SOCIAL IMPACT VENTURE CONSULTANTS

A NEW AREA OF GROWTH FOR SOCIAL ENTREPRENEURS

reprinted with permission from the IE Social Innovation Blog: https://goo.gl/d9gq1r

INTERVIEW BY JOSH ENTSMINGER

I sat down with IE alumni and Fundie Ventures co-founders Stuart Minaar and Andy Wong to talk about the difficulties of navigating the next generation of social impact funding.

What does the future hold for social impact funds in Europe?

Globally, impact investment is on the rise, finally. For the governments which have more draconian capitalist policies (the like of President Trump), corporates are stepping to the fore to shift their investments to more socially/environmentally-conscious investments, this is known as conscious capitalism. Case in point, is the recent email that the CEO of BlackRock made public. This kind of shift is definitely creating some momentum that favours impact investing becoming the traditional investment. This is matched in Europe through an increase in larger investment banks creating impact funds, the UNDP setting up a Social Impact Fund, France driving the support for innovation around climate change and the European Commission granting structural financing to organisations to grow the social entrepreneurship/impact investment ecosystem. European business schools are offering courses on alternative financing, Oxford seems to be a front-runner with their social finance and impact investing programmes. This triple helix drive is creating tremendous awareness, which ultimately is one of the more influential ways for widespread systemic change from traditional investments to more responsible investments. What this is means for a little impact fund like ours, is that there is an increased awareness around impact investing. Corporates are looking to startup technology to improve the impact of their business lines on society and startup founders are starting to transition to developing double bottom-line business from inception and not as an afterthought. The hope is that these factors culminate to an increased access to responsible capital in Europe.

Fundie Ventures’ focus is on the ‘missing middle’ investments, these are, typically, between €50k to €500k ticket sizes and are often overlooked by traditional VC’s as it comes with higher risk. This is a crucial stage as this is where the failure rate is at the highest, which is primarily due the lack of funding preventing a long enough runway to grow. We are excited to see the engagement and activity in Europe and enjoy the little wins when we see a startup that we analysed a year ago, has gone to raise the next round. We hope that through our efforts we can inspire other European business schools to set up their own student-run impact funds, and ultimately create a network of funds linked to business schools in Europe. Through our joint efforts we can start to make a little dent in the gap.

What developments would you like to see in impact assessment?

This is a tricky one as we are yet to see a standardised assessment tool that can allow a fund to compare different deals on an apple-for-apple basis. This adds an element of intuition to the decision making process about social impact and, consequently, the investment. For this reason, we treat the social impact measurement of each deal we analyse on a case by case basis. Perhaps with an increase in the number of social impact startups getting investment, organisations like GIIN (Global Impact Investment Network) would be able to aggregate the data to create assessment standards. An easier start would be to look at doing specific assessments for certain verticals or SDG’s. There is a lot of effort currently being put towards cracking the impact assessment conundrum. We are pretty confident that within the next 12–18 months we will be closer to a solution.

What kind of tool would help you most in advancing social impact funds?

One of the the main problems that any VC is facing, is origination. There is either an overload of unsolicited deals that don’t match their investment appetite or there is a lack of really good deals. What we have experienced with Spanish deals is that the same 5–10 deals circle pass us via external partners every 6 months. A useful tool for each country would be a “marketplace” for social impact startups that connects impact funds to startups with a double bottom-line. A platform that curates the startups and impact funds so ensure their relevance and validity to be on the platform. The second tool would be a platform for potential limited partners, family offices and HNWI’s (high net worth individuals) to learn more about the various funds as means to invest in, and vice versa.

What trend are you suspicious of, or find overhyped, in social impact?

The integration of blockchain and crypto-currencies into the pitch decks that we see. Personally, I steer clear of a startup, in their early stages, speaking about using blockchain as part of or parallel to their product offering. Our hesitation around it is firstly, because it is a dazzling distraction. It is a trending tech that still has the buzzword glow, but ultimately it distracts the founder from focusing on making sure that the business model is solid, which is what is needed in early-stage startups. The second reason is because, it is still an immature technology that is too unstable to base an investment on. There aren’t enough success stories of social impact startups in their first two years of growth who have successfully used blockchain to raise a decent round or do a ICO. It may seem attractive, but once you dig deeper, the cracks appear. Not a good sign of being investment-ready.

To see more about fundie ventures, see: https://www.fundie.ventures/investment-philosophy