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Building a Vibrant Impact Ecosystem with Jim Sorenson

Dec 1, 2022

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Jim Sorenson, founder of Sorenson Impact, chats with Lauren Lane-Zucker of Impact Entrepreneur about his vision for the future of impact.

Jim Sorenson is one of the pioneers in impact investing. Throughout his career, Jim has been steadfast in finding solutions to the issues impacting society. As Laurie Lane-Zucker, Founder and CEO of Impact Entrepreneur states it, “Jim strongly believes that to solve the biggest challenges facing society, the impact ecosystem must align through a more holistic approach to impact investing, with a focus on actionable results at scale.”

Jim, the founder of the Sorenson Impact Group, joined Laurie as part of Impact Entrepreneur’s Luminarias Webinar Series to discuss the trajectory of Jim’s career and how his endeavors have helped shape the field of impact. During the conversation, they discussed everything from what inspired Jim to start a career in impact to training the next generation of impact leaders to the role of impact measurement and management. Watch the full conversation or read highlights from the interview below.

 

Can you share one or two early experiences or your earliest professional work that inspired you onto the path of impact?

There were definitely some influences in my life that shaped who I am and ultimately helped me in becoming quite involved in the impact movement. My parents were pretty fundamental to that. I come from a very entrepreneurial family. My dad was a renowned entrepreneur and a medical device pioneer. He was always questioning the paradigms, trying to find a better way, and leading with innovation. Those are characteristics that are really important when we look at what impact investing tries to do. You have to think outside of the box quite often.

My mother was very empathetic. She was a social entrepreneur. She may not have had the business acumen, but she was very much an entrepreneur and innovator with a love for helping people. These themes of entrepreneurial drive and instinct are inherent in me. I couldn’t help but learn by osmosis. Ultimately, it helped to shape who I would become as an entrepreneur. My mother really pushed me to look for things that benefit society.

Can you explain a little bit more about your work with the population of the deaf and give us a sense of your general trajectory?

I was focused on a business that was moving toward the mass market in terms of video communication in the very early days of broadband and the internet. We received a term sheet from Venrock to fund the growth of the business. The next day, the dot-com bubble burst, and anyone that lived during that timeframe saw tremendous devaluations, particularly of tech businesses. Portfolios were decimated. There was a convergence of technology that was needed in order to drive this market for us. It was basically put on hold, and we were left scrambling.

It was the classical entrepreneurial moment where you ask, what do you do now? How do you pivot from this? It was right at that junction that a brother-in-law of mine who was deaf came to me with this new service that was being trialed for the deaf community called Video Relay Service. It enabled the deaf to be able to communicate through a remote American Sign Language interpreter over the internet in real-time. Up to that point in time, their communication had a lot of latency and dirtiness to it because it was text-based.

This solution enabled fluid communication for someone that was deaf. Because we’d invested in the tech, we were in a much better position to provide an experience to the deaf community than our competitors. It was an immediate success. The company grew exponentially. It created this moment of realizing that not only was this a successful business, but it had a very profound impact on this underserved community. Because it was a business, there was a cash flow model to it, and we could access capital from a much larger pool. We were able to scale and become self-sustaining and really make a difference in a way that would be difficult to replicate with a government program or in a typical NGO or nonprofit.

That put me on the path of wanting to give back. I wasn’t satisfied with what was available in typical philanthropy — I wanted to utilize this model. I started looking for other sectors of impact, other sources for deal flow. That’s what led me to impact investing. Of course, this was before the term had been coined. At that point in time, I was focused on how to help build the field, create awareness, educate, and then help facilitate an ecosystem that would enable capital to be used for impact.

Can you tell us about the scope of the Sorenson Impact Center’s work in research, mentorship, and developing impact leaders at the University of Utah?

I was approached by a couple of students and another venture capitalist about a very interesting model at the University of Utah in which the students would actually help to raise a venture fund. They would work with other VCs and entrepreneurs to get access to deal flow, and the students would actually work on investing in real-life deals. Ultimately, the success of that would come back and continue to build the program. I helped to get this program, The University Venture Fund, off the ground. It was successful. The students raised about $18 million in this fund, and they learned all of the aspects of underwriting a venture deal and working with venture capitalists in real-time and with real deals. It was transformational for them in terms of the experiential education that they were getting, and they really did good work.

I realized that this is a model that could be utilized in this very early stage of ecosystem building. The Center has gone on not only to do the type of work that the students were doing in the university venture fund, but they are helping to build the field. There’s a whole section for data science, measurement, performance improvement, and storytelling to make sure that the stories of the people that are generating impact are getting told.

We have now created a program that’s about 30 full-time professionals who manage about 50 students every semester with over 500 that have gone through the program. These students are now out in the field. They have careers that have been informed by their experience. It is a wonderful opportunity for students and a real resource intermediary for the space.

How do you view the role of philanthropy in impact investing? More broadly, how do you think philanthropy might need to change to help society successfully transform to better align with the SDGs sustainability principles and create a triple bottom line economy?

I think philanthropy is very important. Alongside the program-related investments, we also make grants to organizations focusing on our mission for impact investing. Philanthropy truly provides a North Star in terms of the impact, and it’s very important that impact be central. I think that philanthropy can provide this very early-stage catalytic capital that social entrepreneurs need to help them through what they call the pioneering gap. Quite often it’s referred to as the “valley of death,” where the social entrepreneur has an idea and needs early-stage capital. If a foundation comes in, it’s quite often catalytic to others coming in. We find ourselves in that role quite often. Foundations need to do more of that type of philanthropy and be more strategic in their thinking as it relates to bringing different sectors together — traditional investors with concessionary investors with government — that ultimately makes an investment that would otherwise not work become investable because of this innovative capital stack.

What in your view is the proper role of impact measurement management (IMM) in impact investing and the emerging impact economy as a whole? Can you also comment with respect to the recent controversy surrounding ESG measurement and reporting? How do you view the role of IMM at present and moving forward?

It’s really critical. We see cases of what’s often referred to as impact washing or greenwashing. I think it does happen. I’ve certainly been approached by some that are looking for investment, and when you really read through it and look at it, the impact is not there — the intentionality, the permanence, and the commitment by the management in the team. These are all very important. But we also look at the restructuring of the business or the business model. We like businesses where every dollar that’s generated is creating impact so there’s a tight correlation. And then a management team that is committed, certainly a B Corp or something of that nature, really helps to solidify that commitment to management to impact.

Beyond that, we integrate metrics to measure impact and report it over time. In our fund Catalyst, which is real estate, we have five pillars of impact: affordability, access to services, economic sustainability, economic development and inclusion. We go in and do an assessment up front and look at existing databases to see what the needs are in the community. Then we score how well the program development addresses those needs. That informs our decision on whether we invest. Then we align the incentives to our partners in terms of financial incentives to impact as well as to financial returns. This allows us to make sure that we’re addressing the impact alongside the financial returns.

I view ESG as a strategy that’s evolving. I think there are good examples on both sides: On one side, ESG is being promoted for something that it’s not, and on the other side is confusion with so many frameworks and measurement systems. I think this will continue to evolve, and we’ll work through these. There is an effort underway to harmonize the frameworks. Whether we call it ESG or sustainable investing, I think it really is here to stay because investors want the data. They want to make smart investments. If you exclude the framework of ESG, you’re basically making investments less transparent, and you’re excluding very important risk data that informs decisions and is part of a judiciary responsibility. It’s become politicized, which is unfortunate, but I think it will improve. Some critiques are valid, but I think there’s a real effort underway to address them.

Can you share more about the role of catalytic capital from both investors’ and entrepreneurs’ perspectives?

The thing that I often point out is impact investing is different than traditional investing, and it really is a spectrum. On one end, you have typical philanthropy and grants. On the other end, you have market rate and not impact. Impact investing is everything in between. It goes all the way to fully market rate investing for impact, and then from grant funding to program-related investment to blended finance to thematic impact investing to sustainable investing which incorporates ESG. These are all part of the spectrum of what I’d call mission-aligned investing. They’re all important and play a role. When you get them all working together, magic happens.

What is your message to teenagers and young adults who are concerned about the future of our planet? What role can they play in the impact and creative economy?

I’m heartened by the next generation because this is something that they care about, and it’s something that they look to incorporate into their careers. That’s somewhat different from older generations. It’s that type of interest in collaboration that is going to make a difference in the future. We need to create the pathways and the opportunities to enable them to express their values in their work. That’s certainly a big aspect of what we do at the Sorenson Impact Center.

We have students that are PhD candidates in neuroscience and undergrads in finance who all want to incorporate, learn, and bring impact into their careers and into what they’re doing. They’re attracted by the Center because of the prospect of being able to do that. It’s incredible to see the diversity. We know that there’s going to be a tremendous wealth transfer in the future. This is where it’s going to go, to a younger generation that really cares about these issues.

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