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Applying Impact Measurement to a Venture Fund

Written by Capria Admin
April 20, 2014

Why and when should impact investors measure impact? You know you are creating it — is measuring worth the expense? This is a common question discussed in the space of impact investing. I joined Unitus Ventures to answer “how do we measure impact” which needed me to start with what, why and when.

What does Impact Measurement Mean in a Fund Context?

Among the plethora of investment options, impact investing is an approach that merges the pure financial investment world with select goals borrowed from the philanthropy world. Let us look at both the “impact” and the “investors” in impact investors. “Impact” encompasses the social or environmental value; “investors” means there is an absolute expectation of financial return. We talk more about impacting investing trends here. Given the nature of the investment it is important to measure the right amount of impact so as to not hinder a business as it scales in revenues and impact.

Mission drift – hard to avoid, but you can shine a light on it

Over the last couple of years we have learnt from the MFI industry about “mission drift” – as MFIs started to scale very fast, not all loans were being productively used, some clients used them only for consumption purposes.  Some firms raised interest rates to satisfy investors at the expense of captive customers. All of this could be tracked and possibly avoided if mission drift was detected early. An important learning for impact businesses as stated by one of our portfolio companies, iSTAR’s CEO, Surga Thilakan, “It is important to recognize the drift, so all stakeholders including the entrepreneurs are aware”.  At Unitus Ventures, we believe building an impact measurement system at the seed stage would help shine a light on mission drift, thereby allowing the company and investors to decide what percentage of drift can be accepted on a continual basis.

Surveying the Options for Impact Reporting at the Fund Level

We started to think about impact measurement and what it means for a multi-sector seed fund in 2013. We took the following initial steps and found:

  • There are multiple potential standards for impact measurement and reporting
    • IRIS – comprehensive set of metrics to choose from and create your own framework. Standardization of the metrics makes it broadly comparable to other funds. Aligning to IRIS was a given as soon as we saw the comprehensive nature of their metrics and standardization across sectors and geographies.
    • B-Analytics –a web analytics platform to measure, benchmark and report impact created by funds and social enterprises. B-Lab offers a comprehensive assessment of social and environmental data, thematic & industry data assessment and custom data assessment. These assessments were not suitable as all aspects were not measurable by seed stage companies.
    • GIIRS Ratings & Analytics – B-Analytics also provides GIIRS ratings for venture funds that are rigorous and comparable across companies and funds. We felt the intent to create a gold standard and cause systemic change in the impact investing space over time, was great. However, until very recently, it did not consider the size/stage of the business.
    • PRISM – a venture fund rating tool normalized to the Indian context. As one of their Pioneer Funds, we participated in their Beta testing and provided feedback from a seed fund’s perspective. Considering multiple perspectives, the tool is adaptable to each fund’s mission and needs in terms of the assessment and reporting. PRISM was recently launched at Sankalp 2014.
  • Understand stakeholders’ (predominantly fund investors’) expectations
    • Simple and concise impact measurement
    • Be able to compare across similar funds, where appropriate
  • Research other impact venture fund’s impact reports
    • Most funds use IRIS metrics for their framework, whether or not they get GIIRS rated
    • Some provide too much information, some just touch the surface – there was no clear standardization.

The need for right-sized frameworks and metrics

From the research we found that it is particularly challenging to apply standard frameworks and rating systems to a multi-sector early-stage venture fund, for two reasons. First, existing rating systems in the for-profit domain are designed for large companies, looking across social impact, environmental impact, corporate governance, gender equality, etc. Many of these metrics simply don’t make sense to apply to a seed stage startup of 5-10 employees. With recent updates we hope this challenge is overcome in time. In the nonprofit domain, impact assessment and evaluation is a well-developed field. But such evaluation carries a very high cost that cannot be shouldered by struggling early-stage commercial companies.

Considering all of the above, we developed a right-sized framework that is collaborative and adaptive to the stage of the company (very early to ready for growth). Based on discussions with the portfolio companies on their intended impact, we map metrics from the broad framework.

Let’s not institutionalize comparison of large oranges to green papayas


We also understand that within seed stage companies, they could be at different stages – just out of a pilot and ready to take the model to BoP or be at a stage where they are ready to scale BoP impact. Comparisons of seed-stage companies can be challenging; it is absurd to compare an established and scaled company with a startup. Appropriate impact metrics vary greatly based on the stage of investment and company growth. We made our framework adaptive to include more metrics along with growth. We have identified social, financial and ecosystem metrics at a company, sector and portfolio level. We will be rolling up common metrics from the company to sector to portfolio levels. Fundamentally, we also believe and trust our portfolio companies and that they will be ethical in reporting the social impact metrics. At all points we ensure that we do not place an undue burden on our portfolio companies or our fund operations by mutually agreeing upon a data collection system.

The next post will detail the fund level metrics that are aggregated from company to sector to fund level and rationale behind choosing them.

Our Measuring Impact Resource Center >


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Unitus Ventures is now Capria India

Unitus Ventures, a leading venture capital firm in India, is joining forces with its US affiliate Capria Ventures, a Global South specialist, to operate with a unified global strategy under a single brand, Capria Ventures.