Money & Policy

The Growing Movement to Invest in the Older Americans’ Market

Raising money for products or services serving them is tough, but getting easier

When real estate developer Del Webb and his partner J.G. Boswell started building Sun City near Phoenix in the 1950s, the enterprise was considered high-risk. No one had created a community on this scale catering to older Americans pursuing an active retirement. “‘Financially, such a project would fail because of ‘cannibalism’ (more people would die than move in),” cautioned a report Webb got, according to The King Of California: J.G. Boswell and the Making of A Secret American Empire. Even Webb’s execs were skeptical: “How am I going to get a 30-year mortgage on a guy who is 65-years-old?” worried one.

Turns out, Sun City’s grand opening on New Year’s Day, 1960 was a rip-roaring success, with a line of cars backed up for more than two miles. Sales took off far faster than management’s business plan predicted and Sun City helped open a money spigot for entrepreneurs, as investors looked to profit from the new lifestyle of leisure in retirement.

From Sun City to Silicon Valley

I thought of the Sun City while listening to Seth Sternberg, a Silicon Valley high-tech entrepreneur, at the Milken Institute Summit on Business and the Future of Aging in early May. Sternberg is a co-founder of Honor, a high-tech platform matching in-home caregivers with older people who need them.

Sternberg & Co. raised an impressive $62 million from venture capitalists. Yet the Honor founders, each with proven start-up chops in Silicon Valley, discovered it was incredibly difficult to persuade venture capitalists to invest in the aging market.

The new longevity market will have its “Sun City moment” when socially-conscious investors decide to back social entrepreneurs and ventures.

“Venture capitalists think the elderly and technology don’t work together. There is this psychological barrier in the industry,” Sternberg said. “The perception is: ‘Why invest in a product to sell to the elderly? They are going to age out.’ ‘I should invest in people with longer lifespans,’ they say. Yet very few teens stay with any product their whole lifetime, much less a year or more.”

Sounds like the reactions to Sun City before the grand opening, doesn’t it?

Credit: Capital Impact Partners
Ellis Carr, CEO of Capital Impact Partners

Socially-Conscious Investors Meet Social Entrepreneurs

Here’s my bet: The new longevity market will have its “Sun City moment” when the swelling coffers of socially-conscious investors decide to back social entrepreneurs and social ventures seeking opportunities generated by an aging society — healthier, better educated and more engaged than previous generations.

A couple of definitions: Social entrepreneurs are people who create businesses and organizations with the goal of driving social change for the better. (Social entrepreneurship is especially attractive to people in their second and third acts.) Social ventures describe the creations of those social entrepreneurs; the ventures may be structured as nonprofits, for-profits or co-ops. But all social ventures want to drive social change for the better and stay in business with positive cash flow.

“I’m really interested in trying to get my friends in the world of social investing and impact investing to include aging as part of their matrix, “says Paul Irving, chairman of the Milken Institute Center for the Future of Aging.

That would be welcome, indeed.

How to Convince People With Money

As someone in the audience of a 2016 panel session on social innovation at the Encore.org annual conference said: “Everyone I talk to is trying to raise money. How can we get the creative ideas with the people who have money? How to bridge the gap?”

The difficulty of finding money to start and then run a social enterprise is no surprise to those who’ve tried. Ask David Campbell, founder of All Hands Volunteers, a nonprofit that sends thousands of volunteers to disaster zones. “It’s like starting a small business,” he says, looking back at All Hands Volunteers’ first five years. “If you talk to someone who opened a restaurant or some other business, they’ll say the same thing: It’s really challenging to get through the first five years.”

Struggle often reflects the business of entrepreneurship, including social entrepreneurship targeted at an aging population. It’s hard work and money always a pressing worry. I don’t see that changing.

Shamelessness Is a Virtue

The key is persistence. “Be shameless in using whatever avenue you can to get access to the funding that helps you open your doors,” says Alexandra Drane, a Boston-based serial entrepreneur behind for-profits and nonprofits. “It can be a family member, a friend, a potential customer, an angel investor. In full disclosure, I am a rabble-rousing boot-strapper.”

I’m eager to see what happens as more and more successful ventures attract much larger sums of money, which, in turn, will attract more entrepreneurs into the longevity market.

Investing in Housing for Older Adults

An example might be Capital Impact Partners, a Community Development Financial Institution (CDFI) headquartered in Arlington, Va. (CDFIs are financial institutions aiming to strengthen low-income communities through home loans, small business loans and other initiatives.) Capital Impact Partners sees helping low-income older adults as a critical part of its mission, which is why it’s an investor along with AARP, AARP Foundation and the Calvert Foundation in the $80 million Age Strong investment fund.

“There is a need for long-term and patient capital for social entrepreneurs,” says Ellis Carr, Capital Impact Partners’ CEO.

Among its own investments is Colorado’s first “Green House” project for skilled nursing care in Loveland. A Green House is designed to look like a home for 10 to 12 older people. In partnership with the Loveland Housing Authority on the campus of the Mirasol Senior Living Community, Capital Impact Partners helped finance the construction of six 7,500-square-foot homes with private rooms and bathrooms; most of the inhabitants are on Medicaid.

Carr believes that other CDFIs will pursue similar initiatives to improve the lives of America’s elders.

The Impact Investing Convergence

The growth and expansion of impact investing (formerly known as ethical investing or socially responsible investing) may well lead to more social ventures for the older market, too. When this idea began in the ‘80s and ‘90s, it was all about marrying personal values to an investment portfolio by, say, finding companies that didn’t profit from things like smoking or weapons. But the Wall Street rap against impact investing was that you needed to sacrifice returns in order to invest this way.

Even when that’s the case — depending on the investment — investors have voted their preferences with their portfolios, in a positive fashion. Money invested with a conscience in the U.S. totaled $8.72 trillion last year, nearly 22 percent of all investments under professional management, according to the U.S. Forum for Sustainable and Responsible Investment.

“What is starting to happen is a convergence of the for-profit traditional investor and the traditional make-the-world-a-better-place organization that is exciting, but difficult to navigate,” says Terri Barreiro, adjunct instructor teaching Social Entrepreneurship and American Philanthropy at the Humphrey School of Public Affairs.

The demographics of an aging society is among the most significant forces shaping the U.S. economy, along with globalization and the rise of the digital economy. The trick is better matchmaking between social entrepreneurs and social investors. That day will come — hopefully sooner rather than later.

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Chris Farrell
By Chris Farrell
Chris Farrell is senior economics contributor for American Public Media's Marketplace. An award-winning journalist, he is author
 of the books Purpose and a Paycheck:  Finding Meaning, Money and Happiness in the Second Half of Life and Unretirement: How Baby Boomers Are Changing the Way We Think About Work, Community, and The Good Life.@cfarrellecon

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