Looking for an impact investor? Here’s my advice.
By Eric Chapman
As managing partner of a local venture fund with a focus on impact, it’s a question I get asked all the time: what do you weigh when considering an investment in a business that seeks to make a positive difference while making a profit?
Here’s the simple answer: we look for teams with good ideas; an identifiable, addressable market; clear goals and a reasonable plan for achieving them.
But the better, more involved answer: we look for impact entrepreneurs who truly understand what it is they want in — and what they need to get out of--an investor. In short, we are looking for smart potential partners.
Investors come in different varieties, each somewhere along the continuum from passive to active. A startup entrepreneur who thinks all they need is a check from a passive investor is probably wrong. A smart one will be able to take a realistic view of their business plan, their team, and the current state of their product and be able to see where they need help, and which investor team can help them fill these gaps.
No one — not a single individual or even a team — can fill all the roles necessary to successfully build a startup. Those who understand where they need help and actively seek it out are ahead of the game.
So, what should you be looking for in an investor? The best ones are those who will push you, help you challenge your assumptions and work with you to refine your business models. Look for teams that can be a good source of insight into your proposed market, or bring expertise in some technical area or skillsets you lack. At a minimum, they should be all-in to help you attract additional investors and initial customers.
But most of all, if you are seeking to build an impact business, you need an investor who believes in you and what you are trying to accomplish. You need someone who understands and values your broader definition of ROI. Most of all, you need someone who willing to try to do something truly meaningful with you.
Eric Chapman is a serial entrepreneur and experienced business consultant with a history of working with impact startups. He is currently Managing Principal of the SustainVC venture fund.