Profiting From Jewish Life?

Basically, Saul Orbach feels about Jewish foundations the way the old ladies in the Woody Allen joke feel about the food up in the Catskills: terrible, and such small portions!

On the one hand, says Orbach, foundations don’t give innovators enough money to do anything really big. On the other, the money those innovators do get keeps them dependent, scrambling for more donations — and unable to do anything really big.

An entrepreneur and investor who has volunteered as a mentor for PresenTense, a group that helps Jewish entrepreneurial efforts, Orbach thinks Jewish philanthropy should learn some lessons from the private sector. So he wants to start a for-profit social impact investment fund, the first in the Jewish world.

“Providing a profit motive can incentivize people more than just idealism,” Orbach said.

It’s venture capital with a social conscience: impact investors put their money into companies whose products or services promise to generate both a financial return to them and a benefit to the community.

Such funds already exist outside the Jewish world; in fact, they can be big business. J.P. Morgan published a report about them in late 2010 entitled “Impact Investments: An Emerging Asset Class” that put possible profits between $183 billion and $667 billion over the next decade.

But so far, the social impact model has been applied mainly in the developing world, to provide basic goods and services like housing and water. Progressive Jewish Alliance & Jewish Funds for Justice is the closest Jewish analogue; two of its funds invest in disadvantaged communities like New Orleans, and some of pay about 1 percent in interest, said Jeffrey Dekro, who is president of those funds.

Orbach wants his fund to tackle specifically Jewish problems. He’s intrigued, for example, by the idea of an online day school as a more affordable alternative to the traditional model.

“In the Jewish world, we have such a highly developed charitable infrastructure. So this is really a brand-new way of engaging people,” said Shawn Landres, the CEO and co-founder of Jumpstart, a think tank and consultancy that advises Jewish startups and philanthropists and has had Orbach speak at its events.

Orbach is still figuring out how big his fund would be, who would back it, what he would invest in and what he would target as his return to investors. In his 25-year career, he has worked as an executive and raised money for fledgling companies. He worked as an entrepreneur-in-residence at Angle Technology Ventures, where he evaluated investments for a venture capital fund.

But he can say he is contemplating a two-pronged approach for his fund that would combine investment in existing companies or business plans with an incubator that would pay entrepreneurs to contemplate the problems of the Jewish people and devise profitable solutions.

In addition to the focus on for-profits, rather than nonprofits, the main difference between what he wants to do, and what exists now at Jewish startup supporters like Natan and Bikkurim, would be the size of the investments, Orbach said.

“They’ll have a few million dollars like a real company needs to get started instead of the $50,000 typically available to a Jewish nonprofit,” he said. “Why should we lose all the brightest minds to Silicon Valley or Silicon Alley?”

Besides broadening the pool of Jewish entrepreneurs, Orbach said, his model would ameliorate the problem of funding for nonprofits that are struggling to grow beyond the startup stage, like JDub, the forward-thinking record label that failed in 2011. In operation for almost nine years, JDub released 35 albums, helped launch the career of crossover chasidic reggae star Matisyahu and developed a hybrid business model with multiple sources of revenue.

But social impact investing will face challenges, precisely because it is a new idea in Jewish philanthropy.

“We’re talking about getting money together to put into investment-ready enterprises,” Landres said. “There may not be enough investment-ready enterprises.”

Then there’s the question of the size of the market, or what Landres calls “the crisis of free.” In the era of Birthright, which has given away trips to Israel to more than 250,000 diaspora Jews, how many are willing to pay how much for Jewish life?

Also, Jewish funders practice a kind of philanthropic kashrut. They tend to strictly separate their investing from their giving, said Sandy Cardin, president of the Charles and Lynn Schusterman Family Foundation.

“People think in sharp, sophisticated ways about investment and leverage until they get inside the organizational community,” said Dekro, who has encountered this difficulty in raising money for his organization’s funds.

Of course, Orbach doesn’t think giving should go away, but he thinks that his fund could help to create productive organizations that won’t need donations.

“The Rambam said the highest charitable value is sustainability,” he said.