Social Impact Projection
Investors who seek to achieve social impact with their investment decisions have well-established frameworks to evaluate financial risk and return but no standard approach for factoring social impact into that equation. The absence of an accepted model for quantifying social impact limits impact investors’ ability to effectively integrate their financial and social objectives when evaluating early stage investments.
As more angel investors incorporate social return into their consideration of an overall return profile, many now require companies to provide historical impact reports such as B Lab Impact Assessments alongside their financial projections. GoodCompany is developing a forward-looking model that integrates social impact into the assessment of early stage social enterprises’ return potential with benefits for companies, investors, and the impact investing field.
For Social Enterprises:
Entrepreneurs present investors with financial projections based on clearly stated assumptions about their business trajectory, even if they have little historical financial performance. Social entrepreneurs also need a simple yet precise way to articulate the impact potential of their business and how that impact will relate to revenue growth. The earlier that companies build impact projections into their core strategy, the easier it becomes to tie their impact objectives to their principal product or service as they go to market.
The SIP model provides a framework for understanding the relationship between a company’s core revenue drivers and its social outcomes, helping founders to refine a growth strategy that optimizes both financial and social returns over time. Unlike existing platforms for impact measurement, SIP provides early stage social enterprises without rich historical data a way to communicate clearly, in dollar terms, the social benefit they expect to produce. We believe this approach can direct seed capital towards the most impactful investment opportunities.
Fundamentally, investors price risk. The goal of SIP is to make investors’ risk-return dynamic as explicit for social outcomes as it is for financial outcomes, and to enable an analysis that balances these dual objectives in a meaningful way.
SIP is intended for investors who want to substantively incorporate social impact into their investment decisions and need a method that reflects the data collection hurdles facing early stage social enterprises. The SIP model allows angel investors to benchmark the social return of companies across sectors using dollars as a common denominator, helping them determine where their investments at the early stage will bear the largest social return.
Unlike GIIRS or other impact measurement systems that rely on performance to date, PSI provides investors a lens to forecast the overall return potential--both financial and social--of early stage companies during the due diligence process. By facilitating deeper discussions between entrepreneurs and investors about the blended returns offered by impact investments, GoodCompany hopes to establish a new standard practice in angel investing.
If you've received a password to participate in the beta development of SIP, click HERE.