Three Great Reasons Why YOU Should Measure Your Impact
This article is part of a series by Ananda Impact Ventures Co-Founder Johannes Weber called “Make it matter”
Recently, I listened to Brad Gerstner from Altimeter on the 20VC podcast. When asked what his life goal was, Brad answered that he wanted to “do sh*t that matters” and that he wanted to “have a meaningful impact” on the world.
Wow. Just like me. Yet for Brad, “impact” includes financing a cloud storage unicorn. For me, the definition of “impact” is quite a bit narrower.
I would never argue with Brad, as I believe he’s a truly inspiring person who speaks from the heart. But what’s really interesting is that in the last few years almost all entrepreneurs and VCs have begun to talk about wanting to create something “meaningful”: they want to have an impact.
That wasn’t true when we started Ananda 13 years ago. The term “impact investing” didn’t exist, or at least I wasn’t aware of it. Traditional VCs laughed at us, and we had almost nothing to showcase to convince them we had a viable business model.
Today, the world has changed. We’ve become pioneers in impact investing and in impact measurement (read our latest impact report here). We created the Impact Carry Model with the European Investment Fund, which is now used by > 80 funds in the world. But mostly importantly, we’ve invested and channeled more than 500m EUR into impact-driven companies, and each year we assess over 5,000 impact investing opportunities.
Today more and more entrepreneurs want to build impactful businesses. Atomico data states that 15–20% of European startups are impact focused, a 33% increase since 2018.
So what exactly is “impact”, and why should entrepreneurs and investors measure their impact?
I would like to give you my definition of impact.
Through intended actions, achieve positive and measurable results in solving a meaningful social, climate or environmental challenge.
There are many other definitions of impact, and many of them I respect. But this is the one for me.
From my perspective, there are three main reasons to measure your impact:
1) It helps you to love what you do
Measuring the impact you’re having can be a profoundly unifying experience for you and your team. You can connect with your colleagues on a much more meaningful level. It defines the higher goal you’re striving for and makes your vision much more concrete.
Creating your own Theory of Change, setting impact KPIs and giving them target values can be an intense exercise, and most of us don’t get it right the first time (we’ll write about this process another time). But once you’ve created what we call “the zero line” of where you stand today, you’re on the road. And it’s usually an irreversible process.
As you understand how your fund, your company, and your project are making the world a better place, you and your team will find more meaning in what you do. And if you can then develop a model to grow your impact in lockstep with your turnover, you’ll be truly flying.
2) It helps you to differentiate and communicate
We’ve interviewed our founders on the positive effects of measuring their impact. The top one was: “It helps me to differentiate myself from the competition”.
But measured impact also helps to strengthen internal communications with the team, the board and all other stakeholders. It gives everyone a stronger sense of purpose and helps make them advocates for the company. If you can break down your impact into meaningful stories everyone can tell, you’ll have it made, because an inspiring narrative can travel far.
3) It helps you to attract and retain talent
Many founders also reported that measured impact enabled them to attract and retain better talent for longer periods of time.
We’ve witnessed this in action for people in all roles and levels of seniority, but especially for programmers and tech talent. They enjoy a challenge, but also like to feel they’re making a difference. Knowing their skills will have an impact is often a really important factor when deciding for whom to work. And great programmers are currently the scarcest resource out there, so that’s good news for impact entrepreneurs in the tech space!
Being impactful and measuring it also helps in general with retainment. We’ve also seen this trend, with a significantly lower employee fluctuation in our portfolio companies than what’s reported in traditional VC-backed companies.
So in my view, there really is no downside to measuring your impact — only upsides!
You will love what you do more, be able to communicate it better, and attract and retain better talent.
Lastly, it’s worth mentioning that every company and every investor does have the potential to deliver impact. But it’s how central it is to your mission that counts. If you want to enjoy the benefits I’ve listed above, make impact more explicit in your business and then just keep improving. Because the world needs it.
Has impact had an influence on you joining or staying with the company you work for? Tell us you story in the comments!
Here some useful resources:
- https://impact2021.ananda.vc/
- https://www.impactvc.co/
- https://thegiin.org/imm/
- https://medium.com/@Dama_Yanthy/a-deep-dive-into-the-world-of-impact-investing-7b0dce0d3aa0
- https://www.rockpa.org/project/new-impact-investing-handbook/
- https://tideline.com/truth-in-impact-a-tideline-guide-to-using-the-impact-investment-label/
- https://www.rubio.vc/wp-content/uploads/2022/04/Rubio-ImpactReport-2021.pdf
- https://www.norrsken.vc/impact-investing
Friends that can help measure your impact:
Johannes Weber is Managing Partner and Co-Founder of Ananda Impact Ventures
