When I started in impact investing, I met a promising entrepreneur. He was in his early 30s, smart, educated, well-networked, and well-versed in the issues of his sector. His startup had seed funding from multiple angels and a customer contract. He was very articulate and had a certain charisma that came with the conviction of someone who is committed to a cause.
I wanted to invest in his startup. I had multiple meetings with him, followed by a site visit. No red flags. But then I realized a strange thing. It came increasingly difficult to arrange a meeting with him, because he was traveling so much. He was doing consulting works as his expertise was on demand by many institutions around the country. When I asked for a pitch deck, he only sent me a company profile, never including a business plan. In conversations, he identified many potential market opportunities to pursue, but he did not attempt to put together a coherent plan.
Needless to say, I did not invest in his startup. His company still exists today and he is still active in the circle, but they have not raised external funding and the company has not risen to prominence apart from its limited communities.
Everyone has their own reason to start an impact enterprise. The entrepreneur in my story is probably using his company as a platform to influence others to make changes happen in the society. It is an admirable goal, but the potential impact of such approach is limited. Impact enterprises should aim to expand its influences by growing their business. A scaled-up and mature business would provide more direct benefits to the society, has the resources to do more experiments and gain more insights, and has more lessons that can be shared to others.
Over the years, I came to see more of this type of entrepreneurs, who are more interested in solving big societal problems. They are relentless people aiming to push boundaries of what’s possible. Pardon my probably over-generalization here, but these entrepreneurs tend to be either very young and idealistic, or very senior with past achievements that provide them with resources to pursue non-financial goals later in life. But I am barely interested to invest in these companies.
When I met an entrepreneur, I prefer to focus my attention entirely on discussing the business plan. I would then assess their missions implicitly, based on my interactions with the entrepreneurs, later conversations with the management, discussions with their employees and other stakeholders, and site visits.
Business goals and business plans would have the following elements often missing from high-level noble goals:
- A clear and sufficiently large target segment that can be addressed by the company
- Unfulfilled needs of the above segment
- Advantages that the company has in order to bridge the gap
- A timeframe and workable scenario of the company serving the segment in financially sustainable manners
With an iterative process of market research, product research, and reflections within the team, business goals can be derived from noble goals. For example, the following real-world noble goals that I received from actual proposals are more convincing if they are presented alongside business goals that can be discussed and evaluated.