Venture capital is evolving, and the upcoming SuperVenture event promises to delve even deeper into how innovation and impact converge in today’s investment strategies. Today’s visionary General Partners (GPs) recognize that financial performance can be deeply aligned with meaningful societal impact. But in our data-saturated environment, defining, measuring, and tracking impact remains a formidable challenge. How can GPs and Limited Partners (LPs) integrate impact effectively without drowning in complex data and reporting requirements? In conversation with SC Moatti from Mighty Capital, industry experts Caroline Gillespie from Commonfund, Joanna Kuang from Illumen Capital, and Humaira Faiz from the W. K. Kellogg Foundation offer insights into the evolving landscape of impact investing, revealing essential frameworks and practical strategies to balance investment returns with social priorities. This conversation originated on stage at our Spring 2024 event and is a sequel to a previous article on our blog linked here.
GPs: Set impact goals with intentionality
As Joanna notes, impact starts with a clear vision. GPs need to identify and prioritize targeted goals—such as job creation, education access, or sustainability infrastructure. Starting with a compelling, specific impact vision enables a GP to align portfolio strategy accordingly. But impact isn’t a checkbox—it’s a growth engine. GPs play a crucial role in guiding portfolio companies to refine their impact metrics, identify appropriate frameworks, and effectively communicate their social value and outcomes. Empowering portfolio companies to track relevant metrics fosters a two-way dialogue that supports measurable results without imposing excessive demands on entrepreneurs.
Humaira shares that some of their GPs hire data scientists to showcase both the outcomes of their investments and the additional value they contribute, such as helping portfolio companies scale, reach more customers, and optimize operations.
Frameworks as structural guides
Impact measurement can be complex, but established frameworks like the UN Sustainable Development Goals (SDGs) provide valuable structure. They enable GPs to categorize and communicate their impact goals effectively. For instance, a sustainability-focused GP might track metrics aligned with goals such as carbon reduction or clean energy access.
Caroline highlights the role of tools like BlueMark, a certification and scoring system that standardizes impact metrics, allowing for consistent, cross-portfolio impact assessments. This approach, still evolving, brings greater transparency and enables meaningful comparisons. Similarly, GIIN Iris+ offers a robust platform for impact evaluation by measuring impact against industry benchmarks. Combining these tools into a cohesive strategy remains a challenge, but their role in modern impact investing is undeniable.
LPs: Emphasize clarity and consistency
LPs are increasingly interested in understanding the impact of their investments but often face inconsistent reporting standards. By defining core metrics and maintaining these expectations year-over-year, LPs can reduce the burden on GPs, creating a streamlined data ecosystem that benefits all stakeholders.
Joanna points out that Illumen’s bias-reduction methodology focuses on fostering awareness, structured decision-making, and inclusive practices to minimize implicit biases. By implementing training programs that highlight racial and gender bias, Illumen aims to educate GPs about the subtleties of bias in everyday interactions.
Caroline notes that Commonfund has prioritized client education on impact investing through initiatives like the Commonfund Institute. Through resources, workshops, and forums, they are equipping clients to engage more meaningfully with impact initiatives.
Such initiatives are invaluable, especially for those new to impact investing, as they offer insights and examples to help align investments with impactful outcomes.
A continuous improvement flywheel
Impact measurement is more than data; it’s about creating a cycle of continuous improvement. As GPs refine their strategies based on impact data, they can better support portfolio companies and they build a flywheel effect, supporting greater value for both society and investors. The best investors in this era will excel at the art and science of impact, building lasting value for investors, portfolio companies, and communities.
Joanna, Caroline, and Humaira all emphasize that consistent data collection and feedback fuel a “flywheel” of continuous improvement, where each success builds momentum for the next. Humaira shares that the Kellogg Foundation has begun tracking engagements through various partners and technology systems, allowing them to visualize and measure impact.
Adding to this momentum, AI is transforming impact reporting. Caroline notes that recent developments in AI tools now allow for automated analysis of financial data, significantly reducing manual processing. The potential of AI to automate and standardize impact reporting holds promise for an industry still characterized by diverse practices, setting a new standard for efficiency and reliability in impact measurement.
About the author: SC Moatti is the Founding Managing Partner of Mighty Capital, a Silicon Valley venture firm that capitalizes on the growing importance of product managers in enterprise success, and chairs the Board of Products That Count, a 501(c)3 nonprofit that helps everyone build great products and inspires 500,000+ product managers. Honored on the Kauffman Top 30 Index, she has invested in pioneering companies like Amplitude (NASDAQ: AMPL), Groq, and Canela. SC frequently speaks on global stages like TechCrunch and Fortune’s Most Powerful Women Summit and lectured on product and investing at the executive programs of Stanford and Columbia Universities. SC spent the first decade of her career as an entrepreneur and product manager, pioneering the cloud, mobile, and social revolutions with industry leaders like Siebel Systems and Facebook where she earned her a reputation as “a genius at making products people love.” Raised in an entrepreneurial family in Paris, SC has a master’s in electrical engineering and a Stanford MBA, and is a Kauffman Fellow and member of YPO. For more information, visit Mighty.Capital.
