Investors increasingly see the creative economy as a path to achieving economic and social impact
  • Impact investors, increasingly interested in the creative economy, are convening a community to identify new investment vehicles for $1 billion. 
  • With COVID-19 keeping everything local, impact investors see a new link between the creative economy and economic development. 
  • The idea of VC-style, for-profit investment in artists or artist collectives dates back to the decision in the late 1990s to discontinue the NEA’s individual artist grants. 

Describing art as an investment evokes buying a Georgia O’Keeffe and letting its value appreciate under glass until your retirement. It does not bring to mind a textile factory in Detroit. 

But the team at the Industrial Sewing and Innovation Center (ISAIC) are artisans — some with years of traditional artisan experience in fashion and apparel manufacturing, others learning the trade after emigrating to the United States or returning to society after a stint in prison or living on the street. ISAIC also brings art and design students in for the summer to help them connect their artistic knowledge and talent with the manufacturing process.

“So often, design is so detached from manufacturing,” explained ISAIC CEO and chairwoman Jen Guarino, in a video interview with Karma from her desk on the factory floor. (She, like the other employees, wore a mask.)

“I think the only way you create viable change is by doing it together versus in silos,” she added.

ISAIC is one of several organizations making up the new creative economy: the nonprofits and enterprises creating ethical fashion, sustainable food, social impact media, creative physical spaces, and other industries driven by creativity and design and, often, a localist lens. COVID-19 has made visible the value of the creative economy’s hyperlocal nature — and increasingly piqued the interest of impact investors. 

In June, the nonprofit Upstart Co-Lab convened a group of foundations and investors with more than $1 billion in capital to pioneer support for the creative economy via impact investments, instead of more traditional grants.

“The creative sector in the US is sort of flipped — typically, philanthropy is the R&D capital for education or health or environment or social justice activities, and the market or government will bring those concepts to scale,” explained Upstart Co-Lab’s founder, Laura Callanan, in an interview with Karma.

Callanan started Upstart Co-Lab after serving for just over a year in 2014-2015 as senior deputy chairman at the National Endowment for the Arts (NEA), which has a modest $160 million annual budget. Seeing a diminishing role for the government in supporting the arts, Callanan turned to the market for a solution — specifically, to impact investing. The returns and impact of the creative economy mapped to many of the environmental, economic development, and social justice metrics valued by impact investors, but had always been considered as a separate “arts and culture” category, she noted.

“We always kind of had this premise that artists are natural entrepreneurs.”

This was not the first time the creative community borrowed language or structure from investment. Creative Capital was founded after the NEA ended its individual artist grants in the late 1990s. Financial support to replace the artist grants was the impetus, but its founders looked at venture capital’s support of the then-nascent tech sector and saw a new model for artist support: well-timed infusions of capital, ongoing mentorship and skill-building, and pitch retreats. 

“We always kind of had this premise that artists are natural entrepreneurs,” said Kerri Schlottman, Creative Capital’s director of institutional advancement, in an interview with Karma. “They think about their projects as launching new businesses. They’re constantly moving from project to project, creating these incredible things to put out in the world and then moving to the next one.”

Now, as part of Upstart Co-Lab’s member community, Creative Capital will strategize with ten other funders on how their $1 billion could be deployed to the creative economy, including the various types of investment vehicles that could be launched for artists launching businesses based on their creative work.

“Grants or selling their work is what artists are taught are their only options, but that is going away,” said Schlottman. “We’re constantly thinking about how to be innovative. We call it investment, but it could look a lot of different ways.”

The most exciting potential outcome from the newly-formed group could be the marriage of that entrepreneurial creativity with localism, both of which align with economic, social, and environmental goals that many impact investors have. Callanan, who serves on an international advisory board for the British Council’s creative economy arm, pointed out that the U.S. is not the only place rethinking its sourcing and turning back to local artisans.

“The colleague who’s on the advisory board from Indonesia, where the government has placed a lot of emphasis on creative industries as big export opportunities, said that at the beginning of COVID there was all of this product that was poised for export but then it couldn’t go anywhere,” she said. “And suddenly you have everyone spending all this time in their home, and what do you do when you’re in your home? You’re like, ‘Oh, I should change my curtains, I should get a new duvet cover.’”

“we know that the arts are critical for mental health.”

With COVID-19 keeping both people and goods close to home, funders are looking for ways to foster a sense of community through creative enterprises and to bring them to a wider audience virtually. The Jessie Ball duPont Fund is bringing their decades of local focus — their mission dictates investments in communities in Florida, Virginia, and Delaware — to the conversation.

“We came out with a refreshed strategy right before COVID around place-making and equity — the alignment of the creative economy with place-making is very, very high. There is nothing that creates a better sense of place than the arts,” said duPont Fund president Mari Kuraishi in an interview with Karma. “One of the questions we’re asking ourselves is whether there’s a new way to think about financing arts and culture going forward.”

Her director of impact investing, Chris Crothers, echoed this assessment: “There’s gonna be a new normal for these [arts and culture] institutions. They’re not going to be able to be financed the way they’ve always been financed, which is, you have 20 nonprofits in your community, and each one has their own executive director and staff. They’re kind of in their silos.”

Callanan, who had the members community in the works before the pandemic, is also optimistic about the emerging link between localism and the arts: “There’s going to be a greater appreciation of the things that are close to you in your community because they’re the things you have access to, but I think it’s also going to get people to appreciate the quality, the originality, the talent of their neighbors in a way that they might not have noticed.”

ISAIC is just one example of the economic value that creative thinking and local problem-solving can create. When the pandemic began, Guarino shifted the factory’s planned apparel production to face masks and other PPE. “We went out and sourced the material in bulk and came up with a standard style, and then we cut and fitted it and sent it out to several manufacturers and kept businesses afloat,” she recalled. “We basically aggregated the demand by getting bulk orders and then we aggregated capacity by supplying the capacity.”

The need for art to build connections is more obvious than ever, and how investments in those connections take shape may drive innovation for the next decade.

“Having been isolated for so long, it’s so very clear that community matters,” said Kuraishi. “And we would all have gone crazy if it weren’t for Netflix, so we know that the arts are critical for mental health.”

Laura Callanan was senior deputy chairman at the NEA in 2014-2015. An earlier version of this article incorrectly said she was director. 

Photo by John F. Martin/ISAIC