5 questions with Andy Rappaport

As general partner of August Capital, Andy Rappaport is a typical VC. He sits on boards and scouts investments in the open-source, broadband and semiconductor sectors.

Outside of venture capital, however, Rappaport has honed a second identity. He is one of Silicon Valley’s most active Democratic Party supporters and philanthropists. A profile in The New York Times four years ago referred to the bearded Rappaport as a leader in the “vast left wing conspiracy” and pointed to his support of liberal causes and involvement in Democratic inner circles.

More recently, Rappaport has mixed his social agenda and his personal investment portfolio. A few months ago, he and his wife Deborah invested a seven-figure sum in New Cycle Capital, a newly launched early stage venture fund that backs “green” companies and businesses that provide services to low-income populations. The investment is part of what Rappaport predicts will be a growing trend among high net-worth individuals and foundations to invest in for-profit funds that also further their social agenda.

PE Week Senior Writer Joanna Glasner recently hooked up with Rappaport to ask him about politics and socially responsible investing

Q: What piqued your interest in socially responsible venture capital?


My wife and I started to see opportunities for for-profit businesses that could also address some of the things non-profits wanted to do.

What we would love to see is some opportunity to put money to use in for-profit entities that can achieve some social return.

Q: What is your investment approach

?A: A lot of socially responsible funds have this idea that they’ll provide a social return, but you’ll have to accept a below-average financial return. I disagree. Once you give a business an opportunity to make a below-average return, you make it more likely it will.

In terms of businesses, I’m very attracted to inner city commerce opportunities. Related to that are financial companies that are more socially responsible with respect to same-day loans, check cashing and those sorts of things.

Q: Do you expect to see this space grow?


Yes. There are a lot of people here in Silicon Valley who are still relatively young who have made a lot of money and are looking at their investable capital and asking themselves: ‘Why shouldn’t I use this to achieve some social returns?’

Q: What about exits?


Clearly there have not been a lot of exits for the kinds of companies in which New Cycle and others are investors. But that’s common in venture. When VCs first invested in software and Web companies, for example, there were no exits. There are never any exits until there are, and until there are capital is relatively scarce.

Q: What are your thoughts on the 2008 presidential campaign?


I’m a public Democrat, and so obviously I’ve been enthused by the fact that we’ve had a good campaign for the nominees. Even though I didn’t start out as a Barack Obama supporter—I was a dedicated John Edwards supporter—I’m pleased by how the Obama campaign has brought in so many new voters. It’s been great to see and I think we’re in a very strong position.