Impact investments refer to those investments made with an aim of having a social and environmental impact along with financial returns.
The Global Impact Investing Network (GIIN)’s Advisor for South Asia, Anil Sinha said,
“there has been a tremendous development in India around impact investing activities in the last five years and the country is in a sweet spot.”
India is projected to see impact investments worth $40 billion by 2025 thus stimulating the growth of social entrepreneurship in foreseeable future. Impact funds were the first investors in 62 percent of all deals and in eight of the top ten microfinance institutions in India. This led to traction from conventional PE and VC funds, even as business models of underlying industries matured.
Source: Forbes India
The Investor’s Dilemma
An Impact Investor is constantly in a dilemma to find the right balance between profit and purpose. While their primary goal is to evaluate the return potential of any investee, being an impact-centric model, the investor is also looking to invest in an organisation that tackles social issues while making sustainable profits. An Investor specifically looks for that golden mean between Profit and Purpose which addresses the problem at hand, sustainably.
As a Social Entrepreneur, you need to bring out the problem, the solution, the impact and the for-profit model to the table. We spoke to a few influencers and here are some key points that every social entrepreneur who is preparing their impact investment pitch, should bear in mind.
1. Know your Investor
Servane Mouazan, a coach for impact and social investors, Founder of Ogunte, helps women entrepreneurs, in building their business model and seeking the right investors. She tells us,
“Do your due diligence, understand what your targeted investors know and what they are not familiar with. (It might be that they are very good on agri business, but their gender lens needs upgrading…) This will require some background research and subtle conversations with stakeholders, investors themselves – if you can – and past investees. Don’t form an opinion only with a website.
Secondly, it is necessary to understand whether these investors are looking for a social impact unicorn or are they taking measurable, conscious and diverse risks?
Some investors think they understand a product or a service because they might use them in their daily lives, but do they actually know what you are talking about? Have they got an innate understanding of the market? You will need support, not just cash, to grow your business, so you will need to have useful investors in knowledge and connections.
Are they forthcoming and honest about their past mistakes or successes? A good level of transparency and sense of learning is paramount for healthy investor – investee relationships.”
2. Be ready to talk about numbers
Bryan at Upaya Workshop in Mumbai
While talking to us about his experience, he stressed upon the fact that just because you are an impact-driven organisation, doesn’t mean that the investors won’t stress upon the numbers.
“They are investing a huge sum in your organisation and they need to know if you can earn it back. You need to be ready to talk numbers with them.”
3. Address the problem sharply using creative storytelling
Creative storytelling communicates the problem and your solution by showing your innovation and its real-life impact. Based on the type of your social enterprise, you can tell 4 different types of stories. Additionally, creating short films can go a long way in not only raising funds but also in creating a credible social proof.
4. Explain how you can bridge the gap sustainably while bringing profits to the company
This is the favourite part of any investor. You are already a change maker and an activist fighting for a cause. The investor wants to see your entrepreneurial side – how you can convert your social innovation into a sustainable business model.
“She needs to trust you as an entrepreneur.” – Bryan Lee
But this can also go wrong sometimes. If you end up adding an impact angle to your commercial model, just to seek sympathised funding from investors, it will backfire. Thinking that way would be your greatest mistake.
5. Highlight what is in it for the investor
Every investor’s motive boils down to what is in it for them. Address that clearly. Your business model, although impact centric, needs to be exciting, sustainable and promising enough for your investor to invest that amount of money.
6. Keep your presentation crisp, strong and effective
Steer clear of long, drab presentations loaded with sales driven language. Instead, focus on how you can address the problem holistically.
“Seeking investment for your social enterprise is not very different from the usual, tech and commercial ones. Only you have to show your promise as an entrepreneur and a changemaker, both at the same time”. – Bryan Lee
Cover image source: Harvard Innovation Lab