Placed-Based Impact Investing Takes Off In Buffalo, NY

A small number of place-based funds in the U.S. focus on impact investing. One of them is Western New York Impact Investment Fund, which targets eight counties in Western New York State.

With a focus that ranges from workforce development and neighborhood revitalization to health and environmental conservation, the Buffalo-based fund has also pioneered a complex assessment process. And it recently raised a second fund, at $12 million.

“This is my hometown,” says Tom Quinn, a serial entrepreneur who is a born and bred Buffalo native and has headed the fund since it was launched in 2017. “I want to make it a better place to live.”

Building Deal Flow

In 2015 Clara Miller, then-president of the FB Heron Foundation, and Clotilde Perez-Bode Dedecker, president and CEO of the Community Foundation for Greater Buffalo, got to talking about impact investing in Buffalo. That led them to convene a series of meetings with community leaders to gauge the level of interest. They also determined they needed a few things: a fund of at least $8 million to get started and a sufficient supply of potential investments.

With that in mind, they spent two and a half years researching the matter, along with such questions as whether their investments could produce market-level returns. Then, in 2017, while fundraising, they approached Quinn about heading up the effort. In August of that year, he signed on and also closed on an $8.15 million fund.

With that, Quinn and his colleagues got to work networking in the community to build deal flow. Over the next four-and-a-half years, they invested $6.9 million (the rest of the money was used for expenses) in eight companies, with multiple investments in some of them. That last part was especially important during the worst of the pandemic to help companies that were struggling.

Social Impact Pillars

By the end of 2021, the valuation was $18 million to $19 million, according to Quinn, an amount he calls “encouraging from a financial standpoint.” Social impact-wise, they’ve created 500 jobs, along with a variety of other outcomes.

But also significant, says Quinn, has been the framework they’ve developed for analyzing performance according to five pillars of social impact: employment/workforce development, workforce diversity, neighborhood revitalization, health and healthcare access and the environment.

After the George Floyd murder and a heightened focus on racial inequities, Quinn and his colleagues added a DEI lens and expanded their criteria for measuring social impact to 42. It’s used in due diligence, as well as communicating with the companies they invest in.

At the same time, while all those criteria are important, individual investments aren’t weighted the same. One might be heavy on job creation for marginalized communities and neighborhood revitalization, but not doing much for the environment, for example, while another might be environmentally focused and also employing formerly incarcerated individuals. “As a total portfolio measure, we want to make sure we have a broad social impact,” says Quinn.

According to Quinn, while he won’t change, say, a company’s business model, he will make suggestions about other impact questions. Take Viridi Parente. In 2018, the company, which makes battery technology for commercial grade equipment, was going to run its manufacturing out of Boston, because the company had acquired the technology from a venture with a plant located there. Then Quinn asked why the plan wasn’t planning to move those 300 to 500 manufacturing jobs to Buffalo.

A few days later, the founder decided to renovate a 850,000 square foot former car manufacturing plant in the city and move production, and those jobs, to that location. “By having a seat at the table early, we had an impact on how they thought about this,” says Quinn.

Funding the Valley of Death

Investments tend to be in early stage companies—and, in fact, they’re younger in their maturity than Quinn had assumed they would be originally. “We fund much earlier in the spectrum,” he says, with Series A, B and C rounds, plus junior debt, as well term loans to help struggling companies stay afoot, especially during the pandemic. The reason: They found that early stage—known as the valley of death—was the one during which companies had the hardest time finding money.

Initial investments are $500,000-$750,000, though there has been some follow on funding. The initial investment in Viridi was $600,000 in subordinated debt and participation in a Series A round, followed by a Series B, and a Series C. So far, one of the fund’s investments has gone bust, a pirogue manufacturer that couldn’t make it through the pandemic.

At the end of the summer, Quinn and his colleagues decided to raise a series 2 fund of at least $8 million. They ended up closing on $12 million in April, with participation from such companies as M&T Bank and Bank of America.

Quinn attributes that outcome partly to the fund’s previous success, as well as to a growing awareness of and interest in impact investing. “A lot of the people we talked to at first told us they loved what we were trying to do. But they were going to watch and see how we developed,” says Quinn. “A lot of people stood on the side—I don’t blame them—and it’s driven me more than anything.”