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Are You Investor Ready?

34403284_mlIf you are in the midst of launching your own business or if you are currently in business, you are likely wondering if your enterprise is investor-ready. “Investor readiness” hinges on a variety of factors. Simply preparing a strategic business plan and financials is not an indication that your business is ready to take on an outside investment. Even if you are eager for an outside investment, there is no guarantee that anyone will be interested in your venture. Plenty of preparation and hard work is necessary to put your enterprise in a position that interests outsiders. This process is commonly referred to as “investor readiness.” Click here to view Investor Ready Checklist.

Types of Investment

As capitalism has progressed, the variety of funding options has blossomed. Today, business investment takes place in all sorts of forms from new age crowd funding to angel investors, venture capital and traditional bank loans. The challenge lies in securing the necessary funding. It is quite often the entrepreneur’s lack of investor readiness which prevents them from securing investment funds they so desperately needs.

Common Errors When Seeking Business Funding

Put yourself in the position of a venture capitalist or general business investor. Such an individual is constantly bombarded with requests for investments. Though venture capitalists might genuinely be interested in helping to launch or improve enterprises, the truth is that it is often too premature for such an investment. The average business has a variety of weaknesses and structural problems that an investor does not want to be involved in fixing. In some instances, the investor does not have the necessary capital to address such problems either. Entrepreneurs seeking investment capital should ensure that there is a certain polish to their presentation in terms of both content and aesthetics. They should put themselves in the investor’s shoes and consider how the pitch sounds from their perspective and whether the requested amount of funds is appropriate for your business’s current state and goals.

Steps to Take

Begin by assessing your business plan and your projected financial goals. It is prudent to engage the assistance of a funding expert to determine if your investment request is appropriate for the stage that your business is at. The funding expert will analyze your company’s financials and provide appropriate advice. He will also help you figure out the proper type of funding for your business and determine the best way to approach potential investors.

Figure out the type of investment that is ideal for your company as there are different types of funding. Some forms might be appropriate for your business while others are not. It is imperative that you pinpoint the funding types that are appropriate for your company’s objectives. This way, you can determine if an investor’s objectives are aligned with your own. Determine which forms of funding are appropriate for your long term goals as well. For some entrepreneurs, giving up equity will hamper the business in the short-term and/or the long-term. It is therefore important to determine what type of impact a new investor will make on your ability to lead and steer the company. Consider whether ceding a portion of control is really worth the money.

Target the Right Type of Investor

Be as objective as you can when attempting to determine which investors are ideal for your business. Perhaps your business is not suited for an investment from a venture capitalist. Maybe an angel investor or crowd funding is a more appropriate option. In general, venture capitalists are not the best investor target for local businesses. However, plenty of crowd funding participants are interested in funding small businesses. Do your homework before soliciting funds from these groups and you’ll boost the odds of finding an interested investor.

Maximpact experts are here to help you simplify the process to become investor ready. You can visit us on the web at www.Maximpactservices.com. Maximpact has 135  business development products and services designed to help your business evolve and meet its full potential. Our mentors and business experts will steer you in the right direction and jump-start your investor readiness. Visit www.maximpact.com now to find solutions you need for success.

Helpful Resource and Tool:  Maximpact Investor Read Check List

Seven Steps to Allocating More of Your Portfolio to Impact

Guest blog by En Lee and Sam Lindsay

For many investors, impact investing has remained largely confined to private investments. For this reason, impact investments may still account for only a small proportion of many portfolios.However, with new opportunities for impact investing now emerging across different asset classes, investors are beginning to allocate more of their assets to businesses that generate social and environmental outcomes. To encourage this move, the Investor Team for the Impact Investing Exchange Asia (IIX Asia) has come up with a simple 7-step process that helps investors and advisors assess investment portfolios and begin the process of shifting the emphasis in the direction of more impact investments.Step 1: Define Core Values and Mission

  • Identify core values, mission, country and sector preferences
  • Understand the motivation (e.g. preserving family legacy or instilling values in the next generation)

Step 2: Identify Target Impact Areas and Role of Investment

  • Identify your target outcomes and objectives (improving healthcare, empowering rural women through education)
  • Define the risk/return profile of your investments (wealth preservation, commercial returns etc.)

Step 3: Integrate Impact Allocation

  • Determine allocation across asset classes: cash, fixed income, public/private equity, real estate…
  • Distinguish between philanthropic and investment capital in the portfolio

Step 4: Evaluate and Select Investment Opportunities

  • Determine which investments should be non-impact, mission-related and mission-driven
  • Direct investments (e.g. private equity, debt, hybrids etc.)
  • Indirect investments (e.g. funds, funds of funds etc.)

Step 5: Implement a Strategy

  • Identify potential impact investment opportunities (e.g. by using a impact accelerator such as Impact Partners or a deal site like Maximpact)
  • Commence due diligence, structure investment, execute and close transaction and if necessary, post-deal monitoring (specialists can assist in these areas)

Step 6: Monitor, Analyze and Report Results

  • Measure financial, social and/or environmental returns
  • Insist on impact assessment report from a reputable assessor (professionals such as Shujog Impact Assessment can help)
  • Identify a suitable impact methodology for the identified outcomes (e.g. GIIRS)

Step 7: Consider Changes in Objectives, Strategy and Managers

  • Revisit country and sector focus
  • Evaluate investment financial and social/environmental performance
  • Assess asset allocation, risk/return profile and intended social and environmental outcomes

A version of this blog was first published in the IIX Asia digital publication, Impact Quarterly.


About the Authors:
En Lee is Co-Head, Asia Pacific for LGT Venture Philanthropy, a global impact investor supporting organisations with outstanding social and environmental impact. He is the former Director and Head of Investor Team at Impact Investment Exchange Asia. Sam Lindsay is a consultant for the Aligned Network and a former Investor Team Member at IIX Asia.


About IIX Asia:
Impact Investment Exchange Asia (IIX Asia) is the world’s first public trading platform dedicated to connecting social enterprises with mission-aligned investment.


Image credit: 123RF

DATA FOR IMPACT

data 302x302by Marta Maretich @maximpactdotcom

Data is a hot topic in the worlds of government, business and philanthropy. As information technologies mature, the increased availability of data, coupled with advances in analysis, mean that many sectors are reaping the long-promised rewards; and feeling the pressure of a new age of data immersion.

This data boom will affect the growing impact investment sector on several levels. First, it will provide new opportunities for research and development. As others follow the lead of institutions like the World Bank and the UNDP, and governments like the Netherlands and Sweden, and begin to make their data public in open data initiatives, huge amounts of information about countries, communities and projects will be available online for the first time. This information is are source for entrepreneurs and investors, who can use it to identify markets, develop deals and target capital where it will have the most impact.

Impact measurement will be another field influenced by the rise of data. As the sector develops, investors from every part of the spectrum will come under increasing pressure to collect data and use it to demonstrate impact. How to measure impact is still an issue and the race is on to find the right tools for the job: IRIS and GIIRS are already available and other systems will emerge as the sector expands. Yet measurement is here to stay. As impact investing gains popularity, the call for evidence-based accountability grows louder and serious players will need to answer.

The call for transparency is another dimension of data. Like many other sectors, the impact sector is coming under more pressure to share its data publicly. ImpactIQ,a nonprofit media platform for social finance, has challenged the sector to “put its data where its mouth is” and contribute deal information to an open database. The aim is to collect data for analysis and research to build the sector. Several Maximpact funds, including Toniic, the Unreasonable Institute and Impact Engine, are already taking part. For more, see this blogpost by ImpactIQ editor David Bank.

The overall message for the sector is to get ready for data: using it, collecting it, analyzing it, sharing it and publishing it as never before. With its philosophy of openness, Maximpact supports this move to a more transparent future for data and for the sector as a whole. By sharing more, we stand to gain a lot.