Administrator | December 8, 2016

‘What I wish I knew of Impact Investors when I started’

In a post written from personal experience, Sreejith Nedumpully, Director at Upaya Social Ventures, founder of ROPE (which was a Villgro incubatee) and, most recently, a speaker at Vllgro's Unconvention Bengaluru, wrote about his learning and experience of impact investment over the years:

“What do impact investors want? Sustainable social impact with financial return”

“What are board meetings for? To take policy decisions and ensure organization is on track”

How can one disagree with the above answers? Yet, that is what I did! Because, practically there is something more every new entrepreneur should know beyond these text-bookish answers.

I was speaking at a Villgro Unconvention workshop in Bangalore to a group of aspiring social entrepreneurs. Now with a little bit of experience on both the social entrepreneur and investor sides I, it seems, am one of those uniquely qualified to talk on the topic, ‘What I wish I knew of impact investors’!

Preparing for the talk my thoughts went to the days when I started as an entrepreneur. What I knew of investors then? How my perceptions of a social enterprise, investors’ role and working with investors in a startup changed since then? I also thought of the many early stage entrepreneurs I met and the several practical and conceptual questions they had asked me about investors in general and impact investors in particular. Then there is the experience of working with a few of them over the last few years in the capacities of an investor, board member or adviser. Drawing from all these I wanted this session to be interesting, specific and practically relevant, with useful tips!

The session went well and was very interactive. There were few interesting questions from the audience. All those are compiled here. Hope it makes a good reading especially for early stage social entrepreneurs.

1) How important is impact for impact investors? It is important. But, impact for most impact investors is an entry filter. They use impact potential of the business model, nature of the impact and impact intent of the entrepreneur as criterion for investing. If those are established, then the assumption is that as the business grows the impact also grows and as business becomes sustainable impact also becomes sustainable provided the company sticks to its business model.

2) What comes first, impact or finance? Once you pass the entry filter on impact, path to scale and profitability comes first. Team’s execution capability comes second. Impact investors are interested in you because you are building a commercially viable and scalable company that creates social impact. Otherwise, there is nothing new from charity or a commercial business that you are doing. In addition, in a capital starved country getting more capital for impact investment funds depends on proving that commercial success and impact can co-exist.

3) Investors invest to exit! Details like when, with what return, what impact all vary from investor to investor and company to company and depends! But, they must exit within a time frame. Startup entrepreneurs better keep this in mind that it is your journey and they are not here to be part of your roller – coaster ride and share its emotions. If you are thinking of getting out of a trouble or a business down turn, chances are they are thinking of exit!

Read the original Linkedin post here