The Tuck Social Venture Fund (TSVF), an early stage impact investing fund at The Tuck School of Business, recently completed an investment in CNote, an award-winning, first-of-its-kind financial technology platform that offers customizable, socially responsible fixed-income products to accredited and retail investors.
Founded by impact-motivated entrepreneurs Catherine Berman and Yuliya Tarasava, CNote uses technology to streamline impactful community investments via Community Development Financial Institutions (CDFIs). CDFIs are federally-certified, mission-driven financial institutions that invest in small businesses, affordable housing, and community facilities in low-income and underserved communities. CNote is currently the only platform qualified by the SEC to offer access to the CDFI market for investors of any size; it has the potential to play a key role in unlocking more mainstream investor capital for community development purposes and other impact causes.
TSVF made a $25K investment in CNote’s seed fundraising round led by The Artemis Fund, a female-led venture capital fund based in Houston, TX focused on female founders. “We felt this investment gave us an opportunity to amplify the impact of our investment dollars by facilitating a solution that unlocks more capital for impact. This venture has the potential to provide billions in funding to female and minority-led businesses and communities,” says Gavin Loudfoot T’20, a TSVF director.
“We are very excited to be partnering the Tuck Social Venture Fund,” says CNote CEO Catherine Berman. “We see a lot of value in having access to the Tuck community and network through this partnership, and are deeply aligned with their team’s vision of investing in transformative social change.”
This year’s team of six second-year Tuck MBA students felt that CNote was a great addition to the fund, which has current investments in a civic engagement solution, education technology platform, a clean energy company and a college savings-focused fintech startup. This is the first year that a team of directors has made two investments in one academic year and marks the fund’s fifth investment since its inception in 2015.
Acknowledging the uncertainty caused by the pandemic, our team worked to think through a range of scenarios for how the company would be impacted by the crisis. It was a challenging question to consider and a valuable learning experience for us as students.
TSVF’s objective is to make investments in early-stage companies that have a measurable social or environmental impact while returning market-rate returns to investors. As a student-run fund, it is a unique experiential learning opportunity provided by Tuck that enables directors to develop their impact investing skills by making and managing investments in impact startups. Making investment decisions requires the directors to think critically about impact and the role of enterprises in driving social outcomes. “The ability to gain first-hand deal exposure really amplifies what we learn in class, and in the TSVF context, forces us to define and understand the true impact of any investment we consider,” says T’20 co-director Nina Scheepers.
The decision to make an investment in CNote in the middle of a global pandemic was not taken lightly by the student directors or the fund’s advisors. The team began engaging CNote in early 2020 and developed a strong conviction that the company’s platform, impact, and team presented a compelling case for investment prior to disruptions caused by COVID-19. When COVID-19 hit, the directors and advisors took a collective pause to reevaluate the investment and conduct additional reflection, conversation, and research. “Acknowledging the uncertainty caused by the pandemic, our team worked to think through a range of scenarios for how the company would be impacted by the crisis. It was a challenging question to consider and a valuable learning experience for us as students,” says T’20 co-director Mo Earley.
We’ve been impressed with [CNote’s] impact-forward approach to this crisis, where they are quickly innovating to help accelerate capital into CDFIs to support small businesses that need it now more than ever
Following extensive additional diligence on the company and current market conditions, the team ultimately concluded that the investment thesis for CNote’s platform remained valid – and was perhaps even heightened as a result of the crisis. Co-director Adam Lebovitz T’20 says, “Despite a lot of uncertainty in the world, our team strongly believes in the sustainability of CNote’s solution and stands behind its highly qualified and capable leadership. We’ve been impressed with their impact-forward approach to this crisis, where they are quickly innovating to help accelerate capital into CDFIs to support small businesses that need it now more than ever.”
The team believes in the long-term viability and strength of CNote, though it was also the company’s heightened impact potential as a result of the pandemic that caught the directors’ attention. “It quickly became evident in our additional diligence that CNote’s impact potential was elevated as a result of COVID-19,” says T’20 co-director Jenna Pugrant. “Small businesses and low-income communities are going to continue to feel the economic effects of this crisis well beyond the immediate public health threat. As a platform uniquely well positioned to move capital into CDFIs that serve low-income and underserved communities, we believe they have an important role to play in helping to direct money and relief efforts to the communities who need it most.”
Based out of Tuck Business School at Dartmouth, TSVF is a student-run, early-stage investment fund that invests in for-profit social enterprises that deliver a measurable social impact and financial return. The fund is also aimed at facilitating experiential learning opportunities for the next generation of leaders in impact investing.
TSVF is overseen by the Center for Business, Government & Society and the Center for Entrepreneurship. The fund’s advisers who work closely with the students include John McKinley, executive director of the Center for Business, Government & Society; Curt Welling D’71, T’77, Clinical Professor of Business; and Daniella Reichstetter T’07, Executive Director of the Center for Entrepreneurship and Adjunct Professor.