Facilitating access to impact investment – the role of good data
Throughout all business stages, from idea to maturity, one of the main challenges entrepreneurs face is to attract appropriate funding. Results of the GREEN-WIN research on business models indicate that some green entrepreneurs are at a disadvantage when they approach investors. Sometimes their channels to market may not be strong enough, other times customer segmentation may be difficult, some other times the market demand for their green products and services is yet to be developed.
Nonetheless, the market for green products and services is growing globally and there is enough capital available to invest in viable businesses that also generate a positive environmental and social impact. Family offices, venture philanthropy, business angels, impact investors, impact asset managers, debt providers and public funding are currently leading the charge.
The amount invested globally remains however very small compared to the potential. Of the US$ 1 Trillion estimated potential for impact investment, barely US$ 170Bn are currently invested. Matching capital with the right kinds of deals to speed up green SME funding at a larger scale requires relevant data and information processing already in the pre-due-diligence stage. Without this, access to funding remains a challenge for green entrepreneurs. Becoming investor-ready, identifying and approaching the right investors, getting the right documentation all involve a significant amount of preparation.
In order to facilitate the process and lower the transaction costs, specific tools and services are being developed to help green businesses and investors find the right match, connect faster and more efficiently. One example of such practical tool is The Ground_Up Project (www.groundupproject.net) - a deal-sourcing platform for sustainability ventures looking for under $10M in funding. The platform is positioned in the pre-due-diligence phase and is primarily sourcing impact businesses looking for equity, debt and hybrid finance. It offers a special feature that helps entrepreneurs with investor readiness preparation and coaching and then provides personalized introductions to investors.
With a network of impact investors, asset managers, family offices and angel investors, the platform is useful to any enterprise that can demonstrate social and environmental impact and wants to gain visibility and access to investors. Through the platform investors have access to a granular understanding of relevant company, impact and fundraising information. Having the right type of data helps investors manage deal flow information, quick selection and facilitates faster introductions online as well as through The Ground_Up Project team.
In order to increase the visibility of green businesses involved in the GREEN-WIN project and to facilitate their access to funding, collaborating companies were invited to register on The Ground_Up Project platform and make their business information available to investors. One such example is SU-RE.CO, a sustainable coffee producing company from Indonesia, less than 2 years old, which is currently looking for funding to expand its production.
If they are well designed to offer and curate appropriate and relevant data, platforms can be very effective in facilitating access to finance for green entrepreneurs and deal-flow selection for investors and intermediaries. Increasing the scale and speed of deal flow is key to reaching the full potential of the impact market.