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12 - Concluding Thoughts on Mobilizing for Impact
- from Case Study 4
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- By Jed Emerson, Senior Fellow, ImpactAssets, Tim Freundlich, President, ImpactAssets
- Jed Emerson
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- Book:
- The ImpactAssets Handbook for Investors
- Published by:
- Anthem Press
- Published online:
- 15 October 2019
- Print publication:
- 03 October 2017, pp 281-288
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- Chapter
- Export citation
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Summary
As we look back on the ground we have covered in this The ImpactAssets Handbook for Investors, it is clear that while impact investing has moved from the fringe toward the mainstream, the individual investor still has many moving parts and challenges to consider. Among the questions we've explored are:
• How should you define your approach?
• Where do you go for resources, support and information?
• How do you understand the nature of the impact you want to create?
• What types of returns should you expect and how do you assess the performance of your portfolio on both financial and impact terms?
All investors have before them opportunities to align capital with community and values with value creation. By thinking—and then acting!—within a Total Portfolio Management framework, you have the potential to achieve the greatest leverage and impact possible for the assets you have under management, regardless of whether you're an investor operating on your own at a retail level or a higher net worth asset owner with a team to assist you. If you're committed to impact as well as wanting to protect your financial future, you can attain various levels of financial return together with the generation of social and environmental impacts. And you can direct your resources toward not only providing for your own future, but the future of your children and community.
As we look ahead to that future, what are final words one should keep in mind when moving along the path?
Fortune Favors the Prepared Mind
Good investing involves some level of luck—that the markets move up with you; that you select the right managers at the right time and so on—but the fact is good preparation can help you increase the odds you've made the right decisions at the right times for the right reasons. Rather than attempting to “time the market” looking to take advantage of short-term ups and downs, remember to stay focused on your long-term goals and plan for those goals through creating a sound strategy. Investors need to stay on top of the latest thinking, be clear on their objectives and work to understand the investments they are making—and that is not a question of luck!
3 - Seed Stage Investing: High Impact, But Not for the Faint of Heart
- from Case Study 1
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- By Tim Freundlich, President, ImpactAssets, Jed Emerson, Senior Fellow, ImpactAssets, Lindsay Smalling, Producer Curator, SOCAP
- Jed Emerson
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- Book:
- The ImpactAssets Handbook for Investors
- Published by:
- Anthem Press
- Published online:
- 15 October 2019
- Print publication:
- 03 October 2017, pp 79-88
-
- Chapter
- Export citation
-
Summary
To meet a promising entrepreneur, be convinced their venture will thrive in the market, and subsequently invest at the ground floor; this is the exciting vision of seed stage investing. In this chapter we will explore some of the opportunities and “how to's” of investing in seed stage companies. Although a risky proposition, seed investing has nonetheless attracted investors who want to put their capital where it may be the only chance these ventures have to build and grow a potentially great solution to some impact challenge. An entire ecosystem of venture capital and angel investing has developed to support seed stage technology start-ups and other companies with large-scale potential.
As the market for impact investing has grown, however, it would appear the capital available for seed stage investing has not kept apace.
In the authors’ conversations with industry players, it is clear that many believe social entrepreneurs need capacity-building support to make their ventures “investment-ready,” and point to accelerators or incubators as a solution. Others advocate for philanthropic dollars to fill the funding gap while an organization tests its product and establishes a customer base. On the capital side, many interpret the seed stage gap as an investor issue; the economics of investing in a round of $500,000 or less in an early stage social venture just doesn't make sense considering the extensive due diligence, term sheet negotiation and ongoing monitoring of investments required by this type of investing. In addition, it can be very difficult to generate the deal flow to match an investor's financial and impact-based expectations as well as their geographic or issue area focus.
Compounding these issues, the whole discussion can be somewhat opaque, with outsiders gaining little visibility into funds, investors, ventures and deals within the seed stage landscape. This creates a level of uncertainty and reluctance to invest in the absence of such transparency and data. Each of these factors contributes to the frustration experienced by both investors and entrepreneurs trying to increase funding flows between impact investors and promising social entrepreneurs. But there are, nonetheless, opportunities in the exciting, risky, “deep end of the pool” that is seed stage impact investing. And for many, “going direct” is what impact investing is all about. Let us walk through some of the characteristics, both the challenges and opportunities, in this category of investment practice.