In Operation Impact, leading practitioners bust common impact investing myths with practical solutions. The series is brought to you by ImpactAlpha in partnership with the Case Foundation, Acumen, Bridges Fund Management, and ImpactSpace (ImpactAlpha’s open impact database).
The impact data flywheel is starting to spin.
ImpactAlpha’s Operation Impact series, produced in collaboration with the Case Foundation, has highlighted advances that are starting to make it possible to add “impact” (to risk and return) as a core consideration in investment decision-making. The series has explored: the new culture of transparency around impact financing and performance; higher-value, lower-cost data about the real impact of investments on customers and communities; and crisp, comparable data to drive improvements in impact management.
As a media company focused on the impact investment marketplace, ImpactAlpha has two key insights to add to this rich discussion. The first is about the power of an open-data platform like ImpactSpace. The second is about the value of a daily editorial platform, like The Brief, our daily newsletter, that reaches tens of thousands of participants in the impact investing marketplace (sign up here). When it comes to impact deals and data, we are “Open Daily.”
To be sure, it’s too early to declare success — beware “the metrics myth.” But as investors demand impact financing and performance data, the marketplace is responding. From reporting frameworks like those from the Sustainable Accounting Standards Board, to open portfolio data like that shared by Toniic’s T100, to industry-standard ratings like B Lab’s “Best for the World” list, to impact data startups like iPar — data is indeed “the next frontier in impact investing,” as Jean Case, CEO of the Case Foundation, wrote in the Stanford Social Innovation Review.
This series was inspired by Case’s call to action to #ShareYourData. “As the movement seeks to put trillions of dollars to work to deliver both social and financial returns, I look to what is needed most to propel it to the next phase, and the answer is abundantly clear: data,” Case wrote. “To enter the mainstream, impact investing requires accessible and reliable data that demonstrates the breadth of the field, along with the return and impact spectrum it offers.”
In the Operation Impact series opener, the Case Foundation’s Rehana Nathoo highlighted the new culture of transparency that the foundation is promoting with its Impact Investing Network Map, a visualization of impact investing transactions to date. (Full disclosure: ImpactAlpha is supporting the rollout of the Impact Investing Network Map, built by the Case Foundation and powered by data from our ImpactSpace database.) The Network Map already is drawing in more and better investment data from funds and ventures eager to “put impact investing on the map.”
In the second post in the series, Acumen explained “how” to measure impact itself, at lower cost and with higher value. “With a steely-eyed focus on getting end-consumer data at scale,” Tom Adams writes. Acumen has run more than one hundred Lean Data projects in the past two-and-half years, interviewing more than 35,000 investee-customers.
In the most recent post, Amanda Feldman, Clara Barby and Olivia Prentice of the Impact Management Project detailed how hundreds of people and organizations came together to agree on the fundamentals of impact performance that really matter. Even disparate sets of data across five key dimensions, they write, “provides an opportunity for us to all to interpret, compare and improve our performance over time.”
Data network effects
Getting the data flywheel to spin has not been easy. As the Operation Impact series was rolling out, CB Insights, which tracks venture capital and startup financing across the board (including in many areas of interest to impact investors), separately published a provocative piece about their own efforts. The idea of a data flywheel, more commonly known as data network effects, is that the more data provided by users of a shared platform, the better the product, which attracts more users and more data. “Rinse & repeat,” they wrote.
It’s harder than it looks. “We contacted hundreds of VCs, private equity firms, and corporate development teams and asked them to submit their data,” the CB Insights’ team admitted. “We reached out to thousands of startups asking them to do the same. And the reaction was an overwhelming, deafening silence.”
Ultimately, CB Insights turned to machine learning software and algorithmic extraction of data from unstructured sources, a tool they call “The Cruncher.”
Then, a funny thing happened, starting in about 2015. CB Insights had largely given up on voluntary submission of data, when firms and funds started submitting data on their own.
At ImpactSpace, which was acquired by ImpactAlpha in 2015, we don’t (yet) have a Cruncher. And it has indeed been a challenge to get busy entrepreneurs, fund managers and others to submit data on their investments and portfolios. But by hook and by crook, we have built what we think is the largest open impact database around, with more than 13,000 data points for ventures, investors and deals. We’re proud that the Case Foundation selected ImpactSpace to be a primary provider of data for the beta version of the Impact Investing Network Map.
And lo and behold, data is starting to flow, about companies, funds and transactions. Our open-data model, like CrunchBase’s, means everybody can add to ImpactSpace and improve their own profiles. It also means third parties can use the data for value-added “apps” and services, in the same way the Case Foundation has built the Network Map.
The Case Foundation’s #ShareYourData campaign has jogged many stakeholders to contribute. The GSG Honors, which ImpactAlpha managed in collaboration with the Global Steering Group for Impact Investing, generated more than 150 high-quality entries. As just one example of how editorial coverage draw in data, investors in sustainable agriculture rushed to get us their data after we published a roundup of dozens of recent deals in a report headlined, “Smallholder farmers are investable,” in collaboration with the Initiative for Smallholder Finance. Some funds apologized for not having sent their data earlier!
Most importantly, our Brief newsletter has been like catnip for deal information. We’ve published more than 150 daily editions since the beginning of the year, featuring hundreds of deals in our daily #Dealflow section (as well as dozens of #Signals, #Features and a daily dose of long-term thinking in the form of dispatches from #2030). We are scanning dozens of global sources, but we’re also attracting a growing amount of incoming deal information from ventures and investors.
Just as CB Insights reported, as individual investors (for example, as limited partners) have started to use the database, the firms they invest in and the general partners of their funds are reaching out to update their profiles and portfolio listings.
Of course, basic data on venture and funds, and even close to real-time #Dealflow data are only the base layers of an impact data ecosystem. But deals are real-time indicators of the flow of capital, such as it is, toward a sustainable, inclusive economy for the 21st century. Mapping them brings the connections to life. As Rehana Nathoo explained, “Looking specifically at the investments that connect them, we can foster a better understanding of the size, breadth, depth, and, importantly, the enormous potential of this field.”
Onto such deal data can be layered impact data of the type Acumen is collecting through its lean data initiative. That impact data can then be analyzed and compared, as suggested by the Impact Management collaboration. And all of that data can be aligned and tracked against shared targets like the 2030 Sustainable Development Goals.
At ImpactAlpha and ImpactSpace, we are on the beat, open daily. With our partners, we are working to spin that data flywheel. Here’s how you can help it spin faster:
- #ShareYourData. Visit ImpactSpace to submit or revise your data today. And share your impact deals with ImpactAlpha by sending them to [email protected]
- Explore the Impact Investing Network Map. Visit the Case Foundation website.
- Spread the word. Share the Operation Impact series with your network and encourage others to embrace transparency and disclosure.
In Operation Impact, leading practitioners bust common impact investing myths with practical solutions. The series is brought to you by ImpactAlpha in partnership with the Case Foundation, Acumen, Bridges Fund Management, and ImpactSpace (ImpactAlpha’s open impact database). More from the series: