There is a common misconception that social and environmental (S/E Impact) companies can’t return the same type of investment potential that high tech companies can. In fact, this belief can create limiting behaviors on the part of social and environmental impact companies. When they feel that they are not bound by the same rules as the companies that they are competing with for investment dollars, then S/E Impact companies limit their potential.
The Rockies Venture Club once supported non-profits as a part of the Angel Capital Summit. As a non-profit ourselves, we saw the value in supporting non-profits and yet it somehow didn’t feel “right” in an investment event. People are in a different mindset when they are pursuing philanthropy than they are when they are investing – even though one person may do both from time to time. Our goal is to create opportunities for investments that have philanthropic outcomes but also return venture-grade returns on investment. These returns allow serial philanthropists to create “evergreen funds” that are replenished by investment returns and which can then be re-invested to do even more good.
There is, in fact, a blurred line between pure philanthropy and some S/E Impact investments. But there is also a blurred line between impact investments and high growth investments. The differences should be based on the investor’s objectives. Impact investors are following a global trend towards enabling communities or producing long-term sustainable environmental products vs. dwelling in an endless cycle of donations that only results in continued poverty.
With a huge global demand for impact investment and a diminishing availability of aid, a revolution in how aid is delivered is needed. Impact Angel Investing is one key to filling that gap.
How we measure the outcomes of our investments is the key to understanding impact investing. Traditional investments looked at Return on Investment in terms of multiples of investment, IRR or other purely financial means. We now have sophisticated Triple Bottom Line metrics that allow us to measure not only economic returns, but also social and environmental returns. Corporations are increasingly measuring their results using Triple Bottom Line approaches and it makes sense that this kind of thinking should also apply to Angel Investing.
Attend the Impact Angel Investing event December 11th and find out more how we all can benefit from impact investing and see four great impact entrepreneurs pitch their businesses – and you can decide for yourself.