Thank you, Lin-Manuel Miranda, for showing us the arts are a good investment
The Broadway show Hamilton is a popular, critical and financial success. The show recently won 11 Tony Awards, including Best Musical. The Rockefeller Foundation, believing the show is a “catalyst for social change”, bought $7.5 million in tickets for public high school students nationwide. Performances are sold out for the next six months, and The New York Times is predicting, “the unlikely hit will ultimately generate upward of $1 billion in sales.”
This hip-hop musical is part of the more than $700 billion of the US Gross Domestic Product (GDP) generated by arts and cultural production. Since before the term “social enterprise” was coined, nonprofit arts organizations have been earning their way: 60% of income for arts organizations comes from earned sources like tuition, merchandise, royalties and ticket sales.
And artists can do more than get butts in seats.
They are behind some of the most popular companies of the sharing economy. Perry Chen — musician and visual artist — co-founded Kickstarter. AirBnB founders Joe Gebbia and Brian Chesky are graduates of the Rhode Island School of Design.
So, if artists bring together creativity, social change, global influence, and genius — and can earn money doing it — where are the impact investors?
Conventional investors don’t seem to have this problem. They have figured out how to buy shares in important paintings, to invest in the stream of royalties generated by music and film and to make private equity investments in the creative industries.
You would think that investors seeking to do well and do good would be curious about creativity. Not only have 11 million people taken a flyer pledging $2.4 billion to support projects on Kickstarter, but the creative economy is grabbing attention among titans and influencers at places like Davos. Top CEOs acknowledge that creativity is one of the most valuable skills for corporate workers. And creatives who would rather work on their own have driven the market value for Etsy to over $1 billion.
It shouldn’t be that tough, since some of the impact investing sector’s real pioneers are artists themselves:
· Clara Miller, founder of Nonprofit Finance Fund and who is now revolutionizing the field of mission-related investing as president of the FB Heron Foundation, majored in studio art.
· Jed Emerson, who started investors thinking about “blended value”, kicked off 2016 with a blog musing about the importance of museums and music (including his own guitar playing).
· Patricia Farrar-Rivas, founding partner and CEO of impact investment advisor Veris Wealth Partners, had an early career as a dancer.
· Debra Schwartz, Managing Director of impact investing at the MacArthur Foundation, was active in the student theater at Yale College.
Recently, two national foundations separately engaged two different impact investing advisory firms to landscape their mission-related investment options. Both foundations asked about how they could make impact investments in the arts, and both advisors said they couldn’t: there were no products or funds for impact, arts and creativity. That’s not to say investments aren’t being made. They just aren’t being made on purpose.
When the Calvert Social Investment Foundation recently looked at its portfolio, it found at least $20 million invested in creative places and businesses. When the Treasury Department’s CDFI Fund did the same, they found $460 million in creative placemaking projects. These are good deals, coming in through regular channels, and they are investable. But still there is no product or fund that allows investors to direct their impact capital to affordable artists’ housing or creative companies.
Of course art has value much greater than its financial worth, and a lot of artists and art-making will never be “investable”. But by engaging with investors who appreciate that artists can bring a unique approach to driving social impact as innovators and changemakers, we can expand the pool of resources, bringing capital needed to experiment and scale to some of the most creative people around.
Impact investing is going mainstream, as asset owners look to get more than a financial return from their investment. The social and economic benefits of investing in the arts is clear. So, as the song says, let’s not throw away our shot.
Laura Callanan is the founding partner of Upstart Co-Lab, a national collaboration connecting artists, impact investors and social entrepreneurs to create opportunities for artist innovators to deliver social impact at scale. Follow us on Twitter.