The economics of The Social Age are bound to be interesting. You’ve heard me talk about the need to incorporate “social” factors of production into the economic equation. I recently had the opportunity to speak with Kevin Jones of Good Capital, a venture firm that focuses on harnessing “the power of the market to create sustainable solutions to some of society’s most challenging problems”.

Kevin and his partners Joy Anderson and Tim Freundlich are currently raising and investing their first fund. This, to me, is very exciting. There is a new class of investors emerging, and to give readers and inside look at how venture capital is changing shape in The Social Age, Kevin has generously agreed to share his thoughts and insights with us on a monthly basis.

Susanne Goldstein: The name of your organization is Good Capital, which leads me to believe there is such a thing as “bad”capital. What is “bad” capital?

Kevin Jones: Most capital is by its nature, thought to be amoral; “not subject to the ministrations of the do gooders, but instead a force of nature” to borrow Andrew Carnegie’s notable phrase from his Gospel of Wealth essay. That is, most capital exists in a world where the question of whether it’s good or bad is not one that you can even ask. You can ask about risk and return, but not the impact of that capital.

As for bad capital, well, there’s plenty of it around, depending on your viewpoint. I have a friend who runs a “vulture fund”; he does PIPE deals; (private investment in public equity). He swoops in and buys the depressed stock of publicly traded technology companies and finds a way to boost results, at least in the short term, such that the stock rises. His interests and those of the company are not truly in alignment, so from the company’s standpoint, his is bad capital; he may cut short a promising product’s development, and rush something to market too quickly. But from the standpoint of his investors, his capital is fine; he has returns that are significantly above market. Other capital sources that are deployed without thought to their true impact on the planet or the people are also bad capital. Increasingly, bad capital is being called to account. The impact of capital, good and bad is showing up on the balance sheet because people are starting to demand that kind of accountability.

SG: How is “good” capital different?

KJ: Well our real innovation was in saying that something like Good and Capital could come together in the first place; kind of like chocolate and peanut butter for Reese’s peanut butter cups. When we first floated the name, some people said, are you naive or arrogant? Capital is about financial return, period. But since then, Milton Friedman has died and whatever trend, whatever shift in the zeitgeist we were reacting to when we first came together to say that you could invest for good, not just give for good, but invest for good, has grown. Our story is really in our logo; we are good and capital coming together, and we are riding a wave. Five years ago if we’d started this company we would have been lonely guys pushing a rock up a hill. Now the wind is at our backs and people are joining in.

Our innovation is in saying that you can invest for good, and even, sometimes do more good than if you’d given the money away. You can increase your positive impact on the world, and in the truest sense, changed the world without it costing you a dime, because you get your capital back, at a rate that beats inflation.

SG: What does your organization do?

KJ: We exist to accelerate the flow of capital to good. Our first fund is the first to take equity from investors and place it into high performing non profit and for profit social enterprises to enable them to grow and then offer a financial return to investors. By contrast, venture philanthropy funds like Acumen or New Schools take donor money and place them into non profits and then use that money to invest in social purpose businesses; That’s the financial innovation. What we are really doing is providing growth capital to world class entrepreneurs who, because of the cost of the social mission to their businesses, are not able to attract traditional growth capital, like venture funding.

SG: Why is this type of investment asset class important, and why should we care?

KJ: There are thousand or maybe tens of thousands of social entrepreneurs; the field is exploding; people using the market to earn income to support a social mission in new and innovative ways. The problem is, they can’t grow to scale. Foundations fund proof of concepts, these entrepreneurs don’t have the assets that would let them attract debt. What they need, what this field needs, to prove that it is, truly, an asset class halfway between giving and investing, is an infusion of growth capital to let these amazing, world class entrepreneurs, take their businesses to scale, to give them the fuel to have the positive impact in the world that they truly can make.

SG: Do you think people will actually put money into your fund? Aren’t investors just trying to make the best possible return on their money?

KJ: In fact, people are investing in new ways. People are learning to add impact, what they and their money does in the world, to the traditional equation of risk and return. Now it’s risk, return AND impact. We are attracting investors, who are committing millions of dollars to us. We have a pipeline of something like $22 million in investor dollars. It’s a new world. Good and Capital have come together and we are riding a wave.

SG: How will a fund like this effect change in the world?

KJ: I think we will provide the fuel for the best entrepreneurs, who have the talent and the business models to have a huge impact in the world. And we will assemble the best human capital around them — the advisors, the volunteers, the networks, the media attention — to create a track record that will make it easier for people to realize that there truly is a new asset class between giving and investing.

SG: How do you think investment and venture capital will change in The Social Age?

KJ: I think everyone is more aware of the impact of their actions these days, from the way they spend their time, to the way they spend their consumer dollars. Now, even the deeper things are changing and people are thinking and acting differently about the way they use their investment dollars. Impact, social and environmental impact, what we do that effects the planet and the people, is now emerging onto the balance sheet.

Kevin Jones is a Founding Partner in Good Capital, focusing on market formation and advisor engagement. His extensive entrepreneurial and private investment experience covers a range of technology and social enterprises include six market dominating businesses. Kevin has been a columnist for Forbes and Business 2.0, on the boards of Social Enterprise Alliance, and Social Venture Partners International. He led a malaria project in Zwaziland and Mozambique and was a founder of Parents for Public Schools, a national organization. Kevin can be reached at kevin at goodcap dot net