Richard Parsons, the former chairman of Citigroup and the former chairman and chief executive of Time Warner, who co-chaired a commission on Social Security for George W. Bush, and who was a member of the economic advisory team for President Barack Obama, not to mention a current member of the board of directors for the Commission on Presidential Debates, ambles into the corner office on the 26th floor of this Manhattan high-rise where the impact investing firm he founded with his friend Ronald Lauder, the billionaire cosmetics heir and philanthropist, is located.
The firm is the PanAfrican Investment Co. LLC. It’s personally funded by Parsons and Lauder.
Parsons is a big man, standing at 6-feet, 4-inches, and he is imposing. He leans in to shake your hand or speak with you. And his energy, like many people of power, is felt; he charges a room just by his mere presence.
The only hint of Parsons being 66 years old is the wisps of gray at his temple. His gait is solid and quick. His body language is open to the people he encounters, as a politician’s might be, and unlike the closed and careful gesticulations of celebrities or business magnates. (Parsons was rumored to have considered running for mayor of New York City in 2006.) He goes by “Dick.”
Blue, open-collared shirt. Dress slacks. Oval-framed glasses. He is the epitome of a successful businessman who doesn’t have to try, who could be spotted at “21” or in the lobby of the Carlton Cannes. It’s the demeanor that makes this man.
The office buzzes with his presence. All seven of the firm’s employees have been eagerly awaiting his arrival. And now that he is here, they are noticeably aflutter.
I am in a small office interviewing one of the firm’s directors, Lior Prosor, a former venture capital executive. Another employee knocks on the door frame, pops his head in and announces that “one of the founders” has arrived and I must cut off my interview; Prosor is needed down the hall.
I follow Prosor to the corner office, where Parsons is standing. He shakes my hand firmly, strongly, like a man should. He looks straight into my eyes. Then he sits at a round table, on top of which is one of those starfish looking speakerphones designed for group conference calls. As materials are passed around and the call is set to begin, Parsons checks his smartphone.
The call and meeting are a financial review of all the investments that PIC has made—and is considering. There are fewer than a dozen people sitting around a table in New York City, yet the decisions they will make could affect the lives of thousands—half a world away in sub-Saharan Africa. Jobs will be created. Incomes earned. Communities fortified. Standards of living bettered. And if all goes well, the investments made will earn a nice financial return to boot.
This is impact investing in action.
Parsons and Lauder have been the best of friends for decades. Dana Reed, PIC’s chief executive, on the other hand, is the hired gun. She is a financial pro with all the right education and experience to run PIC as the venture capital firm it’s meant to be. She was a fellow at the Export-Import Bank of the United States during business school. She built out a mergers and acquisitions advisory unit at a boutique firm, spent time at J.P. Morgan, and then worked the buy side—just as the markets collapsed in 2008. Parsons plucked her two years ago from the asset management business she was helping to run and grow, and which he had taken a majority ownership in.
Of course there is the “doing good” aspect to Reed’s mission as CEO. But that is incidental to her focus. Which is finding good deals. Which means finding good investment opportunities. Which means finding good companies in which to invest. Which means a lot of hard work, due diligence and understanding.
The fund’s focus is on Africa because that’s where impact can be felt by turning on the capital spigot. Besides, Parsons and Lauder had already formed business interests in Rwanda and they wanted to add to those.
Still, you hear a lot about “deal flow” issues in the impact investing world. How do you source deals? How do you vet deals? How do you fund deals thousands of miles away? Never mind ongoing due diligence.
For Reed, deal flow hasn’t been a problem. Entrepreneurs find her or she meets an entrepreneur on the ground. Or she has an idea. Reed has lots of ideas. She looks for opportunities when she visits a place. She might hear about something missing in the marketplace or someone doing something different in the marketplace. Then she tries to connect the dots, her investment filling the gaps. She is building an ecosystem, a structured, flowing, dynamic ecosystem that adapts to the market and market conditions.
“I don’t have a business plan, but the mission is to do good, and to do well. To create a return on capital while creating an identifiable social impact. That is my mission. That’s my mandate, and it’s as broad as that,” Reed says. “Last year, would a business plan look different than what I would write today? Yes. Last year, I said I wouldn’t have looked at South Africa. I would have said sub-Saharan, not South Africa. I figured [South Africa] was done, that it was a place we heard about 20 years ago, that there probably are not these small nichey opportunities that we’re looking for there. I couldn’t have been more wrong. There’s a huge divide between the classes there. There’s a lot of impact to be created that is needed.”
Unlike a fund that has to invest within certain sectors or parameters or risk alienating investors who position portfolios as part of a larger asset allocation strategy, PIC—because it’s privately funded—can do whatever it wants, as long as the partners are on board. And so far so good. Reed says while the portfolio of investments is young, it’s performing well and as expected—if not better.