When an investor is looking to make an impact investment, they’re looking for a business that will be able to use those funds to scale something of value that already exists in the business. In other words, when taking on investment, it’s best to take something that already works and make it bigger and better. So how do you make your business investment ready?An investor also wants to see that the business is one that is ready to scale. This generally means your organisation will need to have proved there’s a market for it’s value proposition, by demonstrating that your product or service is not just desired by the market, but that someone is willing to pay for it. From an investor’s perspective, there are three elements of the business that I would look at in order to decide if the business is ready for impact investment. Number one, is the management team. Is the team:
- competent and capable to manage the business?
- ready to be held accountable for the business (for both mission and money)?
- agile and innovative enough to respond to changes in the market?
These are some of the elements where risk is involved, and you need to ensure your investor feels confident in your ability to handle the risks as well as the opportunities.
Number two, is the model. Is your organisation’s business model clearly articulated? Is it capable of delivering the intended value? At TDi we are fans of using the business model canvas as a way to ensure that an organisation has thought about the main components that go into any business and understand how they interrelate. The business model canvas allows us, on a single sheet of paper, to understand the health of the key parts of the business and quickly change the way the business model works as new information arises and the market changes. The end goal is to ensure a business is sustainable. The third element is mission. Impact investment isn’t just about financial returns, but also about being actable and demonstrating a positive social and environmental impact. The last vital element for investment is that the mission can be clearly articulated in terms of the change it wants to make in the world. It also must have the ability to demonstrate meaningful measurement and performance of the mission.
Investment readiness is about explaining how an injection of money can produce both mission and financial returns.
— Paul Steele
Investment readiness is about explaining how an injection of money can produce both mission and financial returns. Investment readiness means you can demonstrate that an investor will get a return, both financial and impact that is consummate with the risk. Any organisation interested in taking on investment needs to ensure their investor is comfortable with not only the opportunity but also the risks and returns of the enterprise.