Discovering the world of impact investors
Anyone who travels the world knows that preparation is key before entering a new country. Do you need a visa? What’s the best way to get from A to Z? Do you understand the local language? How much time should you plan to reach your destination?
As a social entrepreneur, discovering the world of impact investors is like going on a trip. You enter uncharted territory – at least from your personal point of view. Unless you’ve gone through this experience already, there’s a proverbial mountain of details to study and a myriad of lessons to learn if you want to successfully raise impact investment. But maybe you are the type of traveller who likes to immerse themselves in adventure, without bothering much about the risk of failure?
If you have plenty of time and no pressure to arrive, then you should feel free to venture and experiment. But if your bank account tells you that it would be great to have fresh money injected in 6 to 9 months, it’s high time to do your homework. Here is a short travel guide on how to systematically discover the world of impact investors:
Get your visa
Taking a long flight and arriving at customs without a visa in your pocket or a valid passport in your hands is probably not a wise approach. The risk of getting refused is very high. Similarly, it makes a lot of sense to test the new territory by first attending investor events and sector conferences. There, you can absorb the atmosphere and learn a lot by being a curious observer. What do impact investors expect and how do they tick? What language do they speak? What can you learn from other social entrepreneurs pitching at these events? And how does the audience react to their storylines?
This will put you in a position to get acquainted with the “country” before things get serious. If you need ideas where to go, there are many facilitators and media in the sector who spread the news about pitch events and conferences (some links are listed below).
Map the country
Would you hitchhike in an unknown country without a good map in your hands? Of course, you can be lucky and get great advice from locals and tourists on the road. But if time is scarce and money short, this is probably not a promising tactic to pursue.
Mapping the world of impact investors helps you to master three crucial steps:
- Get a full picture of the relevant players and avoid missing out on any important ones.
- Identify those that may be a good fit for your social enterprise and avoid running around in circles.
- Understand what you need to prepare before you knock on their doors.
A great way to map the country is by doing a full research of impact investors who are active in your specific region and impact theme. For example, is your social enterprise engaged in Latin America and provides basic health services to the very poor? Or are you offering clean, affordable energy solutions to Sub-Saharan African countries? Does your Western European organisation allow people with disabilities to be better included in society? Whatever your solution, impact investors have their preferences with respect to countries and themes too. So, researching their profiles is a brilliant way to save lots of time and hassle.
Sources such as conference lists, impact investor associations, sector events or simple internet keyword searches will do the trick. Take your time to build an extensive “long list” of investors. Then ask your friends, mentors and fellow entrepreneurs for other names or for personal experiences with investors that you already identified. To enjoy your trip to the fullest, tips from local experts and fellow travellers are always worth considering. This way, you create your own “Lonely Planet” edition and have the full picture of where you want to go and who you want to visit.
Design your trip
Now that you have an entire list of who’s who in the impact investor world, it’s time to sort things out. What are the absolute must-see highlights on your list? Which ones are less important priorities for you? To make this important decision and shape your personal trip, there are several criteria to consider. For example:
- Do these investors provide the type of financing instruments that you need for your organisation to scale?
- Do their average investment amounts fit to the size of capital that you’d like to raise?
- Are these investors active in the stage that your social enterprise is currently in?
- If you seek “hands-on” investors who will also contribute their network, strategic guidance and advice: Do their previous investments and website profiles indicate that they are ready to do more than giving money?
At the end, you will hold your personal trip plan in your hands. In the (social) finance scene, this is called a “short-list” of investors.
Learn the language
Let’s assume for a second that you go to a country whose language you’re not an expert in. How do you find your way without getting lost (provided you don’t have a trusted local guide)? When it comes to the impact investor world, the majority of social entrepreneurs are in a similar situation. Investors, whether they are traditional or impact-oriented, do not necessarily think, speak and act in a way that you are used to in your own scene. They have their specific vocabulary, culture and expectations. So, if your trip to their “country” is to be a successful one, it makes a lot of sense to master the basics of their language.
It doesn’t really matter whether you tap into your personal networks for advice, take an online course on social finance or work with an intermediary to know the terms that you need to speak and understand. As long as you are aware of the fact that there’s a new language to learn, you are one step closer to success.
Pack your bags
As an adventurous, self-organised traveller, you’ll probably spend some time on thoroughly packing your bags. You’ll have your map, passport, visa, compass, camera, trip plan and reservations ready. In the world of impact investors, the equivalent for this equipment is a “pitch deck” – a compelling presentation of your enterprise. If you have never done this before, don’t shy away from asking advice and testing your pitch with family and friends first. The most important thing is that it’s clear, focused and convincing.
Of course, you could cram your bags with 50 kg of luggage. But even if you’re strong enough to carry it, the airline personnel will probably object or charge you a horrendous fee. The same applies to bombarding investors with 50 or more slides.
Efficiency is key. If you can’t “pack” your story and main facts into 10 to 15 pages, then you won’t be allowed to enter and board the plane. Also, don’t miss out to read the list of dos and don’ts. Most investors, especially the major institutional names, publish on their websites what they would like to see when you approach them for the very first time. Don’t contact them or call them up before you have your story, pitch and materials ready. There is only one chance to make a great impression.
Ready for boarding?
Are you ready to discover the world of impact investors? With good preparation, guidance and equipment there is no need to panic. Instead, you can enjoy the experience and get better every time you venture into the unknown. The good news is that even with a small budget, you can find lots of useful resources to help to make your trip a very successful one.
Links and resources
Just a few examples for sector events, conferences, pitching opportunities, research material and directories/lists of investors:
- European Venture Philanthropy Association: http://evpa.eu.com/about-us/about-the-sector
- Foro Latinoamerica de Inversion de Impacto (FLII) – the largest impact investing gathering in Latin America: http://www.inversiondeimpacto.org/
- Sankalp Forum: http://www.sankalpforum.com/
- SOCAP: http://socialcapitalmarkets.net/
- SensAbility Social Enterprise Conference in Germany: http://www.sensability.de/
- Seif Impact Investing Congress in Switzerland: http://seif.org/en/congress/
- GIIN Global Impact Investing Network https://thegiin.org/news-and-events/
- An entire free online course to master the language of “social finance” and prepare for accessing impact investment started on May 3, 2017 (registration is still open). The NovoEd course provides useful resources such as example pitch decks and investor due diligence check lists. For more information visit https://app.novoed.com/socialfinance-may2017
On how to prepare a good pitch, the following articles & resources may be a great read:
- “The Art of the Pitch: How Startup Social Enterprises Pitch Impact Investors” by Naki B. Mendoza / on Devex https://www.devex.com/news/the-art-of-the-pitch-how-startup-social-enterprises-pitch-impact-investors-88266
- “How to Pitch Your Social Enterprise Idea to an Investor” by Robin Zhang / on British Council / https://www.britishcouncil.org/voices-magazine/how-pitch-your-social-enterprise-idea-investor
About the author:
Christina Möhrle started her own shop as a freelance writer and journalist in 2012 to specifically promote social entrepreneurship and impact investing. Since 2014 she additionally takes care of FASE’s communications, papers and blogs. After 15 years as a manager in investor relations, structured finance and venture capital, helping to build the social finance ecosystem has become Christina’s passion and profession.
This blogpost is presented by FASE in collaboration with Siemens Stiftung and it’s part of a series of Blogposts, Webinars and Website content that we will provide on our website within the next weeks and months.
We will cover the following topics:
- Why using a self-sustaining business model?
- Testing your idea in the market
- Getting the business plan ready
- Approaching investors
You can find the first blogpost of this series >> here.
The Financing Agency for Social Entrepreneurship GmbH (FASE) is an Ashoka initiative and supports selected social enterprises in raising growth capital. FASE identifies investors and financiers of the entire spectrum ranging from private investors, family offices, foundations, social investors and banks. FASE puts an emphasis on building hybrid deals combining several investors with different financing components. www.fa-se.eu