How we measure impact — our first ever public impact report
How to measure impact is a hotly discussed topic. When we started out, we talked to the key thought leaders and reviewed the existing best practices and frameworks. There is no gold standard or off-the-shelf framework, especially when you are dealing with very early-stage start-ups that have limited resources and constantly evolving business models, so we took the best of what we could find and adopted it to the context of early-stage start-ups.
Today, for the first time we are publicly releasing our Annual Impact Report where we openly share the frameworks we use and disclose on an investment by investment basis how we measure impact and what our investments achieved in 2020.
Is our impact measurement method perfect? No. Are we at least directionally right? We think so. We are constantly learning and evolving, but one thing we know for sure — we have to start somewhere.
Yes, we are a little bit nervous about disclosing this publicly. We are pretty sure that some will criticise us and say that our methods are very unscientific and that we are brutally oversimplifying the exercise of impact measurement. We don’t underestimate the complexity, especially around measuring the short term vs. long term effects, but at the same time, we have been part of countless panels and roundtable discussions, where often the end conclusion is “this is really complex, if we can’t do it perfectly, we default to not doing it”.
We disagree with that. We see so many ways how setting even simple impact KPIs makes you a better impact investor. For example, many of our investment cases get killed in the screening process when we ask ourselves — how would we measure impact here? Is it intentional and measurable? What are the impact KPIs we would be tracking? If the answer is not obvious, it is a first indication that maybe we are not looking at an impact company and need to scrutinise it extra carefully.
Secondly, our team’s financial incentives (carried interest) is linked to achieving both impact and financial targets, which also ensures that the two always go hand in hand — no impact, no money.
We really hope that more impact funds will choose to open up and share their impact methodology and results publicly. We have a lot to learn from each other and if we open up our books and start discussing real examples maybe over time we can get closer to standardization and ultimate truth.
Any tips on how we can improve for the 2021 report? We want to hear from you!
Big shout out to all our portfolio companies who are committed to tracking their impact KPIs and agreed to share these figures publicly, you are the true heroes here!
Norrsken VC Team
