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Opinion

A VC investment manager explains how to get into impact venture capital

- August 19, 2020 3 MIN READ
Photo: AdobeStock
For many, COVID-19 has been a time for self-reflection. It’s been a time for understanding who we are and what drives us. A time to consider what’s important.

We’ve noticed this changing tide through the growing interest we’re seeing in impact investing and the question of how we can be more conscious with how we use our time and our capital. We are being increasingly asked about roles in the impact investment ecosystem and what options there are for students through to experienced professionals looking to blend business and purpose.

Giant Leap Fund investment manager Rachel Yang. Photo: supplied

We’re humbled by the interest and are excited by the potential to grow the ecosystem so that in future, impact investing is just the default way of investing. We want to help people on their journey and felt the best way to do this was to create an article so we can give consistent advice.

We’re looking at this through an impact venture capital lens (investing in impact businesses), but keep in mind there are plenty of roles in the broader impact investing sector, and some general advice on this is in here too.

 

What is impact investing?

According to the Global Impact Investing Network, impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. It is not about trading off one for the other.

Impact investing is a lens, not an asset class. Impact investors consider various investment opportunities (in companies, property, infrastructure, public equities) by assessing whether they meet the criteria they have set for social or environmental impact and whether it will also deliver their target financial returns. This criteria differs for each impact investor or fund and is subjective. For example, you might ensure your impact aligns with the UN Sustainable Development Goals and assess impact based on the five dimensions of impact. John Treadgold has put together a really in-depth series on this topic, which is a great starting point if you are looking to learn more.

At Giant Leap, we invest in businesses across three themes: health and wellbeing, sustainable living and empowering people. We ensure impact is lock-step with revenue, so for every dollar of revenue, there is a ‘unit’ of impact generated. For example, Goterra is one of our portfolio companies. They breed Black Soldier Flies (maggots) to consume organic waste. As a waste management business, their impact is generated by diverting waste from landfill. Their revenue is generated by diverting waste from landfill. Their impact metric is tonnes of waste diverted from landfill.

In terms of financial returns, we are looking for the same returns as traditional VCs — a target of more than 20% internal rate of return.

How do I find a job in impact investing?

As impact VC grows in Australia there’s going to be a demand for a multitude of different roles including community management, data analysis, impact measurement, consulting as well as investment.

Our first bit of advice would be to read up on the sector and follow active organisations in the space. For example:

It’s also worth tuning into podcasts like Humans of Purpose with Mike Davis and Good Future with John Treadgold.

Then ask yourself what kind of role you see yourself in. You may want to be more of an operator rather than an investor, in which case, maybe a role in an impact startup is for you.

Also, be sure you understand and align with the fund’s definition of impact before you apply. As we have already mentioned, impact is incredibly subjective and is defined differently across industry.

Some impact funds, for instance, may invest in companies that have a good overall goal, but don’t embed progress towards that impact into their business model. You may disagree with how a particular fund evaluates impact businesses, so it is best to understand this before you apply or raise your interest in a role with the firm. There is no right or wrong way to look at impact.

Also, there are plenty of other ways to benefit society in similar means to impact VC depending on the problems you want to help solve. If you are hoping to tackle larger problems, such as homelessness, with a more traditional, direct approach some roles in the public sector or organisations involved with social impact bonds may suit better. Or you might want to focus your energy on one sector or issue that you’re passionate about (climate change) and find an impact startup that matches that interest.

There are also other types of roles in impact investing, such as in the renewable infrastructure sector which include roles on large-scale projects as opposed to startups.

Once you’ve hit the books and have a sense on what direction you want to go in, it’s the right time to network with those already in the industry and attempt to scout out any emerging opportunities.

  • Rachel Yang is the Investment Manager of Giant Leap Fund. For job openings at impact startups, check out Giant Leap’s job board.
  • Also, check out WORK180 for workplaces that support women in their careers. 

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