Keith Ippel, founder and Co-CEO of Spring, a leading early-stage impact investing ecosystem that has raised over $47 million in early-stage capital, believes that investing with purpose is fulfilling, especially when the investment initially takes place. There is an instant gratification in knowing that your money is contributing to advancing a cause or supporting an underrepresented community. The potential for success and impact is exhilarating, and as an investor, there is an opportunity to share the story, attract other investors, and potentially reinvest if the venture performs well.
However, a crucial question arises over time: will the impact actually materialize? Are the teams you invested in truly making a difference as promised? When investing in early-stage, purpose-driven companies, how can progress and impact be measured? Public companies are obligated to provide detailed reports, such as ESG reporting, to their investors, but private companies do not have the same requirements. Therefore, when investing in an early-stage company, it is necessary to proactively ask questions, help establish metrics, and set targets for the leadership team.
Before delving into the specifics, there are essential preliminary questions that need to be addressed. Firstly, what is the purpose or mission of the company you invested in? What is the impact thesis for the organization based on this mission, and how can the impact be measured? Choosing appropriate metrics does not have to be arbitrary; resources such as the Global Impact Investing Network’s IRIS+ and Project Drawdown can assist in determining relevant performance metrics. These elements can help establish clear goals with measurable outcomes for the company to work towards.
Moving forward, determining a format and frequency for progress reporting is crucial. How will the company report on their accomplishments, lessons learned, and planned adaptations? Regular and consistent communication will be essential to demonstrate advancement and impact over time. As the company evolves and begins to generate revenue, financial reporting alongside impact reporting will become necessary. It is essential to recognize that impact alone cannot sustain a business, financial success is also crucial.
The process of measuring performance can be a collaborative effort between investors and founders. While understanding the potential for financial return is important, establishing metrics goes beyond that. Investors can help founders create a structure that holds them accountable for realizing their vision, ultimately driving impact. Rather than straining the relationship, metrics can propel the business and its mission forward. This collaborative approach can lead to a successful partnership between investors and founders, with the shared goal of creating positive impact and financial success.
