Impact Investing Metrics

Many VC funds have impact investing as a part of the investment thesis.

Impact investing takes into account the social impact of the fund in addition to the financial return.

For impact investing, include metrics showing the impact of each investment.

There are several ways to measure impact.

For startups in well-defined areas, use the expected returns method, which determines if an investment meets threshold criteria.

For early-stage companies just starting, use the theory of change method, which estimates the social impact of those activities.

For startups in a well-defined sector use the mission alignment method, which measures operational activities and compares them to the industry standards.

For all other startups, use the experimental methods which calculate the results from each investment’s activities to determine the impact. 

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