Guest blog: Monika R. Johnson, MBA/MS 2019
When the University of Michigan Social Venture Fund (SVF) launched in September 2009 as the first student-led impact investing fund, it sought to invest in and support innovative companies that place social and environmental impact at the heart of their business models. Through ten years of investing, Fund associates from the Ross MBA and BBA programs (including many dual-degree students) have analyzed hundreds of companies, searching for those that deliver both maximum impact and an optimal level of financial return. SVF has grown a portfolio of nine early stage companies with missions in four issue areas: food systems and environment, healthcare, education, and urban revitalization.
Like many impact investors, we are often asked to quantify our portfolio companies’ work to solve a particular problem. So, as a reflection on the past decade, a team of students set out to understand which portfolio companies have been impact success stories, which have struggled, and how all of their experiences can inform future investments. We looked to the Omidyar Network, the Global Impact Investing Network, Village Capital, the Rise Fund, Acumen, and other investors to identify a strategy for analyzing our portfolio’s impact; initially, though, we struggled to find one framework that appropriately valued companies’ contributions to systemic, long-term outcomes with short-term outputs. For example, we wanted to highlight not only how LearnZillion is helping individual students, but also how their platform is improving the way curriculum is delivered overall. Moreover, we saw additional value in companies sector-level impact, as well as SVF’s contribution to portfolio companies’ via consulting projects.
These priorities led us to create a model for measuring impact centered around two main concepts:
- Lock-step vs. Long-tail Impact: Some of our investees have measurable impact baked into their business models, where impact and profit move in lock-step. Others are working toward accomplishing a goal with difficult-to-measure outputs but strong long-term outcomes.
- Reformist vs. Transformative Impact: Inspired by The Movement for Black Lives’ framework for change, we noticed that some portfolio companies deliver immediate, direct services to their own stakeholders (reformist players), while others promote system and sector-level impact beyond the immediate stakeholders (transformative players). These two types of companies complement one another.
Our analysis also revealed that SVF portfolio consulting projects have enabled several companies to understand and quantify their impact on a deeper level: a lifecycle analysis assessment conducted for Chirps, as well as a social return on investment model created for Court Innovations, are profiled.
As SVF enters its second decade, we hope to see the Fund driving impact across sectors with these lessons learned in mind. To read the entire report and learn more about these portfolio companies download the 2019 Social Venture Fund Report.