How to Get Involved in the Impact Investing Sector, Part 2
By Elizabeth Coston and Alex Frederick
Last month, we teamed up with Net Impact to publish “How to Get Involved in the Impact Investing Sector.” The blog post explains paths to exploring careers in impact investing and links to Net Impact’s recently launched Impact Investing Portal, which includes an Impact Investing Career Guide, additional articles and resources on the sector, and an impact investing jobs board. At Impact Engine, we get lots of inquiries about where to look for and apply to impact investing jobs and always direct people to our Social Impact Jobs Board and our most recent blog post “Looking for Jobs with Social Impact?” We also have an internship program for MBA students, where interns get a hands-on role on our deal team identifying potential portfolio companies, mapping out the investment landscape in our four social impact focus areas, and much more. One of our current interns, Alex Frederick, and our senior associate, Elizabeth Coston, share their experiences working directly in the impact investing fund space and offer advice to those looking to get involved in the field.
Elizabeth Coston, Senior Associate
What is the experience like being an associate at Impact Engine?
I spend most of my time doing due diligence on prospective investments. During a diligence process, we are trying to understand the the value proposition of a given company’s solution, the size of the market opportunity, and the potential for both financial returns and impact. We also care about who the team is, their backgrounds, motivations, strengths and weaknesses. In order to come up with a well-rounded assessment of a company, I spend a lot of time talking directly with entrepreneurs, as well as industry experts, company advisers, customers, and fellow investors. We dive into financial models and sales pipelines to understand how the company approaches cash management and thinks about growth. We have an investment committee that meets monthly to approve deals, so our team’s job is to boil down hours of conversations and research into a succinct and clear thesis of why we think a company is worth investing in, what the risks and mitigants are, and their path towards achieving scale and success. Outside of diligence, I also support our existing portfolio companies in their fundraising endeavors. When they start to think about raising their next round, we come up with a list of potential funds or family offices that might be a good fit and facilitate introductions. Another part of my job is managing some of our fund’s back office and operations. This includes preparing financial reports for our investors, working with our accounting firm on taxes, and managing processes such as capital calls and deal closings.
What was your background/path to Impact Engine?
Out of college, I spent a couple of years working in Investment Banking. It was a valuable grounding in financial basics such as modeling and valuation, but more importantly I learned how to interpret numbers to tell a compelling story. Working in M&A, one of my frustrations was that I didn’t get to see what happened after a deal closed. So I moved into Wealth Management where we were building long term relationships with clients, and investing directly on their behalf. We invested across all sectors, so I got to learn about industries ranging from water utilities to consumer staples to composite materials. While I loved the variety of the role, I was missing an underlying motivation. I went back to business school to figure out how to incorporate social impact into my career, and ended up discovering impact investing. Coming out of school, I worked in a more programmatic impact investing role, which helped me to understand the broader landscape and build my network in Chicago. I got to know Impact Engine through that work and ended up joining the team as we made the transition from an accelerator to a seed fund.
What kind of skill sets are valuable in impact investing?
If you’re interested in a role like mine, one of the skill sets that has served me well is the ability to shift between macro and micro thinking. It’s important to be able to understand the context in which a company is operating and the trends that are driving the industry. For example, what are the implications of the rising cost of higher education? Where does this create opportunities for impact, and what types of companies should we avoid as a result? On the flip side, once we have identified companies that are consistent with our broader theses, we must be willing to spend time on the details. What are the terms of customer contracts? What does the sales cycle look like? How much money do they need to get to profitability?
What advice do you have for those interested in working in the sector?
As many of you have already discovered, impact investing jobs are hard to come by! I would recommend talking to organizations or people who interest you, and asking them what they read, what events they go to, whether there are other people they can connect you with. Have opinions and be prepared to talk about what about impact investing appeals to you and why. The more concrete your wishlist is, the more easily people can help you. Be proactive, and create opportunities for yourself. Also don’t be afraid to go into an organization where the role is not exactly where you see yourself, as long as you identify with the people and the work they are doing. My role changed within 6 months of joining Impact Engine, which is not unusual within small organizations.
What resources do you recommend for those interested in learning about or finding a job in the sector?
A few more ways to get more informed about the space:
- Find alumni from your school who are working in the field and ask them about their career path
- Check out the Case Foundation’s Impact Investing Map
- Identify and follow the sector-specific organizations that bring together numerous companies in your areas of interest. For example in Chicago, if you care about healthcare, keep up to date with Matter; education, check out LEAP; cleantech, Clean Energy Trust.
- Sign up for impact investing newsletters (On Impact, ImpactAlpha)
Alex Frederick, University of Chicago Booth School of Business MBA Student Intern
What skills have you gained working as an intern at Impact Engine?
The internship at Impact Engine has been an amazing opportunity to dip my toes into a career in impact investing. I was welcomed as part of the team, and given real responsibilities to source and evaluate investment opportunities. Most of my time has been spent on the investment-side. The experience has allowed me to develop the following skills and expertise:
- Macro analysis: In order to effectively evaluate investment opportunities, I learned to get up to speed quickly on economic and technological trends.
- Networking skills: I learned that the best opportunities were often referral-based. To develop a steady inflow of referrals, I attended industry pitch and networking events.
- Deal sourcing and screening: I evaluated over 1,000 investment opportunities during my internship. Through pattern recognition I learned to quickly to identify the opportunities that stood the best chance for investment. Lively deal team meetings gave me the opportunity to defend my recommended investments from both financial and social impact standpoints. I’ve also gained experience in developing investment theses, sourcing opportunities, evaluating pitch decks and investment materials, and interviewing founders.
- Due diligence: I’ve been able to take on key roles in the due diligence process including financial modeling, evaluating financial statements, term sheets and legal document reviews, sales pipeline analysis, and analysis of other investment materials.
What advice do you have for MBAs interested in working in the sector?
Impact investing covers several asset classes. When I investigated venture capital as a means of creating social impact, I learned that it is an apprenticeship business. To me that means that it takes years of first-hand experience and mentoring to develop the skills necessary to be a “good” investor. Venture impact investing adds an additional level of complexity because, not only do you need to understand the basics of VC (negotiations, term sheets, financial modeling, industry expertise, etc.), you also need to develop a philosophy or thesis to evaluate the impact of social ventures. An internship at an impact investing firm is an ideal way to see if this career is for you, and to start building a track record of experiences and accomplishments. My advice is to seek out a VC or impact investing internship, but if that fails, look for ways to gain the same experiences on your own.
Here are several ideas to build relevant VC skills:
- Go to start-up events (pitch and networking)
- Become an expert on industries that interest you
- Work at a startup (preferably in an operations or fundraising capacity)
- Pretend to be an impact investor: create your own investment thesis; find relevant companies on sites like AngelList and Crunchbase, evaluate them as potential investments, and track their progress over time
- Take on ad-hoc (e.g. research) projects for start-ups or impact investing firms
This blog series has been developed in partnership with Net Impact, is a global community of students and professionals who use their skills and careers to drive transformational social and environmental change.