Impact Investment is one that has multiple objectives: to generate a positive and measurable impact on people and the environment and, at the same time, to produce an attractive financial return.
Undoubtedly, interest in Impact Investment has accelerated for a number of reasons: the concern that exists in civil society, corporations and investors to want to balance economic benefits with the desire to generate positive impacts on society and the planet; the United Nations Sustainable Development Goals, which address issues as diverse as poverty and hunger elimination, combating climate change, gender equality, environmental advocacy; and the positions of big investors like Sir Ronald Cohen, who seek to reconcile profitability goals with the need for a social and environmental purpose when investing.
The World of Venture Capital, better known as Venture Capital (VC), has the potential to provide great support to Impact Investment through optimized investment tools and methods to develop startups. To understand this, you have to enter the VC «kitchen» and study the winning recipes.
As many know, on average, VC is not a very attractive asset class, its average return is lower than that of the NASDAQ and carries with it a higher risk, but at the same time sophisticated investors like the Yale Endowment Fund get a VC return of more than 18% per year for the past 10 years. Why? The answer is in the high returns obtained by a select group of VC, operating with teams with extensive experience in specific verticals, FinTech, Health, Cybersecurity, etc. These VCs have the ability to detect distinctive equipment early, support them in their development and anchor their growth. In short, it’s not luck: it’s method!
This way of working begins to develop in Impact Investment with a model that brings together investors, VCs, and units specialized in accelerating the growth of startups. In Chile, this «virtuous mix» is growing rapidly: Impact funds already manage more than $140MM of dollars, in 2019 Qwest Capital created the first public impact fund and Corfo, through Startup Chile, has defined as a priority the support for impact startups. To crown all this, since the middle of this year, TechForGood Israel, an accelerator specialized in developing impact-oriented startups, initiated cooperation activities with entities representative of the Chilean innovation ecosystem with the aim of turning our country into a regional innovation center in Impact Investment.
With all these ingredients in hand it is highly likely that very soon we will have in Chile numerous virtuous Chefs producing a greater positive impact on the planet, in society and generating very attractive returns.