SAN MATEO, Calif.--(BUSINESS WIRE)--Transform Capital announces today how they are disrupting the traditional Venture Capital (VC) profit-sharing model with an innovative structure where investors can earn outsized returns like a traditional VC fund while weaving in philanthropy without affecting an investor’s profits. Transform Capital is able to achieve this by sacrificing some of the General Partners’ profits while donating to non-profit organizations while the fund returns the initial capital to the Limited Partners (LPs, individuals/organizations that invested in the fund).
Transform Capital’s innovative model with a strong philanthropic mission stands in sharp contrast to other market players while still delivering outsized returns. Traditionally, a venture capital fund returns the initial capital to all investors first before distributing 80% of the profit to the investors and 20% to the VC (also known as carry). This is often referred to as an “80/20 split” where philanthropy is absent today.
Giving back is in the DNA of the fund – the investors of the fund and the portfolio founders, all play a crucial role in disrupting the traditional model.
The Fund
Transform Capital, like traditional venture capital firms, invests in high-growth, revenue-generating late-stage technology startups, but it delivers results while combining a non-traditional way of giving back. Transform Capital’s mission is simple - make money while doing good by donating 50% of the partner’s profit to philanthropic causes LPs care about.
Portfolio Founders
Transform Capital has unique access to some of the best late-stage companies. It has invested in Classy, Eastern Standard Provisions, Jackpocket, Kitman Labs, LeaseLock, NEX, Paro, Passport, Paystand, Urgently, Workspot and YieldStreet. Each of the CEOs prioritized taking investments from Transform Capital in heavily oversubscribed rounds to support the philanthropic mission.
"We are very much mission aligned with Transform Capital. We both share the ‘pursuit of meaningful work’ with our different endeavors. We empower business professionals to pursue meaningful work while Transform Capital creates meaningful work with their investments and generous philanthropic commitment. We are proud to have a ‘doing well by doing good’ investor on our cap table," said Anita Samojednik, CEO of Paro.io, a Transform Capital portfolio company.
Investors of The Fund - The LPs
Investors also play an important role in both deal sourcing and in selecting the causes to which the General Partners of Transform Capital ultimately donates its profits. Transform Capital contributes to the causes its investors care about from the first exit, while deferring profits for the General Partners until the fund has fully returned the initial capital to all investors.
With this innovative structure, Transform Capital has proven that it can return the same investment multiples as a traditional fund and yet do good at the same time, without sacrificing LPs’ profits. Instead of an 80/20 profit-sharing model, it’s an 80/10/10 model - LPs still receive 80% of the profit (as in the traditional model), 10% to the Foundation, and 10% to the Partners. In addition, LPs benefit from this model because they get to select which non-profits receive donations from the Foundation.
“We believe in the power of a virtuous cycle where transformative ideas can turn into outsized profits and outsized profits can in return do good in our world. Venture capital is one of the best vehicles to do this and we hope to inspire other venture firms to follow,” said Jonathan Ebinger, founder and Managing General Partner at Transform Capital.
The Fund’s LP base consists of mission-driven foundations like The National Geographic Society (NGS). "We are proud to join Transform Capital as both an investor and a strategic partner of the Transform Capital Foundation. Transform's unique model will enable the National Geographic Society to benefit from the traditional venture capital fund model while furthering our mission to illuminate and protect the wonders of our world. We view Transform as a new route for charitable giving and NGS is proud to be at the forefront of this transformative approach to philanthropy," said Jill Tiefenthaler, CEO of the National Geographic Society.
To learn more about the innovative Transform Capital Profit Sharing model, visit: https://www.transform-cap.com/how-we-disrupt-traditional-vc.
About Transform Capital
Transform Capital is a Silicon Valley-based venture capital fund that invests in high-growth, late-stage technology companies. Founded by VC veteran and Managing General Partner Jonathan Ebinger (20+ years at BlueRun Ventures) and co-lead with General Partner and serial entrepreneur, Aihui Ong, Transform Capital aims to inspire philanthropy in venture capital by committing 50% of the General Partners' profits to three areas of focus: Education, Environment and Health. For more information, visit https://www.transform-cap.com and follow @TransformCapVC on Twitter.
