The class I teach at NYU's Stern School of Business was fortunate to have as a guest speaker last night Chuck Harris who is a founding partner of a new financial intermediary called SeaChange Capital Partners. Chuck's ambitious, innovative and much needed idea is to fill the market gap that exists for growth capital for nonprofits with proven track records.

Chuck brings significant corporate and nonprofit experience together, having been at Goldman Sachs for 23 years, including as partner and managing director, and also as the board chair of College Summit, and the co-chair of the New York Advisory Board of Teach For America. His quiet style and investment banker grooming give little hint that he interrupted his Harvard education for seven years to play guitar in a rock and roll band, before finishing and going on to get an MBA from MIT's Sloan School of Business.

"For nonprofits it is easier to get start-up capital than growth capital," Chuck said as he began to describe the path that led him to start SeaChange. "John Whitehead at Goldman Sachs had long thought there should be an investment bank for the nonprofit sector. Then in 2004 after becoming a significant donor to College Summit, I decided to work for six months in the development department. I observed the disconnect between a dynamic, formidable entrepreneur named J.B. Schramm who started the organization and had very lofty ambitions for it, and the way it was being financed, which was by grant writers cranking out as many grants each week as they could. And I thought, why not finance this as a corporation would finance this at the same stage of its growth?"

"We created a 12-page private placement memorandum and raised $15 million of equity capital in six months. Once we were well capitalized, other money came in more readily. People want to invest in well capitalized organizations. And the senior executive team now was able to focus more on strategy than on fundraising. The key is to convince people to finance the enterprise, not the program."

"Seachange Capital Partners will need to raise $15 million of our own start-up money, but we will sustain ourselves by taking a percentage out of every transaction in which we engage. We plan to raise and invest about $100 million in our first three years. What we will likely do is raise $50 million with the promise to match it out of our own back pockets. We will have a light touch with our investments. We plan to take board seats but not become management consultants. And we'll take Whitehead's advice here too, which is 'start small so your mistakes are small.'"

Chuck's ideas were particularly interesting to me having just come from Harvard's Social Enterprise Conference on Sunday where it was my job to introduce Victoria Hale, the founder of the world's first nonprofit pharmaceutical, the Institute for One World Health. They are focused on developing and distributing drugs for the so called "neglected diseases" that take such a toll on the poorest of the poor in developing countries. Victoria's organization has attracted grants from the Gates Foundation of $42 million for malaria vaccine development, $46 million for treating diarrhea in infants, and $47 million for medicine for the parasitic disease of visceral leishmaniasis that kills 1.5 million people a year. Her biggest worry: money! All of the above grants are restricted. She's received only a fraction of that for her own operating and capacity needs. She has not yet succeeded in convincing funders to, as Chuck Harris urges, "finance the enterprise, not the program."