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Understanding Impact Investing

2 min read Impact investing seeks to fund startups with social or environmental benefits. Impact companies have the intent of providing social or environmental aid and solutions with measurable results. The investment must provide a benefit that is more than what would have occurred without the aid of the organization, a concept referred to as additionality. In this article, we will understand how to predict and measure the impact of your startup’s investment. Indicators of Successful Impact Investment The indicators of a successful impact investment are as follows: Shows a measured impact over time, based on its business model forecast. The company brings innovation that provides for significant impact. The company has a sustainable business model and strong entrepreneurial skills and capabilities. If you have these elements, you have a true impact investment that is making a difference. How To Measure Impact Impact startups need to know and understand how to measure their impact in addition to their financial return. Here are some ways to measure impact: The startup could measure the impact for each unit sold. This works well when the impact is the same for each customer. An example would be a bottle-less solution for water distribution. The startup could measure the impact based on a sample and then extrapolate across the entire business. This works well when the impact is not exactly the same for each customer. An example would be the graduation rate of a student through an education program. Look at comparable solutions with a stated impact and adopt those metrics. An example would be the reduction in carbon emissions based on reduced fuel usage. The startup could then apply that metric to their own user base. Impact investors will look for impact metrics from the startup, so it’s important to measure and track them. Impact Measurements The measure of impact is in the eye of the beholder. What impact you see may not be shared with the investor or company you are working with. Using a measuring system helps offset bias in this regard. There are several systems you can use. Some examples include: GIIRS (Global Impact Investing Rating System): This system rates companies based on social and impact performance metrics. This system is considered one of the primary standards.   IRIS (Impact Reporting and Investment Standards): This system provides metrics for social, environmental, and financial performance of a company.  B Analytics: This system was developed by B Lab, and it provides a tool to assess, compare, and improve impact. SASB Standards (Sustainable Accounting Standards Board): This system provides sustainability standards for over 70 industries. GRI Standards: This system was one of the first to provide standards for sustainability reporting. International Integrated Reporting Council: This system provides reporting with an emphasis on bringing cohesion and efficiency to the reporting process.  The above tools can help immensely when comparing metrics across sectors. Impact metrics In addition to measuring, startups in the impact space should also show their impact metrics. Investors will be looking for the impact metric results. A common mistake by impact companies is to focus on the size of the market to be served and the needs in those markets. Instead, you should measure the actual impact results of your business on the market you are serving and show those results. For example, you can show how many students graduated, how many bottles of plastics were removed from the waste stream, or how many students improved their test scores. Focus on the primary impact on the customer rather than the secondary impact on the employee of the business. There are several metric systems including GIIN’s IRIS+ metrics, the IRIS Thematic Taxonomy, and the Impact Management Project. In short, no one system covers all impact sectors. To learn more about the impact metrics your startup fits, review the UN’s Sustainable Development Goals. Feel free to try out our calculators and contact us if you would like to discuss your fundraise: http://staging.startupfundingespresso.com/calculators/ Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group.

The Importance of Diversity in Your Portfolio

1 min read According to a Harvard Business Review study on increasing diversity in venture capital partnerships, the more similar the backgrounds shared by the investment partners, the lower the investment performance. Diversity, simply put, leads to better performing teams. Diversity of perspective breeds a startup that has a better understanding of the pain points that they’re trying to solve. The more a startup ensures that its team includes both women and minorities, the more likely it is to uncover the solution to the problem it set out to solve, and the more likely it is to yield a high performance. However, the fact remains that minority and women-owned businesses still struggle with funding when compared to their white, male, counterparts. While the investment space is working to shift this imbalance, the work is far from over and many still face an uphill battle toward equality. Minorities and women continue to face both structural barriers and biases when it comes to career paths. These individuals are expected to fit within a certain mold and stay within that mold. For example, less than 30% of the CEOs within the US are women. Statistically, however, there are more women in the US than men at roughly 97 men to 100 women. As Ola Gambari, COO of Hungry Fan explains: “It’s the idea of this preconceived notion that we have a lane, and we’re supposed to stay in it and, as a minority, if I’m not running a business focused on minority problems, I shouldn’t be running that business, neglecting the fact that I share all of the other pain points of other human beings in this society.” Instead, investors should be evaluating the business on its merits, not just the fact that it has minority founders. Again, it breaks down to recognizing that different perspectives matter and yield better results. As more investors embrace this knowledge, the more equality we’ll begin to see. Read more: http://staging.startupfundingespresso.com/education Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

The Challenges of Investing in the Impact Space

1min read When it comes to impact investing, the truth is this: It’s harder to invest in the impact space than in the traditional venture space.  That is not to say that the traditional venture space isn’t hard. Of course, investing in the venture space is quite tricky on its own. However, impact investing holds a set of challenges unique to its sector. One thing that new investors interested in impact should keep in mind is that these are investments that take time. It is not uncommon to wind up making an investment and holding on to it for 5-8 years, on average. Fundamentally, impact investing is not for the faint of heart. It requires a tremendous amount of focus, and you should only be investing in areas where you think you can affect the outcome. Otherwise, the time you spend with it may not be worth it. It’s also essential to take your time and ensure that you’ve put in the work to make the entrepreneur and first five people of the team resilient individuals. After all, they are likely in it for the long haul, too, and it all comes down to emotional resilience. Make sure that the team has figured out how to take care of themselves through the process of starting a company. Many times, these early-stage entrepreneurs offer a lot of opportunities to investors, but if the individual hasn’t spent time on him or herself, there’s going to end up being corners that get cut. It is at this stage investors begin to see some of the messiness, especially the ethical hang-ups that can happen with new companies. There are a lot of opportunities around the world to open up markets for these individuals, but you have to make sure that they are well prepared for the ride. Read more: http://staging.startupfundingespresso.com/education Hall T. Martin is the founder and CEO of the TEN Capital Network.TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

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