NPX Announces Seven "Pay For Success" Financings In The Bay Area and Colorado That Aim To Drive Upward Economic Mobility
35 investors invested $7.8 million in seven nonprofit organizations with financial returns tied to impact performance
Feb 03, 2022, 09:00 ET
SAN FRANCISCO, Feb. 3, 2022 /PRNewswire/ -- NPX, a company transforming the way nonprofits are funded by explicitly linking capital with results, announced today the closing of $7.8 million in "Pay For Success" investments by seven nonprofit organizations in the Bay Area and Colorado -- 10,000 Degrees, ActivateWork (formerly ActivateIT), Bridge House Ready To Work, CrossPurpose, LaMedichi Savings Club, Mission Asset Fund (MAF) and Rivet School.
The nonprofits raised investment capital from 35 accredited and institutional investors seeking both financial and social returns through NPX's "Pay For Success" financing structure, known as an Impact Security. The Impact Security, developed by NPX and Anna Pinedo, partner and co-leader of the global capital markets practice at Mayer Brown, is a performance-based debt security that links payment obligations to impact. The investment capital raised provides the nonprofits with multiple years of flexible working capital to run their programs.
As outcomes are achieved by the nonprofits and independently verified, funding is released to the nonprofits from outcomes funds -- the Bay Area Donor Impact Fund (DIF) and the Colorado Donor Impact Fund (DIF) -- supported by donations from 36 philanthropists and foundations.
The Impact Security is similar to a social impact bond (SIB), but with private philanthropists serving as the outcome payor instead of the government.
Funding in this way incentivizes impact. By measuring and rewarding outcomes, all parties -- nonprofits, donors and investors -- are aligned in order to maximize impact.
"Having invested in several Pay for Success projects over the years, we are excited to partner with NPX on this project that goes beyond the traditional public sector payor model to leverage the power of donations," said Sara Vernon Sterman, Chief Program Officer at Reinvestment Fund. "If successful, the program will not only help people living in poverty build a bridge to economic security but also prove out a model that could dramatically impact the field."
The seven nonprofits that received funding represent a wide-range of organizations -- from start-up to established, serving first-generation students, immigrant families and low-income individuals across Colorado and the Bay Area. Of the seven nonprofits, three (43%) are BIPOC-led and/or founded and four (57%) are women-led.
Nonprofits appreciated several unique aspects of this funding model, including flexible capital tied to outcomes, trust from funders on how to spend money to drive outcomes and large amounts of funding over long timelines.
If successful, the funding will result in the following:
- 50 individuals experiencing homelessness stably housed and employed
- 45 low-income individuals secure and retain living wage jobs
- 500 Hispanic and Latino/a immigrants in rural Colorado build emergency savings
- Over 600 low-income credit invisible individuals establish a credit score, which can unlock access to mainstream financial services
- Over 200 low-income, first-generation and working adult students complete baccalaureate degrees, which has the potential to increase lifetime earnings
This financing model mobilized new funds to the nonprofits. Of the 35 accredited and institutional investors participating in the deal, 25 had never before funded these nonprofits.
"NPX launched its work in Colorado and the Bay Area to achieve three goals: pioneer a new results-based funding model with broad applicability, catalyze more money to nonprofits and drive long-term impact," said Lindsay Beck, Co-Founder and Co-CEO of NPX. "We've achieved the first two goals and look forward to seeing the impact that nonprofits can have when given long-term, flexible, outcomes-based funding."
To learn more about this deal, please refer to the Bay Area and Colorado Case Studies.
Thank you to our partners who provided support and expertise:
Mayer Brown LLP
Morgan, Lewis & Bockius LLP
NPX is transforming how nonprofits are funded by explicitly linking capital with impact. Learn more at www.npxadvisors.com.
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