Impact Management | January 25, 2022

How one fund manager tech’ed up its data management in search of ‘impact alpha’

Dennis Price
ImpactAlpha Editor

Dennis Price

ImpactAlpha, Jan. 25 SJF Ventures believed better, faster and smarter impact data could set them apart. 

The Durham, N.C.-based impact venture capital fund manager had outgrown its Excel spreadsheets. Collecting and analyzing impact data from dozens of startup investments in energy, food, education and health over two decades and four funds had become unwieldy. 

The proliferation of standards and frameworks, not to mention regulatory scrutiny, had managers scrambling to meet goals and expectations.

Worse yet, the outdated system was hampering the fund’s ability to build more impactful companies.

Over the past year, SJF spoke with more than a dozen providers of technology for impact measurement and management and mapped their offerings for alignment with standards such as the U.N. Sustainable Development Goals and the Sustainability Accounting Standards Board, as well as for capabilities for benchmarking, visualization and surveys. 

Among the providers: Aeris Atlas, Impact Delta, Proof of Impact and Tablecloth. SJF gave ImpactAlpha an early look at the resulting report, which chronicles the journey, maps the platforms and shares the firm’s analysis.

SJF ultimately selected Upmetrics, a San Francisco-based platform originally designed to support nonprofits and foundations. Upmetrics now works with a range of impact investors including L.A.-based Slauson and Co., Camelback Ventures in New Orleans and Clear Vision Impact Fund in New York.

“Impact drives alpha,” SJF’s Emma Sissman told ImpactAlpha. With better data, the firm can demonstrate to limited partners the impact it is creating per dollar invested. Cleaner also helps SJF tailor the support it provides portfolio companies. 

SJF says in areas such as employee retention, customer loyalty, marketing, and ultimately acquisition, it has seen that deeper and broader impact leads to enhanced business value and success. 

At a portfolio company that employed a large, low-income workforce, for example, SJF had identified slow uptake of benefits. SJF then worked with data measurement firm 60 Decibels, which specializes in collecting data directly from customers, to better understand how to drive uptake. The firm witnessed lower turnover, higher productivity and reduced operating costs. 

“The more impactful we can make a company, the more valuable it can become,” Sissman says.

Impact measurement and management

The step-up by SJF signals the growing importance of quality, verifiable impact data as a differentiator for impact investors.

“More and more funds have come to market with specific theses around what impact means to them,” says Sissman. “A core piece of differentiating your strategy is that you need to show that it’s working.”

The search for a technology partner led to a map that plots the platforms according to their focus on ESG objectives versus impact outcomes, and orientation towards public versus private markets. Upmetrics scoredon private markets and impact.

Last month’s takedown of MSCI by a team of Bloomberg Businessweek reporters laid out what impact investors have long known: Environmental, social or governance, a strategy largely deployed in public markets, is a risk mitigation strategy that doesn’t necessarily translate into positive impact.

That’s pushed many impact investors, particularly those in private markets, to go beyond simple measurement to proactive management, says Sissman. 

Whether it’s industry frameworks like the Impact Management Project, the SDGs, or a deep understanding of diversity, “having a technology platform that allows us to gather data and spit out what we want to and analyze it in the way that we want to, will enable the reporting and the analysis of impact better for all stakeholders involved,” she says. 

Improving the ability to drive impact requires a shift from manual, time consuming and clunky to automated, consistent and an ability to store and share knowledge.

Managers like SJF are embracing technology to improve how they collect and analyze data in order to make impact a core part of an investment, says SJF’s Heather McPherson

“These platforms are playing a really critical role in closing the gap between fund management and impact management.”