ImpactAlpha, September 20th (original post date 2/6/18 on Medium.com by Lauren Cochran). I get 4–5 requests to do an informational interview/coffee chat/career session per week. I hate saying no, but this time adds up and I often say the same things over and over again. I can get a little crabby about it, so rather than biting off the heads of well-intentioned MBAs, friends of friends, sisters of friends, people you met on a plane, neighbor’s cousin’s dog walkers etc., I thought I would put the more frequent rants on the inter-webs. Many of my colleagues across the industry deal with the same thing — I am not that brilliant, so please feel free to recycle! Tackling a couple of FAQs in this post. I promise more in the next few weeks.
But first, before you call me or anyone else in the industry, for the love of all that is good in this world, please look at the Global Impact Investing Network’s (the GIIN) website. If it is answered there, do not ask it of me. They also have a job board, as does ANDE, Next Billion and probably a bunch of others I don’t even know about (feel free to add in the comments!). If you haven’t done the basic homework of Google, I will probably bite your head off and not feel bad about it. End of rant.
Now, some frequently asked questions on background and what hiring teams look for in impact investing.
Do I need to have a finance background to do impact investing?
The key word of impact investing is…errr investing. If you want to make decisions that put someone else’s principal at risk with the expectation of financial reward, having well-honed finance skills is a prerequisite. Yes, you do need to go do investment banking, brutal private equity focused consulting, something in venture or go to a firm with resources to provide training for at least a year. Probably two. Most impact investing firms are too small to give the basic, but time-consuming training around financial modeling, understanding financial statements and doing operational analysis of a company. Candidates that have gone through this training can do all this and more in their sleep (for real, in investment banking that was a thing). Competition for principal investing jobs in impact is fierce. For every person who doesn’t want to sweat out two years of their life on the 58th floor of [insert wall street bank here], there are two people that already have. Sorry!
There are of course exceptions. More philanthropic organizations will often overlook the need for a hard-core finance background. Larger firms that have the resources to train people might (see big banks building out internal impact investing teams) though competition from internal transferees is tough. In addition, if you have expertise in a specific area, say education or health, firms focused on making investments related to your area of expertise may choose to have both experts and finance people. In addition, as with regular investing, early stage impact investing firms sometimes convert ex-operators into investors, valuing experience earned in a scaling company.
There are also OTHER jobs in impact investing (gasp!) outside of that specific principal allocation process. Impact measurement is a growing area (more on that in a future post). Increasingly, firms are getting large enough to have professional investor relations staff as well as portfolio management teams that work with companies post-investment. Stand-alone technical assistance firms are also open to experts with operating experience. And wealth advisors and private banks are hiring impact oriented people with skills that complement their existing financial research and due diligence teams. Late entrant after posting — go work for an impact company! These jobs aren’t any easier to get, but the skill set required is not the one described above.
Do I need to have an impact background to do impact investing?
Despite the sarcastic first line in the investing section, impact experience requirements can be a bit squishier. You need a compelling story about why you want to make the move into this highly competitive industry. It can relate to volunteer experience, personal anecdotes or a change in your world view, but most people will see right through shallow made up answers. Again, for every disaffected investment banker with a vague sense that they need to win back their soul possibly via impact investing, there’s another one who felt that and did something about it IRL. A Kiva fellowship, a stint at the Clinton Foundation, peace corps, the Army, working at an orphanage in Haiti — I’ve seen all of it on resumes. Good finance people in impact are hard to find so there are certainly exceptions to this one, but this is also not a cushy industry; the passion will have to sustain you, so if you really don’t care about education or investing in solar, then don’t. See next question…
How’s the pay?
If you’re coming from traditional finance or consulting it is highly likely you will have to take a pay cut. Most of the people with the most interesting jobs in the field often took a substantial pay cut to get experience. When I joined the Clinton Foundation, I took 85% less than at my prior job in private equity. Post-MBA when I joined Imprint, I made 60% less than I did as a 25-year-old associate in PE. One could argue I was an overpaid 25-year-old (my dad), but I could have gone back to regular private equity and made many multiples more than at my beloved Imprint (John and Taylor, roll your eyes here). I am not special. A close friend in an enviable impact investing job left being a cushy lawyer to make $18k a year in India at an MFI while paying off law school loans. Some people have offered to work for Blue Haven for free! I don’t believe in free labor (plus it’s illegal), but if you need to make in the high 6 or even 7 figures to support your life style, this is not the industry for you.
In the past year or two, the industry has recognized that it needs to pay up for good talent. As large private banks vie for senior experienced hires to build out their impact practices, salaries have come more in line with traditional finance. Still, some big banks and PE firms see impact fund related work as second class and pay these teams less than their traditional counterparts despite the fact that the job is harder. Too many people want impact investing to be cheaper, easier, faster, but still make commercial financial returns. That’s clearly insane. In addition, at entry levels, if you bring little in the way of impact experience, a significant pay gap persists across the board.
That’s all I’ve got for now. Future posts will include, how do I have a career investing in emerging markets from the US (you can’t), basic CV tips, interview 101, internships. If you’re reading this and have other ideas, please feel free to suggest in the comments. I will probably rely on my associates, Grace and Sarah, to write a post or two as well (yes, both came from rigorous consulting backgrounds and both did stints at Acumen for far lower pay then their consulting gigs). Please also — I KNOW there are exceptions to each and every statement above, but a decade in impact investing and literally a bajillion coffee chats (yes, that seems actually literal) have produced this streamlined advice which holds most of the time.
This article originally appeared on Medium by Blue Haven Initiative’s Lauren Cochran.