Keith Ippel, the founder and Co-CEO of Spring, a prominent early-stage impact investing ecosystem, has raised over $47 million in early-stage capital. Investing with a purpose can be a gratifying experience, providing immediate satisfaction knowing that funds are being used to support a cause or community in need. As an investor, there is also the excitement of potential success and impact, telling the story to draw in other investors and reinvesting if the venture performs well.
However, the crucial question that emerges is whether the promised impact will actually happen. When investing in early-stage, purpose-driven companies, it is essential to measure progress and impact, both for the benefit of the company and the investors. Unlike public companies, private companies do not have the obligation to provide detailed reports, such as ESG reporting, automatically. Therefore, investors in early-stage companies must take an active role in gathering information and guiding the company’s leadership in establishing metrics and targets.
Before delving into the details of measuring impact, there are preliminary questions that need to be addressed. These include understanding the purpose or why of the company, determining the impact thesis, selecting the appropriate metrics, and identifying the outcomes that these metrics will create. Various tools and databases can aid in selecting relevant performance metrics, such as the Global Impact Investing Network’s IRIS+ and Project Drawdown for climate-related metrics. Establishing clear goals and metrics sets the stage for measuring progress and impact effectively.
Once the goals and metrics are established, the next step is to agree on a reporting format and communication cadence. It is essential for companies to report regularly on their accomplishments, learnings, adaptations, and impact to demonstrate progress and levels of impact over time. As the company evolves and begins to generate revenue, financial reporting will also become necessary alongside impact reporting. Collaboration between investors and founders in setting up a structured reporting system can help keep the founders accountable for realizing their vision and achieving impact.
Metrics play a crucial role in advancing the business and its mission, rather than straining the relationship between investors and founders. By working together to measure performance, investors not only gain insight into potential returns but also assist founders in creating a framework that drives the company’s impact forward. The collaborative effort in establishing metrics and reporting progress can be instrumental in ensuring the success and sustainability of purpose-driven companies, ultimately fulfilling their mission to create positive change in the world.
