I believe that every business is an impact business, meeting a need or generating demand while creating direct tangible value.
My problem with most impact funds is that they more often than not sustain broken business models by start-ups.
We need to rethink the place of impact funds and work towards having them deployed to enterprises that have committed themselves to good product or service.
The need for capitalisation outside traditional banking instruments for start-ups and growth stage companies is not about to abate.
The flavour of capital, however, keeps changing from time to time following global trends or adopting the bias of its owners.
Last week I was with an impact investor. We explored the different flavours of this type of capital. We agreed that most funds are established and executed on the basis of “ego tinder’—which rounds deliver the biggest high, either from a well-crafted story or an obtuse metric that if further interrogated would not really register solid on impact.
I believe that every business is an impact business, meeting a need or generating demand while creating direct tangible value.
My problem with most impact funds is that they more often than not sustain broken business models by start-ups. These are models that should have died many quarters ago or better yet been pivoted into something more sustainable.
In response, most start-ups will align themselves with the expectations and ride out the opportunity for what it’s worth, with the long-term effect for the ecosystem being negative.
We need to rethink the place of impact funds and work towards having them deployed to enterprises that have committed themselves to good product or service.
These enterprises do not need to be reaching hundreds of thousands by way of users or pulling revenue in the millions of shillings. Even cottage industries deliver immense measurable value despite their size, but they would never register on the radar of most minders of capital.
Impact in my books must hold its own on capital preservation, growth and return as a baseline.
Outside dealing drugs, gun running and adult content if you hit these three metrics, true impact has been delivered in the form of sustainable enterprises that can support jobs long-term or provide for systems that underpin the same, such as healthcare and mobility.
Left unchecked, we will end up with an innumerable number of initiatives masquerading as enterprise, contorted to fit the template put out by purveyors of capital.
While arguably looked at from only one frame, I think it is time to hit reset.
