For the past few months, I have been reflecting a lot on my role as an investor. Business plans and proposals come across my desk and as I shift through them, it really struck me on how large a responsibility investors play in accelerating trends, shaping a community or even country’s economy, but yet how little this responsibility is spoken about in the investing circles. We place so much emphasis on finding the right business, the right management team, the right social impact, that sometimes we get lost in our own capacity to recognize what really is innovative and what truly deserves to be funded. So, from my experiences, here’s what I think an investor’s responsibilities are on top of the typical investment work:
1) Investors need to live in the future.
This is a point I feel very strongly about. If you’re an investor: VC/PE and particularly if you play in the startup and impact investing work, (as Fred Wilson pointed today in his blog post and what Paul Graham said): you should live in the future and see what is missing. So well said. I’m currently in an environment (yes, I recognize that I am in Africa – so feel free to shower stereotypes), where I know investors who are still using yahoo mail, internet explorer and Windows 2003 (true story!). Not to say that there are anything wrong with the products, but more so – I think it’s so important to be keeping up with the trends in the world, technology being one of them. How can you expect to identify an investment that is ‘ground-breaking’ if you’re not even following the newest trends in your sector? Taking this a step further, if you are following these global trends vs. local trends, it is then our responsibility to seek out entrepreneurs who can close this gap and further elevate the developing world, or the developing world would forever be playing ‘catch up’.
2) Don’t be a sheep.
This responsibility is particularly important in the impact investing space. Given that we’re playing in a field that is largely uncharted, risk is high and typically, most investors are unable to size up a new market and end up relying on the opinions of other investors. aka. I’ll invest if someone else will too aka. a sheep. Impact investors say that they are risk tolerant, but few translate this tolerance into signing along the dotted line. A very chicken and egg situation. Hence, I have to constantly push myself to understand what is the right balance of being a market leader but also not be a reckless investor. Balance is key.
3) The need to close and disburse faster
There are a lot of delays that occur in [impact] investing. The courting of investors and [social] entrepreneurs, the dance between finding the right termsheet, the issue of making sure that the social impact actually has an impact, and [insert your traditional delays in investing here]. This is the norm. This is my challenge to investors: recognize that the longer the delay, the bigger the strain on the business/organization. From an entrepreneur perspective, you’re constantly watching your ‘runway’ aka. how much money do I have before I run out, and a delayed closing round and disbursement is to the [social] entrepreneur’s disadvantage as well as to their customers. If we’re really standing with the poor, then deals need to close quicker with clear and simple terms, as the longer the delay, the more people are missing out on potentially experiencing the product/service.
This is by no means supposed to be an exhaustive list of responsibilities, but instead ones that I feel are most important given my experience. As investors, we are in a privileged position to start/continue or end trends. I think it’s time that we started thinking a little harder about where our responsibilities lie.