I’ve been in Nairobi for almost three months now and life seems to have taken to me thinking in fragments and bullet points. My mind had been flooded with learnings, lessons, business plans, fragments of news, discussions of development, conflict, life of expats, impact assessments and where to make investments count. It’s hard to segment out the which bullet points are worth sharing but to give some context on the dominant thoughts floating around, here’s a blog post that was published a while back on the Acumen Fund blog on Oct 22nd. A little dated, but still relevant questions.
Originally published on Oct 22, 2012 on the Acumen Fund blog. Republished with permission.
In the world of impact investing, there is next to no time to rest. There is a sense of urgency to explore the boundaries of this sector and uncover the dynamics of success of a potential investment. In the best cases, you get an investment approved and everything goes as planned according to your initial memo. In the worst cases, you get stuck in the trenches, pre– and post-investment, fighting to make each dollar count.
In this continuous process of exploring boundaries, here’s a couple of lessons I’ve learned and questions that I’m constantly asking myself, which perhaps, you might be too.
Humanizing Market Creation
As I dive in deeper into the healthcare and nutrition sector in East Africa, I was reminded by a colleague of a great video by Seth Godin at last year’s Investor Gathering.
Seth Godin discussing market creation at the 2011 Investor Gathering
The driving questions at hand: how do we humanize market creation? How do we teach people to use products they have never used before? How do we convey the value of our services and products of our portfolio companies?
This is when we aim to have two-way stories—to become part of the fabric of the community and co-create alongside the investor company. Market creation is more than just getting consumers to use our services and products. Good market creation is about teaching and fundamentally changing consumers’ behaviors.
The Unreliable Narrator
I’ve become increasingly distrustful of my internal narrator lately. I’m slowly discovering that impact investment evaluation is skewed heavily towards my inherited prejudices of traditional investments, at the expense of taking into account the social impact. When I stop to contemplate my actions, I find myself wondering whether I am really listening and being objective, or just narrating back to myself what I think I heard.
It’s hard sometimes to fully comprehend the impact of what we evaluate, especially if you have not experienced what it is like on the ground. This distrust means that when we are surging forward in a sector that is fraught with uncertainty and trade-offs, we need to be mindful of the context of the investment.
An Ode to Value
As an impact investor, our role is so much more than just being a transactor of debt or equity to potential investees. We have an opportunity to become an ecosystem builder, and to lead the charge to solve market inefficiencies. My daily challenges are thus: are we creating value pre and post our investments and where do we draw the line of support? How do we value a business that has negative cash flows? How do we encourage organizations to move away from grant reliance? How far do we lean into risk for the sake of value?