Generating Returns: Upstart's Laura Callanan on Social Entrepreneurship and Impact Investing in the Arts

Upstart Co-Lab is a nonprofit, nationwide collaboration that seeks to create "opportunities for artist innovators to deliver social impact at scale." It connects artists, entrepreneurs, impact investors, social enterprises, and sustainable companies. I wrote about it back in late 2016 as it exemplified the timely confluence of impact investing with new thinking about using the arts to drive social progress.

I recently had the opportunity to speak with Upstart's founder, Laura Callanan, about the current state of arts-related impact investing, and how donors are beginning to view funding as more of an investment than a one-time donation. 

The seeds of Upstart were planted roughly six years ago when Callanan was having lunch with her friend Jim Houghton, the founding artistic director of Signature Theatre in NYC. Callanan sat on the board and saw first-hand Houghton's extensive and ever-evolving job description. He worked closely with private and public funders. He had a hand in programming and community building. He oversaw its daily operations. He was clearly more than an "arts administrator."

"Then I heard the words coming out of my mouth," Callanan recalls. "'Jim, you are what they call a social entrepreneur. But no one calls you that because you are working in the arts. And you don’t call yourself that because you are working in the arts. But take it from me..."

Callanan's perspective comes from extensive experience in both the arts and finance worlds. Early in her career, she worked at two of the top cultural institutions in New York City. After graduate school, she ended up on Wall Street for six years working with large, endowed nonprofits borrowing in the public markets, and inside foundations for eight years managing their endowments.

These experiences taught her that financing and investing can be powerful tools for social sector leaders. The catch? Arts organizations have traditionally failed to leverage them properly. Then again, many of these tools weren't available, say, 10 years ago. Now they are. Why?

The answer is an evolving perception of art's value to society. Some of the hottest trends in today's arts philanthropy landscape—the proliferation of public art, the spate of foundation-led "artist as activist" awards, creative placemaking—are rooted in a belief in the arts' ability to drive social change. The idea has clearly reached critical mass.

Callanan sees this shift playing out across three main audiences in the arts ecosystem: Civic and business leaders, institutions, and impact investors.

To the former, "mayors and governors are commissioning Creative Economy plans," while "corporate leaders agree that the future of their businesses depends on creativity in the workforce." Meanwhile, institutions that "already value the arts, storytelling, creativity, and innovation are exploring ways to effectively deploy their endowment capital on-mission."

The third group of individuals represents the greatest potential to move the dial. “Impact investors, enthusiastic about aligning their capital with their values, have begun to ask for an opportunity to invest in the power of the arts and creativity to make positive social change," Callanan said. "With investment capital, creatives with sustainable business models can take their success to scale."

Impact investors working with Upstart can support these efforts by targeting investment to respective areas. Creative Places, for example, targets creatives that benefit their neighbors by focusing on housing, workspace, co-packing space, and retail space. Creative Businesses, meanwhile, focuses on creative industries such as fashion, culinary arts, architecture, game design, and industrial design.

I asked Callanan how these macro-level developments may affect large “legacy” cultural institutions, referencing a quote from Apollo Magazine noting that national grantmakers are "edging politely but firmly away" from legacy institutions in New York City that cannot "demonstrate a significant contribution to solving or soothing specific social or economic traumas."

Prefacing her response by noting that large cultural institutions are not Upstart's target audience, Callanan said that "a lot of legacy companies—not arts organizations but for-profit companies in all kinds of industries—have figured out that they cannot innovate so easily within. So they start or invest in venture capital funds and keep a watchful eye on where the really fresh ideas are being hatched—from entrepreneurs, inside start-up companies. This might be an idea for the large cultural institutions." That's an interesting thought: Will we start seeing places like the Met putting up seed funding for fledgling artist outfits in places like Bushwick? 

Perhaps, but the question brings me to the final piece of the puzzle: outcomes. Impact investors, by definition, demand a quantifiable return on investment. But the "artistic experience," or so we're told, is ambiguous, ephemeral, and unquantifiable, right? Not so fast, says Callanan.

She pointed to the Gates Foundation’s Art of Saving a Life initiative, which brings together artists, musicians, and painters to demonstrate how vaccines positively change the course of history.

"Here is a foundation very committed to medical research, very committed to evidence," she said, that launched the program because Gates realized that "without storytelling, without context, the vaccines that worked so well in the lab would never make it to the people who need them.

“Who was the audience? Multi-lateral organizations to prioritize paying for vaccines. National governments to welcome the vaccines in and make sure they are distributed. Community leaders to endorse and encourage the use of vaccines locally. Facts, evidence are not always enough to get important programs implemented. Sometimes, it takes a story that brings the evidence to life, to reach a decision maker a different way."

It's a sentiment that speaks to the heart of Upstart's guiding philosophy. Upstart, Callanan said, is focused on "the artists who take their skill, aptitude, vision and ability and choose to apply it to the same priority issues—criminal justice system reform, combatting type 2 diabetes in communities of color, climate change, immigration—as other social entrepreneurs."

"And, like all social entrepreneurs, if they do it right, there will be measurable, long-term, social benefits. Because it’s a good intervention."