After meeting a gentlemen who is sitting on 20 million dollars in cash and would like to invest for impact, but is frustrated by a lack of opportunities to do so – I am officially convinced that ACCESS TO CAPITAL IS NOT THE PROBLEM. There are people who want to invest to make a difference, but here’s why they aren’t doing it:
- Deal Flow: In the past six months, I’ve screened 74 Colorado-based social impact angel investments. Only six of them met our basic investor criteria, and one of met the criteria for companies most likely to be funded. One Possible Solution: Galvanize the philanthropic community to provide uber-early stage funding to create more investor-ready companies (The Gates Foundation is starting to do this).
- Deal Screening/Due Diligence: It is incredibly time consuming to do the research needed to make intelligent investing decisions. Many angels have day jobs and others like myself, experience burnout from intensive ongoing due diligence. One Possible Solution: Work with Angel Capital Association, Toniic and Investor Circle to create/enhance standard due diligence processes.
- Mentors and Consultants: One of the Impact Angel Group’s best 2012 accomplishments, we helped two companies avoid raising capital by matching them with high quality mentors and consultants willing to work for equity. This was a great solution for all parties involved, but we need more people willing to do this.
One Possible Solution: Leverage the value of people who don’t have to work, such as the growing baby boomer retiree and second generation wealth communities.
- Executive Leadership: From what I’ve seen, most social impact CEOs tend to fall into two camps: 1) Young, smart and enthusiastic, but with little experience running a business or 2) Seasoned, smart and capable technologists with little experience or desire to run a business. We need more capable executives to run these companies.
One Possible Solution: Recruit executive talent from other industries (See one innovative approach to recruiting Clean Tech Execs).
- Angel Education and Outreach: There are a lot of investors interested in social impact investing, but few can actually answer questions like: How do you define social impact investing? Can you actually make money doing it and what’s the impact/$ return trade-off? How do you invest in a company that isn’t going to exit? How do you invest across borders? …We need more people with answers to these questions. One Possible Solution: Arm key local influencers with stories of social impact success to present to their local angel network events.
- Collaboration with Existing Angel Networks: In most cases, I actually think it’s a terrible idea to brand investments and investors as social impact investors (read why). We’ve had much better luck integrating social impact investment opportunities into the existing angel infrastructure. One Possible Solution: Integrate top notch social impact companies and investors into existing non-impact angel networks instead of creating more social impact silos.
What do you think? Is access to capital the problem? Are there other paths to social impact success? Leave a comment.