Five Questions to Ask Yourself Before Pitching to an Impact Investor
Impact investing is making waves as the new, cool kid on the block that everyone wants to befriend. This type of strategy allows investors to put their money behind social and environmental causes that they actually care about while also generating a financial return. With a do-good, feel-good mentality, it’s no wonder the strategy continues to rise in popularity.
According to the 2018 Canadian Impact Investment Trends Report, impact investing in Canada has grown at a rate of 81 per cent over the previous two years. The report cites an increase from $8.15 billion in 2015 to $14.75 billion in 2017 and counting. With current investors noting that the strategy continues to meet or exceed their expectations, word on the street is that impact investing is expected to continue climbing the ranks.
If you own a new or budding sustainable start-up and are looking to secure business resources through an impact investor, here are some questions to ask yourself before you start the process.
1. How Will My Start-up Measure Impact Investment?
Before you begin the search, set yourself up for success while drafting your business plan. In the early stages, it’s important to define how you’ll measure the results of any impact investments you secure. Potential investors will be keen to hear about your social and environmental goals as well as how you plan to evaluate them. These metrics should be prominent in your business plan and pitch. Don’t overshoot your targets just to secure a deal; ensure your goals are realistic, practical and timely for your business.
2. What Types of Investment Does My Start-up Need?
Now that you have a business plan drafted for your sustainable company, you likely know how much investment you need to launch or scale it. However, there are many methods that investors will use for sustainable start-ups. From capital to grants, inside knowledge, industry advice and even sharing important business contacts, investors can choose to contribute in several ways. It’s important to be clear about your needs to potential investors and have a plan in place to acquire what you’re looking for.
3. What Do I Know About My Potential Investors?
In the same way that the types of investments will differ, so too will the people behind them. From angel investors to government groups, venture capitalists, financial organizations and more, your ideal impact investor could take on many personas. Do your homework to ensure your list of investors offers the type of investment your start-up is looking for. Helpful resources include the Canadian Investment Network, Global Impact Investing Network (GIIN), AngelList and Crunchbase. Once you have a shortlist, investigate the businesses they’ve supported in the past. This will help you to understand their values and ensure you are aligned in your beliefs.
4. How Will I Build a Relationship Before I Make a Pitch?
Establishing a rapport with a potential investor goes a long way in making a better pitch—and hopefully securing a deal. You may choose to connect at a common industry event or ask a mutual connection to put you in touch. Either way, your goal with each communication or conversation should be to secure another chance to interact. When you feel confident in your relationship and are ready to make a pitch, be sure to set up a specific meeting. This will ensure both parties are prepared and ready to discuss the potential investment.
5. What Will I Cover in My Pitch?
Time is money and your potential investor will likely not give you much of it when it comes to a pitch meeting. To respect their time, ensure you have a short, compelling pitch prepared. Talk about your start-up, the social or environmental issues you hope to solve, your business goals and your plans to reach them. Be prepared to speak to your mutual values, how they align, and what you’ve already achieved in business. You also must know your industry well in order to answer any questions from your investor and to be able to set yourself apart so that they’ll invest in you, not your competition.
6. Am I Prepared for Negotiations—or Worse, Rejection?
When it comes time to make your pitch, prepare yourself for many types of outcomes. Your impact investor may decline you outright, negotiate a deal or think about your proposal in the future. Not every pitch will result in a positive outcome right away. By being open to discussion, questioning and even criticism, you must go into your pitch prepared to be persistent. Even if your pitch is unsuccessful, the investor likely has a whole network of contacts who may be interested instead, so it’s essential that you maintain good relations and keep your head up.
Benefits of Securing Impact Investments as a Start-up
If you’re new to impact investing or the start-up world in general, here are a few advantages to becoming an impact enterprise:
Take advantage of a large investor pool. GIIN estimates that the global investment market is valued at $502 million USD and growing. Plus, securing an impact investment does not prevent you from seeking other types of funding and grants as well. Impact and non-impact funds can co-exist within your start-up.
Open yourself up to possible perks. Some impact investors may be able to offer you better terms, low interest rates, a longer grace period and other advantages.
Lower your susceptibility to risk. Having an impact investor on board won’t ensure it will be entirely smooth sailing ahead for your start-up, but they can certainly guide you on the water. Take advantage of your investor’s business experience and be open to their advice.
Align your sustainable goals early. Impact investors will be at the forefront of change when it comes to social responsibility. They can help you implement your social and environmental goals in a sustainable way earlier and much more effectively than your closest competitors.
Michelle Novielli | Contributing Writer