Jobs for the Future’s new $50M fund looks to invest in underrepresented founders

Two years ago, Jobs for the Future (JFF), a nonprofit dedicated to helping low-wage workers achieve upward mobility, created a venture capital arm, JFFVentures, to back technologies innovative in terms of employment.

In a move suggesting the launch went well, JFFVentures today unveiled its second fund, JFFVentures Fund II, with a target of $50 million. $15 million has already been raised.

The new fund – provided in part by the Autodesk Foundation, the Workday Foundation and the American Council on Education – will target founders who create human resources, education and workforce solutions that “enable economic mobility for workers in middle- and low-wage jobs,” said Sabari Raja, managing partner of JFFVentures Fund.

“We are looking to invest in 30-35 pre-seed and seed startups, with initial checks between $250,000 and $1 million, with the ability to lead rounds,” Raja told TechCrunch. “We will set aside $1-2 million for follow-on investments in companies that outperform from a financial and impact perspective.”

JFFVentures Fund II joins the growing number of impact-focused venture capital funds in the United States that seek to drive social, economic and environmental change while generating investment returns. Others include Collaborative Fund, Third Sphere and the nonprofit fund Acumen.

Impact investing is a huge – and growing – opportunity. The private impact market reached approximately $1.2 trillion at the end of 2021, up 63% since 2019, according to the Global Impact Investing Network, an international think tank.

But impact funds face challenges that many traditional startup investment vehicles don’t.

On the one hand, it can be difficult for venture capital firms to measure the actual impacts or progress of an investment objective. Impact funds have historically offered lower returns, according to a 2021 study from Cambridge Associates. And many impact funds have limited track records because the sector is very new.

So how does JFFVentures Fund II plan to avoid these pitfalls?

Well, Raja says, even though the fund is operationally independent from JFF, JFFVentures Fund II will benefit the broader JFF community, including its relationships with government, corporate, educational and nonprofit partners. Fund II founders will be able to bring in at least one dedicated person who will focus on connecting portfolio companies to experts and networks in the JFF ecosystem, Raja added.

“We are focused on the journey of the worker in middle- and low-wage jobs, investing in new technologies that provide education, access to quality jobs, tools for employers to support their career development and complete services. who help them outside of work so they can thrive at work,” he said. “We have the expertise and experience to solve critical workforce issues through technology-based approaches.”

Yigal Kerszenbaum, another managing partner of JFFVentures, said one of Fund II’s top priorities is “economic progress for underserved and underrepresented populations.” Kerszenbaum cited women, workers with disabilities, immigrants, aging populations and communities of color as examples.

“Diversity is ingrained in the design and DNA of the fund,” Kerszenbaum said. “Five of the six team members are women, we are mostly immigrants and speak seven languages ​​within the team. Many of us are first-generation college students. Additionally, 100% of our ten-person advisory board is made up of women, many of whom are investors, subject matter experts, and operators from diverse backgrounds.

Many funds have diversity goals that they fail to meet. (The negative reaction from the DEI didn’t help.) But Kerszenbaum says Fund II was structured from a legal perspective to ensure it stayed true to its mission.

“We have committed in our fund documents that at least 50% of Fund II founders will identify as underrepresented in terms of founder background,” he said. “Additionally, part of the team has been assigned a carry, which will be earned by meeting certain social impact goals, some of which relate to founder diversity.”

A sticking point could be the balance between these goals and returns.

The 2021 Cambridge Associates study found that typical impact venture funds tend to underperform, faring only slightly better than the S&P 500 over a 21-year period. In the cohort Cambridge examined, the bottom quartile of funds returned just 2.43% to limited partners.

Kerszenbaum, however, pointed to the inaugural performance of the JFFVentures fund as proof that Fund II can succeed.

Sixty-five percent of the first fund’s 55 founders — 84 percent of whom identify as underrepresented in the venture capital industry — were successful in raising capital from late-stage investors, Kerszenbaum says. JFFVentures also reserves the right to invest up to 20% of Fund II in startups based outside the United States, in contrast to the exclusively domestic purview of the first fund, giving venture capitalists additional leverage to raise returns.

“We aspire to become the benchmark for private-nonprofit partnerships that can amplify innovation and impact and unlock value for entrepreneurs, investors and beneficiaries,” Kerszenbaum said. “Our goal is to be the first stop for entrepreneurs building at the intersection of innovation and impact, because our value-add beyond the check has meaningful, measurable growth results.