You can make money and make the world a better place

Last week, we had a conversation with Mike Winterfield, CEO of Active Impact Investments, to talk about Active Impact Fund, the first fund being raised by the company. Vancouver-based Active Impact Investments aims to increase social and environmental impact by investing capital and talent into early stage, purpose-driven companies to help them succeed and scale. We unpacked the mission and reason behind creating such a fund, while exploring some of the challenges faced by a social-purpose driven fund in this fast-growing industry.

Tell us a little about your background and your journey into impact investing.

I began my career in sales working for small- to medium-sized, high growth, high potential private companies, in various sectors. I held quite a few senior operational roles where I had an opportunity to lead projects that I probably wasn’t really qualified to do but through trial and error and hard work we managed to pull it off, which instilled a lot of confidence in me. I loved what I did and I, along with the variety of companies I was working for, always performed quite well so I got to a point where I felt I could have a positive impact in any role. So, I asked myself the question, “If I won the lottery, what would I do?” and I started to really think about the optimal work to do if I didn’t have to do it for the money. While I was doing this soul searching, someone in my network introduced me to, what he called at the time, ‘conscious capitalism’ and I really fell in love with the concept.

“The idea of having a different reason to get out of bed in the morning, but also being unapologetic about the fact that I could make money while making the world a better place, really stood out to me.”

So, what drove the idea for Active Impact Investments? Why focus your fund specifically on purpose-driven businesses?

I wanted to do something entrepreneurial, something driven by purpose instead of simply being concerned with wealth maximization, with disregard for the social and environmental consequences. And that’s really how the idea of the fund started to form. I thought to myself, “I wonder if I could pool together a group of people who want to use their capital consciously, and also pool together a group of people who have a background similar to mine; people later in their career with a host of experience and expertise looking to do something more meaningful with their time?” So I, of course, focused the fund on purpose-driven businesses because it made sense that if we were going to help people grow, we should help the good guys/gals win!

What is the mission of this fund? What do you hope to achieve?

The mission of the fund is to direct more capital and talent to purpose-driven businesses. If we can be educational, inspirational, advocates, and thought leaders to and for these companies while proving out our own model, investors and employees will not have to choose between purpose and profit. As a professionally managed fund, we are also excited about the opportunity for investors to take a diversified approach to impact investing through a hand-picked portfolio of high growth companies. Our goal is to be able to show impact investing is a viable method of investing by leading through example. We want to stop the debate and speculation around impact investing and if it really ‘works’ and create more success stories in our portfolio and above market returns for our investors. After we do this, even the most traditional capitalists will be happy to park their money with us which unlocks a lot of capital that could go towards solving important global issues.

And how do you decide where AIF will invest? What is your process of sourcing and screening companies?

A lot of fund managers come from a strong finance background and often times don’t have a close relationship with start-ups. I come from a background of working mostly for and with small- to medium-sized companies so I’m constantly ‘in the field’ by connecting with and mentoring ventures. This opens up a great channel to source companies from, which other fund managers may not have access to. The other way we source potential ventures are through referral partners; accelerators, incubators, service providers, VC funds, and angel funds all refer ventures to us if they think there could be a fit.

When it comes to screening, we first start with authenticity. What that means is that we screen for the usual (eg. SDG alignments, impact measurement) but we also recognize that entrepreneurs can be early on in their journey. We try to judge if their social impact is something that is baked into their DNA, and we try to gauge how these entrepreneurs will evolve as their businesses evolve. We then switch to pure economics and I’m sure we are similar to any high performing VC or private equity fund’s screening methods; we look for the ones that are most capable of rapid scale with good cashflow in order to achieve above market returns. Then, we help our ventures more operationally than most small funds do.

What types of companies are in your portfolio? Are there any sectors or business models that you are especially keen on?

We focus on companies with the following business models: software services, software products (SaaS), and other services. Our team has experience and a background working with these types of companies so it helps us not only do a better job of understanding the business, but also provides our investees with more relevant talent and skills because our team is able to better tap into our respective networks and expertise. Another reason we love working with software is because we can work with entrepreneurs at an earlier stage since software-based businesses are less capital intensive and scale very efficiently.

How do your investors know where their capital is going? Do they play any other roles apart from just investing capital?

We have two types of investors: approximately half of our investors are passive and the other half active. Passive investors are totally welcome and as our investor pool grows, we will have more and more passive investors join. However, the unique part of our fund is our active investor group. These are people who want to be more involved with their money, which appeals to some folks that feel they can increase their ROI and have more line of sight. If they have the skills and network (e.g. experience with senior roles in some operational capacity) they can be part of an ‘investment club’, which provides them with the opportunity to be involved with a number of committees that we have including a Screening Committee, a Due Diligence Committee, and a Post-Investment Support Committee.

What are some of the greatest problems you face?

The biggest problem that the entire private equity, impact investing space faces is access to and awareness of funds like ours. Market reach and access are hard because only 1.8% of Canadians qualify under the accredited investor exemption which allows them to invest. Of that 1.8% that are allowed, only one per cent are investing in private equity. Financial and wealth advisors aren’t presenting these opportunities to their clients, even though their clients are showing more interest every day in impact investing, which leaves a huge gap in the market.

That’s where the SVX plays an important role and provides us with an essential service; they unlock a group of investors for us to tap into and present our opportunity to investors only after being professionally vetted and approved. Once people hear about our mission, model, and track record of success, they are always very interested.

Is there anything currently exciting in the works for AIF?

Our next close is in September. We have a lot of traction and strong interest so we are looking forward to that. The average cheque size has moved up quite considerably, which creates opportunities for us and for our future portfolio companies. Secondly, we’ve made our first investment and we’re working towards deploying more money into some really exciting companies very soon. For us, our hard work really begins the day we have invested into a company. We work side-by-side with them, providing support and talent and that is what we’re most excited about, above and beyond being able to provide them with the capital they need.

To learn more about Active Impact Investments and its current offering, please visit SVX.ca for access to more details, documents, and updates.

Follow us on Medium (SVX) and Twitter to stay up to date with everything #ImpInv!

--

--

--

SVX is financial services firm & impact investing platform connecting ventures, funds, and investors to catalyze investment capital for impact. #ImpInv #SocEnt

Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium

Welcoming Lia & Daniel, Our New Venture Associate & Intern

Current Status of Lamden Business and Development

A 6 question guide to face change in 2022

The Simply Troubled and Generally Confused World of Allocator Technology

What a VC Stack looks like

My 2018 Business Resolutions

Recap | 2017 National #WLPower25 Award Receptions

SAP acquiring Signavio has tremendous value potential — Here is why

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
SVX

SVX

SVX is financial services firm & impact investing platform connecting ventures, funds, and investors to catalyze investment capital for impact. #ImpInv #SocEnt

More from Medium

Startup : A Word That Changing the Lives of Homemakers

How To Effortlessly Be Happy & Rich

India’s UAE exports to hit $40b this year

Welcome to the Success Tribe Summit Interview Series!