Kat Taylor started a bank, a venture capital firm and an agribusiness to use capitalism’s toolbox to fight systemic racism, environmental destruction and economic inequality.
On March 1st, as she gathered with thousands of others to march across the Edmund Pettus Bridge in Selma, Alabama on the 55th anniversary of Bloody Sunday, Kat Taylor burst into a rendition of Aretha Franklin’s “Do Right Woman, Do Right Man.” These days, Taylor is best known as the singing spouse of billionaire climate change activist and ex-Democratic presidential candidate Tom Steyer. But in the world of impact investing, she’s famous in her own right for the breadth and ambition of her efforts, as well as her musical shtick. Indeed, Taylor’s efforts are the big reason the couple made the Forbes Impact 50 for 2020.
Way back in 2007 (the stone age in impact investing), Taylor and Steyer launched an idea they’d talked about for years: use a charitable foundation to start a bank that would lend to nonprofits and do-gooder businesses and direct its profits back to their environmental and community charitable causes. With Taylor as CEO, Beneficial State Bank has grown into a $1.1 billion institution with 13 branches stretching from Washington to Southern California. The couple has put $110 million of charitable donations into Beneficial, which has $760 million in loans outstanding to its target market, though it hasn’t yet paid out dividends to the foundation. (Taylor is now Beneficial’s chair, having stepped away from the CEO job in January to campaign with Steyer.)
Meanwhile, Taylor has been pursuing an even more in-the-weeds environmental project: turning the 1,800 acre grass-fed cattle ranch 40 miles south of San Francisco that she and Steyer acquired in 2002 into a model for “regenerative” agriculture, focused on water and land quality as well as humane animal treatment. Before the pandemic, the TomKat Ranch was seeing steady sales of its prime LeftCoast Grassfed beef brand, collecting data on soil health, running on-site workshops and lobbying big buyers like schools and hospitals to demand regenerative food. Since the pandemic, it has shifted to hosting virtual webinars and has donated chickens and coops to struggling senior homes and food banks. While the couple has invested tens of millions into the ranch, it has yet to turn a profit.
Finally, there’s what Taylor hopes will become her biggest impact play of all, Radicle Impact, a for-profit venture capital firm she co-founded in 2013 to invest in “good food, good money and good climate.” Radicle has so far poured $45 million, almost entirely from Taylor and Steyer, into 27 portfolio companies—everything from fintechs like LendUp and Aspiration to local farm company Hudson Valley Harvest to Aclima, which creates pollution sensing networks and UrbanFootprint, a seller of city planning software. But ultimately, Taylor hopes to deploy $1 billion in impact money, both from her family’s fortune and from outside investors, through Radicle—and to make real money doing it.
“Radicle is trying to show that you can sustainably earn benchmark returns and do good and do the right thing for the world,” Taylor says. “We’re evangelical about it.”
Taylor traces her activist streak to watching the news with her parents from the time she was five and seeing the assassination of JFK, civil rights marches, anti-war protests and the funeral of Martin Luther King Jr. play out on that mesmerizing small screen. “I knew that something very evil was at the heart of American society that we were trying to atone for it without actually addressing it,” she says. Plus, her mother was an environmental crusader.
Growing up in San Mateo County, Calif, Taylor had an undeniably privileged childhood —her maternal grandfather was the CEO of San Francisco’s Crocker National Bank (acquired by Wells Fargo in 1986). After attending a swank private prep school and Harvard, she backpacked around the world for a few years and headed to Stanford for a four-year MBA and law degree program.
Back in her Harvard days, Taylor thought she’d become a crusading lawyer. Instead, just a few months after her Stanford graduation, she married fellow MBA classmate Steyer and went to work for Wells Fargo. After 14 months on the job, at age 29, she quit to become a stay-at-home mom to what was to become a brood of four.
As Steyer built Farallon Capital, his hedge fund, Taylor fed her activist appetite by serving on not-for-profit boards—public radio, a prison reform group. But her life drastically changed in 2004 with the reelection of George W. Bush. Steyer had expected to serve in a John Kerry Administration. “We were like, well, that’s not happening, so what can we do to be of service? [Tom] turned to me and said, ‘Maybe it’s time to start that bank; we have enough wealth to do that,’” Taylor recalls.
In June 2007, the couple donated $22.5 million to a foundation as seed capital to start a bank with the specific goal of improving economic opportunity and financial literacy for low- and moderate-income communities in the San Francisco Bay Area. Later they ramped up their charitable commitment to fund both an acquisition and organic growth. From the first, Taylor made sure that at least 75% of Beneficial’s loans went to organizations promoting some mission (e.g. affordable housing, social justice, environmental sustainability) or to businesses that were women- or minority-led.
Lending, however, has limitations, as Taylor quickly realized. She had to turn down loan applications from a slew of promising entrepreneurs–many of them from “BIPOCs,” says Taylor (referring to Black, Indigenous and people of color)–because their credit profiles were just too risky for a regulated and FDIC insured bank.
That’s when Taylor started thinking about the need for an integrated impact capital strategy—including not just lending and philanthropy, but venture capital investing too.
“The systems that we are working in are complex with no one-size-fits-all solutions,” Taylor says. “To gain freedom from the devastating Black-White dynamic, we will have to shift assets. Disinvested communities who have been hurt the worst may require grants to build capacity for capital absorption, but they also deserve productive equity capital for community development, control and ownership.” In other words, more than just handouts, those who have been historically denied a shot at realizing the capitalist dream, should get one now.
So Taylor started making a few venture capital investments through the foundation that owned Beneficial—for example, putting money into a Black-led clean energy fund. After becoming more familiar with and making contacts in the VC world, Taylor officially entered it. She pulled together a team of four partners, including herself, and put some $25 million in for-profit Radicle Impact.
“Just like the bank is trying to change the banking system for good, Radicle is trying to be a good venture firm with aligned values,” she says. In addition to backing companies it believes promote good food, good money, and good climate, it aims to get capital to entrepreneurs who have had less access. More than half its portfolio companies have founders or CEOs who are women or people of color, compared to a third of all venture-capital backed companies, according to an analysis of Crunchbase data by the Kauffman Fellows Research Center.
Consider Vericool, founder Darrell Jobe, an ex-gang member who dropped out of school in eighth grade and was first incarcerated at 14. Not surprisingly, he faced immense hurdles when he tried to raise capital for his sustainable packaging startup. “Where do you find VCs sitting around and also VCs that are going to give you an opportunity?” Jobe asks. “A lot of the companies look at the [packaging] inventions but they don’t want you. They just want your invention.”
When Jobe met Taylor, he says, she was “full of hugs” and invited him to her home, just to get to know him. Earlier this year, Radicle led a $19.1 million Series A round for Vericool that closed in late March, after the start of the pandemic. Without that funding, Jobe says, he would have had to liquidate his business. “Instead of just speaking words, they live up to it. They actually do what they say they’re going to do,” he says. “They really care about people and the planet and just making sure that things are evened out.”
Radicle’s willingness to take an early flyer on companies means its dollars—like those of any early stage investor—can catalyze investment by others; it boasts that its portfolio companies have raised more than $850 million since it first invested. But so far, returns have been secondary to Taylor’s ambitious climate change and social justice goals. Instead of touting benchmarks like revenues for her portfolio companies, she talks up impact metrics, such as gallons of water saved (200 billion) or the tons of CO2 emissions avoided (840,000).
Monetary returns? Radicle’s portfolio holdings are currently worth about 150% of the nearly $45 million it has invested, and its first fund’s annual internal rate of return is roughly 14%, compared to the 20% average return Cambridge Associates calculates for venture funds started in 2013. Radicle is likely to try to raise additional capital in 2021 and aims at that point to expand its investor base beyond Taylor and Steyer. While the couple were early to sign the giving pledge—they say they’ll give “the bulk” of their $1.4 billion current net worth to charity—Taylor understands that most potential impact investors aren’t ready to simply give their wealth away.
Big Money, Big Impact
So Taylor is thinking creatively again, about ways Radicle could let others “dip their toes in the impact investing arena,” she says. “We’re considering the possibility of selling minority positions in the portfolio companies that we own — with their permission, of course — so that somebody can buy a little bit of a number of companies, be along for the ride, not risk a lot of capital and be diversified. And they can say, ‘Oh, I get it, we’re doing a lot of good by being very conscious of where we allocate venture finance.’”
Like her husband, Taylor doesn’t shy away from controversy. She’s “radically honest,’’ says Catha Groot, a partner at Radicle. “If [a situation] requires saying something that is impolite or is going to stir that pot, that’s totally fine with Kat Taylor.”
Take, for example, her 2018 attack on BlackRock CEO Larry Fink. After Fink wrote a widely-applauded letter to fellow CEOs calling for a focus on bettering society over profits, Taylor fired back with her own letter. “My standards are even higher than Fink’s,” she wrote in a Conscious Company opinion piece. “Until I see real action and accountability, I’m saving my standing ovation.”
Just a few months later, in May 2018, she resigned from Harvard’s Board of Overseers, saying the school failed to fully divest from fossil fuels, among other dubious investments.
Since then, Taylor and Steyer have gotten their own lesson in such purity tests. While Steyer sold his ownership stake in Farallon in 2012, he took heat during his presidential run when his financial disclosure form showed he had a few thousand dollars invested in a Colorado oil and gas company and a few million in private equity funds with stakes in oil and gas or shale infrastructure companies.
“Once he realized, ‘Oh my God, this is coming toward us like a speeding train,’ he tried to align everything we do,” Taylor says. “As soon as awareness dawned on us both, we got out as fast as we could. Then we tried to encourage others to get out, too.”
Now, the couple is quick to shed any perceived conflict of interest. In April, Steyer was appointed chief advisor to California Governor Gavin Newsom’s Task Force on Business and Jobs Recovery. To avoid a perceived conflict of interest, Taylor and Steyer put all of their assets that could be influenced by California policy into a blind trust and Taylor temporarily stepped down from Radicle’s investment committee.
The Radicle sabbatical leaves her more time for her assorted philanthropic and policy projects. For example, Taylor is working with California legislators on initiatives to steer farm products (that might otherwise go unsold during the pandemic) to food banks and to impose transparency obligations on donor-advised funds; she is also championing a proposal to turbocharge the state’s consumer financial protection, all while running the TomKat ranch at a safe social distance.
Before the pandemic, Taylor had embarked on a multi-city speaking tour urging people to align capital with values, pointing to Radicle and Beneficial State Bank as models. Now her Zoom calendar is full of events where she preaches (and sings) about how capital—when responsibly deployed—can help create a better, more equitable society.
“Ultimately, the real measure of society will be whether we need philanthropy at all,” she declares. “It’s kind of an admission of failure because if we were running society right, we wouldn’t need to give people money.”