Sector-based investing, rather than investment in entrepreneurs or businesses, is the way forward for impact investing, according to a recent series of online articles published in the Stanford Social Innovation Review. The series of posts, written by Matt Bannick, a managing partner of the Omidyar Network, and Paula Goodman, its director, draw on the organisation’s broad experience in the field to conclude that investors can achieve more impact by applying capital to sectors, not just firms.
“In the past five years we’ve seen an exponential growth of interest in our industry, much of it focused on individual firms,” write the authors. “Most impact investors see their primary goal as finding and investing in enterprises that yield strong financial and social returns.”
Although the Omidyar Network shares and supports this approach, the authors say, they’ve come to see it as limited.”Our experience from the past eight years is that impact investors can massively increase the number of lives they touch by concentrating investments in specific industry sectors in specific geographies, and by investing in a range of organizations to accelerate the development of these industry segments. The need for investment is particularly acute at the earliest stages of innovation, which provide the foundation in which entire new sectors can emerge and scale rapidly by tapping commercial capital markets.”
Bannick and Goodman go on to argue for a shift in focus toward the goal of scaling entire industry sectors in addition to individual firms. The point is market acceleration: By supporting an entire sector, they maintain, investors can multiply the rate of change and bring much greater impact, faster.
What does this mean for Maximpact users? Not all investors will want to adopt the Omidyar Network’s sector-based approach, but for those who do, the shift is already supported by Maximpact’s architecture.
Maximpact’s platform allows users to define search parameters by sector, geographical region, and country, helping them to hone in on developments in a particular impact sector and part of the world. Maximpact’s open access policy ensures a wide variety of listings covering a range of developments at every level, from crucial early-stage innovations to complex international scaling projects. Its saved search function lets users group deals and review them comparatively, getting a more integrated picture of how investing might actually catalyze sector development. And, because listings are transparent, users can see who else is engaged in supporting a specific sector,giving them the opportunity to find synergies and engage in collaboration.
On another level, Maximpact is itself apiece of key infrastructure for the growing impact investment sector. Providing a functional, accessible marketplace for all players, Maximpact’s goal is to accelerate development across the entire sector, and, in the words of Bannick and Goodman,doing its part to “spark, nurture and scale” this new sector to bring about social change.