October 11, 2017
Social Impact Investing – How to get started?
Originally published by Ferd.
Is your bank, foundation or trust looking to invest in social impact? Then you should check out Social Business Angel Hedda Pahlson-Moller’s advice on how to get started!
Pahlson-Moller is an international Angel Investor and co-founder and CEO of the Social Impact Catalyst organization called TIIME. She invests privately through her VC entity, OMSINT, and sits on the boards of several business angel funds and networks. She is also engaged in Gender Lens Investing and women empowerment.
– What is your advice on becoming a social investor?
Investment activity, particularly early-stage investing, has considerable risk and you should be aware of all possible outcomes – including losing your money, your time… and more. Depressing disclaimer aside, all investments have a risk/return ratio – and the risk is higher when it comes to early stage investing.
Soul of philanthropy & the spirit of investing
There is a lot of debate around the definitions of impact investing, and we could spend a long time mapping the diverse perspectives. At the core, we are talking about measurable societal impact alongside a viable business model. I personally follow the principles of Venture Philanthropy, which we say ‘matches the soul of philanthropy and the spirit of investing’. In the scope of social finance, I am what is called an ‘impact-first’ investor. I look for mission-driven projects that ideally have impact metrics alongside of a sustainable business model.
In terms of concrete suggestions for newcomers to the social investment scene, I would recommend investors to begin explore areas of social/environmental impact that resonate with them personally. The joy of early-stage investing is being part of value creation from the ground up – being part of the journey and value creation. The adventure! Having a personal connection to the project and its purpose and mission will make the investment and engagement even more meaningful. And obviously the relationship with the entrepreneur is critical at this early stage – you invest in the person or the team and their vision more than anything else.
If you don’t know where to start in terms of setting your impact focus, try the United Nations Sustainable Development Goals (SDGs). They are an excellent place to start identifying the most pressing issues the world is facing and developing your investment strategy accordingly.
Develop basic metrics
The next challenge is to develop some basic metrics for each domain you want to track. If you are working on Gender Equality (SDG 5!), your impact metrics can be built around more specific topics like Access to Capital, Workplace Equity or Products and Services designed for women and girls. As you develop your strategy and metrics you will set specific output (and outcome) expectations that will help you track and improve your investment performance.
Impact- first or finance-first?
As I work with very early stage companies that do not have the luxury of large teams or consulting budgets, I often co-design the impact metrics alongside the entrepreneurs that both align to my own investment strategy and to their own priorities. An important criteria is what they are actually capable of reporting on, as it requires time and effort. Running a start-up and surviving all the operational and financing challenges is already a strain. Additional reporting can be a burden, so keeping it lean and ensuring that only the most critical elements are stressed – 2 to 3 impact metrics is more than reasonable! But you need to be clear as an investor if you are impact first or finance first, and to what extent you are willing to accept a trade-off on profitability to maintain the expected impact.
Learn more – join EVPA’s annual conference in November
Next – dive in! Connecting with social entrepreneurship and investment networks will give you the deal flow. You have local, European and international communities for every kind of social enterprise imaginable. There are incubators and accelerators, co-working spaces and associations galore! You can look at organizations such as EBAN Impact, the Impact Hub, Impact Garden, TONIIC (GIIN is for the institutional investors), Clearly So, SEA, SEIF, TBLI (the list goes on!) and of course the European Venture Philanthropy Association (EVPA), home of the aforementioned Venture Philanthropy practice and full of helpful sources. EVPA have their annual conference in Oslo 8th -10th November this year celebrating the Nordic Model of public-private partnerships and blended/hybrid capital, showcasing the leading voices of VP/Social Investing. Join us!
Collaborate with others
I always recommend new and veteran investors alike to co-invest when possible. The due diligence and monitoring will improve considerably if you collaborate with other early-stage investors. Not only can you leverage from their respective deal flow, but also their experience and expertise, knowledge and network. All this will come in handy when helping a small company grow. Joining an angel investing group with experience in the impact space can be invaluable – and a lot of fun!
– What is your experiences going from a traditional investor to investing in social entrepreneurs?
Social investing is true value creation – you are just creating value beyond financial value. The fundamentals of social investing are based on the same principle of managing returns, but by returns we also incorporate social and environmental impact.Basically, you are including the additional dimension to your risk and return approach, which is ‘impact’.
It was the most exhilarating and fulfilling moment when I recognized that I could combine aspirations to create socially/environmental positive impact WHILE supporting entrepreneurs and applying investment and business strategies.
Meet Hedda Pahlson-Moller and other social impact investors at The EVPA Conference at Sentralen in Oslo 9th-10th of November. Sign up for the conference with the promotion code “Partner30” and get 30% discount!
Click to read the recent interview with Hedda Paulson-Moller regarding Social Entrepreneur of the Year 2017.
About Hedda Pahlson-Moller
Hedda Pahlson-Moller is the co-founder and CEO of TIIME (www.tiime.org), a Social Impact Catalyst. She invests privately through her VC entity, OMSINT. She sits on the board of the European Business Angel Network (EBAN) running EBAN Impact, the Luxembourg Business Angel Network (LBAN) and she is a Board member and Lead Investor of Rising Tide Europe (Women’s angel fund). She also sits on the advisory board for the Vodafone F-Lane Accelerator for Women Empowerment and EquiLibre, a Think Tank for Gender Complementarity.
Her board engagement with the European Venture Philanthropy Association (EVPA), Luxembourg Microfinance Development Fund (LMDF) and country representative for Ashoka reflect her commitment to mobilizing resources & capital towards sustainable projects that value ‘Triple Bottom Line’ (People, Planet, Profit).
Hedda is part of the CSDD (Conseil Superieur de Development Durable) as an advisor to the Luxembourg government for sustainable development strategy. She co-founded the Impactory, the first co-working space in Luxembourg for social entrepreneurs (now NYUKO). She is Adjunct Professor of Entrepreneurship and Social Entrepreneurship at Sacred Heart University’s Exec. MBA program, lectures on Social Enterprise & Social Innovation for the University of Luxembourg and is an Executive Fellow at Essex University.