"Impact Investing" is still investing

In 2015, the Global Impact Investing Network (GIIN) estimated total impact investing assets under management to be $77 billion. This number is expected to grow to $1 trillion by the year 2020. By any measure, these figures are impressive; the potential for deep, systemic change through conscious capitalism is extraordinary. And it’s no question that our current food system is ripe for change.

The rising numbers in impact investing funds speak not only to a growing sense of social responsibility in the investment community but also to heightened recognition for the profit opportunities therein. Afterall, impact investing is still, first and foremost, investing. So when seeking funding for a mission minded business, all the same rules apply. As an entrepreneur, you must...

  • Identify and define the size of the market opportunity
  • Differentiate your product offering
  • Demonstrate a solid business model or path to creating one
  • Assemble a phenomenal team

Your mission may be an attractive part of the story, but it can make it more difficult for the numbers to stack up: ingredients are more expensive, the supply chain may be less efficient, and your ultimate pricing in the market will likely be higher. All too often, entrepreneurs are so focused on "doing good" that there isn’t enough focus on the business basics. While a compelling mission and core values are important selling points, don't forget that you're running a business. Investors--even impact investors--are looking to for a return on their dollars.

GIIN has defined Impact Investing as “Investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return”.  One of the key challenges impact investors are facing as a whole is how to define the “impact” to be measured.  As you can imagine, triple bottom line metrics are not easy to define, and there is little consistency from one company to another, much less one industry to another.  Nonetheless, the growth of impact investing dollars is a testament not just to the investment opportunity but to the shift in mindset toward investing overall.  

Investors recognize the tremendous business potential in reshaping our food system while increasing accountability and fostering sustainable practices.  Equally, growing consumer demand for ethical, sustainable products is creating a ripple effect across the entire ecosystem.  This emerging shift in consumer awareness and heightened sense of social responsibility is giving rise to entrepreneurs who seek to fuel the good food movement.

Consumer products are just the beginning

The number of natural and organic consumer branded products has grown exponentially in recent years, and this expansion has helped to drive broader interest and education in the space as a whole. But this is just the beginning. Consumer products have pushed other parts of the supply chain to step up as well. With increases in everything from sustainable farming to ethical sourcing and food access, mission minded brands are catalyzing change both upstream and downstream.

“Big Food” has spent decades building its ecosystem. Now thoughtful, local, sustainable food must do the same. Each niche within this new ecosystem constitutes a business opportunity, and increasingly entrepreneurs are realizing this. Exciting developments are emerging in a variety of sectors such as: FoodTech (both in the lab and in the digital world), Sustainable Agriculture, Food Waste, Vertical/Indoor Farming, Aquaculture, Food Access...and many many more.  

For example, California Safe Soil is a company that is revolutionizing the world of food waste. They have developed a composting technology that closely mimics the digestive process of the human body.  This system can fully recycle 15 tons of food waste in just three hours.  Each batch of waste is then converted into a powerful, non-chemical liquid fertilizer that can help increase crop yield, improve soil health, and reduce a farm's need for harmful nitrate-rich products. Through their innovation, California Safe Soil is not only helping to alleviate food waste but is also providing a valuable product to the farming community, enriching our soil and closing the loop.  

As the good food ecosystem expands beyond consumer products, so does the intersection of food and sustainability. 

Not all roads lead to an exit

Not all businesses are suited for growth and scale: some mission driven companies should remain lifestyle businesses, and an exit should not always be a foregone conclusion. In these cases, typical Venture Capital or Private Equity investors may not be the right funding sources. This doesn’t mean, however, that outside capital can’t be involved. 

The anticipated $1 trillion in impact investing funds reflects a broader range of players, from individuals, endowments, and pensions to financial institutions, government entities, and foundations. The vehicles for these investments could include grants, debt, or annuities.

For instance, governments are getting active in encouraging local food. In August 2016, Governor Cuomo announced the New York Grown & Certified initiative along with a $15 million dollar investment in a food hub in the Bronx which will include a cold storage facility and food processing center. As a result, farms and companies will have more access to services and infrastructure that generally  wouldn't be within their reach.

Family offices are another great alternative funding source, as they typically have more flexibility with regards to the size of company, sector, and returns. They typically have the ability to invest at any stage and make follow-on investments as well.

Lastly, foundations and other institutional investors are becoming increasingly interested in the food space, as evidenced by Arabella Advisors' recent Good Food initiative.  

So, what makes good food such good impact investing?  

Ethical, sustainable food and agriculture solutions...

  • Catalyzes both philanthropic and financial capital
  • Plays across sectors such as environment, health, equity, and education
  • Appeals to “next generation” investors
  • Comprises local, regional and national dimensions
  • And offers the potential for “System” level change

It’s this last possibilitythe opportunity for systemic changethat is the most exciting part of what Mission and Money can create together. With expanded investment sources that aren't necessarily driving only towards growth and exit, entrepreneurs will be able to work across the ecosystem and to create solutions for tomorrow's food.