How to find an Impact Investor for your purpose-driven start-up
When I speak to start-up founders, they often seem to think that impact investors are mysterious, transient beings that everybody has heard of but nobody has ever met.
I often get asked: who are these ‘impact investors’ and where do I find them?
Well, you don’t need to wonder anymore because I’m about to reveal the secret tactics I use to attract impact investors.
Firstly, it’s important to say that impact investors exist, there are plenty of them and they are increasing in number. The Global Impact Investing Network (GIIN) estimates that the global impact investing market is worth a whopping $1.164 trillion dollars at the end of 2021, up 63% from the end of 2019.
Daring Capital exists to bridge the gap between impact investors, and founders whose companies make the world a better place. So as the founder/CEO, I spend a huge amount of time looking for impact investors, and I’ve developed some tactics over the years that have really worked for me. Most investor groups keep this stuff secret but, in the name of transparency, I want to share with you the tactics I use.
So here are five broad strategies I use to find impact investors:
#1 Check Databases
In my experience founders rarely look at databases, and yet they can be a brilliant source of information - some are even free!.
There are a couple of free databases that I use.
Good Finance has a very extensive database of impact investing institutions in the UK. The database allows you to filter by investment product (debt or equity), geographical location, and issue area so is a pretty useful way of finding interested investors.
Considered Capital have a handy fundraising directory full of useful lists of investors, grantmakers and competitions. If you sign up to their mailing list, you can keep on top of new ones as they come out.
💬 Top tip: remember that a lot of impact investing institutions in the UK may only invest in specific legal structures, such as CICs or or companies ltd by shares that have profit locks or asset locks. Always check this before you apply!
#2: Research Similar Companies
It’s no secret that many founders create products that solve a problem that they’re experiencing. That’s a great starting point but isn’t enough to prove there is a real problem. Investors want to know that potential customers have also struggled to find a solution to your issue.
Dig around for some really compelling research which backs up your hypothesis. And if it doesn’t exist? Interview people, send out surveys and create your own bank of data.
💬 Extra tip: link or reference any external evidence that you are citing
#3: Get Familiar with Philanthropists
Slowly but surely, philanthropists are developing an interest in impact investing.
A lot of the larger charitable foundations will accept unsolicited applications for investment, such as Esme Fairbairn. You can usually find how to apply on their website.
Even the ones that don’t publicise it may also invest. It’s worth looking for foundations or philanthropists that provide grants to charities in your field to see if they have made any impact investments. For example, a foundation supporting charities tackling homelessness may also be interested in investing in social enterprises that tackle the same issue.
Unlike private companies, charities and charitable trusts have to publish a lot of information in their annual accounts about who they invest in or receive investment from. This means you can see who a trust has invested in and you can also see on a charity’s accounts who they have received money from.
#4 Utilise LinkedIn
Contrary to what a lot of people may publicly say, many investors will respond to the right kind of outreach.
You may have identified a prospect who is a philanthropist or investor in this space. A warm introduction is usually preferable but if that’s not possible then a well judged DM may also be worth a go.
As you can imagine, I get a lot of cold direct messages (DMs) but most of them are from founders that haven’t even bothered to look at our website (if they did they would see that they are not eligible). The ones that have bothered to do some research and send a targeted DM really stand out.
Here are the key elements to a successful DM:
Keep it relevant: do your homework on the person and explain why you think they are a good fit for this opportunity. For example, if you run a DEI business and they have previously supported DEI-related businesses then mention it.
Keep it brief: I will never read lots of paragraphs. Keep it to a 2 paragraphs max and provide a link to your deck for more information.
Calls not coffee: as a starting point, it’s much easier to hop on a quick 30 minute call to discuss something, especially if you have a calendly link. Coffees tend to be more time consuming and so I find investors are more likely to agree to a call at first. If it goes well, follow up with a coffee
Mention a couple of highlights: just drop in a couple of things that you have done that make it stand out, it might be your ARR, how much you have raised or an experienced advisor you have recruited
Follow up: if you haven’t heard back after a week, politely send another DM. Don’t chase before that or you will just annoy them.
Remember: it’s better to spend a little longer doing DMs properly than just randomly targeting anyone who looks a bit like they might have cash. Spray and pray rarely works!
#5 Get to Know Syndicates
A syndicate is where a group of investors get into groups to share deal flow and invest together in businesses.
There are a few impact-focussed syndicates out there including:
Green Angel Syndicates: they focus on - you guessed it - green tech!
The Conduit: they have a broad thesis which allows them to invest in businesses working for people and planet. Generally, they invest in companies at the Series A stage who have fast-growth trajectories.
Obu: Obu is an angel community that supports purpose-driven businesses led by female founders. They are relatively new so I don’t know too much about their track record but they have backed some interesting businesses.
Daring Capital: last but not least, my very own Daring Capital. We invest in extraordinary, underrepresented entrepreneurs starting profitable companies that will make the world a better place.
I’d love to hear from you - how have you secured your investors?
As always, get in touch to let me know or with any other useful feedback!
Jem and the team at Daring Capital
Investors talking at a Daring Capital Business Showcase