Suzanne Biegel | Getting real on measurement – the role of the impact investor
It’s been well over a decade now that I’ve been investing in growing businesses – and charities – tackling ingrained social and environmental challenges. I have some truly exciting companies in my portfolio, some of which have grown significantly in the last couple of years. It’s an honour to be part of their journey, and I am glad to offer my skills and experience when they need it (and sometimes when they think they don’t). But as an impact investor, I am very aware of the risks we run when we ask the entrepreneurs for too much, too early; it’s time to get real about the practicalities of impact measurement.
Many funders in the international development world, for example, want to measure absolutely everything. They’re right that knowing your impact and improving data collection are important, but so is actually delivering your project. From an investment and scaling standpoint, we have to remember that these are early stage businesses – perhaps they can only realistically measure a couple of indicators really well. That’s okay with me. I’d rather genuine, useful measurement in one or two areas than pages of data. Impact measurement is there to help us improve, not to be so onerous it detracts from delivering on social change or costs so much (in time or money) that we take our eye off the ball in delivering our products/services.
If I am investing in a growth enterprise tackling a particular social issue – like access to clean water, for women and girls, in the Global South – I cannot ask them to do longitudinal analyses on the impact of clean water on the community. I can ask them to tell me the three things that they think are worth measuring, and how that will affect their decision making. I can ask for one or two measures for how their solution has created direct efficiencies for customers (as evidenced by asking their customers or observing households); or I can ask to see how they have created new sources of income for a value chain (like having women/older girls as water distribution agents). I can then try to ascertain where those efficiencies have resulted in more time for something else (and what that is), how they have decreased incidence of illness/improved health through clean water, get customer feedback on quality of life differences – or time savings, or increased income, or decrease in use of energy to boil water. I may be able to get gender disaggregated data, and ask them to consider how they are collecting their data to help them know when they’re having an impact. As they grow, I may well expect to see more – but just as I won’t question every expenditure figure in their financial report, I won’t interrogate every piece of data in an impact report either. It’s the big picture that matters.
Overloading entrepreneurs with reporting requirements is not realistic and it will not help them achieve more – it may make them achieve less because they’re desperately collecting data when they could be delivering the work and satisfying their customers.
Ownership matters, and we are backing entrepreneurs because we believe in their intention to deliver social change as well as their business model. This means trusting them to choose appropriate metrics, working through that with them, and setting up – with them – straightforward ways to report back to us. It doesn’t mean expecting them to do detailed impact reports for ten different donors or investors. That is part of the reason due diligence can take so long; I am trying to decide if my vision and values match with those of the entrepreneur. Once I am in, I need to step back and let the business make some headway. We need the entrepreneurs to feel ownership and responsibility for reporting on impact in a way that genuinely helps them improve.
Patience isn’t just about patient capital; it also means giving the business space to work out for itself what its impact is, what it is not, and what they can do to improve it. That is not to say we cannot remind them, or help share our experience, or make introductions to people whose ideas on measurement they can use. It just means weighing up the importance of incredibly detailed impact reports in contrast to delivering work on the ground.
It is usually clear when an entrepreneur is compromising their values as their business is growing. It isn’t clear in the numbers – data can hide a multitude of issues – but it usually is in the way they conduct business, the retention rate of customers or service users, and their willingness to be transparent with their investors. I choose to back certain entrepreneurs because I share the belief that their business can change something in the world for the better – this usually comes with a fundamental commitment to impact. I would rather trust in that than overwhelm them with constant requests for data.
What we can do is to ask them what we can do to support the growth of their impact, to be there when they need guidance and to trust their vision for change.