What Impact Investors Look for in Start-Ups

Are you ready to start securing funding for your startup? Check out seven of the most important factors that impact investors typically look out for – from team cohesiveness to projected growth and innovation.

Securing funding for your start-up can often feel like a big task. 

Whether you’re looking to bolster your impact in the community, achieve expansive growth in terms of your team and revenue, or streamline foundational operations, you know you need that financial boost. 

But when it comes to maximizing social impact, it's not just about reaching out to any investor and hoping for the best - it's about finding the right impact investor who can align with your mission.

So, what are these impact investors actually looking for in promising start-ups like yours? 

While it's true that every business model has its own requirements and specific niches, understanding some of the core elements that impact investors prioritize can make a big difference in how you present yourself and your company. Plus, it can also increase your chances of securing said funding.

So, in order to prepare effectively, let's dive into what impact investors typically want to see before they commit their funds to a social impact start-up. 

Oh, and before we do, always remember: although ticking every box might be ideal, it’s ultimately more about aligning with their ideals and proving the value of your venture.

7 criteria impact investors are looking for before they invest

What resonates with impact investors? 

Unlike traditional investors, impact investors have a distinct set of priorities that aligns with their mission-driven ethos and doesn’t necessarily revolve solely around profit margins.

So before you head into that all-important pitch meeting, here are seven factors that can make or break their decision to invest:

1. Strong teams

Trust is the foundation of any investment, and impact investors typically place their faith in cohesive teams – not just individuals. Teams that demonstrate synergy and feature diverse skills typically resonate better with potential funders.

2. Industry + topic expertise

The credibility of a start-up significantly hinges on the team's expertise, and investors feel more secure when they see founders with a proven track record in the industry. Whether it's hands-on work experience or knowledge gained from formal and informal learning, showcasing this expertise can lower perceived investment risks.

3. Proofs of concepts

Before impact investors even consider putting their money on the line, they need tangible evidence of your venture's viability. This basically means that they're looking for clear signs of traction, enthusiastic responses from potential users, and a validated product or solution.

4. Scalability potential

For investors, scalability isn't just about broadening the user base – that barely scratches the surface. Instead, they also evaluate the pricing potential of your product, its relevance to diverse audience sizes, and its ability to grow without substantially increasing operational costs. Beyond that, impact investors are also interested in the product's lifecycle and its versatility across different scenarios and contexts.

5. Social or environmental innovative disruption

In a market filled with solutions, what makes yours stand out? Impact investors want to understand how your offering bridges existing gaps in unique ways, and they’re especially attracted to products or services that not only address a challenge but do so innovatively. 

6. Ambitious growth projections and return on investment

Beyond the product, investors are buying into your vision. They want to see your enthusiasm alongside growth projections and promising returns. Having a clear roadmap that details your start-up's plans to achieve its full profit and impact potential is key when it comes to pitching and securing funding.

7. Impact strategy + Theory of change

Social impact start-ups need to make their mark beyond just profits. With this in mind, impact investors expect clarity on how you intend to generate positive societal or environmental impact, your approach to measuring it, and the specific metrics you'll use to track your progress.

Understanding impact investors and their priorities

Understanding the subtle nuances of pitching to impact investors goes beyond having a solid business model – it's about highlighting your unique proposition and aligning with the values that matter most to them.

To ensure you’re on the right track, let’s quickly recap what impact investors are typically looking out for:

1. Strong teams that act together

2. Demonstrated industry and topic expertise

3. Concrete proofs of concept

4. Scalability potential

5. Innovative social or environmental disruption

6. Ambitious growth projections and return on investment

7. A well-defined impact strategy 

Feeling overwhelmed or unsure about how to position your start-up effectively? You're not alone. Schedule a Strategy Call with our founder, Margherita, to uncover new ways to refine your pitch, build a compelling narrative, and devise a plan that resonates with impact investors. 

Your vision deserves the right kind of support. Let's make it happen together!