Step 2: Sourcing An Investment Pipeline
Sourcing your pipeline is about finding ways to access a selection of potential deals that fit your interests and strategy. Investors new to the impact space will quickly find that the problem is not how to find enough pipeline, but how to find quality pipeline. While there are online databases and global crowdsourcing sites, often searching through the volume of deals can be overwhelming. Many impact-oriented events and conferences have added “pitch” events for entrepreneurs looking for capital, but the quality of the deals presented can vary greatly and often pitch events do not tease up the most investable. In addition, global deals are often harder to source given geographic and cost constraints. Toniic members advise the following:
1. Find trusted partners. Look for value-aligned networks of investors, impact intermediaries, impact banks, investment advisory firms, incubators, and fund managers who will allow you to co-invest, or select some of their deals. For example, Greenstart partner Dave Graham brings quality deals from their accelerator to share with the Toniic network for co-investment and has become a trusted knowledge and deal flow partner. The best way to learn about partners is to trust your instincts with a bias towards jumping in and making a small initial investment. The deal flow sources and intermediaries in the space come in all shapes and forms—for example academic institutions, nonprofits and for-profit companies. One of the unique roles Toniic plays is to source vetted deals from around the globe from these kinds of intermediaries. Some notable types and examples of intermediaries in the space include:
Dealflow Networks Emerging Globally. In 2012, Shawn Westcott and Ruth Brännvall founded Impact Invest Scandinavia (IIS), an angel impact investor network based in Sweden. The Nordic model of a strong welfare state is changing due to, among other things, privatization of government services, challenges from a changing and aging population, and a growing interest in developing markets, and new enterprises addressing these issues. With their combined experience, Westcott and Brännvall saw firsthand impact entrepreneurs who were having trouble accessing private start-up capital and an investment community that was unaware of the opportunities of investing in companies delivering blended value.
In partnership with Toniic LLC, they have created a community of learning by doing that includes philanthropists, technology investors, banks, and governmental agencies, as well as a number of deal-flow partners. The network made its first investment recently with the company, Bonzun. In partnership with the Karolinska Institute in Sweden and the Ministry of Health in China, Bonzun operates a medical web portal providing information for pregnant women and new parents in China.
a. Incubators and accelerators help socially conscious start-ups refine their business models and prepare to pitch to investors. More incubators and accelerators are developing in regions around the globe as impact investors realize the importance of the intermediary space for global investing.
- Africa: The Impact Amplifier
- Central and Eastern Europe: Investment Ready, NESsT
- India: Dasra Social Impact, Villgro SEED, Ennovent, Unltd India
- Latin America: Avina, Agora Partnerships, New Ventures Mexico, NESsT, Njambre
- UK: ClearlySo
- United States: Duke SEAD, Fledge, Global Social Incubator at Santa Clara, Good Company Residency, Greenstart, Hawai’i Investment Ready, Hult Prize, Hub Ventures, Impact Engine, Mac6, the Unreasonable Institute
- Global network of local incubators. Echoing Green Fellowship, Village Capital
b. Business plan competitions can help early-stage entrepreneurs connect with mentorship, practice pitching to investors and get their plans ready for first infusions of capital. Examples include Global Social Venture Competition and the William James Institute’s Sustainable Business Plan. There is also a new generation of competitions, like Fish 2.0, that are sector focused and combine processes and tools used in incubators, accelerators, pitch fests and competitions.
c. Impact investing funds. A few pioneer vetted lists of impact funds include ImpactBase (for accredited investors only) and ImpactAssets 50. In addition, the GIIRS website includes benchmarked ratings of funds around the globe based on their intentions and practices around social impact.
d. Networking groups, such as the Global Impact Investing Network, HUB Ventures, Mission Investors Exchange, the Philanthropy Workshop West or the South African Network for Impact Investing, provide learning and community as well as access to resources for impact investors.
e. Deal Flow and investor networks. Investor networks in the impact investing space come in many sizes and cover different geographic areas. Some are sector-specific, while others look at all sectors in a specific geography, such as I3N in India. Others focus on all sectors in all geographies, like Toniic. Some take a regional approach to deals and membership, while others support global members and deals across all sectors. In most cases, these investor networks are open to accredited investors only, though some welcome any type of member. These networks can provide a wide variety of services like capacity building on the dealflow side as well as on the investor side, deal vetting, syndication services and more. Some are high touch, while others are more of a virtual community. Following are examples from around the world: Investors’ Circle (US); Intellecap’s Impact Investing Network (India); Ennovent’s Impact Circles (India); ClearlySo (UK), Impact Invest Scandinavia (Nordics); Mission Markets (US based, online transaction platform for sustainable deals); PYMWYMIC (Netherlands); and Toniic (Global).
f. Key events and conferences can keep you informed of impact investing trends. These include multi-sector events like Impact Forum (Singapore), Investors’ Circle’s Beyond the Pitch events (US), SANKALP (India), SOCAP (US), PYMWYMIC (Netherlands) and Toniic Global Member Conference (US & Global) as well as issue-specific conferences, like the Yale Global Health and Innovation conference. Click here for GIIN’s list of upcoming events around the globe.
g. Impact intermediaries, like Avina, D. Capital, Avantage Ventures, Intellecap, Total Impact Advisors and Greenstart, are developing in regions around the world to support entrepreneurs and investors. See our Regional Guides for a selection of intermediaries around the globe. More are being stimulated and supported by development agencies and foundations like USAID, the Omidyar Network and the Rockefeller Foundation.
h. Crowdfunding is becoming big business globally. Crowdfunding platforms, like Crowdfunder in the US and Symbid in the Netherlands, provide opportunities both for “retail” investments (for non-accredited and accredited investors) and “platform” investments (in crowdfunding platform enterprises for accredited investors). Globally, new platforms also provide investment opportunity for impact investors – examples include VC4Africa (which helps investors invest equity into African businesses) and Myc4 (which helps investors place debt in African businesses). Donation-based efforts also can seed early-stage companies, as is often the case on Kickstarter, or support investing in specialized sectors, such as Medstartr for healthcare tech start-ups.
2. Form or join a practice group. Over the past two years, a small group of members within Toniic have volunteered to act as practice group leads, creating informal mini “hubs” within the network. This is a welcome development, as it allows investors to learn more about a region of interest and learn from others with specific regional and/or investment expertise. Currently, Toniic has four active practice groups – three focus on regions (India, Africa, and Latin America) and the 100% Impact Network for members who have the intention to deploy 100% of their assets to impact.