After completing a successful two-year pilot, the Los Angeles Cleantech Incubator (LACI) was ready to launch its inaugural Debt Fund. The goal was to capitalize companies solving the greatest challenges related to climate change across three priority spaces in cleantech: transportation, clean energy, and sustainable cities. Spearheading the effort was Alex Mitchell, senior Vice President of Unlocking Innovation through the empowerment of start-ups—one of the three pillars of the organization's theory of change—in addition to Market Transformation through partnerships and pilots, and Enhancing Community through workforce development and programs. For over a decade, LACI had worked with nearly 300 start-ups through its incubator program to help sustainable start-ups, particularly those founded by and serving underrepresented individuals and communities, gain access to capital and scale their businesses. The Debt Fund would draw heavily on LACI's expertise and existing portfolio to provide loans with interest rates at or below market rates to companies that had achieved market traction but did not have the cash flow required to qualify for traditional loans. Specifically, the Debt Fund would focus on capitalizing minorities who were disproportionately affected by the cost and lack of access to equity funding. As its incubator program portfolio was nearly 33 percent women and 33 percent underrepresented founders of color, Mitchell needed a plan for preventing biases from imbuing the lending process at LACI while staying true to the organization's social mission of building a more sustainable and equitable ecosystem. In addition, while LACI had developed an impact framework for the incubator program that not only aligned with portfolio companies but underscored the importance of start-up engagement in the process, he struggled with how best to do the same with the Debt Fund. Finally, LACI would be partnering with other cleantech start-ups ("incubator partners") in the launch of the Debt Fund so determining the scope of impact to ensure cooperative dynamics would be a significant consideration. While LACI had made significant strides, there was much more work to be done.
