Two years ago, Jobs for the Future (JFF), a nonprofit dedicated to helping low-wage workers attain upward mobility, established a venture arm, JFFVentures, to back innovative employment tech.
In a move implying that the launch went well, JFFVentures today unveiled its second fund, JFFVentures Fund II, with a target of $50 million — $15 million has been raised so far.
The new fund — furnished in part by the Autodesk Foundation, the Workday Foundation and the American Council on Education — will target founders building HR, education and workforce solutions that “enable economic mobility for workers in middle to low-wage jobs,” said JFFVentures Fund managing partner Sabari Raja.
“We’re looking to invest in 30 to 35 pre-seed- and seed-stage startups, with initial check sizes between $250,000 [and] $1 million, with the ability to lead rounds,” Raja told TechCrunch. “We’ll reserve $1 million to $2 million for follow-on investments into companies that are outperforming from a financial and impact perspective.”
JFFVentures Fund II joins the growing number of impact-focused VC funds stateside, which seek to drive social, economic and environmental change while earning investment returns. Others include Collaborative Fund, Third Sphere, and the nonprofit Acumen Fund.
Impact investing is a massive — and expanding — opportunity. According to the Global Impact Investing Network, an international think tank, the private impact market grew to approximately $1.2 trillion at the end of 2021, up 63% since 2019.
But impact funds face challenges that many traditional startup investment vehicles don’t.
For one, it can be difficult for VCs to measure an investment target’s real-world impacts or progress. Impact funds have historically offered lower returns, according to a 2021 study from Cambridge Associates. And many impact funds have limited track records, since the sector is so new.
So how is JFFVentures Fund II planning to avoid these pitfalls?
Well, Raja says, while the fund is operationally independent from JFF, JFFVentures Fund II will benefit from the wider JFF community, including its connections with government, corporate, education and nonprofit partners. Founders in Fund II will be able to tap at least one dedicated person who is focused on connecting portfolio companies to experts and networks across the JFF ecosystem, Raja added.
“We’re honed in on the journey of the worker in middle- to low-wage jobs, investing in novel technologies that provide them the education, access to quality jobs, tools for employers to support their career growth and wrap-around services that help them outside of work so they can thrive at work,” she said. “We have expertise and experience solving critical workforce problems with technology-enabled approaches.”
Yigal Kerszenbaum, another managing partner at JFFVentures, said that a top priority for Fund II is “economic advancement for the underserved and underrepresented populations.” Kerszenbaum called out women, disabled workers, immigrants, aging populations and communities of color as examples.
“Diversity is embedded into the design and DNA of the fund,” Kerszenbaum said. “Five out of the six team members are female, and we’re majority immigrants and speak seven languages across the team. Many of us are first-gen college students. Additionally, 100% of our ten-person advisory board is female, many of whom are investors, subject-matter experts and operators that come from diverse backgrounds.”
Plenty of funds have diversity goals that they don’t meet. (The DEI backlash hasn’t helped.) But Kerszenbaum says that Fund II has been structured from a legal perspective to ensure it remains true to its mission.
“We’ve committed in our fund docs that at least 50% of Fund II founders will identify as underrepresented in terms of founder backgrounds,” he said. “Additionally, part of the team has been allocated carry, which will be earned by hitting certain social impact goals, some of which are tied to founder diversity.”
A sticking point could be balancing those goals with returns.
The 2021 study from Cambridge Associates found that the typical impact venture fund tends to underperform, faring little better than the S&P 500 over a 21-year period. In the cohort Cambridge looked at, the bottom quartile of funds returned just 2.43% to limited partners.
Kerszenbaum pointed to JFFVentures’ inaugural fund performance as evidence Fund II can succeed, though.
Sixty-five percent of the first fund’s 55 founders — 84% of whom self-identify as underrepresented in the VC space — have gone on to successfully raise capital from late-stage investors, Kerszenbaum says. JFFVentures is also reserving the right to invest up to 20% of Fund II in startups based outside of the U.S., in contrast to the first fund’s exclusively domestic purview — giving the VC an additional lever to boost returns.
“We aspire to be the gold standard for nonprofit-private partnerships that can amplify innovation and impact and unlock value for entrepreneurs, investors and beneficiaries alike,” 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 outcomes towards growth.”
