A Look at Impact Investing in Chicago
The idea of “making an impact” has exploded into our everyday vernacular. Millennials want to make an impact in their personal and professional lives, startups want to make an impact on the world, and investors want to provide the financial capital to support both. Since 2007, impact investing has grown tremendously, with funds of all different sizes, missions, and investor bases collectively managing over $60B in assets intended to generate both financial return and social/environmental impact.
This growth trajectory makes sense. There’s an appetite to create positive social outcomes that are also profitable, which startup culture has helped breed by introducing the concept of disruption into longstanding industries and sectors. Plus, impact investing is maturing, and as there are more examples of investment approaches and strategies that also create impact, startups, corporations, economic institutions, and investors have all come to understand it better.
Practically, impact investing can be more difficult to define. There are many different types of impact and investment strategies/approaches, and while the concept of impact investing is powerful, it is also very broad. Anecdotally, Hyde Park Angels has made cleantech, edtech, healthcare, and sustainability investments since its inception, but it hasn’t always recognized them explicitly as impact investments. As impact investing has continued to pick up steam, we have become increasingly interested in better defining it and understanding the players in the space, so we teamed up with Impact Engine, an investment partner that focuses exclusively on impact investing, to take a closer look and figure out who invests in impact.
We had to start at the beginning, by understanding exactly what impact investing is. Impact Engine defines impact investing the same way the World Economic Forum does, as “an investment approach intentionally seeking to create both financial return and social impact that is actively measured.” This basic definition helps lay the framework for impact investing, but doesn’t exactly paint a picture of what an impact investment looks like. So we asked Impact Engine, which invests in early stage companies like we do, how they take this definition and turn it into an investment strategy.
In many ways, what Impact Engine is looking for is similar to what all early-stage investors look for: great entrepreneurs launching businesses that are addressing big market opportunities with a unique, differentiated product or service offering. The difference is that they are screening for social or environmental impact as well, deliberately seeking out companies whose product or service inherently creates a social benefit. They pointed out that a lot of investors are making investments in sectors where impact naturally aligns with financial returns, including cleantech, edtech and health. In other sectors, like fintech, companies may be addressing underserved customers with products that are compelling because they save money, thus leaving those customers financially better off. Alternatively, rising customer demand for healthier, more sustainable products creates opportunities for companies in sectors ranging from consumer products to sustainable agriculture.
We decided it would be helpful to look at Impact Engine’s portfolio companies to get a sense of what problems impact businesses solve and how they solve them, and we hand-selected three to highlight:
· Regroup Therapy: 1 in 5 Americans suffers from a diagnosable behavioral health condition, but over 55% of U.S. counties have no practicing psychiatrists, psychologists or social workers. Regroup Therapy partners with health entities nationwide to provide state-of-the-art, video-based behavioral health integration, increasing access to critical behavioral health services, reducing total cost to treat, and enabling better outcomes for individuals and communities.
· Luna Lights: Luna Lights focuses on developing products that keep older adults healthy by preventing and detecting falls and keeping them connected to loved ones. Namely, the company provides a predictive and preventive experience that simplifies the data collected in order to target the elderly population and uses the data to warn family members and caretakers of potential health problems or falls.
· ThinkCERCA: ThinkCERCA is a technology platform for literacy that incorporates a new methodology for teaching close reading and critical thinking. Currently it is implemented in 264 schools, serving 358,000 students, and students whose teachers are using the platform regularly are achieving an increase of 2.2 grade levels in reading over the course of a single semester.
Essentially, impact companies are doing the same thing as non-impact companies: finding a way to solve clear pain points in the market and build a sustainable and profitable business based on their solution. The main difference is the solutions also create added social benefit. With this more concrete understanding of what impact investing looks like, we can move on to explore who is actually doing it.
For our purposes, we focused on Chicago, evaluating early-stage funds and organizations that were mainly focused on impact investments as opposed to groups like ours that consider and evaluate them alongside non-impact companies. With the help of Venngage we started visualizing this data, which is the first step in understanding the people and market behind impact investing.
This article is our first step in a larger series focused on providing insights into the impact investing space. If you know of impact-focused funds in the Midwest and beyond, share them in our comments section so we can continue our research.
About Hyde Park Angels
Hyde Park Angels is transforming early-stage investing by taking a people first approach. The organization is the largest and most active angel group in the Midwest. With a membership of over 100 successful entrepreneurs, executives, and venture capitalists, the group provides critical strategic expertise to entrepreneurs and the entrepreneurial community. Nearly 40% of our members have founded a company, 88% are CEO’s, top executives or corporate board members, and 100% invest in startups. By leveraging the members’ deep and broad knowledge of multiple industries and financial capital, Hyde Park Angels has driven multiple exits and invested millions of dollars in over 40 portfolio companies that have created over hundreds of jobs in the Midwest since 2006.
About Impact Engine
Impact Engine is an investment fund that empowers entrepreneurs, mentors, and investors to make a positive impact on society. Through financial and human capital, we help for-profit businesses address the world’s greatest social and environmental challenges.
About the Authors
Alida Miranda-Wolff heads up communications and strategy at Hyde Park Angels, crafting and disseminating the organization’s brand in all forms across all channels. In addition to single-handedly building HPA’s integrated communications plan and executing its core elements, Alida manages membership, partnerships, portfolio company support, and all community engagement.
Prior to joining Hyde Park Angels, Alida served in a variety of journalism, marketing, communications, and management roles, specializing in creating spreadable multimedia content for tech-enabled businesses at all stages. Alida has run several Kickstarter campaigns, including one of the most successful in Chicago history, and still mentors companies running their own campaigns.
Alida graduated Phi Beta Kappa from the University of Chicago in 2014 with multiple honors and awards. She remains active in the university of alumni network, serving on five advisory boards and committees. Alida is also a published author and poet, with two poetry chapbooks currently in print, Domestic Scenes and Tree Fingers.
Noelle Juengling is the Program Coordinator at Impact Engine, responsible for marketing strategy, mentor and curriculum planning, and processes oversight. Noelle is inspired by the challenge to fundamentally shift the way companies think about their role in driving societal and environmental change. Prior to Impact Engine, Noelle held marketing positions at Lifebooker and UrbanBound, companies using digital technologies in innovative ways to drive new business and consumer action. Noelle is a graduate of New York University, with a Bachelor of Science in Communicative Sciences & Disorders and minor in Media, Culture, and Communication. She also attended Startup Institute in Chicago, graduating with a unique knowledge of how to navigate the start up world.