In this interview from February 11, Kimberly Miller interviews Karyn Barsa, who will be speaking at the Green Cities Conference taking place May 19-21 in Orlando, FL. Karyn Barsa discusses social enterprise, her work with Investors’ Circle and Patagonia, and why sustainable businesses give her hope despite today’s economic woes. This is the second in a series of interviews with Green Cities speakers.

“We’re tremendously excited about the fact that the Obama administration seems to understand that the future for business is all around sustainability and broad context of sustainability, so that means not only green, but social concerns have to be enveloped in that and profitability has to be addressed.”  – Karyn Barsa

 

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Transcript of Interview
February 11, 2009

So I guess what I first want to start out with is the talking about the projects you’re involved in right now and the companies you’ve been involved with previously and are currently involved with?
Ok, well let me explain a little bit about Investors’ Circle. We are actually the oldest, largest and the only national early stage investor group that is devoted to socially and environmentally responsible businesses. So we are some 225 members strong across country, looking at mission based businesses in a broad spectrum of sectors. So it’s a great opportunity for entrepreneurs who are interested in really making a mark in the world using for-profit business to find funding. So Investors’ Circle being a collection of early stage essentially “angel investors” or private investors each member makes his or her own investment decisions. We don’t manage a fund here that invests on behalf of Investors’ Circle , so at any given time there are a number of different companies that are in play or being considered in a due diligence process by any number of our members.

Ok, and so what is your role specifically at Investors’ Circle ?
I am President and CEO here.

And so what does that mean as far as the kind of work that you get to do?
AH! I get to do all the fun stuff actually because Investors’ Circle is a lot more than just an “angel group” if you will, we’ve been known for 10 or 12 years as a “thought leader” if you will and an organization that helps develop a sector called “social enterprise” and specifically for-profit social enterprise and move that forward. So my big goal is not only to facilitate the process of moving capital from our members and others into social enterprises, but also to help the world understand what are the benefits of for- profit business in creating real and sustainable and lasting change in our communities and the potential for this is just phenomenal. There is so much work that Investors’ Circle really wants to do going forward, and so much creative financing that can be organized for the benefit of social enterprise and ultimately for the benefit of the communities and the world we live in, that its every morning that I get up and it’s a new idea and it’s a new concept to chase down and invite collaborative partnership into. So what I do is really great fun.

Yeah, it sounds like a phenomenal job to have, that’s for sure. So could you give me an example maybe of the type of start up that’s Investors’ Circle helps along?
Sure, because we have such a broad range of members and some individuals who are accredited investors and others who are what we call institutional members, they might be funds, they might be family foundations that sort of thing. We fund a broad range of companies in various stages of development, so yes we do provide some seed capital, but we also provide expansion capital to companies that are more well established. And I can tell you that there are a number of companies that have come through Investors’ Circle and have been financed by our members that you might know about, so for instance, there are very well known brand names like Niman Ranch, or Zip Car or Justice Earth if your out here on the West Coast, companies like that, Guayaki, which have really been able to transform their sort of startup and small enterprise from concept to national and sometimes international brands. So Investors’ Circle is very interested in working with an entrepreneur to say “ok, how can you maximize the impact that you envision?” And in some cases that means staying small and slow in terms of growth and local and in other cases it means, “hey lets take this brand out to the world,” because the brand has a message that we want everyone to understand.

So you talked earlier about social enterprise, what does that mean exactly?
For us that really means, and I have to admit that the term “social enterprise” is used somewhat loosely and could really benefit from greater standardization of definition here, but social enterprise generally speaking are organizations that put missions even ahead of profit, if you will, and it doesn’t mean that they can’t achieve profit and very strong profit, but the reason that they exist is to benefit the communities that their involved with in one way or another. Its really baked into the DNA or the business plan of the company, and social enterprise can refer to organizations that are for-profit companies as we traditionally know them or can refer to non-profit organization that want to develop for-profit entities within them so that their less reliant or sort of the vagaries of contributions as their main revenue source. I’m trying to think of a good example of a non- profit organization that has an embedded social enterprise, and perhaps the most well known is Goodwill for instance with their retail stores, and you know there are a number of other organizations that use it to great impact. It really helps support the community work that their doing.

So whenever you speak at Green Cities are you going to be speaking on social enterprises and how for- profit business can make a social impact?
Yes, and in fact I have to say I’m waiting for some direction from the Green Cities event managers to understand to how I might best add value to the program. But I’m happy to speak from particularly a green perspective or speak from the stand point of the power of for- profit enterprise to make a tremendous difference or whether it’s specifically green, whether it’s a broader context of sustainability or whether it’s a social impact that one wants to put forth.

So switching gears just a little bit, I’m curious to know what the pivotal moment was that prompted you to do the type of work that you do, because it is phenomenal work, it’s very impactful and you’re doing it at such a high level that you actually have a chance to influence and change, it seems, a number of social causes.
Well, you know, I thank you for asking that because it brings a big smile to my face when I think about it. I actually started my career in investment banking and did all of those wildly rapacious things that investment bankers are known for. I eventually moved through hook or by crook and became Chief Financial Officer at Patagonia, and at the time in the mid 90’s Patagonia was really seen as counterculture organization and my friends from Wall Street ribbed me to no end about moving out to a place where I had to wear Birkenstocks everyday and what have you, but Patagonia is involved and committed to its mission of using business to implement and inspire solution to the environmental crisis, to such and extent that the consumer doesn’t even begin to see, really only sees the tip of the iceberg in terms of what Patagonia is involved with. Patagonia reaches back into its supply chain and reaches forward into its customer base really to spread the concept of environmental impact reduction and works very directly with companies all over the globe to help them reach those goals in that regard. So I was so inspired by what was going on at Patagonia and became quite a convert in my understanding what for- profit can do to actually make a difference in the world, that when I eventually became CEO at Smith & Hawkin, which is another company that is known for its commitment to environmental impact reduction and sustainability, it had just become a part of my perspective and my life focus at that point, so to move to Investors’ Circle with two mission based businesses in my background this is an absolute joy, I mean talk about a culmination of everything I wanted to do, I come from a finance background in investment banking and here I get to play with investors and entrepreneurs, there could be nothing better, I have to tell you.

Everyone can only hope to be able to do that kind of work after laying those solid foundations in other companies.
Well you know its true but in all honesty and I won’t take up too much of your time with this perspective, it really is a matter of being open to the sort of inputs that come into your life, and understand what their meaning could be, and not working against them but working with that sort of natural flow. It’s been a phenomenal opportunity for me, I’m just thrilled.

So I guess we could talk about things outside of work for just a moment, just talk about who Karyn Barsa is, what other interest do you have, what other things are you currently involved with?
Well I’m really turned on by business and using business to solve some of the worlds biggest issues and I also serve on a number of other boards. I’m on the board of a wonderful company which is doing phenomenal things; they are a mission based business that sources organic fair trade cotton from India and does a lot of work on the ground to improve the lives of Indian farmers. I’m also on the board of a public company called Decker’s Outdoors Corporation. And Decker’s makes footwear including UGG brand boots and shoes, but they also make a brand called Simple and they aspire to make Simple the most environmentally responsible footwear line in the entire world, and they are working very hard to do that. So when you see this sort of impact that small business can have in communities and large public companies can have it become a very inspiring, sort of get you out of bed in the morning sort of prospect. And when I’m not working with those companies I’m skiing, or bicycling, either mountain biking or road riding. I have to say Northern California provides the greatest access I’ve ever had to whole spectrum of outdoor activities, that frankly if you really enjoy being in a fog enshrouded space, you can find that, and if you enjoy being in bright sunshine all the time, you can find that as well. It’s perfect.

So what do you think about the current economic situation and the future of business? And what socially responsible businesses are going to have to do to stay viable?
You know I have to say that I would guess that the majority of individuals involved in this sustainable business movement and social enterprise and what have you are absolutely thrilled with the current economic environment and the change in the administration. We really feel that we have a wind at our back, first of all the old economic order is falling apart at the seams. We’re going to have to learn now to live with a much less leverage in our society so we’ll start to get down to real value add from a company stand point, rather than the creation of more dollars from a single dollar through what is essentially a leverage or a smoke and mirrors sort of approach. We’re also tremendously excited about the fact that the Obama administration seems to understand that the future for business is all around sustainability and broad context of sustainability, so that means not only green, but social concerns have to be enveloped in that and profitability has to be addressed. So there is a role for business to play that begins to overlap non-profits and the government sectors have been doing for years. And when you consider the fact that we are going into a significant amount of debt from a government standpoint, you wonder whether or not the government should be relied upon to provide the sort of social benefits that it’s been providing as the sole provider for so many generations. And when you think about the opportunity for for-profit business to generate some return in that regard I think that’s a spectacular use of funds to support business in that regard. So, it’s all gonna work out eventually, the economic cycles can be very painful to go through but they always come through in the end, and we see an upswing, and I think that social enterprise and sustainable businesses will be at the forefront of all this as soon as we start to pull out of the tailspin.

So what kind of specific sustainability work have you been involved in? Because I know with Green Cities there is a lot of talk about sustainability as it relates to the municipality. So if you could just talk about some sustainability work.
Well you know sustainability is such a broad term and I know that Green Cities is specifically on environmental and green approaches and I think that that’s really one leg of a three part stool if you will, to use a tired metaphor but, to be truly sustainable community or business or even organism with that you really have to consider all of the aspects of your existence, and that does include the three part process of people, planet, profit. So Patagonia is probably from a personal stand point where I had the most experience in terms of reducing environmental impact and helping organizations understand how to grow in an environmentally respectful matter. We also worked with a number of non- profits, one of which I had experience with was Save Mono Lake organization. And after they had worked so hard to Save Mono Lake which is a large salt water lake in California, I take that back let’s just call it a large lake in California because I don’t know what the salinity or the density is these days. Well once they had worked so hard to save Mono Lake they said, “well now what?” Do we cease to exist or can we turn our efforts to help organization and municipalities learn how to develop a sustaining sort of environment, and at Patagonia we helped them create a business plan that would move their efforts and whatever they had learned through that process into more of a municipal focus. And as well the former CEO at Patagonia, who’s no longer there Dave Olsen, is involved directly with working with municipalities to reduce their environmental footprint. And he does some spectacular work throughout the state of California and nationally. So I’ve been associated with green work from a municipal standpoint by association and also in a small way through Patagonia as well.

Is there anything that you have coming up; any kind of projects that you’re excited about that maybe isn’t out there in the world of news yet, but that your working on and looking forward to?
Sure, you know what, there are a number of things at Investors’ Circle that are very exciting to me but I’ll mention just a couple and the first is that we put on two conferences each year and we have one conference coming up in San Francisco coming up in April, April 19^th through the 21^st. So that takes up a lot of our focus and effort because we try not to just put on a venture fair process where companies come and meet investors and make their presentations, but we have an entire day that is devoted specifically to promoting the social enterprise space forward. So it’s a wonderful conference with really stimulating keynote speakers, plannery sessions and what have you all designed to be very interactive. The other thing that we’re working on I think from a project standpoint is something that might be interesting to a number of socially or environmentally minded entrepreneurs, and that is that there is a, we believe there is a large amount of capital that could be deployed by various foundations under programs called Program Related Investments. And this is actually an IRS construct that allows a foundation to make investments in for- profit and non- profit businesses that are designed to actually return something to the foundation, but the key is in order to qualify from an IRS standpoint, these investments have to be made in a way that is “below market.” So entrepreneurs that qualify for that sort of PRI Investment enjoy very low cost debt for instance that financing and some very interesting and positive and flexible terms and what have you. What we would like to do at Investors’ Circle is do some work around unlocking the potential for more PRI Investment from foundations and partner with a couple of our very well known partners, like RSF Social Finance, to make that a reality and be able to package these deals for our entrepreneurs who come to us for funding. And I’m really excited about that because what makes green investment so exciting to me from an investor’s standpoint is that many of these companies are eligible for subsidized capital, they’re eligible for grants from foundations, and PRI monies from foundations and when they come to an “angel group” or an individual angel for funding, that angel benefits from the capital that’s been put in the form of grants and PRI’s. It’s a beautiful way to construct a very solid capital structure and for angel investors to enjoy a significantly reduced risk profile. So that is one of our chief ways of looking to catalyze the flow of angel investments into green and socially responsible companies.

Well that sounds really, really terrific and all very, very exciting work.
It is it really is. I can’t tell you I bounce out of bed every morning.

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Karyn Barsa serves as President for Investors’ Circle. Formerly CEO of Smith & Hawken and COO/CFO of Patagonia, Karyn has led two vibrant organizations that serve as models for values-centered leadership around the world. With a career that includes investment banking, commercial banking, and turnaround corporate finance, Karyn has specialized in opportunities to meld business and social missions and has been a featured speaker for numerous organizations including the American Management Association, Business for Social Responsibility, and various sponsored conferences. In addition to serving on the board of Investors’ Circle, Karyn is a member of the Board of Directors at Deckers Outdoor Corporation (Nasdaq: DECK) and a member of the Board of Directors of NESsT. Karyn also serves on the Advisory Board of inResonance, Inc. Karyn holds a B.A. in Economics from Connecticut College and a MBA from the University of Southern California.

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