Impact Investing: On Capital Gains through Social Good

Impact Investing: On Capital Gains through Social Good

While it seems to be gaining visibility as a new trend, impact investing has been a ‘thing’ for at least a decade. Fundamentally, it refers to the process by which an investor actively seeks to gain financial return and social benefit. Think global energy, environment, healthcare, solar power, technology, water; it’s everywhere. We see a lot of impact investing in the Bay area, especially in industries like cleantech and energy, where many of our clients are enjoying remarkable success.

It’s also (unironically) making a big splash in water. Here are important things to know about investing in social good – what to know, who’s investing, how you can get involved, and what’s in store for the future.

What to Know

As with all early stage companies, a great team is key. “A ‘B’ team can run an ‘A’ idea into the ground and break a business, but an ‘A’ team can take even a ‘B’ idea and make it work,” says Tom Ferguson, Vice President of Programming at Imagine H2O, a nonprofit helping solve global water challenges that has seen great results from engaging with impact investors. “If you look at virtually anything ‘unsexy’ and under-resourced, there is likely a good investment opportunity there,” Ferguson continues. When asked about investing in water, he replied, “It’s a challenging area, but it’s well worth getting smart on it now.” (ICYMI: the implications of climate change and global warming are most devastating on water resources.)

If you’re an entrepreneur looking for investment

Be clear in your priorities and when considering investors. The ‘spray and pray’ method will not work with impact investing. Be conscious of the areas specific investors care about. If you’re working to cure a sleeping sickness in Africa, you don’t want to go to an investor focused on sustainable energy.

If you’re an investor

“The best thing you can do is let them do their thing. Don’t kill them with 45 monthly metrics to report. Start with one or two key impact-related data points to watch and build from there.”

Who’s Who

When you look for partners for your idea or organization, venture funds and family offices are a great place to start. Here are some of the top impact investors on our radar and a snapshot of what they’re into:

What’s Next

There are three times to get involved in impact investing, Ferguson shares:

  1. You can be late, when competition has driven down returns;
  2. You can be on time, which is practically impossible to do consistently as an investor; or
  3. You can be early, get in on early deals at reasonable prices, and learn key lessons ahead of others.

Which will you choose?

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For more insights on impact investing and to learn how Early Growth Financial Services can support you along the way, contact us today.

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