Date: June 27, 2012
By: Jesse Grainger
In part two of our “4 Influential People in Impact Investing You Need to Know” series, we talk with Richard Ambrose of Pomona Impact, a pioneering angel investment group that targets small- to medium-sized impact businesses across Central America and Ecuador.
1. How important are accelerators to the future of impact investing?
Accelerators are the linchpin to the development of the social business ecosystem, the bridge that links and prepares social entrepreneurs to partner with impact investors. Without accelerators, many social entrepreneurs with very good ideas would flounder and fail and many small impact investors, like Pomona Impact, would simply not have the capacity and reach to execute on their missions. Accelerators are the single greatest catalysts to the growth of the industry.
2. How do you think “Impact Investing in Action” has helped to build the field?
Impact Investing in Action has done much of the heavy lifting to assemble the infrastructure necessary to propel social entrepreneurs in Central America forward and attract impact investors to the region. It has helped to identify businesses that create real impact and show potential for strong growth, and provided entrepreneurs with skills-building training and coaching on how to ready their businesses for outside investors. This improves the landscape of investable social businesses considerably.
In addition to generating a compelling pipeline and providing a platform for them to present to investors, Impact Investing in Action has enabled Pomona Impact to connect with a number of other investors with a similar mission and interest in Central America. This has sparked efforts for greater collaboration (among investors) and an exchange of best practices that is certain to increase investment to the region.
3. What are the main challenges facing impact investing?
In my view, the two largest challenges are 1) investment pipeline and 2) involvement/investment in earlier-stage companies. With the help of Agora, other accelerators, and the increasing availability of investment capital targeting the region, we feel pipeline will continue to grow and become less of a problem. The larger hurdle is getting investment to seed and early-stage social businesses. Early-stage companies require much more work and oversight from accelerators and technical consultants and yet do not have the funds to pay for it. The risk/return profiles of these firms also make them tough cases for investment, even for impact investors with highly concessionary return targets.
4. What does the future hold for the impact investing movement?
I think we’ll see greater collaboration between impact investing and sources of philanthropic capital. The Monitor report titled “Blueprint to Scale” highlights many ways this can take form. One of the most compelling ideas is using philanthropic capital to invest along side impact investors on a given project while serving as a first loss tranche. This improves risk-adjusted returns (for investors), ultimately encouraging greater flows of investment to higher risk ventures, such as start-ups and early-stage businesses, as well as businesses operating in volatile countries.