After two days, seven meetings and eleven conversation streams, I remembered the importance of focusing on our mission, values and seeking to understand our investors well before inviting them to invest; here’s why:
- Impact vs. revenue don’t coexist in the minds of many – The language of impact remains a foreign tongue to many limited partners (LPs). Everyone we met had a degree of commitment to impact investing. For some it is minority founders, others a climate mission. For most, the question of “you’re still thinking of making money, right?” came up. Traditional fund managers who are entering a “double or triple bottom line” world, can benefit from training on what that means, how it looks and who would be worthy of impact dollars. Giving money to a minority founder with little to no affinity to her community may not result in impact. Having an hour long conversation on the financial returns of electric vehicles without mentioning the need for impact analysis can yield negative impact.
- A unique perspective on investing is required – Savvy limited partners (LPs) have looked at dozens of general partners (GPs) in the venture capital space. All propositions start sounding the same. Hence the need for a unique strategy that stands out for both impact and tech investing. Being able to answer the question of “what is unique about your approach to climate impact, or social impact” or “why do you choose to invest in AI and what specific problem are you attempting to solve”. These questions and more are key to an informed conversation with an LP.
- The financial sector may be isolated – Operating from buildings in downtown Manhattan on a 40th floor can give investors a great advantage and an inspiring and grand scale perspective. But that position is isolated at best. You commune on a day to day basis with other professionals who speak your financial language, read the same email lists and commute the same routes. Impact investing requires a community perspective; it needs fund managers who interact with founders, see first hand the problems they are solving for in the community and analyze the best approach to measuring impact. To effectively convince LPs of your impact strategy, you want to speak their language and invite them to learn about impact investing and its value to their bottom line.
- Storytelling works with the right audience – A powerful approach to raising funds for impact investing is telling your LPs stories of the communities you serve and the change your investments are making on their lives. However for this to hold true, the LP demographic would possess a degree of interest in the impact or the impacted communities. Without it, your stories fall on deaf ears. To that end, as a GP you’d want to have insight on the person you’re telling a story to and shift the focus of your pitch depending on the degree of connectedness the LP audience member has to the impact. If the gap is great, focus on the financial returns, if it is small, tell a story that builds that connection.F
In the end, raising funds is based on relationship building. To build long lasting relationships with your LPs, understand them, anchor your presentations in your values, and speak the language of your audience.