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Faces of Impact Interview Series: Kim Morrish, angel investor

by Quynhnhu Nguyen, John Lloyd & Jessica Duveen

This is the second in a series of interviews being conducted with members of the ClearlySo Angels – the UK’s leading group of high-net-worth individuals and families dedicated to investing with an impact lens, creating social and environmental impact alongside financial return.

To read the previous interview, with CSA member, Brian Rusling, click here.

When did you start angel investing?

I started my career in 1993 with the US Agency for International Development (USAID) managing debt, equity and grant programmes. I was most attracted to SME debt and equity projects as they provided the “biggest bang for the buck,” in terms of generating sustainable economic development. Access to capital is critical in allowing businesses to grow, generate income and create employment. I learned a lot about the type of businesses and business leaders who were good investments during my time managing debt and equity programmes in seven different countries.

My first angel investments occurred at the same time – one breaking even and one a total loss. Both of these early experiences demonstrated the importance of the founders and their alignment for the future.

What is most important to you – social/environmental impact, financial return, or both?

Both are important. I have highly scalable businesses in my portfolio that should produce both a significant return and significant impact. There are others that have the potential to produce a significant social impact but may not generate high financial returns as they split profits with participating schools or keep prices low to serve greater numbers of beneficiaries. I look at each investment opportunity individually and make decisions based on a variety of factors. I am willing to accept lower returns for higher impact, and vice versa.

Is there any specific impact you care about the most and why?

I care about creating opportunities and solutions that positively affect the way we live.  I’m drawn to areas such as the environment, mental health, and education. For example, energy consumption is a necessity of everyday life worldwide. Innovations in sustainable energy will enable more efficient ways of producing and consuming energy, expand outreach and have a direct impact on the quality of the environment we are creating for future generations. Similarly, mental health has a tremendous impact on quality of life for those suffering, on their loved ones and their ability to contribute socially and economically. I have seen first-hand the devastating consequences of untreated mental illness and the far-reaching wake of pain and suffering it creates. There is a huge unmet demand for innovations and solutions in mental health. In the case of education, study after study reveals the long term sustainable impact created by investment in education on health, civil society and the economy.

Are you willing to share a bit about your portfolio? What have you invested in? What have the results been like?

Over the past few years, I have supported ten social impact organisations. It’s too soon to assess returns on the investments to date, but nothing has failed. Within the portfolio, I have two ClearlySo Angel (CSA) businesses: School Space, in which I’ve made two rounds, and Bulb. School Space is having a significant impact in the education sector by helping schools generate income through hiring out their underutilised facilities. The two co-founders, James and Jemma, have a great track record over the past seven years in generating over £500,000 for their partner schools. Another CSA investment is Bulb, which has taken the green energy sector by storm and currently provides sustainable energy to 800,000 households and is bringing on 100,000 new customers a month.

I have also invested in two funds, where I have placed my confidence in the fund founders/managers.  An investment in a well-managed fund can provide better diversification of risk and saves due diligence required for individual deals.

How do you pick the right companies to invest in? What are some of the challenges? What are the most important things to look for?

I back founders (and their teams) who are working to address social problems with proven, sustainable revenue models and market demand. I target scale of impact, along with anticipated financial returns. But with early stage investing, financial forecasts are tenuous and success ultimately boils down to the ability of the team to execute. I back people who are smart, emotionally intelligent, have graft, and are incredibly resilient – the kind of people that will get up again in the face of failure and are not easily discouraged. I came across a quote the other day by Michael Jordan that hit home:  “I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed”. So, if I can’t identify a history of commitment, resilience, and graft in a team, I won’t back them.

What are some of the warning signs to look out for that indicate you probably shouldn’t invest?

First and foremost, I won’t invest if I have any doubts about the ability of the founders, or their ability to attract and retain a strong team. The lack of a proven commercial model or an over-hyped valuation can also be warning signs. I look for intelligence and confidence but avoid arrogance. Effective leaders need to possess curiosity, humility and empathy more than just sheer intelligence.

In the case of co-founders, I want to see aligned vision and values. In the same way that 50% of marriages fail, businesses fail when partners are out of alignment or at odds. One of the companies I recently backed has two amazing co-founders – but from diverse backgrounds and with different life priorities. Their new partnership represented a greater risk to me than backing either one of them separately would have been. I asked them to do “pre-marriage” counselling as a way to prepare and align themselves for the future, which they did. At that point there was barely a business, so I was backing the co-founders and their idea of professionalising early years’ childcare. Their humility, openness and curiosity have been remarkable and fill me with confidence for the success of the venture.

When is the right time for a founder to seek investment vs self-funding or bootstrapping?

I like to invest at the stage where founders have already proven the concept, commercial model, and have been able to attract talent to their team. Typically, these aspects of a start-up should be self-funded through boot-strapping or a friends and family investment round. The timeframe on raising investment will be dependent on the business. For example, School Space ran a profitable business for seven years which could self-finance its growth. It only took on its first investment when its founders wanted to significantly scale. Other businesses will want and need to scale more quickly. I’m most comfortable investing where founders have skin in the game, either through years of their own graft, investment or investment of people who know and trust them.

What should a founder look for in an angel investor?

Founders should look for patient and supportive capital, someone who leaves their ego at the door and is there to serve the venture and entrepreneur where they can.

How important are boards? What should a founder look for in a board member?

Boards are vital in representing external investors and stakeholders, providing oversight, governance, accountability, support and challenge. Founders should apply vigorous criteria and process to selecting their board members. They should approach their board selection in the same way they recruit their senior team. It’s important to look at any skills gaps that they have in the leadership team and to try to get that expertise on the Board. In that sense, it’s an opportunity to bring vital talent in to “round out” the team, often bigger and more experienced talent than they could afford for an executive role. Finally, founders should like and trust their board members and be able to rely on them through thick and thin.

Conversely, a poor Board is a waste of time and money.

Thank you for your time and insight Kim.

Interview conducted by Quynhnhu Nguyen and John Lloyd of ClearlySo; editorial support from Jessica Duveen of ClearlySo.