A Conversation with Catarina Schwab, Co-Founder & Co-CEO of NPX, Inc.
On Being & Finding True Pioneers
January 10, 2018
1. What is your business?
NPX is a for-profit company that seeks to transform how impact is funded in the nonprofit sector and beyond. We invented a financial product called the Impact Security that brings together donors, investors, and non-profits to fund impact in a new way.
Today, nonprofits cannot access capital based on their impact. This is the equivalent of a for-profit company not being able to access capital based on their earnings. The current nonprofit fundraising model is based on an organization’s ability to host glitzy fundraisers, attract a high-powered board or reduce overhead to a debilitating level. As a result, non-profits average 20% cost of capital as compared to the for-profit sector’s 5-10%.
The nonprofit sector is a trillion-dollar industry, but money is being wasted on avoidable inefficiencies and there isn’t enough philanthropic capital to solve the world’s issues. There is a growing asset class of Impact Investing, but unfortunately, nonprofits are largely excluded from these types of investments. Our product, the Impact Security, changes that. It is the first financial product that allows an impact investor to invest in a nonprofit and potentially earn financial returns tied to social or environmental impact.
In addition to capital constraints, nonprofits and donors cannot readily access impact data. Nonprofits are not incentivized to share their data because it is not tied to capital. Our product, the Impact Security, links capital with impact for the first time. This simple change will provide donors with data on what interventions are working and aren’t working, leading to more informed decision making.
2. What made you decide to start your business and/or switch careers?
Over the last 20 years, I have had 6 careers. No joke. Investment banker, Venture Capitalist, Technology Executive, Retail Business Owner, Nonprofit Executive and now Co-Founder of NPX. Each opportunity was awesome. I learned new skills, met new people, completed my tenure and moved on to the next opportunity. Some might say I like new challenges.
In my last role, I was VP of Development for the global nonprofit buildOn. During my five-year tenure, I discovered first-hand that the nonprofit funding model is broken. Four months of the year I was planning a gala and, while it was wonderful to gather our buildOn family to celebrate our successes, I could see that donor fatigue was real and the events felt removed from our goal to empower youth through service.
When I left buildOn in 2013, I set out to figure out a solution to this problem. Luckily, I met Lindsay Beck who had been tackling this problem at Wharton Business School. I knew immediately that her idea was a game-changer, and I was eager to be a part of it.
3. Was there ever a particularly tough time that in retrospect was a priceless learning moment?
I would say we have had fewer tough times, but lots of learning moments! Honing our messaging has been a lot harder than I expected. We live in an age of information overload, buzzwords and sound bites. When you are trying to disrupt an entire sector, you need more than an infographic or two-minute film (although we do have both of those – Impact Security Infographic + NPX Film (password: 15v7npxGoldman38)) to reach your audience. We have worked really hard on our messaging, and it is always exciting to watch people have their “aha moment.”
I would say another difficulty in starting something new is finding the true pioneers. We have had a lot of very loud cheerleaders on the sidelines, but few people willing to be the first to participate in an Impact Security. We have been close to launching a few deals and for various reasons, it hasn’t happened. Each time you have to pick yourself up, listen to feedback, iterate on the product or strategy and move on.
4. Were your family and friends helpful or obstacles in launching your business? How so?
They have been amazing. From words of encouragement to investing in our company, our family and friends have been incredibly supportive. I have to say it helps to be married to a venture capitalist! My husband believes in our big idea 100% and knows how hard it is to get something off the ground as that is his “day job.” His optimism for NPX is infectious.
5. Were there any partnerships that were particularly helpful?
Morrison & Foerster, the New York and San Francisco-based law firm, has been an incredible pro bono partner for the last five years. Lindsay met the firm while she was at Wharton, and they have worked on everything from setting up our company to launching the first Impact Security. Anna Pinedo, a partner at the firm, has been key to helping us think creatively about the product and its application. NPX and Morrison & Foerster were thrilled to win the Financial Times Innovative Lawyers award in December 2016.
6. What are some successes you have had with your business that make you proud?
Lindsay and I were very proud to be honored as two of the “100 Most Intriguing Entrepreneurs” at the Goldman Sachs Builders + Innovators Summit in mid-October of this year. Spending two days with our fellow entrepreneurs was endlessly inspiring and a great reminder that there is no such thing as an “overnight success”.
7. What are some of your current challenges?
Getting our first deal done. The good news is we are getting really close! We realized over a year ago that it is hard because our model requires Donors to change their behavior. The change is actually quite simple. Instead of making a donation and hoping for impact, we are asking donors to measure impact and then make the donation if impact happens. Behavior change is hard.
8. What would be your biggest piece of advice you would give to yourself ten years ago?
Discover your “superpowers” early and seek out opportunities that lend themselves to your strengths. Of course, we should all identify our weaknesses and perhaps spend some time working on them, but better yet find a business partner or colleague who complements your skill set.
I remember so well when Lindsay and I were playing “hot potato” with the CEO role. “No, you be the CEO… No, you be the CEO.” Finally, we looked at each other and said, “Can we be Co-CEOs?” We didn’t know if sharing the CEO role was a recipe for success or confusion, but we gave it a shot. It turned out to be one of our best decisions.
9. What are your hopes for your business for the next five years?
My hope is for NPX to change how the world funds impact. Finance matters. The way you fund impact actually determines what impact is possible. We have a lot of urgent issues that we need to come together and solve in new ways.
10. Are you willing to serve as a mentor to others interested in your sector?
Yes! Mentorship has been an incredibly important factor in my career. Both seeking mentors for myself and serving as a mentor to others.
It’s funny because I actually reached out to Princeton (my alma mater) when I was transitioning careers in my late twenties and asked them if they could help me find a mentor. They told me about a new type of alumni event called “Net Nights”, which they hoped would foster connections between alumni through networking and interesting content. I asked the date of the next Net Night in San Francisco to which they replied, “Oh, we haven’t launched there yet…would you like to launch it?” I did launch and run Net Nights for the next two years and realized that searching for “the one” mentor is a futile exercise. You can, and should, have many mentors who you can turn to for different types of advice during each stage of your life.
It would be an honor to mentor members of your Nxt Chptr community.
Date of conversation: October 6, 2017
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