Case ID: HKS227
Solution ID: 6146

Coastal Ventures Limited Partnership Balancing a Sustainable Investment Strategy with a Social Mission Case Solution

Case Solution

Nat Henshaw, president of CEI Ventures Inc. (CVI) a subsidiary of the nonprofit Coastal Enterprises Inc. (CEI), was involved in a balancing act. He was a manager of a for-profit venture capital fund, Coastal Ventures Limited Partnership (CVLP), with a social mission that valued good-quality jobs, employee ownership, and a concern for the environment. Henshaw and his board of directors were also thinking about the next venture capital fund, which they wanted to have in place when they began to wind down the investment activity of the current fund. Did they have the right balance between profit and social mission? Could they invest the remaining 60% of CVLP's funds in the next two years in a manner that struck the right balance? And did they have a good enough track record to attract investment into a new fund? Many students will be unfamiliar with this type of institution and the case provides sufficient details on the institutional structure of a community development venture capital fund and the way it operates to serve as an introduction to this subject. It demonstrates the way in which both institutionally and operationally the fund is designed to promote both profitable investments and a social mission. Nevertheless, the fund faces considerable problems in maintaining this balance. The case can then serve as a platform for a discussion of the effectiveness of such an institution in promoting community economic development. More generally, this case can be used to teach students about the "double bottom-line," where the bottom line is of a business which is the subsidiary of a nonprofit institution, which set up the business in the first place as part of its efforts to fulfill its mission. Such arrangements are becoming more common in the US nonprofit sector and they raise issues about the legitimacy of for-profit subsidiaries and the blurring of the line between the for-profit and nonprofit world. HKS Case Number 1669.0


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