Hatcher's deal flow was analyzed and data on third-party transactions taken to determine the impact on investment returns. This review includes both ESG and overt sustainable. We observed that multiplications of investors influenced by impact were significantly more frequent.
This leads us to concluding that Impact strategies tend to be more accretive than typical investments in the early stages. In this article, we examine series A and earlier investments, which are the main focus of Hatcher's work and is able to handle the volume of transactions for the study.
Our analysis measures the change in value over a certain period of time. Since valuations fluctuate, it's not always a realized value. A lot of investments are not realized within this time-frame. We analyze the time elapsed to determine whether any relevant signals were at hand and, therefore, we eliminate any recent valuations (possibly even to zero).
The following chart illustrates the effects. This is a brief overview of Visit this link one perspective, with particular early stage rounds, relatively recent time of investing, and a five-year time horizon. It is illustrative of the relative performance in many views that we looked at. However, the numbers are scenario-specific and sensitive to changes in views' parameters.
Impact Vs. Non-Impact Investor
This review is not complete without confounding factors. We don't have any information about the intentions of individual investments This review compares Impact's performance against the other pool.
Some evidence suggests that Impact investors are attracted by entities that have traction. They typically pay a premium, which may reduce portfolio gains and consequently, buy into scalability. However, the performance overall is better for companies with a high impact in both a valuation multiplication and long-term basis.
We tagged impacts investments by looking at high-frequency venture capitalists with explicit mentions of "impact" or similar goals that are evident on their website or the absence of any impact-like approach. We ultimately identify a significant amount of investments within our database, by tagging high frequency investors. We then identified those investments that have an impact investor or mix, which is a 'known' non-impact investment, or both.
As this isn't a point-in-time analysis of transactions that are based on time, many investments are certainly inappropriately tagged. However, this is only an extremely small portion of investors who have incorporated impact concepts more recently tend to be Impact-friendly in earlier strategies.
Beyond the purpose of the investee there are other elements to be taken into consideration. Most likely, the added self-selection and scrutiny of aligning with impact goals, even on a fuzzy basis, leads to more focus on scalability, the feasibility of the project, team composition and other factors that influence the trajectory of valuation. Furthermore, many of the impact investment themes likely have a robust intrinsic return as well.
In short it is clear that there is an relationship between multiples of return for investors and the focus of impact investing. This promotes positive feedback in the impact investing industry that may help to increase the impact goals.