It has been fabulous to read the diverse, thoughtful, and (in many cases) practical discussion provoked by the very well-written SSIR piece by Paul Brest and Kelly Born: "When Can Impact Investing Have Real Impact". The responses from a very complete Who's Who of impact investing (over a dozen thought leaders in the field including Antony Bugg-Levine, Brian Trelstad, Matt Bannick and Paula Goldman, and John Goldstein) provide excellent additions and nuance to the original article.
The dozen plus responses on the site offer more than enough reading, but there were a few tidbits that particularly resonated with us at Inspiring Capital:
- First, the authors' definition of enterprise impact (vs investment impact), and further distinction between product (effects generated by whatever it is that the enterprise produces) and operational (who the business hires, how it treats employees, and use of resources), is useful to consider and measure potential impact investees. Brian Trelstad goes even further with this classification to identify 4 Ps of potential impact: Process (similar to the authors' operational category); Place (suggesting that where an investment is made matters, such as the case of Brian's latest venture: Bridges Ventures' new expansion into the US based on success in the UK); Product (similar to the authors'); and Paradigm (investments that strive to change an entire product category, which could be seen to include Matt Bannick and Paula Goldman's notion of 'Priming the Pump,' or using impact investment to catalyze an industry, or new approaches in an industry. Read more in their SSIR series on the topic published last fall.)
- The next point that jumped out was made by Sterling K. Speirn of the Kellogg Foundation and John Goldstein of Imprint Capital, about the "learning return" involved with impact investing. The notion, with which both credit the Kellogg Foundation, refers to the benefit for the investor and the philanthropy field at large accrued as a result of close engagement with the investee. The interactions over the course of making and managing an impact investment result in better understanding of the real needs, challenges, and opportunities faced by social enterprises on the ground. This learning return is sorely needed in philanthropy and impact investing, and indeed a main goal for Inspiring Capital's work with our clients. Indeed, Brest and Born recognize the value of this additional point in their final response.
- Finally, we appreciated Harold Rosen's expansion of the authors' point about the value of (and additional unmet need for more) assistance by investors for investees, or "Business Advisory Services," as Harold and Root Capital label them. Both not-for-profit and for-profit social enterprises (as traditional startups) have huge needs for advice, guidance, and mentoring on 'hard' and 'soft' topics including financing structures, operations, human resources, and organizational culture and founder mental health. This form of involvement should be as integral and abundant for social enterprises as it is in the highest-performing angel investor networks and venture capital firms.
Congrats and thank you to Paul Brest and Kelly Born for such a well-written and thought-provoking article. This is the type of thinking and content we need to advance impact investing to a serious growth sector. Finally, kudos to SSIR for facilitating and publishing consistently high-quality, cutting edge dialogue.