By Mathias Flattin, investor at XAnge
As a symbol of the growing awareness of the new generation, the “impact startups” use technological innovations as a mean to serve a social or environmental impact, to reshape our societal models. Just as 36% of Millennials (according to the World Economic Forum), they consider that companies must play a major role in improving society. And they implement technological innovations (marketplaces, artificial intelligence, robotics) to serve major causes, such as education, health and/or safety, personal data protection, housing, environmental resources, inclusion and social cohesion.
In this context, to speak solely of France, an extremely dynamic ecosystem emerges around initial successes, think of Compte-Nickel, La Ruche qui dit Oui !, Simplon and others follow closely such as OpenClassrooms, Habx, Phenix, and the spectacular Wandercraft… A network of incubators and accelerators have even been set up: Ticket for Change, the Social Good Lab or the SenseCube. The key tech events also show their interest in this promising sector. In 2015, Slush created the Global Impact Accelerator, and in 2017 VivaTech launched the Positive Impact Challenge.
89 trillion dollars to “change the world”.
At the end of 2015, the United Nations established 17 Sustainable development goals aiming at “ending poverty, protecting the planet and ensuring prosperity for all”. As a consequence of a study done on a case-by-case basis, these 17 “SDGs” are therefore the new United Nations guideline for sustainable development.
At the end of 2016, Grete Faremo — Under Secretary General and UNOPS Executive Director — declared that the eradication of these societal challenges would require an investment of 89 trillion dollars.
… 89 trillion dollars … that is to say 115% of the global GDP in 2016, while philanthropy collects only 1% of this amount each year …
Finding new (massive) funding.
Where will we find the missing 99%? Let’s approach THE field in which capital is necessary: Finance.
In order to address finance, it is necessary to be able to serve market returns comparable to the returns of conventional assets. This is the essence of “Impact Investing”: supporting projects offering a double return on investment, both financial and societal, without sacrificing one for the benefit of the other.
During a Parisian visit, Sir Ronald Cohen — the father of British venture capitalism — recently reminded us that “Impact is an important driver of the performance of a company.”
A company that offers a market return to its financiers finds it easier to relocate funding to nurture its development, pay its employees, hire the best talents, improve its offer .. and thus perpetuate its impact.
In addition, financing its development without relying on generous donors (who re-consider their donations every year) makes a company stronger and allows it to have a long term vision.
Impact Investing supplements philanthropy or the social and solidarity economy, to reorient more resources at the service of great causes by adapting a product to the majority of the circulating capital, the return-seeking capital.
It has already begun. Impact Investing funds already manage more than $ 15.2 billion worldwide according to the Global Impact Investing Network (GIIN) and € 1.26 billion in France, according to AFIC Impact.
Investors have developed realistic models to quantify and evaluate the impact made.
The first funds in this area have already proven to subscribers that the investments can really generate significant, sustainable and quantified benefits for major causes, while producing a market return. Venture Capital targets a two-digit annual return.
Organizations such as AFIC Impact and GIIN are also used to discuss these models and to quantify them. The funds of institutional funds such as BPI France and EIF are pushing for a harmonization of methods, we are already in the maturing phase of this process.
Technology as a powerful impact leverager
Technology allows to increase the scope of the actual impact, which is the key to Impact Venture Capital.
The birth of a technology at a particular instant allows to reorganize a social interaction, a consumption pattern as well as a value chain. Some innovations therefore make it possible to reshape societal patterns, to rethink them in order to generate an even stronger impact on the category of beneficiaries concerned.
Financing Impact Startups requires expertise in Venture Capital but also in Impact Investing. Our XAnge team is a pioneer in Impact Venture Capital which is part of solid investment strategy and a team conviction which has been cultivated since 2009.
Our first impact fund has supported emblematic companies with solutions to causes we wanted to address. Food, Environment, Inclusion, Health, Education, DataPrivacy are the major subjects that our investments target. An intermediation platform like La Ruche Qui Dit Oui! allows small farms to sustain higher margins, construction workers around the world are secured with Arcure Optics, and many patients around the world see their pain levels analyzed in live by their doctor during critical operations with MDoloris. Thousands of lives have been improved by new technologies in a meaningful and sustainable way.
This first vehicle has generated a double-digit return for our investors. And we are raising the next one at the moment.
In 2017 alone, we received around 600 decks that met our criterias, which represents an increase of 80% compared to 2016. And we carry out 10 to 15 new investments every year.
Hundreds of entrepreneurs have already realized that technology can be an antidote to the illnesses of our world. With more and more capital available, they now have the means to grow.
