In January this year, we connected with Purpose Capital’s co-founder, Mr. Assaf Weisz, to check in on the (financial) health of the Impact Investing space. Sure, we hear more and more about how interested financiers and indeed, young people are, in the idea of socially driven business or financial models. But what does this interest look like out there, in reality, and on the field?
Mr. Weisz began Purpose Capital with two other founders “back in the year when The Rockefeller Foundation coined the phrase ‘impact investing’”. Since then, he’s developed a decade of expertise in his field. He’s the perfect person to discuss industry developments with.
What are the overall trends in the space of financing for social purpose businesses?
Mr. Weisz reckons that while functioning, the space is still small. There has been a steady increase in the number and even caliber of entrepreneurs. There’s been an increase in the number and variety of investors. There’s been an increase in infrastructure for the space. The entire development universe has grown.
“But, it all still remains relatively small compared to where it should be.”
It all began with a bunch of social entrepreneurs who had a hard time accessing capital because there was so little of it, Mr. Weisz explains. Then, slowly, investors started joining. First it was the few interested Angels and Foundations. There were a small number of deals. And they were willing to accept lower returns for a higher social outcome. Purpose Capital has worked to increase the visibility of social entrepreneurs (“SocEnts”) and educate investors since this beginning.
But then things began to change. People wanted profit and social impact, compromising on neither. Indeed, they began to focus on building sound businesses that could also create impact, not just settling for one idea over the other. It’s been a few decades. Still, realistically and honestly speaking, social enterprises continue to struggle with capital.
There has however, been a more recent change from the last few years that is important. Mr. Weisz elaborates that back in the day, most deals were done on the private market. These were conducted behind closed doors, with a lucky few finding each other. But increasingly, there is retail funding available. Retail funding includes a myriad of fresh financial models including the more popular one, crowdfunding. Also there are more public names getting involved. There are networks and exchanges now. No longer are social entrepreneurs and their financiers isolated to a lucky few private transactions. Social finance deals have begun to enter the mainstream world.
Often, financiers would like to fund innovation but insist on proven success. Innovation, proven at scale, in a young industry, is hard to come by. How do we get past this trap?
“That’s a tough one,” acknowledges Mr. Weisz. He gives it a few moments of thought and speaks again. It depends on the type of innovation too, he says. For instance, governments have historically been the most accessible and reliable for scientific innovation. Finding funding for business model innovation is definitely harder. Angels are always an option, though one must find the right connection. Investment also varies by place. Canada, for example, has been more risk averse than America. So there are options but in reality, for most, it is difficult to sell an idea in the space of global development.
So realistically, when will things change?
Like in the case of other great changes, a bunch of things need to happen to make a sizeable shift. For one thing, there has been a lot of focus and growth in the innovation economy over the past few decades, which is quite promising. Secondly, the growth of the industry will play a big role in its own shift. He explains, consider Silicon Valley. The investors in their industry come from within it. They started out as technology entrepreneurs who became successful and found their way to the top, to becoming power players and influencers. By contrast, prior generations of Toronto based tech investors came from backgrounds in banking or business in general, often finding themselves in uncharted territory. Similarly, we need more social entrepreneurs to become influential power players, to bring attention and resources to our lot.
As a veteran of the industry who’s seen it grow from nothing, what are you most looking forward to in the impact investing world?
Mr. Weisz is excited for all the budding opportunities to come to fruition, of course. But what he most looks forward to is,“for the concept of social entrepreneurship to increasingly become invisible.” He elaborates that he looks ahead to a time when social impact and profit are so interwoven that there is no such thing as business without impact. A time when all entrepreneurs are impactful and all enterprises deliver both, financial and social success. A time when business, as a concept, has changed entirely because of what we do today.
This is no small dream to dream, Mr. Weisz, and indeed, it is a brave one. But then again, he knew about the industry before it was an industry. And so, we end the conversation on a note of hope.
This article was first published in YourMarkOnTheWorld.com