Outlook

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Philanthropy as Risk Capital: How Foundations are Supporting Impactful Startups

By Tasha Seitz

For those of you interested in how foundations are thinking about impact investing, we highly recommend checking out the Mission Possible Series from Stanford Social Innovation Review, a 10-week series that recently concluded with the announcement that the Ford Foundation will commit $1 billion from its endowment to impact investing. Many leading foundations are thinking about their funding as having the potential to play a catalytic role in providing risk capital, allowing organizations to gather “proof points” and attract other types of capital. This is true of across all types of impact investing, including the very early stage. In the words of Clara Miller, President of the Heron Foundation and a pioneer in impact investing, “success requires a chorus rather than a soloist,” and in that spirit we wanted to share ways that our portfolio companies have benefited from philanthropic capital.

Grants for Product Development

Most foundations will provide grants that award money to support the development of a specific tool or product. Unfortunately, most still limit applicants to 501(c)3 organizations, but some are branching out to support for-profit social entrepreneurs. ThinkCERCA, a member of Impact Engine’s portfolio, was awarded a $250k grant from the Bill & Melinda Gates Foundation through the Literacy Courseware Challenge. This initiative awarded $6 million to 29 organizations focused on building tools to help students in grades 4 through 8 improve their reading and writing skills. ThinkCERCA was already building an online platform for creating personalized critical thinking lessons and utilized the grant money towards expanding their online resource and lesson library. In this case, ThinkCERCA’s mission and pre-existing software platform was well aligned with the […]

By |May 1, 2017|
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Measuring Impact for Social Entrepreneurs

By Tasha Seitz

Financial investors weigh risk, return and liquidity in their investment decisions; impact investors weigh all of these factors, plus impact. Intentionality and measurement are fundamental aspects that define impact investing, yet impact measurement is an extremely difficult challenge.

Impact can be defined in many ways, and different investors may have very different goals and interests. Some types of impact may be “easy” to measure (i.e. how much have unbanked or underbanked customers saved by using this fintech service vs. incumbent solutions?); others much more difficult (i.e. how has this advocacy platform influenced public policy?). Counting “lives touched” is unsatisfying, yet the cost of conducting randomized control trials that serve as the “gold standard” for measurement can be lengthy and prohibitively expensive. And given the variety in the types of impact across a portfolio, and across funds, how do you “roll up” impact measurement in any kind of meaningful way?

The challenges are many, and measurement has been an important discussion in the field of impact investing for many years. In a recent articlein the London School of Economics Business Review, Brian Trelstad, Partner at Bridges US, argues that impact management — articulation of an investor’s impact objectives — is an important precursor to effective measurement.

At Impact Engine, we sit down with entrepreneurs during our due diligence process to talk about the impact they hope to achieve, the target populations they want to serve, and how they might measure and report on the impact they’re having, both now and in the future. We often see a […]

By |April 4, 2017|
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The Future of Term Sheets

For those of you less familiar with the venture capital world, a term sheet is a document detailing agreed-upon terms under which an individual or firm will invest in a startup. Traditionally, this document describes the economics of the deal, control provisions, information rights and provisions for investor liquidity. Today, as investors and entrepreneurs are increasingly interested in the social and environmental impacts of their businesses, we are seeing the term sheet evolve in parallel. In particular, we are starting to see investors requiring alignment of values or commitment to specific impacts.

In January, Obvious Ventures announced its “World Positive Term Sheet”, a concerted effort to help entrepreneurs articulate their values so entrepreneurs and investors are aligned and those values can drive business decisions. This term sheet challenges entrepreneurs to describe their companies’ policies in four main categories: core values; diversity, equity & inclusion; sustainability; and pledging & giving. While each term sheet will be tailored to the individual company, Obvious Ventures emphasizes the need for companies to outline specific statements for each category. For example, will your company create an equitable corporate structure or become a B Corp? Can your product or service be manufactured more sustainably? What are your company’s policies on recruiting for diversity or equitable benefits for maternity/paternity leave? The World Positive Term Sheet is an important anchor for companies, and a way to root business practices in values and ethics that can serve as a litmus test for both entrepreneurs and investors down the road.

A year ago, Kapor Capital launched the Founder’s Commitment, a “road map for startups to create a culture of diversity and inclusion […]

By |February 27, 2017|

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