April 21, 2012
Written by Jessica Young, Marketing Manager, Social Venture Network
In the words of Beth Sirull, ED of Pacific Community Ventures, “the basis of freedom is economic self-sufficiency.” As an impact investor leading capital and business advising programs, she’s inspired to build the impact investing movement knowing that it creates freedom for people.
On Friday, April 20th, at the SVN Annual Member Gathering, Beth led a panel on “Investing That’s Changing the World” with domestic impact investor Rob Davenport (Founder and Managing Partner, Brightpath Capital) and international impact investor Harold Rosen (Founder and ED of Grassroots Business Fund). With a growing number of investors interested in social and environmental impact, and a plethora of social entrepreneurs developing solid business plans, the three believe the impact investing movement is coming into its own.
For entrepreneurs looking to find social capital and investors aligned with their missions, panelists shared valuable insights including criteria they seek in their investments and how entrepreneurs can best position themselves as desirable investees.
Impact Investors Seek
Rob, who focuses on new stage ventures in the Western US, requires that social benefits be part of a business’s output. Impact he looks for includes increases in job creation, levels of education, health and wellness, and clean tech and environmental impact (see portfolio client Sungevity).
Harold, who invests in entrepreneurs at the base of the pyramid (from Delhi to Jakarta and Nairobi to Lima), couples financing with capacity building. Grassroots Business Fund selects high impact businesses that provide low-cost goods and services for the poor, agricultural systems, and sustainable offerings with proven delivery models.
Making the Pitch
Entrepreneurs can best position themselves and their businesses for capital by following these tips:
1. Don’t over-invest in your PowerPoint.
PowerPoints and models are nice to have, but invest more time proving you can run an enterprise soundly. Showing you’re aware of your competition (both current and future) is key.
2. Build the investor’s confidence in you and your management team
Impact investors are in the people business; they want to understand who the entrepreneur is and see emotional intelligence, passion and integrity.
3. Don’t overestimate your growth
Be prepared to hit 40% growth instead of 80%, and sensitize your projections accordingly. Panelists resoundingly agree projections never come close to reality. Hearing “Everything’s great- look at how fast I’m going to grow,” is an automatic put-off says Harold.
4. Demonstrate you can deal with problem cases
Inevitable pitfalls will arise; show you have the flexibility to adjust and will react wisely to stress and business threats. (Consider how you’ll react if your original concept doesn’t play out or if it’s uncertain you’ll make payroll.)
5. Show you are coachable
Loans are risky and investors seek people who are coachable and listen to counsel. Successful entrepreneurs admit when they don’t know what to do and seek expertise and advice.
6. If you only produce one return, make it social
“Even if your venture isn’t as profitable as expected, make sure you can break even with a strong social impact,” advises Rob.
7. Have a sustainable exit strategy
As this is rare, having one will distinguish you from your peers.