<Ned> Front Porch
Impact Investing: Criteria, Category or Feature?
Early stage, pre-revenue investors evaluate deals through the four following criteria. Beyond these four primary criteria, how does impact investing fit in?
- Team: Is the team complete, competent, motivated and able to execute?
- Market Size: Is there a market size that offers opportunity within that meets to funds target investment criteria?
- Product/Service: Is the product/service defensible, have consumer/business demand, and ready to go?
- ROI: Will the angel/VC get a good ROI, and what's the time-frame?
Should impact investing be its own 5th criteria? Is it simply a category of investment, like health, retails, manufacturing, distribution, technology, mobile, etc? Or is it simply a feature, something that may be an addition to the investment opportunity?
Company stage: pre-revenue, early revenue, growth, mature. Those are the four financial stages.
Liquidity event: Acquisition or IPO (though royalty based investing has become a newer possibility the past couple years)
Most VC firms want a company that can grow to $100,000,000 in five years. A tall order, to be sure. Though (bubble or not) if a company can grow to millions of users in the same timeframe, there is still huge value there (Instagram, Twitter, Facebook, Zynga, etc)
Now an impact investment fund may be willing to take much longer for a liquidity event....but they still need that event to happen at some stage.
If a company grows and hires staff and pays them at a fair rate in an emerging market...is that a successful impact investment? Mobile phones, Twitter, YouTube and Facebook have all had very positive impact on social change movements in emerging markets, could they be considered impact investments in hindsight?
Impact investing, criteria, category or feature?
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