Does “empowering entrepreneurs” qualify as impact investment? What about investing in an indigenous technology? Will a business that processes stones for high end customers qualify as an impact investment? These are some of the dilemmas local fund managers face while creating their impact theses and laying the groundwork for their impact measurement process.
At Capria we have a simple ideology of ‘non-prescriptive impact.’ We have interacted with over 200 impact fund managers from diverse sectors and economies and have encountered a range of impact investment theses.. What makes the difference is, context – in categorizing companies as impact VS non-impact.
‘Context’ refers to the characteristics in which a particular fund manager or portfolio company will be functioning. Here are a few examples that we have come across through our work –
- Location: Empowering entrepreneurs in Silicon Valley might not be an impact investment, but empowering them in regions challenged by political situations or resource challenges has the potential to create tremendous impact. Entrepreneurs in such regions have limited access to capital that puts them in a perpetual cycle of low investment leading to inability to scale. Therefore, patient capital is the most appropriate resource to encourage them to be successful entrepreneurs. For instance, an indigenous technology built in Singapore doesn’t always require patient capital, as there is sufficient capital available, but, the same technology being created in emerging countries such as Turkey requires an impact investment.
- People: If a business magnate starts a stone processing factory in Europe with heavy capital investment, an impact investor will not be a fit for providing growth capital. However, if such a business is started by a local women entrepreneur and employees people in an underdeveloped country such as Uganda; that entrepreneur is definitely a target for impact investment.
To define Impact, our goal at Capria is to enhance the footprint of the investment in various dimensions. If we are convinced that the fund manager is committed to impact, even if it is not accurately defined or quantified yet, we help them articulate their thesis in the following ways –
Dimension 1: Evolving the impact thesis
Once we have ascertained that the fund manager is keen on integrating impact in to their investment philosophy, we help them explain their impact accurately. This process can take place during the Intensive portion of the Accelerator in Seattle. Our impact manager works with each team to identify elements of impact while simplifying and defining the investment thesis.
Dimension 2: Sampling impact for individual pipeline deals
This part of the process applies mostly during the warehouse engagement, where Capria provides capital for the fund manager to make their first investment. These investments take place post-Intensive.
Dimension 3: Creating frameworks
As the first two dimensions evolve, a broad framework that will act as the guiding thesis for the fund managers in future investments is developed. The fund manager can then act independently and with precision.
Dimension 4: Using impact
To complete the circle of impact measurement, we support fund managers with performance tracking and understanding the types of business decisions that can be made based on impact such as reporting to various stakeholders, marketing the fund to build social capital, and further fundraising.
We believe in working collaboratively with local fund managers and continually providing tools and support as they go through the process of defining their impact thesis and metrics for themselves. Keep an eye on this page for more learnings from our experiences working with impact fund managers from all over the world.