This year, HBS piloted its first student-run Impact Investing Fund, focused on investing in BIPOC-led and owned small businesses in the Massachusetts area. Since launching, the fund has raised $200k, completed diligence on eight businesses, and is in the process of executing its first investment.

Small businesses are a major growth lever for wealth creation and employment in the United States. Yet, many BIPOC-led and owned businesses currently face systemic barriers to raising capital, including difficulty accessing loans, and lack of access to friends and family equity given the history of racial disparities in the US.

Racial injustice has historically presented itself in many forms—including practices such as slavery, redlining, white-only or white-preferred employment quotas—and has led to stark economic inequity and disparities by race. Massachusetts is no exception. The Federal Reserve Bank of Boston found the average net worth of a white family was $250,000, compared with $2,700 for "Other Hispanic" and $8 for Black (source: Federal Reserve Bank of Boston, The Color of Wealth, 2015).

To address growing inequality, the fund aims to invest patient and flexible growth capital with the intent of scaling BIPOC-led and owned small businesses. The team believes that HBS students are uniquely positioned to support these kinds of investments, which typically have smaller ticket sizes, because they can bring down the high transaction costs that typically deter other funds. At the same time, students get a valuable learning experience which prepares them for careers in impact investing.


Originally conceived in Spring 2020, the objective of the impact fund project was to explore options for setting up an impact fund at HBS. In the context of the COVID-19 pandemic, we were motivated to find a solution to three key problems:

  • Businesses struggling to survive the pandemic, with BIPOC-owned businesses being hit the hardest.
  • MBA students with an interest in impact investing find it hard to build experience in the field.
  • A growing pools of capital in Donor Advised Funds seeking purposeful investment opportunities.

Senior Lecturers Brian Trelstad and George Riedel supported a team of students, Sara Eskola (MBA ’20), Jessica Hart (MBA ’21), Nga Nguy (MBA ’21), on a summer project to explore potential options for a student-run impact fund. By the end of summer the team presented a proposal and received permission from the school to pilot in the 2020-2021 academic year. Joined by senior lecturer EmilyMcComb and additional students in the fall, the team worked to build sourcing partnerships with community organizations, set up the fund infrastructure and begin fundraising.

In parallel, faculty Archie Jones, Henry McGee, Jeff Bussgang and students Allie O’Shea (MBA ’21), Mickias Hailu (MBA ’21), and Shani Carter (MBA ’21) designed a new EC field course, Scaling Minority Businesses, for the fall semester. The team worked throughout the summer of 2020 to develop the course curriculum, including identifying course content and scoping field projects for students. The course launched in the fall, with around 30 students participating and supporting around 10 BIPOC-owned Boston businesses.

Students and faculty from both initiatives joined forces in Spring 2021 to form five deal teams, each conducting diligence on a different business. As the semester draws to a close, the team is completing investments in few of these businesses.

How Does It Actually Work?

The fund is held as a Donor Advised Fund (DAF) with an organization called ImpactAssets. The DAF enables the fund to accept donations and disburse the capital in a number of different ways. As part of the diligence process, deal teams establish what type of capital would be most useful to the business, looking beyond traditional debt and equity. In many cases, teams have found businesses to be overleveraged, making equity investments a viable option. However, as part of our mission to support BIPOC wealth generation, we are cautious not to dilute the founder’s stake. As such, we have also explored more creative financing options like revenue-based financing or convertible notes.

The fund follows a traditional investment process, with deal teams completing diligence and presenting to an Investment Committee (IC). The IC is composed of faculty members and HBS alumni that bring a wealth of experience in investing as well as working with our target communities. Heidi Brooks (MBA ’03) is currently COO, National Institute for Children’s Health Quality, Greg Shell (MBA ’01) is Managing Director of Bain Capital Double Impact Fund, and Stephen Chan (MBA ’09 ) is VP of Strategy and Operations at The Boston Foundation.

In addition to the investment, the fund also offers portfolio companies non-financial support, such as pro-bono consulting projects or opportunities for portfolio companies to be part of the Scaling Minority Business class in future semesters.

First Investment: Casabe

Casabe is a Latina immigrant-owned bodega and artisanal delicatessen in Lawrence, MA which carries a variety of healthy items and foods from “home” such as their famous fresh sugar cane juice. Casabe’s impact potential spans three areas: first, increasing income and wealth creation for the BIPOC community; second, supporting the revitalization of downtown Lawrence which has been downtrodden and lacking investment; and third, increasing access to fresh and healthy food for residents of Lawrence, 80% of whom live in a food desert.

The opportunity to invest in Casabe came to the HBS Impact Fund through the Boston Impact Initiative (BII), a fund focused on “economic justice and opportunity, especially those most oppressed or abandoned by our current economic system.” When BII suggested a potential co-investment with the HBS Impact Fund, the team—Nicole Granet (MBA ’21), Radhika Lokur (MBA ’21), Yonatan Feleke (MBA ’21), Joshua Mbanus (MBA ’21), Grace Dhanraj (MBA ’21), and faculty advisors Emily McComb and Henry McGee—quickly began a rigorous diligence process. This process included elements such as interviews with the owner, discussion with other local bodega owners, research on the market opportunity, a visit to Lawrence, and development of financial projections for the business. A few weeks later, the team presented the investment opportunity to the Investment Committee, which approved the investment. The team is now finalizing the $25,000 investment, working with BII, the fund’s pro-bono legal counsel at WilmerHale, and Impact Assets (which administers the HBS Impact Fund).

Ambitions to Scale

The team looks forward to incorporating learnings and improvements from the past year into its second iteration. They hope to raise a significantly larger fund to be disbursed over the next 7-10 years as well as provide an opportunity for alumni passionate about impact investing to engage with current students.

Beyond Harvard, students and faculty believe this format of student impact fund could be valuable for other MBA programs. Not only is it an effective way of getting small ticket impact capital to under-capitalized businesses, but it also provides a strong platform for building relationships with local communities.

How to Get Involved?

The HBS Impact Fund is expected to continue as a Field Course for RCs in Fall 2021, supervised by the same faculty team.

This article was originally published on The Harbus.