What exactly is the missing middle?
The result is that most highly innovative and early-stage impact ventures fail to meet the funder’s risk-adjusted return expectations. Wietse van der Werf, founder and CEO of Sea Ranger Service, a social venture that creates both social and environmental impact, reflects on the difficulty to find alignment with investors.
I run a mission-driven company and instead of the highest possible returns for shareholders, my team and I are primarily interested in delivering a sustained and growing impact. During our most recent investment rounds, a number of investors, unfortunately, the ones able to provide more substantial growth capital didn’t meet these values. I feel like there is an expectation from social entrepreneurs that we can deliver market-rate financial returns, year-in, year-out and on top of that, that we also deliver substantial positive impact.
Wietse van der Werf (Founder & CEO of Sea Ranger Service)
During our investment rounds, we talked to more than sixty different investors continuously for over fifteen months. It has been an extremely challenging and time-consuming process and most investors said that our type of company wasn't for them.
Joost van Egen (Healthy Entrepreneurs)
Making smart investments in early-stage impact ventures
Tip #1. Use hybrid instruments such as mezzanine instead of plain equity or debt
Check the extract from our Structuring Impact Investments course below for more insights into the pros and cons of mezzanines for investors and entrepreneurs.
Tip #2. Establish smart collaborations to make pursuing impact a revenue-generating activity
Check this other extract from the Structuring Impact Investments course below for more insights into Social Impact Incentives.
Tip #3. Provide patient capital by increasing your investment horizon
Are you eager to learn more about how to structure innovative investments to support early-stage impact ventures?
