Impact Voices | December 14, 2023

Why this Latin American venture fund is listening to customers to drive impact and returns

Carla Grados Villamar

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Guest Author

Carla Grados Villamar

How common is deep impact measurement for an impact investing fund? In practice, most funds focus primarily on measuring outputs, such as the number of products sold or customers served, which tell us very little about the impacts being generated in the lives of customers.

ALIVE Ventures, an impact investment fund manager based in Latin America, bet on a deeper approach, going beyond asking portfolio companies to report operational metrics. Throughout the last five years, while investing their first Fund, ALIVE has demonstrated that a deeper impact measurement strategy is not only attainable, but highly beneficial to all stakeholders. 

Its impact measurement studies, conducted in partnership with 60 Decibels, have revealed that on average more than half of the customers impacted by ALIVE’s companies are from low-income communities and 77% percent report improvements to their quality of life thanks to the company’s products and services. On average, nearly two thirds of customers impacted by investees are women, suggesting that ALIVE’s investments are making a significant difference in promoting gender inclusion. Custom metrics collected from customers for each investee have helped those companies better understand and improve not just their impact, but their business performance as well.

ALIVE’s commitment to listening to end customers and the impact data that has come from that practice has been a point of differentiation and value with their LP investors, as well as a way to engage and support the companies they invest in to align on shared impact goals. And as they raise their next fund, ALIVE is making their leading approach to customer-centric impact measurement a core feature of their fund. The fund will link part of its carry to its impact performance.

Maximizing impact

ALIVE Ventures invests in impact-driven, early-growth companies that leverage technology and other game-changing innovations to address the challenges faced by low-income communities in Latin America, with a focus on Colombia and Peru. To measure impact, ALIVE goes beyond counting lives impacted and instead conducts deep impact studies of each portfolio company at regular intervals and at exit, to understand the profile of customers, changes in the magnitude of impact across the life of each investment, and to gather key business-related data to improve investee business performance.

In its first fund, ALIVE partnered with 60 Decibels to implement these studies, listening to statistically significant sample sizes of customers about how they experienced impact. To date, ALIVE and 60 Decibels have surveyed more than 2,300 customers from the Fund’s portfolio companies across Latin America. 

Deep impact data is key to the evaluation of ALIVE’s impact performance. ALIVE believes that fund-level compensation should be tied to impact performance (in addition to financial performance) and has therefore included impact in its carry structure. 

In its second fund, ALIVE uses the Impact Management Project’s Five Dimensions of Impact as the basis for its fund-level impact evaluation methodology and the deep impact data gathered from customers will be essential for accountability in assessing impact, which ultimately has an impact on the carry allocation to the Manager. 

Findings from the impact measurement studies play a vital role in evaluating investee and fund-level impact performance and improving impact outcomes for the customers reached by those investees, while also providing essential inputs to improve the fund’s overall financial performance.

LP champions

The increasing focus on comprehensive impact measurement practices is evident among limited partners (LPs) directing their capital towards impact funds. In today’s impact investment landscape, LPs are giving greater importance to impact measurement and accountability; they are eager to witness their investments make a significant and meaningful difference. 

Marie Heydenreich, an investment manager at the Dutch Good Growth Fund, a global fund of funds investor with a portfolio of emerging GPs across the global south and an LP of both of ALIVE’s funds, wanted to delve deeper into the qualitative aspects of impact, understanding not only the “what” but also the “who”, “why” and “how” of impact achievements. 

Heydenreich reports that “going beyond numbers and understanding the quality of impact is important. These studies help us understand why as an LP we should ask GPs to focus on other targets. For example, not only reaching more women, but improving the way in which [companies] reach them.”

Burden to opportunity

For investees, impact measurement can be perceived as a reporting compliance burden. Embracing this deeper approach of listening to customers, however, offers a host of tangible business benefits. By gathering customer profile, product insights, and data on the outcomes of their initiatives, investees can identify areas where they excel and areas that require improvement. 

Jacob Rosenbloom, CEO of Levee, a company from ALIVE’s portfolio that makes it easier to find and hire quality talent, recalled how “the study showed Levee that we were helping people to access employment for the first time,” empowering Levee to focus more on this impact metric. Understanding the demographics of a company’s client base and comparing it to the country poverty index, among other factors, helps companies understand if they’re reaching underserved populations. 

Impact measurement has also attracted talent and funding for ALIVE portfolio companies. Juan Pablo Mena, CEO of uPlanner, which supports universities across Latin America in providing superior experiences to their students, said impact is a key motivator for employees.  ALIVE’s impact studies have helped him tangibly demonstrate impact and therefore retain talent. 

In an era when investors are increasingly evaluating impact in their diligence criteria, customer impact data from a third-party provider also serves as a powerful and credible asset. When investees can provide concrete evidence of their impact, they not only inspire confidence in their stakeholders but also stand out in a competitive funding landscape.

Customer voice

For ALIVE, deep impact measurement is a no brainer: it aligns financial and impact goals, enhances accountability and transparency, informs decision-making, and benefits all stakeholders. And to ensure that the benefits of impact measurement are truly achieved, it is essential to include the customer’s voice. 

As demonstrated by ALIVE Ventures and its LPs and investees, embracing deep impact measurement not only drives value for stakeholders across the spectrum and improves impact outcomes, it also contributes to the long-term success of impact investments.

Carla Grados Villamar is manager, Latin America growth lead at 60 Decibels.