Over the past three years the Mobile for Development (M4D) Utilities team has been working with entrepreneurs who are leveraging mobile technology to improve access to essential utility services. When it comes to investment, one of the first issues entrepreneurs face is identifying the ‘right’ funders. To help solve this challenge and facilitate conversations between funders and entrepreneurs, we have curated an Investor Roundtable Webinar Series.
On 13 October 2016, our M4D Utilities team hosted the second webinar in the series focusing on Impact Funds. You can view the first webinar here.
Presenters included:
- Sean Moore, Associate Director, Portfolio Acumen
- Tat-Seng Chiam, Investment Director, Global Innovation Fund
Investment mandates and focus areas
Acumen and the Global Innovation Fund are Impact Funds that invest in social innovations with the potential of improving the lives and opportunities of people in the developing world. GIF take a flexible approach to investment, with no formally specified sectors or geographies, other than ensuring a focus on countries where there are a significant number of people living on less than $5 per day. Acumen has a narrower sector and geographic scope, focusing on select countries in East and West Africa, Asia (India and Pakistan) and Latin America (Peru and Columbia) with regional offices, and also focuses on the BoP demographic (people living on around $2.5 – 4 per day) as their core target market.
Impact Funds – what makes them distinct?
When asked what differentiates Impact Funds from other types of investment, Sean explained that Acumen squarely balances the notion of social impact with financial viability. When approaching an investment, Acumen will analyse both factors to understand how they relate to each other, whereas grant giving organisations will typically focus primarily on social impact potential. Sean also highlighted the important role Impact Funds play in preparing enterprises for follow-on investment capital and more traditional commercial capital down the road, by financing the company appropriately with equity in the early days and building in sufficient governance mechanisms.
Advice for entrepreneurs
There were commonalities in Tat-Seng and Sean’s advice for entrepreneurs on how to avoid common mistakes, particularly around clarity of vision for the project. Tat-Seng explained the importance of being clear on the specific vision of success from the start. Sean urged companies not to be afraid of pivoting core value propositions or business models as they scale, whilst balancing the grand vision with what is feasibly possible at that moment in time. For GIF, Tat-Seng stressed the importance of vigorous evidence of social impact, advising companies to cite studies/examples from the real world that show that your innovation is creating meaningful impact, or ensuring that you will be the one to design a study to generate the necessary evidence.
Investors provide more than simply cash
An important question for businesses thinking about raising funds, is whether there is necessarily a need for investment if they are already growing at a steady pace. Tat-Seng stated that the role of investors extends beyond financial injection to many other value adds, including strategy development, thought partnership, and network linkages to follow-on funders. For example, one reason why GIF invested in Simpa, a solar energy company in India, was because they saw themselves playing a bridging role between the early stage foundation money which Simpa had already received, and helping Simpa access larger pools of private equity and institutional money.
Investor views on the role of mobile technology – opportunities and risks
GIF and Acumen have invested in a number of companies who leverage mobile technology in their businesses. Tat-Seng explained one of the significant benefits of mobile technology is its ability to enable scale at low cost. However, ‘widget technologies’ as GIF term them, are not sufficient on their own for businesses to scale, emphasising the very real challenge of driving behaviour change for adoption of new products and services. Sean pointed out that mobile technology also has direct value to Impact Funds themselves. For example, Acumen are using mobile surveys (SMS and voice) to conduct large scale customer surveys (100 –200 people) on behalf of portfolio companies, to generate market information feedback, and gain detailed insight for portfolio companies to better serve their customers.
Here’s the full recording:
You can download the full slides from the webinar here.
To find out more valuable insights from investors, watch the third webinar in our series on funding platforms with Lendahand and Kiva.