While impact investing has been around for decades, the concept of combining purpose and profit is still fairly new. Many investors seek market-rate returns, so transitioning to an investment strategy with a triple bottom line has been a challenge.
We think about this a lot at PeakChange, our impact advisory firm based in Denver. In our work, we help both experienced and new impact investors grow and manage their impact portfolios. PeakChange supports innovative, business-driven solutions for future sustainability. We focus on Colorado as a model to champion initiatives that encourage entrepreneurship as a powerful change agent. Not only do we invest in social entrepreneurs, we collaborate with service providers and membership organizations to promote and scale impact investing field-building efforts.
The Colorado impact investing landscape is booming. For example, in May 2016, through the Impact Finance Center, local thought leaders gathered to create CO Impact Days — the nation’s first statewide marketplace to convene investors, philanthropists, thought leaders and entrepreneurs. Investors’ Circle, the largest and most active early-stage impact investing network, emphasizes that Colorado is one of their fastest growing and motivated local chapters. Boulder hosted the First Regenerative Future Summit in 2017 and Fort Collins has pledged to reach zero carbon free emissions by 2050, which are positive signs that we are in the place to be for innovation in models and execution. Another outstanding example of a Colorado-based success story with global impact is the Unreasonable Institute, a global network of entrepreneurs, investors, mentors, and funders focused on impact located in Denver.
Not Just Silicon Mountain
We have a unique opportunity in Colorado to define and grow impact investing as a means to achieving positive change. Coloradans have a big appetite for innovative solutions to complex problems and a deep sense of loyalty to Colorado — this isn’t just among Colorado natives. Those of us who got here as fast as we could also want to see Colorado businesses succeed and thrive. This ethos and effort will help scale impact investing as we enter into a new economy that will be more sustainable, resilient, regenerative and inclusive.
We’ve seen many impact successes in Colorado, as evident from the increasing number of impact funds, accelerators, university initiatives, public-private partnerships and even successful exits. However, the state of impact in Colorado still faces many challenges including branding, impact measurement, and access to affordable capital.
Colorado is a community that embraces diversity and cooperation. The Denver Office of Sustainability and Denver Sustainability Council have set ambitious and audacious sustainability goals for 2020. In 2016, The Rise of the Rest Tour came to Denver to celebrate and shine the spotlight on entrepreneurial cities outside of San Francisco, Boston, and New York City, where nearly 80% of venture capital funding is concentrated. Business leaders and local officials have referred to Colorado as Silicon Mountain, in reference to our holistic startup community. While this is meant to be an illustrative point, we believe it does Colorado a disservice. This language continues the stereotype and visualization that Colorado needs to be saved and taught by Silicon Valley. The reality is that Colorado has some of the brightest and most experienced pioneers in the impact space and a vibrant and inclusive community of investors, philanthropists and entrepreneurs who collaborate, work together and want Colorado ventures to succeed. We should brand ourselves the Impact Frontier and not Silicon Mountain.
Measurement of impact remains another challenge. It’s difficult and expensive for early-stage social entrepreneurs to measure their impact. As a result, key performance indicators are deeply financial. This challenge confuses the overall marketplace and perpetuates the myth that social impact doesn’t provide market rate returns. The ROI on impact is complicated. Ultimately, this is a values question for investors who have to ask themselves, does the world really need another ad platform? (as an example) or do we need thought and innovation to solve some of our deepest environmental, poverty and social problems.
Access to affordable capital remains a major gap in the overall ecosystem. For example, women-led ventures receive a very small percentage of total investment capital, reflecting the small percentage of women making investment decisions in the venture capital arena. As an investor who focuses on supporting female-led social ventures, I have found that not only are these founders often more authentic in their numbers and projections, but they also have a passion behind what they are doing that is reflected in their business models and organizational mission. These entrepreneurs are more purposeful in building relationships and teams. I know we will see better outcomes if we deploy capital more purposefully to female-led ventures and significantly shift capital to impact ventures.
To build this inclusive ecosystem, it will require us, the investment and philanthropic communities, to collaborate in assessing new pools of capital and creating new funding models. Colorado has the opportunity to build the field and scale a high-performing model that the rest of the country can follow. We are all in at PeakChange and invite anyone building the field to join us.