Founder's Five + Impact
Founder's Five + Impact
Founder’s Five is a continuing series from Tyton Partners that invites education company founders to shed light on their own success and illuminate the landscape for other education entrepreneurs and investors by answering five basic questions.
Social Finance is an impact finance and advisory nonprofit that works with the public, private, and social sectors to create partnerships and investments that measurably improve lives. Since its founding, the firm has mobilized $350 million in new investments designed to help people and communities realize improved outcomes in education, economic mobility, health, and housing.
Social Finance has pioneered impact-first tools like the Social Impact Bond and the Career Impact Bond to realign markets and systems, mobilize capital at scale, and deliver sustainable impact in communities across the United States. In addition to managing the investment program funded by the Google Career Certificates Fund, its economic mobility portfolio includes the UP Fund, place-based Pay It Forward Funds, and the Dreamers Graduate Loan Fund.
The firm operates with a team of 100 people, based in Boston, Austin, New York, San Francisco, and Washington, DC.
I’ve been fortunate to have had a lot of opportunities in my life—from growing up in Hong Kong, to coming to the U.S. as a foreign student when I was 14 years old, to building a fulfilling career in management consulting, asset management, and impact investing. Coming to this country was one big exercise in finding and forging unlikely connections, and it became an important foundation for the cross-sector work we do at Social Finance.
I went from creating a life in this country to becoming an entrepreneur. In 2011, I was recruited by impact investors Sir Ronald Cohen and David Blood to start Social Finance in the U.S. They had pioneered the Social Impact Bond at Social Finance UK and wanted to bring this tool to the states, and I wanted to scale an innovative new model for achieving social impact. We were, and still are, a nonprofit with an unusual mission: working at the intersection of finance and policy to build innovative partnerships and investments that measurably improve lives. Over the past decade, we’re proud to have catalyzed what was then a fledgling field into a global movement that’s changing the way we put capital to work for society.
From the beginning, we thought very intentionally about the kind of firm we wanted to build. The values that were important to us then are the same now: we were not just building an organization but an entirely new field, built on a core set of principles: data, cross-sector partnerships, governance and accountability, and aligning incentives and risks. Our work fundamentally focuses on realigning markets and systems, rethinking how we allocate capital to achieve the greatest impact.
I’ve always believed the capital markets should complement government and philanthropy to animate impact that would be otherwise impossible to achieve through one single avenue.”Tracy Palandjian
These public-private partnerships are what make true systems change possible.
As an organization, we have been thinking about new approaches to advance economic mobility and opportunity for many years. We believe in the oft-used expression, that talent is everywhere, but opportunity is not. Our current education and training ecosystem isn’t delivering for most American workers, and it isn’t giving businesses the skilled talent they need.
We launched the Career Impact Bond in 2019 as a holistic, student-friendly financing model to address the growing skills gap and increase access to job training programs, particularly for people who face barriers to education and employment. This approach gets at three main questions: who pays, who benefits, and who bears the risk in workforce education and training. The status quo requires the worker to take on the risk of time and money—taking time off work and incurring debt, hoping the journey will yield a degree and skills that lead to a living wage. With the Career Impact Bond, the worker only pays if they land a well-paying job after training. And for businesses, they shift from being a passive recipient of talent that the system delivers to becoming active investors in talent development. We have been adapting this model to different contexts, from a $50 million impact investment fund called the UP Fund to managing the investment program supported by the $100 million Google Career Certificates Fund and place-based Pay It Forward Funds across the country.
We believe our biggest lever for change is improving lives through reorienting our public spending toward results. We launched our Public Sector Practice in 2014 to help government leaders more effectively deploy public resources to achieve outcomes for our communities.
Ultimately, our mission is to build the field of outcomes-based practice. We’re committed to sharing what we’ve learned to bring impact at scale. If we can inspire others to adopt and refine the approaches we’re testing—that, above all, is how we hope to change the market.
I wish I had known how much time it can take for new ideas to take off in the impact space—particularly work that requires building trust and deep engagement among actors across sectors. Patience is critical, but it is challenging, especially for our passionate and fast-paced team. The pathway to scale is often long and nonlinear. Indeed, as I have learned over the years, patience is a form of action. And all partnerships move at the speed of trust.
Innovation is not just about coming up with new ideas. Oftentimes we are not inventing new instruments, but rather combining, adapting, and stretching existing ideas in new ways to achieve impact.
The education landscape is divided. On the one hand, many high-quality, nonprofit education and training programs are funded by government or philanthropy, while many education startup companies are backed by market-rate investment capital. I think the system would benefit from more approaches that fall in between.
If I were to go back in time and start a company besides Social Finance, it would be a field building organization to encourage the creation of more enterprises operating in this “in-between” space—something that would blend private, public, and philanthropic capital to achieve its mission. I believe it’s the collective responsibility of business, government, and civil society to rethink the purpose of capital and its role in delivering social change.