Your Basic Breakdown of How Investors Measure Social Impact

“Tape Measure Cat” by Peter Lee (Source: Flickr)

Impact investors want to measure social impact in much the same way they measure their financial return on investment. You need to show specific evidence that your startup will make a difference. For example, x amount of money given to my company will result in y number of underprivileged students gaining access to my education software, which will increase their chances of pursuing further education by z percent.

Think about what change you can measure as a result of your company, how you’re going to measure it, how you’ll collect the data, who you’re targeting as an impact investor and how this will matter to them. In addition, when you’re presenting your evidence, keep in mind the difference between measuring “outputs,” like stats on the number of people in a program, versus an “impact,” which measures the benefits people receive, and how it affects their lives with education and employability.

For more information, you can go to the Impact Reporting and Investment Standards (IRIS), which offers a guide on how to create a metrics framework that correlates with investor and stakeholder interests. Also, the McKinsey Society offers a useful Social Impact Assessment online tutorial that allows you to tailor metrics to your company.

The most successful impact assessment revolves around impact goals that relate back to the business success. Not only does the output information become more useful to the running of the business, but also management at the investee is more aligned to collecting the data because of the value beyond simply reporting back to their investors.