Are you an entrepreneur working to master the tango with impact investors? It is almost like going on a first date with a lot more preparation and charm! It is all about how much you share, where you hold on, and the back and forth. Here’s 5 tips on how business impact metrics could play a role in the conversation.
Do you want to win over an impact investor’s heart? Share impact stories of your clients and how you are changing their lives. Do you want to win their wallet as well? Present your business impact metrics, with a focus on how you can create a sustainable and profitable business that will deliver continuous positive social impact as it scales
Jump the gun!
Be proactive about including your impact metrics in the pitch. Think ahead and track minimal key impact metrics during your pilot or market trial, and include the numbers in your presentation. If you do not have historic numbers, start the conversation about the metrics that you will potentially track. Impress the investor beforehand with your thought process by connecting the impact metrics to the business.
Show you understand…
Your endgame is to tie the knot, sound extra smart, make the investor want to meet you again. As you open up the metrics conversation, explain the logic behind choosing them, and how they tie into your business operations and success. Most importantly, talk about what questions the metrics will answer, and the assumptions made behind the success criteria. Show that you picked only those metrics that will answer questions relevant to making good business decisions. Build a simple framework of metrics that would also provide useful information for all stakeholders – customers, suppliers, partners, investors. This would give you the advantage in a conversation about impact metrics post investment. Nonetheless, be flexible about upgrading the framework based on the needs of the investor, and of course, your biz.
Talk less, listen more…
Before any communication you have with investors, know what makes them tick. E-stalk them – read their blogs and tweets and discussions on Facebook. Identify how you align with their impact focus, which sectors they plan to invest in, what types of businesses and impact they hope to see, etc. Using this research, present the impact numbers with a concise approach, focusing on the impact the business will have at scale. This will give you clarity about your own business impact and tighten up your story.
Every moment counts…
Well ahead of your discussion with the investor, think of potential questions on projected impact. Starting from the basic questions – who are your target customers? If the investor’s focus is on BoP customers and your current portfolio is MoP, make sure you are clear about their definition. Think about a blended business and project what % of customers would be BoP and what % have the potential to increase over time (read more about mission drift). Taking it a step deeper from here, think through the end benefits for your customers – increase in income, access to opportunities, access to markets, improved healthcare, etc. and answer – how much is your business going to add value vs. other businesses or other sources of value your customers could go after.
The balancing act!
There is a not-so-thin line in the impact investment industry between considering a business too social or too profit-oriented. The two aspects are expected to go hand-in-hand, tipping too strongly either way makes some investors wary about taking the relationship forward. Talk about impact metrics, but do not overdo the social aspect unless they tie directly into the business. Talk about profits, but don’t let that overshadow the value you are delivering for customers. Add cost-ineffective or hyper-complex measurement protocols, and you’ll have them checking Twitter in no time! Have a minimal set of measurable metrics, suited to the stage of your business.
The perfect date
Let us take the example of an e-commerce business approaching a seed-stage investor. The company is selling unique products made by BoP artisans.. We will assume that all aspects of the new business excluding impact metrics and measurement are taken care of. All numbers are hypothetical. As you see fit in your presentation, insert impact statistics.
Start with simple outputs – 5,000 BoP providers (sellers), across 4 States in India, 10 employees, 1,000 buyers, and 1,200 purchasing transactions made by them. Get deeper into the 20% increase in revenues generated by use of your platform thereby demonstrating a 50% increase in income for the sellers. If the numbers are not available, state the expected increase in income based on the plan for streamlined product design training and consistent customer research.
From research about the investors, you found their interest in training and certification. So add a note about hiring certified trainers who will work with the design and customer research staff to train and certify BoP providers to further increase the product quality. Use 20% repeat customers as an indicator to proximate an increase in credibility and utilization in the market.
Connect operational goals – a strategic sourcing plan for BoP sellers and their customers using the 50% increase in income and 20% repeat customers in the pitch – to partners, to BoP populations, to customers on the platform, investors and other stakeholders. Touch briefly on the expected systemic impact, without going into details about the social metrics.
At Unitus Seed Fund, our principles and philosophy revolve around open-mindedness and pragmatism, along with the aspiration for larger change. We expect clarity in the incremental goals that lead to a longer-term objective. We believe in entrepreneurs who can execute on these goals without losing vision for the future. In the spectrum of investors who don’t collect any impact data to those who build large datasets, our principles remain the same when it comes to impact metrics and data collection – we look for lean methods, right-sized frameworks and useful data that support operational decisions.