Lately, it seems, just about everybody is becoming an impact investor. “All good,” one might say, for who wouldn’t want to rally behind those who strive to make a difference in the world while implementing a compelling investment strategy? The tricky part, as Paul Brest and Kelly Born argue in their thoughtful article, is determining what exactly that impact looks like and whether its existence bears any connection to the investment process attached to it.

After almost 10 years of building our practice of double-bottomline venture capital at DBL Investors, we find many aspects of the authors’ conceptual framework resonant, including the notion of perspicacity, the presence or absence of additionality, and the importance of metrics and nonmonetary benefits.

By its nature, venture capital as an asset class relies on a certain level of perspicacity, as referenced in the article—discerning opportunities that ordinary investors don’t see. Routinely investing in often unproven entrepreneurs who take on difficult product development challenges in markets that can be hostile does not happen successfully without some sixth sense that the innovation will prevail and that the odds are not as bad as they appear. What impact investing lends to the venture capital model is another level of purpose, one that reaches into a social or environmental domain by splicing itself into the DNA of a young company whose culture is still in the making.

For example, in the early days of Tesla Motors (one of our investees), when we were looking for a site to build a manufacturing plant, DBL helped the company explore regions of the San Francisco Bay Area that might be suitable and where economic development incentives could help to level the playing field compared to other countries and states that had lower costs. This effort stemmed from aspects of our mission at that time, which included reducing the carbon footprint of transportation and creating high-quality jobs in Bay Area neighborhoods that needed them. Through a process that broke apart the conventional wisdom about whether California was an appropriate place to manufacture, the Tesla team’s perspicacity helped it grab a plant (the former NUMMI plant in Fremont) that many thought was out of its reach, creating a strategic win for both the company and the community. Whether this would have happened without a robust and purposeful early collaboration with DBL Investors we will never know. We do know that to infuse impact into decision making, one needs first to get a seat at the decision-making table.

While the Tesla example shows how mission can lead to nonmonetary assistance to a company that can create very strategic benefits, the fact that DBL Investors invested alongside traditional venture capital firms makes the question of additionality harder to answer. In other cases, it is much clearer. When evaluating a prospective investment with both a social lens and a financial returns lens, we have found that we can connect the dots a little sooner as to why a particular company idea might work. This is because we are keyed into certain societal trends, problems, and policies that have been hard to solve and may even be getting worse. In these situations, it may well be time to turn to an entrepreneurial company to build on previous research and programmatic development from public and nonprofit organizations and to work to solve the problem at a scale unachievable by grants and social-welfare programs alone. Revolution Foods is the clearest example of this in our portfolio. DBL seeded this company at a time when it was very difficult for the founders to attract investment because the company’s purpose was “off-spec” from traditional venture business models. For us, by contrast, the company represented an exciting opportunity to address the epidemic of obesity and diabetes in our schools, particularly those in lower-income demographics. We also believed that cracking the code on K-12 healthy meal preparation would be of interest and value to existing players in the food service industry, creating potential for significant value creation. Today, Revolution Foods is serving more than 200,000 meals a day to children in K-12 schools and has attracted investment from an array of traditional and impact investors. In this as well as many other cases, the impact investor who sees the potential early and so invests early acts as a catalyst to help the entrepreneur gain access to traditional investors later on.

Finally, the appeal by Brest and Born at the end of the article for investors to start measuring and analyzing aspects of their work rings very true to DBL Investors. As the examples I have presented here demonstrate, if you don’t track the efforts, count the jobs, detail the carbon saved, or whatever your social-mission priorities happen to be, it is very hard to show how or whether your investment approach has made a difference. At DBL, twice a year since the inception of both our funds we have been writing quantitative and qualitative impact reports that detail successes, failures, and works in process across a wide range of industries and locales, and through these reports we have been able to help our investors and ourselves assess the nature and scope of our impact.

We believe that some aspects of double-bottom-line venture capital investing, such as working with broader constituencies, paying attention to place, and engaging in policy issues, will become mainstream. In the startup world, using perspicacity with purpose to build businesses and address social problems is a way to refresh the venture capital model to address 21st-century needs and opportunities.

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