Impact investing is the purposeful act of investing in a business or product that will generate, in addition to financial returns, a social or environmental impact.
A 2017 survey conducted by the Global Impact Investing Network, a nonprofit organization for scaling and measuring impact investing worldwide, revealed that over 200 self-identified impact investors closed around 8,000 investments in 2016, with a total value of $22.1 billion. The businesses they invested in focused on creating a positive impact on society or environment, while generating profits for investors.
Seedstars, a global organization that empowers startups in emerging markets through events, workshops, acceleration programs and hubs, is an example of organizations doing impact investing. It aims to reach 10,000 entrepreneurs in 2019. According to the United Nations Conference on Trade and Development, between 5 and 7 trillion dollars of investment are needed each year, until 2030, to reach sustainable development goals worldwide.
Since the inception of Seedstars six years ago, their amount allocated to impact investing has multiplied by nine, said Seedstars event manager Laure de Peretti de la Rocca, during her keynote speech at Seedstars MENA Regional Competition held in Beirut on November 29.
“Goldman Sachs and BlackRock, have either acquired, launched or committed capital dedicated to impact. Despite the growing interest, the amount allocated to impact investment is low. If we look at Goldman, they have 1.3 trillion asset under management, less than 1 percent of it is dedicated to impact,” added Laure stressing on the importance of incentivising corporate and big investment firm to invest in impact businesses.
With a focus on impact investing and fundraising in the US versus Lebanon, the event marked Seedstars’ third regional edition and it was supported by several partners including Investment Development Authority of Lebanon (IDAL), MADA Assistive Technology Center, local telecommunication company Touch, Speed Lebanon, Berytech, Endeavor Lebanon, LebNet and many others. The 3-day competition had 351 attendees, 45 investors, 119 startup founders, 303 one-on-one meetings and a representation from 21 countries.
Speakers included Christopher Schroeder, American investor and entrepreneur and the author of the book Startup Rising: The Entrepreneurial Revolution Remaking the Middle East; Fadi Zoghzoghi, CTO of Bridge Athletic and a LebNet board member; Sharif El-Badawi, partner at 500 Startups; Walid Hanna, founder and CEO of Middle East Venture Partners (MEVP); Ayah Bdeir, founder and CEO of global success startup littleBits and Hassane Slaibi, CEO and cofounder of Band Industries, the company that built the most fundraised musical hardware on Kickstarter: Roadie Tuner.
Over 70% of Millennials and Generation X’ers are investing with a purpose
Doing business to generate profits without expressing social or environmental values is no longer an option for most of the millenials and their predecessor generation. A study conducted this year revealed that millennial investors and generation X investors are becoming more attuned to socially responsible investing than their older counterparts. Another study revealed that 77 percent of millennial investors and 72 percent of generation X investors have made an impact investment, compared to just 30 percent of affluent investors from the baby boomer and older generations.
“It’s no longer about making money, but also about having a purpose. Not only is there this rising interest in impact investing, but also a rise in power of a new generation that believe doing business with a purpose goes hand in hand,” added Laure.
And the winner of last year’s Seedstars Global Summit is an example of investing in high-impact startups.
Impacting farmers’ lives through technology
Last April, over 1,000 attendees, investors, startups and enthusiasts attended Seedstars Global Summit in Switzerland. After hosting around 80 local competitions and organizing five regional summits, the global summit gathered startups from 65 countries including the MENA region, for a chance to pitch and win the grand prize of $500,000 of equity investment. Twelve startups were chosen to present and the winner was AgroCenta. This Ghana-based startup aims to solve two critical problems small farmers face: access to market and access to finance. The lack of an access to a market forces farmers to sell their produce to middlemen, who will in return sell the products at a higher price. The lack of finance won’t allow farmers to expand to bigger farms and increase their production.
AgroCenta built a platform, AgroTrade, that allows farmers to sell their produce directly to large food traders, to ensure fair prices and selling in bulk. It has another platform called AgroPay, which provides financial institutions more visibility over low-risk farmers.
Another Seedstars success story is eFishery, an Indonesian startup that won the global summit in 2014. It’s a smart automatic feeder for fish in farms, making it easier for farmers to track and schedule feeding times using a mobile app. eFishery’s goal is to increase feed efficiency while saving food, as many farm fishes die due to overfeeding.
We may have a long way to go to reach sustainable development goals, especially with the $2.5 trillion investment gap in developing countries, but today’s generation is more than ever willing to invest in businesses that reflect their social and environmental values. With most millennials located in emerging markets, we can only hope the next big success story comes from the MENA region.