A new report on “The State of Social Impact Investing in Kenya” suggests that a growing number of impact investors, many of them pursuing bigger deals, may be driving up valuations and distorting the market.
The perception that social impact investors, in Kenya and elsewhere, may overpay for stakes in startups is not new. As Jonathan Kalan reported for ImpactAlpha way back in 2012, “That has led to some trash-talking between the impact crowd and funds looking for straight-up technology plays — who sometimes vie for the same deals.”
Even more money may be chasing those deals in the future. The report out of the University of Virginia Business School reports that social impact funds could invest $650 million in the next five years in Kenya, about the same amount as was committed in the past decade.
“Competition between social impact investors and private-equity funds had driven valuations by two to three times over the last five years,” the report said, which was based on case studies of 14 businesses and a poll of investment firms, according to Business Times in Nairobi.
Social impact investors are expanding beyond early-stage companies into deals of $3 to $5 million in renewable energy, healthcare, sanitation, fintech, ecotourism and other sectors.