Impact investment as a term is well known among the entrepreneurial fraternity. Impact investment by definition is funding something that addresses social-economic good, unlike pure commercial interests in tech startups. Excerpts from an article in Stanford Social Innovation Review show impact investment gradually gaining a firm ground in the global startup hemisphere.
Impact investors can help provide the kind of financing needed to sort out the world’s long, complex, and often unethical supply chains. In the big scheme of things, impact investing is still a niche activity. But last year, 146 Global Impact Investing Network members reported $60 billion in invested assets in 2015, and 1,380 Principles for Responsible Investment signatories reported assets under management of more than $59 trillion. This suggests growing awareness about responsible investment.
While impact investing is very common in the west due to popularity of social entrepreneurship, in India, it is still very niche. Social entrepreneurs often find themselves looking at a hazy picture while pitching to investors. Questions like ‘How do we convince them of our cause?’ or ‘How can we show them our achievements so that they lend us their money?’ are some of the common questions that arise.
We have with us, Rwitwika Bhattacharya, Founder, and CEO of Swaniti, who will tell us more about how impact investing works.
Thank you Rwitwika for joining us.
- Is impact investment different from venture capital or is it just named differently for social good brands and tech startups, respectively?
RB: Impact investing can be different from venture capital. Impact investing implies the presence of a passive investor who wants to see good and does so by investing a certain amount of financial resources. Venture capital is “hands-on” investing where a firm offers not just financial support but actively works to grow the company (often having a board member present) and works closely with the company.
- Are there any government led initiatives or policies that facilitate investment to social startups?
RB: Collectively there are several that focus on different elements on social enterprises and start-ups. For example, the government was keen on developing a fund of funds (VC style) for enterprises, both social and not. Similarly, the UP government has special provisions for supporting social enterprises. However as of right now there doesn’t exist any policy specifically around social enterprises.
- Is impact investment restricted only to for-profit social startups? Can NGOs, non-profits, and CSR departments avail it?
RB: I am not entirely sure on this. My assessment is that social enterprise includes NGOs and therefore it should be fine.
- How do impact investors evaluate the credibility and returns on a social good concept since it is intangible, relative and unpredictable?
RB: Impact investors have to take care of a double bottom line: they have to see whether there are financial returns and how many people are benefitting. Often times these are complementary to one another. For example, if I want people to have access to clean water, the more people buy my water purifier the more people will have access to it. Therefore in impact investing the metrics are often straightforward.
- Tell us more about Swaniti.
RB: Swaniti aims to deliver development solutions through government officials. We work in governance to leverage state and central government resources to initiate, implement and accelerate development solutions. Our focus areas of work where we have seen our efforts to be most impactful are in health, education, gender, livelihood and water & sanitation. Swaniti is involved in projects where a tangible deliverable towards development exists at the end of our work.
Thus far, Swaniti has worked with over a hundred Parliamentarians, fifteen state level legislators and four Chief Ministers (CMs) offices by either providing implementation support in the constituency (Engagement), research support on key developmental programs (Research) or strategic data based insight to aid development strategy (Data and Technology Insight). For more information follow us on twitter @swaniti.