In the world of investments, a growing trend is emerging that goes beyond traditional profit-driven approaches. Impact investing is gaining traction as a means to create tangible social change while also ensuring financial sustainability.
In an interview with Lisa Jean-Mairet from elea Foundation for Ethics in Globalization, we discuss balancing social impact and financial viability in investment decisions. Lisa emphasises the importance of finding models where these two aspects go hand in hand, rather than viewing them as conflicting priorities. This approach signifies a shift towards a more conscious form of investing, where profit generation is not the sole measure of success.
Tell us more about elea Foundation.
elea is a philanthropic impact investor that exists to fight absolute poverty through entrepreneurial approaches. Established in 2006, elea has since committed substantial resources to identify impact ventures that contribute to poverty alleviation across four primary sectors: employable skills, last mile retail and services, agricultural value chains, and climate and livelihoods. We invest in these companies and collaborate with them as strategic partners to facilitate their next phase of development.
How do you support the organisation’s vision in your role?
In my capacity as Executive Director, my primary focus is on conducting thorough due diligence to identify impactful ventures for our portfolio. Additionally, I am involved in what we refer to as our awareness projects. As an impact investor, particularly in the realm of philanthropic impact investing, elea’s mission encompasses the support of initiatives that enhance the overall strength of the impact investing sector. A crucial aspect of this mission is fostering entrepreneurial capacity, which is essential for the sector’s growth. In part, this entrepreneurial capacity is significantly influenced by education and we feel that’s where the African Leadership Academy (ALA) fits in very snuggly.
What has it been like partnering with a pan-African school like ALA?
It’s been a lot of fun to work with the team over the past few years. During this time, we established the entrepreneurship council, which has enabled us to adopt a broader perspective on the entrepreneurship curriculum across various activities. Additionally, we have actively participated in the Anisha Prize program, which has provided an opportunity to apply our expertise as impact investors. For the elea team, this experience has been particularly valuable in enhancing our understanding of emerging entrepreneurs, who are essential to the pipeline for identifying potential investment opportunities. So yeah, I would say overall it’s going very well.
Through your work with ALA, Anisha, and the investment council, what is something you’ve discovered about the group of entrepreneurs or young leaders we collaborate with that you found interesting?
Something new for me was interacting directly with Anisha’s fellows, and they have pushed me to think differently about certain aspects, leading to valuable insights.
Additionally, I discovered that for someone new to fundraising, understanding the various types of funding options available is crucial. While you may have a solid grasp of your business and its potential, it’s essential to consider what an investor finds appealing about your business model, which may differ from your own perspective. Crafting a narrative that resonates with investors is also a key challenge. I see a significant gap in this area and addressing it could help more young entrepreneurs secure funding that aligns with their objectives.
This is more complex than it appears. Even experienced individuals often face challenges in determining which investment option best supports their vision for growth. Sometimes, entrepreneurs may accept the first funding offer without fully understanding the implications, such as the differences between debt funding from a passive investor and equity funding from someone who is more hands-on. While I haven’t reached a definitive conclusion yet, I am gaining a clearer understanding of the extent of this gap and what it might take to close it.
Images: Lisa has engaged with the Anzisha team at annual events like the EEA Summit, sharing her expertise with our program participants and stakeholders.
How do you balance the social impact and financial viability in your investment decisions?
That’s a great question. Our goal is to identify business models where profit and social impact work together seamlessly.
We seek models that do not require a compromise between generating profit and contributing to community development. For instance, while it is commendable to allocate a portion of profits to community initiatives, our focus is on integrated business models, such as the one exemplified by Blue Lever. In this case, the growth of the business is directly linked to the number of students enrolled in their courses, thereby simultaneously enhancing both business performance and social impact. This alignment is a critical criterion across all sectors in which we invest, as we typically engage as shareholders.
Our mission is to combat absolute poverty through entrepreneurial strategies, fostering the establishment of robust enterprises that can generate sustainable social impact. It is also pertinent to note that our investment approach is characterised by a long-term perspective; we generally commit our capital for approximately seven years. This duration allows entrepreneurs the necessary time to develop their business and impact models in tandem. Such an approach often requires additional patience from investors, which is a vital aspect of our investment philosophy that we believe deserves emphasis.
What strategies or frameworks can investors adopt to guarantee mutual benefits for themselves and the VYE, thereby establishing a successful investment model?
The active collaboration with investors is essential in assisting them with various strategic challenges they may encounter as they expand their businesses. This support can encompass a range of areas, including hiring strategies, fundraising approaches, and overall growth strategies. While this is a critical aspect across our entire portfolio, I believe that for those looking to develop a model specifically aimed at investing in very young entrepreneurs, it would be beneficial to integrate mechanisms that provide this type of support. It is reasonable to assume that younger entrepreneurs, in particular, may require additional guidance on these strategic issues, which they may be facing for the first time.
How can fund managers and organisations serve as advocates for investing in emerging markets and promote the benefits and opportunities associated with such investments?
It’s important to have successful examples in your portfolio. This is crucial because it shows that you invested in entrepreneurs when they were young, ideally in their early twenties. We do have a few examples, but they might not fit the strict definition of very young entrepreneurs, which I consider to be under 23.
Most of our examples are from the late twenties. Additionally, showcasing someone’s entire journey can be valuable. For instance, if an entrepreneur had a previous business before joining your portfolio, sharing what they learned from that experience, even if they were just 19 or 23, can also highlight their success.
We also need to consider the importance of having entrepreneurial skills in this field and increasing the number of deals. It’s essential to have more successful impact entrepreneurs. Additionally, investors should actively direct some of their funds towards initiatives, like a local accelerator, that promote entrepreneurial growth in the sector.
Starting this process early is logical, as it takes time for new knowledge to develop, especially in this area.
Discover additional insights into Lisa’s contributions at elea through this video, which highlights the significance of philanthropic impact investing from the session she led at the Anzisha Entrepreneurship Education in Africa (EEA) Summit 2024.
