Investing with Impact: The New Rules of Making a Difference

iSelect was not conceived as an impact investment fund. When we started the idea was (and continues to be) to find the best and brightest entrepreneurs outside of Silicon Valley and make lots of small bets investing to support them in their new ventures. When the winners emerge, double down on those. This is an investment strategy, not altruism at play.

It just happens to be the case that in St. Louis the best and brightest are working on revolutionizing agriculture and healthcare. In Kansas City they are staring the next generation of animal health companies. Some of the brightest minds in soil health and agronomics come from Southern Illinois, near Champagne. What we should have known all along is that generally when a really smart person dedicates their life to solving a problem they are working to have an impact. About a year ago we realized that our portfolio looks an awful like an impact fund.

[Learn more about investing with impact with iSelect]

The concept of “impact investing” has gained a lot of traction in recent years.

Originally associated with environmental and sustainability causes, the concept has increasingly been expanding its tend to include diversity issues, social impact, healthcare and more. In general, it’s about investing in companies and organizations with the intention to generate a meaningful, beneficial impact alongside a positive financial return.

This can include everything from backing companies that have pledged to reduce their carbon emissions, placing funds in industries such as renewable energy, or supporting those working to improve access to sustainable agriculture and more. Impact investing can involve many different asset classes, including equities, fixed income, private equity, venture capital and more.

But that’s just the beginning.

I like to refer to this idea as “investing with impact,” rather than “impact investing.” Investing with impact is the way we pass on not just wealth but our core values to the next generation.

There are many different ways to make a difference through your investments. Maybe you’re trying to pay attention to the long-term interests of your family, to make sure that they have the financial stability that they need after you’re gone.

That’s investing with impact.

Or maybe you’re worried about long-term risk in the stock market and illiquidity risk, that you’ll outlive your money.

The answer to that is investing with impact.

Maybe you have young children in your family and you’re afraid that they’re not developing the same kind of work ethic that you did at their age, that modern society is holding them back. So, you set up an investment structure that allows them to shadow you and learn from what you do directly.

That’s investing with impact.

A new definition

Because “impact” is just a word.

But by saying “invest with impact” we’re able to cover all angles of the Venn diagram — both those who mean investment as a way to make a difference in the world, and those that are trying to have impact in their own lives and the lives of their families. Doing well by doing good isn’t exclusively the realm of social causes.

This overlap is important, and investors should be taking notice.

According to BNP Paribas, approximately 70% of high net worth individuals say they are worried about their legacies, and this percentage is only expected to grow as more and more of the Baby Boomer generation fades into retirement. Over the next 30 to 40 years, an estimated $30 trillion worth of financial and non-financial assets is expected to pass down from the Boomers to their heirs in Gen X and the Millennial generations.

This transfer isn’t going to happen in a straight line, with advisors changing names on accounts and calling it a day.

There’s more at play.

For the Boomers, it’s very important that they figure out what to do next with their wealth. It’s their highest priority. That doesn’t mean they’re going to give it all away; they are much more interested in transferring it to their kids in a way that comprehensive and achieves greater goals. This means the process needs to be more involved than what past generations did with their wealth.

Because investing with impact is all encompassing. It’s about investing for your children. It’s about investing for your legacy. It’s about investing for society as a whole.

iSelect is dedicated to helping advisors and clients who are seeking to make their own impacts. Interested? Contact us to learn more.

Consideration

With 2021 well underway and with public markets still strong, we think it is an important time to highlight some of the key private market, venture investment themes that iSelect fund has identified for the year. We believe technologies transforming the Agriculture, Food and Wellness markets will flourish, with a focus on four areas: technologies that enable better food choices to drive better health outcomes, technologies that drive better, more profitable farm operations, technologies that drive the Consumerization of Healthcare, and biome-based treatment technologies. At iSelect, we invest for impact AND performance. We offer qualified investors access to emerging growth companies through our national venture capital strategy. Our unique structure allows our investors to continue to invest in these companies as they develop.

Timing

Why is now the right time for venture? The answer is that now is not explicitly the right time. Venture is something we need in our economy at all times. Now is not better than any other particular time. The question is, why ever stop? When we look at the challenges we’re facing in food and healthcare the reality is there is someone, somewhere who has an insight about how to build a product that will solve those problems. And if they put the right resources to it, they will succeed. As long as we need new technology to make life better or make our lives more enjoyable, we need venture capital to help fuel those entrepreneurs.

What is iSelect as a product?

iSelect is a very unique product, but when you break it into its parts it’s fairly easy to understand. On the front end we’re a traditional venture capital fund. We have a diligence process. We have an investment process. We have categories of industries where we have focus and real expertise, and we invest in companies in those areas that meet requirements for the fund. On the back end we’re unique in that we don’t raise a large amount of capital at one time and deploy it over the life of our fund. Each deal that we bring onto the fund, our investors have to prove and determine to invest in that deal. We have to constantly prove our diligence standards. It’s accessible, transparent and easy for investors to come in and see our comprehensive process.

What is the ideal iSelect company?

We are looking for founders that are passionate and we want the problem they’re trying to solve to be big, real, and painful. We want the solution to be revolutionary and we want our capital to be able to help them solve that problem. We want to know that they have customers involved and that the solution they’ve come up with actually meets those customers’ and market needs. And we want the team to be capital efficient with the money they’re spending.

What does the ideal iSelect company look like?

We’re looking for a company that has an opportunity to have a 10x return to our investment or greater in a period of three to seven years. What excites us at iSelect are companies that are solving big problems. We want companies that are going to be the Monsantos of the future. Not just in the size and the scope, but the impact they have on people’s lives. We want to create positive impacts on people’s lives, so we invest in areas like agricultural production and areas like producing healthy foods for our kids. They are problems that impact real people’s lives on a daily basis. That’s what we’re trying to do at iSelect. We’re trying to solve the big problems out there. Find ways to bring capital to the entrepreneurs who are the real heroes out there getting up every morning, beating away at these things that are problems that you and me and everyone else faces in their everyday lives.

What is iSelect?

iSelect is a venture capital firm. What that means is we look at hundreds and hundreds of different companies and we apply tough diligence standards to each of them, looking at whether the team has a good plan for growing the business, whether the team is qualified and credible, and more. We do that to resolve the few who provide the best opportunities for investors. And then iSelect takes that smaller set of investments and goes to investors who are interested in venture capital and provides a way for them to invest in these companies, either individually or all at once. We co-invest alongside other venture capitalists. We source transactions through to an exit where the company would become public or get bought. And we manage that whole investment process on behalf of our investors.