3 Things Impact Investors Are Looking for in a Social Enterprise
Impact investors are like any other investor in that they’ve got money and they want to invest it into a business that will provide them with a healthy financial return. However, there are two things that separate the impact investor from the average investor, and that’s the desire to ensure that their money delivers a social or environmental return as well, and that return is measured.
We spoke to Jess Roth, the Founder and Director of Social Impact Hub (who are very experienced working with impact investors and helping enterprises to get impact investment ready), about things that impact investors are looking for in an investable social enterprise.
Here are three important takeaways to keep in mind:
It seems obvious, but the obvious is always worth reiterating. The ability to measure the impact you’re having, and the capacity to show investors how that impact will increase through their investment, is integral.
As Jess explained, “Impact investors love businesses where the impact is intrinsic. So as the business scales, the impact also grows. The financial return and the impact return need to be inherently linked.”
Sustainable Revenue Model
Impact investors are looking for revenue models that are sustainable. They need to be working. If you’re an early stage business, you need to show evidence of demand and ideally some market traction. The most common way to do this is through going to market with a Minimum Viable Product, but there are also other innovative ways to show market traction like a clinical trial in the health sector.
Jess said “We have supported businesses to secure impact investment at different stages of development, but regardless of stage, the investor needs to have a line of sight as to the growth prospects of the business, a possible exit strategy and therefore their financial return.”
Team & Systems
If an impact investor provides the funding, are you capable of managing the growth that comes with it? Is your team strong? Is your capacity to deliver services or goods ready to handle the influx? These are important questions you need to address, and answers that investors will be looking for.
“An outstanding team can always pivot the strategy. So an investor is fundamentally backing the founder and their management team to deliver on the vision and scale the business to the next level.”