The Yunus & Youth team is always looking for opportunities to build the capacity and skills of our Fellows. On November 11th, we had the pleasure of welcoming Dan and Libby, from the University Impact Fund, who spoke brilliantly about what is impact investing and how to pursue it as social entrepreneurs.
Impact investments are financial investments done to generate measurable positive social/environmental impact at a given region along with a financial return. At the UI Fund, all investment associates are students. Its goal is to solve the world’s most pressing problems by giving students exposure to impact investing and social entrepreneurship, as well as to improve the current impact investing practices worldwide.
Dan and Libby delivered a brilliant session to the Y&Y Fellows on impact investing, its types, best practices and tips.
Regarding the types of investments, they mentioned Debt, Equity and Philanthropy. The first has to do with loans that are expected to be paid back by a given date. Equity is the ownership of part of a company’s assets. At the UI Fund, equity investments are focused on closing a pioneer-stage gap, which means that they invest mostly in companies with a successful prototype who need money to achieve their next milestone. Lastly, philanthropy has to do with project-based or unrestricted grants, given mostly to non-profit organizations, but also to some social enterprises.
When pursuing an impact investment strategy, social entrepreneurs should keep some principles in mind:
First, social entrepreneurs should find potential donors based on their common interests and priorities. Investors are more likely to invest in the issues they care more about. Also, each investment fund has different modalities, criteria and timelines. All those elements should be considered when approaching them.
Second, fundraising is about building relationships, and not only making requests. A strong fundraising strategy is one that keeps stakeholders updated and involved with your social business, even when you “don’t need” money. Those relationships also become stronger when you can show the investor that you have a lot in common, and that investing in your business will also help them in their interests and objectives. To start building them, approach investors with non-monetary requests, such as asking to learn more about their interests and previous experiences. Then, keep the conversation going. It will become much easier to ask for a check when the time comes!
Third, it’s important to demonstrate your impact through a well-structured framework. The Sustainable Development Goals and the Theory of Change are some of the tools mentioned. They can be useful to establish a common language with the investor and to bring more clarity to your value proposition. Also, Kevin Starr’s Four Questions can also be useful: (1) Is your solution needed?; (2) does your solution work?; (3) will people use it as designed and (4) will it get to those who need it the most?. Always be honest about your impact when pitching to investors.
So, before approaching impact investors, make sure you:
1- Research the investment fund thoroughly to find common grounds;
2- Look at the fund’s investment portfolio and evaluate whether you fit into the company profile it is looking for and
3- Reach out to fellow entrepreneurs and ask for advice. They can help you prepare your pitch and make it more attractive!