Impact Entrepreneurship Week: Finding the Right Investors

Impact Entrepreneurship Week 5

We’re continuing Impact Entrepreneurship Week series with an entry from our director of impact investing, Harry Douglas. His advice: “Find funders who understand your mission, vision, and values.”

All week long we’re sharing perspectives on the entrepreneurship ecosystem, and highlighting some of the key lessons aspiring impact entrepreneurs must address in order to succeed. Read the rest of the impact entrepreneurship week series in the blog archive.


Harry DouglasHarry Douglas, Director, Impact Investing:

As an entrepreneur trying to grow, you must consider whether any potential partners are in sync with your company’s core mission. The same consideration extends to potential investors. For a fledgling impact enterprise, it is so important to partner with funders who can help scale while preserving the inherent social mission.

There is no one-size-fits-all solution. Far from it.  Impact companies can pursue funding opportunities from a mix of traditional angels, venture capital, private equity, and impact investors.  It can be arduous to raise capital, and so it can be tempting to accept any offer in the early stages of a business.

Taking the time to screen partners to ensure mission and vision alignment will provide longer term buy-in and can help to prevent divergent visions for the enterprise down the road.

For example, traditional venture capital and private equity firms are bound by fiduciary duty to their limited partner investors (LPs) to deliver maximum risk-adjusted financial returns.  Impact investors sometimes have more flexibility.  They generally draw investments from LPs who grant permission to their fund managers to consider social or environmental impact in their investment decisions, and therefore may be willing to deploy flexible or patient capital in appropriate circumstances, usually so long as the enterprise can demonstrate potential to deliver social or environmental returns. There are also impact investors who seek to maximize financial return while simultaneously fostering impact.

For the entrepreneur, this can mean vastly different expectations from investors, and therefore vastly different experiences managing and scaling the company.  It is critically important to take a long-term view of prospective partners and to build a coalition that will support your financial and social impact success.

The key to achieving a successful partnership is effective and clear communication about the mission, vision, and values of the company, and this starts during the outset of any relationship with a potential investor.

Impact entrepreneurs should be able to succinctly articulate the “why” behind your work—and to present a compelling theory of change that resonates with the investor.