What does “Impact” mean in the context of the Capria Accelerator?
The term “impact investing” has been around for about 10 years. Since the field is still young, impact is a broadly used term, with different meanings to different people. There are many types of impact investors including some with specific definitions such as:
- Improving low-income livelihoods
- Providing access to healthcare, education, and other basic services
- Environmental sustainability
- Focus on under-served girls and women (as customers)
- Making the investing ecosystem work for women
- Combinations of any or all of these, and others
At Capria, we define impact inclusively. Our philosophy of impact investing comes from discussions with many thought leading impact investors as well as from our own experience developing the leading impact venture seed fund in India.
What is “impact investing”?
According to Global Impact Investing Network (GIIN), “impact investments are investments into companies, organizations and funds with the intention to generate … impact alongside a financial return.” As the graphic from The Monitor Group shows, only investments that meet certain financial and impact criteria qualify. While there is some debate over what the financial and impact thresholds are, according to J.P Morgan’s latest survey, roughly 80% of impact funds target market returns.
How we think about Impact
Though Capria is a new venture, my partner Dave Richards and I have been involved in impact investing for many years. When we launched the $23 million Unitus Seed Fund in India in 2012, we needed to define and measure our particular theory of impact for that fund. As our report on Impact Measurement explains, we create impact in three ways:
By having a clear, comprehensive definition of impact aligned with our LPs’ interests, we can select and scale businesses serving low-income populations in India and deliver what our LPs want to see. This is one way to look at impact; there are many others, equally valid.
What this means for Accelerator Applicants
We expect each fund manager we work with to define how impact will be integrated into their investment thesis and approach. We are interested in funds that are going to produce competitive returns while at the same time positively enhance lives. In short, we do not come in with a prescribed impact agenda for Capria, but instead work with fund managers to understand how impact is incorporated into their investment approach. With this in mind, the impact criteria for the Capria Accelerator is much broader than the criteria used for the Unitus Seed Fund because it will be determined by each individual fund manager.
For a potential Capria Accelerator applicant, the more important question is “what is NOT impact.” This can be a complicated question to answer in some markets where simply creating a job, however low-wage it may be, can have substantial positive impact. In general, we will favor fund managers who have developed theories of impact that extend beyond job creation. Aspiring impact fund managers should consider whether the impact is a byproduct of a company’s activity or intrinsic to its existence. Some non-impact examples (with a little exaggeration to help illustrate our point):
- Environmentally friendly production, packaging, and distribution of cigarettes and alcohol
- Mass rural job creation via coal mining
- Local manufacturing and distribution of ultra-low-cost arms
We hope this post clarifies how we think about impact investing and what it means for our accelerator. If you have further questions on whether your model of investing aligns with our broad definition of impact, please email us at info <at> 2021.capria.vc