How to FInd Impact Investors to Finance Your Sustainable Business
By Marta Maretich
Originally posted on the OpenForests blog. OpenForests is a consultancy specializing in sustainable forestry projects.
So, you’ve written the business plan. Congratulations! (And thanks to OpenForests for their usefulguide to writing a business plan for a sustainable forestry enterprise.) Now you’re ready to look past the trees and focus on the forest—the wide world of impact investment. It’s time to go out and raise capital. But where do you start?
DECIDE WHAT KIND OF INVESTMENT YOU’RE LOOKING FOR
Capital is capital, right? Not exactly. There are many different ways of structuring finance and many different ways a business can relate to its investors. Writing your business plan has given you an idea of the amount of investment you need. Now it’s time to think about the kind of investment you’re looking for.
Are you looking for debt or equity? How long will you need the money for? Do you want partners who will offer more than just capital, who will give you advice and contacts, for example? Do you need pure capital, or a blend of capital and grants?
To find out which model might work for you, tune in to the wider world of impact investing and learn about your options. Find projects similar to your own and research how their funding is structured and who their investors are. Websites and company reports can help you form a picture of what’s out there and develop more knowledge about funding choices.
BUILD IMPACT MEASUREMENT INTO YOUR BUSINESS PLAN
In the world of impact investment, impact measurement is as important as financial return. Impact investors look for financially viable businesses that have clear, defined and above all measurable social and/or environmental outcome targets.
To succeed with impact investors, impact metrics need to be prominent in your business plan and your pitch. You’ll need to decide which measures will mean success for you, then define how you will measure and report them. This blog by Jonanthan Kuo shows how important metrics are to Acumen, a successful impact investing pioneer.
How do you know which metrics to include? There are several systems on offer right now but IRIS, from the GIIN is a good starting place for those new to impact metrics. This standardized system offers a broad range of metrics that can be adapted to suit the needs of your business. The key is tochoose metrics that are realistic, practicable, fit into your operations and serve your strategic goals. For more on the best way to “do metrics” see my recent blog post for Maximpact.com.
RESEARCH INVESTORS
The range of impact investors is growing and so is their spectrum of approaches. Some impact investors simply provide capital, others mix catalytic capital with grants to promote growth. Still others work as venture philanthropists, bringing hands-on expertise and networks to help businesses grow. Getting familiar with the different types of investors will help you target the ones that can help you most.
Conferences like SOCAP are a good place to learn about and meet potential impact investors—and if you can’t be there in person, they make videos of many of their discussions and panels available on the web.
Industry blogs like OpenForests, media streams like FastCoexist or Huffpost feature stories about impact businesses and the investors that support them. Our impact deal portal, Maximpact.com, hosts all of these types of investors on it, all of them actively looking for deals. Do your groundwork and understand your options.
TYPES OF IMPACT INVESTORS
· Accelerators, Hubs and Intermediaries
· Angel Investors
· Venture Philanthropists
· Enterprise Capitalists
· Large corporations with sustainability agendas
· Foundations
· Family offices
· Governments
· International development agencies
CULTIVATE RELATIONSHIPS
Business, like life, is all about relationships. Cultivating good relationships with a number of potential investors will pay off now and in the future.
Make a short list of impact investors to approach with your business plan and research them carefully before you set up a meeting. Identify their impact mission—do they want to stop deforestation, protect indigenous communities, promote synergies between agriculture and forest habitats? Find out what investments they’ve made in the past and learn the names and backgrounds of key personnel—impact investing remains a sector where personal values matter, even at the highest levels.
Once you understand your investor, you can speak to their interests and demonstrate how your project will help them meet both their financial and social or environmental impact goals.Be prepared for a two-way dialogue. Your investors may have strong views about your business model and impact goals. Keep an open mind and be prepared to negotiate.
For more insights into how impact investors think about business, see this post by Tilman Ehrbeck.
Find out more about Maximpact.com or list a deal on our global platform
Tags:
