, is one of the heads of DBL Investors’ new fund, DBL Partners III, which the company says is the largest social impact venture fund. The new fund combines partners from DBL Investors and Technology Partners’ energy practice, with Ehrenpreis and Nancy Pfund at the helm. The fund also includes DBL Senior Partner Cynthia Ringo and Partners Mark Perutz and Marc van den Berg (see CleanTechIQ’s recent interview with Cynthia Ringo.)

The new $400 million fund has 128 limited partners, according to an SEC filing.

DBL Investors, led by managing director Nancy Pfund, spun out of JPMorgan in 2008. Five of the 18 companies in DBL’s first fund have gone public, including SolarCity, Pandora Media and Tesla Motors.

DBL Partners III will focus on investments in sustainable energy, products and services, digital media and imaging, health care, and IT, with investments of about $10 million to $20 million per company. Investments will pursue a “double bottom line” approach, defined as a strong financial return with measurable, beneficial social or environmental impact as well.

The new fund has invested in five new companies since its first close in December.

We recently caught up with Ehrenpreis to get his views on the fund’s strategy, impact investing trends, and the environment for raising new cleantech venture funds.  Ehrenpreis led Technology Partners’ investment in Tesla in 2006 and is still on Tesla’s board.

Tells us about the new fund and its strategy.

Ira Ehrenpreis, Managing Director, DBL Partners

DBL Partners III is a $400 million fund. It’s not just the largest impact investing fund ever raised in venture capital; it is also among the largest cleantech or energy innovation-focused funds raised, not just this year, but over the last several years. It’s really exciting.

We’re pioneers in what we think of as double bottom line venture capital, which is this growing field of investing that seeks to optimize both the financial return, what we call the first bottom line, and positive social impact, which includes the social, the environmental and regional economic benefits. We call that the second bottom line.

And to this notion of the “no sacrifices” approach: It’s entrepreneurs that increasingly embrace the double bottom line model and who do want to build world-class companies and want to change the world in the process. They view those as going hand-in-hand.

What we provide is really a platform for entrepreneurs who want to partner with a venture firm that cares about impact and changing the world.

And what we’re finding is that the best entrepreneurs do want to create the biggest possible company and create the biggest possible impact.  And they don’t see a trade off.

When entrepreneurs walk into our office, the first thing they see is “double bottom line.” We’re committed to helping them build their environmental, economic and social impact in a way that drives financial returns and vice versa.

And people often underestimate culture, but our experience tells us that mission can be one of the most powerful and important attributes of success. So many of the great entrepreneurs we’ve been fortunate to partner with really do have this purpose-driven mission; they have the notion of higher calling. They are the exact opposite of mercenary.

How do you measure a company’s impact?  

There’s a number of elements to impact and to our second bottom line. Of course, it’s all of our environmental, energy, sustainability focused companies.  We’ve been fortunate to have partnered with some of the great companies in this area.

It’s also about social mission. And it’s about regional economic benefit. When you think about the different elements of a second bottom line, there’s a number of elements to what it comprises.

Number one, it’s a commitment to diversity. And half of our funds’ new investments to this point have women founders. And of course, our leadership team includes Nancy Pfund and Cynthia Ringo, who are great role models and are themselves pioneers in impact investing. As I think about that, we’ve become a great partner for companies and entrepreneurs who themselves are committed to diversity because they see that we are as well.

The other element to our second bottom line platform is having a commitment to job creation, ideally in economically depressed locations. And in fact, thus far, the majority of the fund’s new investments have been located in economically distressed areas. And part of our strategy is that we understand and see the benefits of bringing the entrepreneurial economy to neighborhoods that haven’t historically had start-ups. And DBL has a focus and a committed set of tools that we have used, and continue to use, in the pursuit of job creation. So that’s another element.

Another aspect is our commitment to metrics. We have developed a methodology that includes quantifiable metrics around our second bottom line as well as a history of qualitative coverage on the successes of the double bottom line strategy.

Where are you seeing the greatest opportunities for investment?

One of our most important areas is the energy, sustainability and cleantech area.

This is a renaissance time for investing in energy innovation and sustainability. There are a number of reasons and drivers behind that. First of all, it’s against a backdrop of a century that many have described as the desert of innovation. We’ve seen more innovation in the last 10 years than the last 100 years combined.

We’re seeing successful entrepreneurs, who previously had focused on other sectors, today focus on energy and sustainability.

Of course we have Elon Musk and Lyndon Rive as the poster examples — people who over the last several years have committed themselves to this area. Also, our own examples of double bottom line investing have been successful in an unprecedented way.

And from the standpoint of the Tesla example, people previously and mistakenly thought that in order to have an electric car, it had to look like a golf cart. So there was this notion of a trade-off: If you wanted the environmental benefits, you had to compromise on the other aspects of a car. Tesla has shown that there is no trade-off, that you can have the most environmentally friendly car on the planet that is also a car that accelerates faster than a Ferrari.  It’s an iPad on wheels. It is the highest safety rated car. There’s no trade off — you can have it all.

And SolarCity has shown that you can actually pay less every month for your electricity and have the environmental solution. It’s not one or the other. And again, that is really emblematic of the ethos of double bottom line – no sacrifice, no trade-off.

We are seeing now a focus by experienced entrepreneurs who want to make cleantech, energy and sustainability the next chapter of their personal and professional lives.

We’re seeing corporates lead the way. One of our core themes is green without sacrifice. That is this notion of no trade-off. Another theme is the transparent supply chain, and Walmart led the way over the last decade in the area of transparency in the supply chain. And so many other companies and industries are now focused on this important trend.

Another theme of ours is the circular economy. That is the reuse and recycling of resources. It’s resource optimization. We’re seeing an increasing number of companies and entrepreneurs focused on this area.

We’re seeing an important innovation cycle not only in energy, but also in agriculture.

Where have you seen the focus of increased corporates activity?

It’s across the board. We’re seeing corporates who look at the entrepreneurial community as a bridge and as great partners for investment and for business development. They’ve been acquirers of our young companies.

And really in all these areas, this is just the tip of the iceberg. We’re just in the early chapter of a 21st century energy economy that is unfolding before our eyes. And we look at this as no different than any other innovation cycle throughout history. And those that are at the emergence of an innovation cycle are often able to be part of the best investment opportunities and best companies. And we feel DBL Partners is uniquely positioned to continue our focus in these areas.

How do you see the cleantech venture capital fundraising environment today? 

Firms that have performed and have been able to attract the great entrepreneurs and have experience have been able to raise funds.

I think there’s always been an interest in firms that can perform on both a financial bottom line and a second bottom line. That’s certainly something that we’ve found. There’s a growing interest in it, and more so with firms that actually do perform on both dimensions.

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