Based on notes for Tom Dawkins’ ‘provocation’ at the Impact Investment Summit 2022.
We’ve heard some great stories over the past two days. There are so many good people in this room doing such good work, including many who have inspired and guided my career.
So much good being done…
But I’m sorry to say that I’m here to tell you; It’s not good enough.
All the good we’re doing isn’t even close to enough if we’re serious about solving the challenges that confront us this decade, at sufficient scale, in the time we have left.
If the impact investment summit grows over the next decade equivalent to it’s growth over the past decade, or even double that, it won’t be enough.
We need to 15X our efforts and impacts over the coming 10 years if we are to create the future we need, one that is more equitable, just and sustainable, in the time we have left.
Christine Clarke from DFAT said yesterday that “Now is the time to pull out all stops on gender lens investing.”
I couldn’t agree more.
Now is the time to pull out the stops for all the versions of impact investing we need.
So what are those stops?
I think the biggest things stopping us from collectively making the impact we seek are how we think about innovation, risk, returns and investability.
First, how we think about impact.
Yesterday David Gonski called for people to put 10% of their funds into impact.
As you might expect, I’m here to advocate that you actually put the 90%, if not 100% into impact, if impact is what you’re serious about creating.
After all, would you consider me, say, a “conscious consumer” if I considered impact on 10% of my purchases but ignored it the other 90% of the time.
The fact is, Impact needs to be a lens, not a category.
It should be something you consider in every single investment you make. Because the truth is, every investment makes an impact on the future, whether you think about it or not.
As a social enterprise founder meeting an investor, I want to know what your non negotiables are.
As a social enterprise, we aim to make a profit. But we do work that isn’t profitable if it makes a sufficient impact and we won’t do projects that aren’t impactful no matter how much you pay us.
Our non-negotiable is impact.
But if you’re insisting on market rate returns it’s clear that your non-negotiable is your return, while impact is a maybe, a sometimes thing. A 10% thing.
But that won’t get us where we need to go.
Andy Kuper from Leapfrog said yesterday that we need to bust the myth that you can’t earn market rate returns while doing impact investment.
That’s true, but we also need to bust the myth that we can build the world we need entirely through market rate investing.
Kevin Jones Doyle, Impact investor and founder of Social Capital Markets Conference in San Francisco, so a man who should know, has said “You can do impact investing at market rate. You just can’t do structural and systemic change at market rate. There is a cost to embedded injustice that the market can’t obliterate on its own.”
We need a greater flexibility of approach.
Saying you do the full gamut of impact investments when you really mean you do market rate returns and tax-deductible philanthropy is like saying you like all genres of music, country and western.
There’s a huge amount of space between market rate return and philanthropy that we need to explore.
Why does this matter?
Because we need desperately need more innovation for social good.
As Jim McKelvey, the cofounder of Square, says, “you don’t want to innovate, you don’t aspire to innovate, you have to innovate.”
That’s where we’re at when it comes to impact. We NEED to innovate. The solutions of yesterday won’t work for tomorrow in a rapidly changing world.
Innovation is hard and risky because the future is unpredictable.
This is the innovation paradox: good ideas look like good ideas but great ideas look like bad ideas.
Good ideas sound good because they largely conform to our expectations and assumptions and don’t challenge the status quo too much, but great ideas dispute the status quo and challenge our assumptions.
This is also what most bad ideas do, which is why it’s impossible to simply pick the “ideas that will work” up-front.
The only way to really figure out what works is to try things.
That’s the role angel investors and early-stage accelerators play in the commercial startup world.
Innovation needs early support based on courage, not just metrics.
But impact investment is, sadly, a world of almost all VCs and no, or far too few, angels.
Most of the active impact investors complain about the lack of deal flow of investable social enterprises.
Investability is treated like something found in nature; just a force that must be adhered to, not something they can control.
But investability isn’t a law of nature. You invented it.
You can move it.
But this will require more courage and a wiliness to take risks to achieve outcomes.
The questions we need to ask more are could this work, do we want it to work, what would we need to do to find out if it can work, rather than demanding certainty that it will work.
Providing more of this early support is why I founded StartSomeGood 12 years ago. It’s why we launched a crowdfunding platform for early stage ventures and why we’re now launching LendForGood, a crowd lending platform to help impact enterprises grow.
Part of the justice we seek is to diversify leadership in our sector beyond what we’ve seen at this event.
I believe those with a lived experience must be involved in designing solutions and experiments.
This is where the innovation we need can come from, but it requires us to work in new ways, to come down from the mountain and walk with these emerging Innovators and entrepreneurs at a much earlier stage.
Investors are too often sitting on the mountain top, waiting for the prophesied few to emerge above the clouds.
Instead, meet us at camp 1, and we’ll climb this thing together.
This requires walking with, not just waiting for, promising innovators.
This is something that philanthropy is doing much better than impact investors at the moment.
This is why so many of the shining lights of enterprises pivoting, surviving and thriving during COVID are the tax-deductible social enterprises.
For many people this is fine, as they think thse are the preffered forms of social enterpies. Structured as non-profits while operating as businsses.
But from an impact investment point of view this should be seen as a challenge to your entire model.
If non-profit social enterprises are going to out-compete for-profit social enterprises there will be even fewer growth-ready and “investible” enterprises.
Making earlier bets, walking with early-stage ventures and supporting them to grow rather they waiting for them to meet business-as-usual standards of return may sound risky.
It is risky.
David Gonsky also said it was is myth that impact investing is risky.
And that’s right. But that’s a bug not a feature.
We desperately need a greater appetite for risk amongst impact investors
Which brings me to my least-favourite phrase you hear at events like this: risk-adjusted returns.
Which risks do you think are being centred when we talk about risk-adjusted returns? It’s not the risk of climate catastrophe or democratic break-down, of lost lives and wasted potential. It’s the risk that someone with more than their share of resources already might lose some of them.
It focused the discussion in completely the wrong place. This is certainly a risk that should be considered, but it is hardly the only one.
The real risk is that we don’t do enough to avoid disaster, not that we miss on a deal here or there.
Only by shifting our frameworks and attitudes to risk and innovation, investability and returns, can we truly unlock the potential of this community to drive positive change at an epic scale over the coming decade.
Only by considering this wider context, being willing to go earlier and moving from curation and waiting to courageous action and commitment can you move from being an impact invest to an impactful investor.
Ultimately change will take all of us.
We have so much of what we need here in this room. Some many resources, ideas, connections and experience.
But if we want a different result, we are going to need to pull out those stops and do things differently.
As the immortal Cate Campbell said after winning gold at the Tokyo Olympics, “You’ve got to risk it to get the biscuit” only by biscuit here we’re talking about a more equal society, functional democracy and liveable planet.
Let’s get out there and create that future.
Tom Dawkins is Co-Founder and CEO of StartSomeGood, a social enterprise which helps people design, launch and grow social impact projects, and co-founder of LendForGood, a new lending platform for growth-ready impact businesses. Find out more and sign up to the LendForGood waitlist.’