Social Impact Investors: How Hope Mago of HCAP Partners Is Helping To Empower Underserved…

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Social Impact Investors: How Hope Mago of HCAP Partners Is Helping To Empower Underserved Communities

The business model has to be sustainable. If the management team doesn’t understand its business model, the investment and impact thesis will erode and the company will not be successful. To illustrate this point, if a company burns though a lot of cash because it has to invest in headcount, equipment, and back-office resources every time it lands a new client, it may lack a sustainable business model.

As part of my series about “individuals and organizations making an important social impact”, I had the pleasure of interviewing Hope Mago.

Hope joined HCAP Partners in May 2009. Hope is responsible for origination and analysis of new investment opportunities, investment due diligence, deal underwriting, and investment monitoring. In addition, he has led the development of impact investing initiatives since joining the firm and contributes to thought leadership in the impact investing space. Hope is currently a board director or actively involved in Arosa, Apprio, Chordline Health (formerly TCS Healthcare Technologies), BetterNight, and Myndshift.

Prior to joining HCAP Partners, Hope worked at the Reserve Bank of Zimbabwe where he was involved in economic policy formulation, lending due diligence for export ventures receiving funding through the Export Support Facility under the Exchange Control Division.

Hope is the Chair of the Board of Directors of Impact Capital Managers, a network that brings together the general partners of market-rate funds deeply committed to impact investing in the United States, collectively representing over $21 billion in impact-focused capital. Hope is also on the board of Heluna Health the leading provider of program services and fiscal sponsorship for over 500 population health projects in the US.

Hope earned an International MBA from the University of San Diego and holds a bachelor’s degree in finance and banking from the University of Zimbabwe.

Thank you so much for doing this with us! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a story about what brought you to this specific career path?

From an early stage in my career, I’ve always been interested in developmental economics. I previously worked at the Reserve Bank of Zimbabwe — the equivalent of the Federal Reserve Bank in the U.S. — where our work was not only focused on the formulation and implementation of monetary policy, directed at ensuring low and stable inflation, but also on supporting employment creation within the economy. Some of the monetary policies we deployed were geared toward creating a more level economic playing field that would support job creation and give people the opportunity to enter the workforce and develop a career pathway. This experience enhanced my understanding of how to leverage capital to drive growth and support investments in the impact space. By the time I enrolled in business school, I was focused on aligning my values with my career path. During business school, I was fortunate to meet the HCAP team and learn about their mission, goals, values, and their impact approach which included deploying capital into undeserved communities. All their values aligned with mine and what I was looking for as the next step in my career, and I jumped on the opportunity to intern with the firm. During this period, HCAP raised its first institutional fund. I was intrigued by the opportunity to not only interact with entrepreneurs who were building amazing companies, but also to influence outcomes for the employees in the low to moderate income communities in which these companies were located. I was fortunate to meet a great firm that lived and breathed its impact story, so it was an easy decision for me to join HCAP full time after I graduated — and it’s been an easy decision to stay ever since.

Can you share a story with us about the most humorous mistake you made when you were first starting? What lesson or takeaway did you learn from that?

Early in my career I had the opportunity to present at a conference as a panelist. Even though I was well prepared, I was really nervous, and during a segment of my panel presentation I referenced the wrong conference name. Fortunately, everyone got a good laugh out of the situation, which significantly eased my nerves and helped me through the remainder of the event. The main lesson I learned is to try to feel comfortable and confident, and to be present. Panel events are great impact knowledge-sharing opportunities, and those in attendance are there to learn from each other and support one another.

Are you able to identify a “tipping point” in your career when you started to see success? Did you start doing anything different? Are there takeaways or lessons that others can learn from that?

A pivotal moment in my career was when we raised our third fund and decided to elevate our impact investing approach by deploying a more intentional impact investing strategy. Our impact approach evolved from a place-based strategy primarily looking to deploy capital in underserved communities to designing what would become the Gainful Jobs Approach:™ our workforce development framework that focuses on creating and improving quality jobs at our portfolio companies. Leading up to this evolution in strategy, we took a step back and asked ourselves, “how do you really drive impact?” We strategized around how we can be part of the full impact journey, driving implementation and execution of our impact framework from day one through partnerships with management teams. This was a big tipping point for me because we could now influence the impact journey at the companies we invested in. We started seeing results including more robust impact outcomes, and this also showed up within the funds’ performance. As a result, we began receiving numerous invitations to participate in knowledge-sharing events including in-depth presentations on our impact approach. And we have continued evolve our impact approach: Our Gainful Jobs Approach™ now starts with a robust quantitative measurement baseline assessment during due diligence to assess existing job quality standards, workplace practices, and improvements, and it includes active portfolio engagement to identify and implement workplace initiatives aimed at creating and maintaining high-quality jobs. As I reflect on our journey over the years, I’m beyond proud and honored that HCAP is considered among the first private equity firms to develop and successfully implement a quality jobs platform across every portfolio company.

None of us are able to achieve success without some help along the way. Is there a particular person or mentor to whom you are grateful who helped get you to where you are? Can you share a story about that?

I’m very grateful for Luther Ragin Jr. who was very helpful to me in my early days in the impact investing world. Luther is the retired president and CEO of the Global Impact Investing Network (GIIN) and currently sits on the board of Rockefeller Philanthropy Advisors. We met when, I had just joined HCAP and started to work in the impact investing space and was learning about measurement and reporting. Luther was one of the first people who really opened up with me, encouraged me, laid out the landscape of impact investing world, and provided me with an overview of where it was headed. Luther helped me think about how we could blend our impact approach with our investing approach to align our goals with an investor perspective. As I followed Luther’s career, I learned about the possibilities within the impact investing space. Luther was a big champion of HCAP, opening his network to us, giving us a platform to educate ourselves on impact investing, and introducing us to other thought leaders, impact investing foundations, and endowments. Luther will forever remain a fundamental figure in my career success.

You have been blessed with great success in a career path that many have attempted, but eventually gave up on. Do you have any words of advice for others who may want to embark on this career path but are afraid of the prospect of failure?

There are many different paths to a career in the impact investing space. You don’t have to come from the traditional investment banking space, or the traditional investment professional pathways. Some people have worked in consulting and others have worked within development agencies such as the International Finance Corporation or the World Bank. I think early in our careers there is a fear of failure because we feel we are not adequately prepared or do not have the right tools to succeed. My advice would be to assess your skill set and your talent and then think about how these facets complement the needs of the organization or career path you intend to take.

Ok, thank you for that. Let’s now jump to the main part of our discussion. You are a PE who is focused on investments that are making a positive social impact. Can you share with us a bit about the projects and companies you have focused on and look to focus on in the future?

One investment that comes to mind and that I’m focused on currently is with BetterNight, a healthcare technology company revolutionizing the diagnosis, treatment, and care management of sleep disorders with a clear goal to improve accessibility, affordability, and health outcomes for patients. Founded in 1995, BetterNight has pioneered the use of home sleep testing, addressing the challenge that 80% of moderate and severe sleep apnea cases remained undiagnosed, in part due to the fragmented and difficult-to-navigate journey for patients. Approximately 54 million adults in the U.S suffer from sleep apnea. Several studies highlight that sleep apnea patients may also have an increased risk of being diagnosed with comorbid conditions such as hypertension, heart disease, Type 2 diabetes, stroke and depression. BetterNight has been able to increase access to care by providing a quicker, lower cost assessment and diagnostic journey for patients and is also able to report higher adherence rates than any of its peers by leveraging its proprietary software platform called Clarity Care.

HCAP encouraged company leadership to prioritize quality jobs and diversity, equity, and inclusion efforts through its Gainful Jobs Approach™ with the goal of recruiting and retaining talent in a tight labor market and helping realize productivity gains and operational efficiencies that would translate into improved patient outcomes and satisfaction levels. HCAP and BetterNight worked collaboratively to enhance the company’s workplace practices through the Gainful Jobs Approach™ in a way that reflected the company’s priorities by aligning on and reviewing progress toward a set of quality jobs goals, holding quarterly check-ins and informal discussions, and formalizing the employee experience as one of BetterNight’s four core company pillars that would be reported on and discussed at the board level. The company prioritizes the development of a diverse and inclusive workforce that is reflective of BetterNight’s patient populations through intentional recruitment practices, mentorship and professional development of staff, and inclusive workplace practices. This impact intentionality has allowed the company to support its rapid growth. BetterNight has not only been able to retain its best talent but has also been able to recruit strongly with increases in headcount from approximately 70 employees when HCAP made its initial investment to almost 300 employees today. BetterNight was recognized with the San Diego Union Tribune Top Workplaces award for 2020, 2021, and 2022 which also reflects high employee engagement and satisfaction.

What you are doing is not very common. Was there an “Aha Moment” that made you decide that you were going to focus on social impact investing? Can you share the story with us?

An important moment for me is seeing the impact our approach to impact investing has on our portfolio companies’ workforces. Our approach may include structuring broad-based wealth creation tools such as employee stock options or structuring a broad-based transaction bonus plan that is paid out when the company is acquired. These vehicles allow the workforce to participate in the value they are helping to create at these companies. Notably, they provide employees with capital they can use to enhance their quality of life, whether they plan to use it for a downpayment on a house, to pay down debt, or to put toward savings/retirement funds. Seeing a significant portion of the workforce participate in these options is always incredibly meaningful and drives home how impact investing affects people’s lives for the better.

Can you share a story with us about your most successful investment? Or an investment that you are most proud of? What was its lesson?

I’m very proud of my investment in Corticare, a tele-EEG diagnostic company working to improve patient quality of life and outcomes by providing real-time neurological information. We partnered with the founders in 2019 and saw an opportunity to leverage technology to allow greater access to EEG services in hospitals across the country. A significant number of hospitals and health systems have EEG equipment on site but there is a national shortage of EEG techs that can set up patients or even monitor the EEG system, as well as a shortage of reading neurologists to interpret the EEG readings. This means that patients may not receive the required standard of care in a timely manner. We saw an opportunity to address this need and provided management with the capital to grow their business. Following our investment, the Corticare team was able to grow its revenues by four times, grew headcount from 35 employees to more than 200 employees, and was able to rapidly extend its services during Covid-19 when ICU and NICU units at hospitals where overwhelmed. We also became one of the largest private employers of EEG techs nationwide during this period. The team was able to grow its coverage from a handful of hospitals and cardiologists to more than 70 hospitals. Corticare management showed an impressive ability to focus on superior healthcare outcomes and scaling their infrastructure to support growth. The team also was well aligned with our impact approach and were great partners in implementing our Gainful Jobs Approach™ during the timeframe of our investment.

Can you share a story of a funding failure of yours? What was its lesson?

We’ve learned that it’s important to work with founders to build a strong executive team. A strong executive team is vital to making a business successful and allows a company to be ready to combat and respond to challenges that come with rapid growth and delivering its value proposition to clients while maintaining high expectations. Adapting to building and investing in a strong professional management team to scale the business can be a challenging inflection point for a lot of founders and entrepreneurs at companies.

Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that story?

We once had the opportunity to work with a specialty pharmacy company that had developed software to significantly increase the number of possible organ transplant matches. Their concept aligned well with our values in that the software provided opportunities to improve health outcomes in underserved populations and addressed a significant healthcare challenge reflected by the length of time organ recipients have to wait to receive an organ transplant. However, given the complexities of the work the company was doing and the regulatory environment it operated in, it took a lot of time for us to get up to speed on the business and the opportunity. The company in the meantime was continuing to grow and landed some significant accounts which ultimately allowed them to get access to capital from a different provider. Every time I see the amazing work they’re doing, I say to myself, “I wish we had an opportunity to work with them.”

Super. Here is the main question of this interview. What are your “5 things I need to see before making an investment” and why? Please share a story or example for each.

  1. The business model needs to align with our investment thesis. Given the mandate we have from our investors to be good stewards of their capital, this is very important to us. When a business model meets our investment thesis, it’s easier to assist the management teams and provide them with significant support in executing their business plans. We have a lot of experience investing in high growth lower middle market companies in four key sectors: healthcare, software, business services, and manufacturing. This experience combined with our networks of operating partners allows us to support companies in these sectors as they look to execute on their growth strategy.
  2. The management team must be aligned with us in our impact approach and be advocates of impact implementation. Our goal is to institute long term impact sustainability that lives beyond HCAP’s investment, so we need impact alignment and buy-in from the management teams or founders.
  3. The team should be cohesive. A cohesive, united team is paramount to implement and execute on strategy. One of the key lessons we’ve learned is that you need a strong, cohesive team when scaling a rapidly growing business. We’re buying into the team’s ability to implement strategies that will drive value, which means both driving growth and impact.
  4. There must be value creation opportunities. This is the driver of enterprise value in business. For example, if we were considering an investment in a healthcare provider that’s launching a telehealth or digital health platform, the value creation is investing in technology to scale the business to enter new markets.
  5. The business model has to be sustainable. If the management team doesn’t understand its business model, the investment and impact thesis will erode and the company will not be successful. To illustrate this point, if a company burns though a lot of cash because it has to invest in headcount, equipment, and back-office resources every time it lands a new client, it may lack a sustainable business model.

You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂

I’m a big advocate for undeserved communities in the United States. According to the Economic Innovation Group, nearly 48 million people reside in distressed communities that have been left behind during periods of economic growth. These distressed communities are currently reporting poverty rates of approximately 24%, housing vacancy rates of 15%, and negative growth in terms of employment at a rate of minus 6%. Additionally, many businesses are moving out of these underserved communities that have already been impacted by economic downturns, Covid-19, and even the current high-inflation environment. As a partner at HCAP, I work to align our capital with our impact approach to leverage and scale businesses in underserved communities. We have an opportunity to drive capital into underserved communities to provide support and catalyze economic growth.

If you could tell other young people one thing about why they should consider making a positive impact on our environment or society, like you, what would you tell them?

Now is the moment when young people can leverage their voices and talent to make an impact on the world. It is possible — and powerful — to align your values with your capital. A great example is the shift we’re seeing in the family office world as younger generations inherit the reigns and try to align their assets under management with their values. Impact is one of the ways you can help drive change by moving capital to create business models that work for everyone. I would encourage young people to think about how they can get more involved not only in terms of advocacy, but also through working in the field of impact.

We are very blessed that a lot of amazing founders and social impact organizations read this column. Is there a person in the world with whom you’d like to have a private breakfast or lunch with, and why? He or she might just see this.

That person would be Melinda Gates. Melinda’s work with the Gates Foundation — and her ability to leverage resources to create new opportunities for previously underrepresented founder groups — is admirable. The Gates Foundation is doing a lot of exciting work in supporting organizations that are focused on economic opportunity and the team there is really aligned with how we approach impact.

How can our readers follow you online? Social Media

Readers can follow me on LinkedIn @Hope Tarirai Mago

This was very meaningful, thank you so much. We wish you only continued success in your great work!

Social Impact Investors: How Hope Mago of HCAP Partners Is Helping To Empower Underserved… was originally published in Authority Magazine on Medium, where people are continuing the conversation by highlighting and responding to this story.