Four Great Stanford Social Innovation Review Articles on Corporate Venture Capital and Impact Investing
February, 2022
The Stanford Social Innovation Review (on Twitter @SSIReview) continues to be a valuable resource for exploring corporate social innovation. Here we highlight and summarize four great articles that we continue to reference as we explore this emerging field.
1. Corporate Impact Investing in Innovation: Five Characteristics of Effective Corporate Impact Investors
February 24, 2021
Authors @RyanMMacpherson, @ClaudineEmeott, @KenGustavsen, and @MosesHChoi define corporate impact investors as those who “make investments that are aligned with and amplified by their company’s strategic priorities, market position, and resources, in order to generate measurable, mutually reinforcing social and financial returns.”
The article outlines the various tools corporate impact investors use — from corporate venture capital to CSR — “to intertwine business and societal goals through the investment process until the success of one affirms and furthers the success of the other”
5 Characteristics of Effective Corporate Impact Investors
- Additionality : “…using corporate resources, market position, customer networks, and supply-chain reach to add value to an investment beyond capital… Increasingly, corporate impact funds are using their market position and supply-chain power to serve as a go-to-market partner, joint technology developer, or customer in valuable ways.”
- Collaboration: “A start-up’s success depends not only on the business, but also on the diversity and strength of the overall ecosystem of accelerators, investors, advisors, and funders… While corporate impact investors may not typically lead deals, they can be a helpful addition to a broader syndicate, and founders, ecosystem players, and institutional investors are increasingly seeking participation from corporate impact funds that offer differentiated value.”
- Governance and Executive Buy-In: “…successful corporate impact funds focus on garnering buy-in from the company’s most senior executives, establishing clear governance and investment-committee protocols with senior leaders for the impact investing program, and where feasible, incorporating investment mandates into the corporate charter itself.”
- Thesis Development: “Effective corporate impact investing strategies and funds often use the company’s overall mid- to long-term strategy to inform the investment thesis. This typically includes identifying opportunities in alignment with the company’s mission statement and/or thematic focus areas, as well as establishing a complementary relationship between the impact investing portfolio and other strategic initiatives and corporate venturing vehicles within the company. This alignment informs clear evaluation criteria for new investments and portfolio performance tracking, and helps establish clear objectives for the relationship between social impact and financial returns.”
- Impact Management: “The best practices integrate clear social and environmental objectives into the diligence process, deal structuring, and portfolio management throughout the life of the investment.”
2. The Four Principles of Venture Funding
Winter 2019
While the audience for this article is not only corporate leaders (venture capitalists and philanthropists, take note), its principles certainly apply to anyone looking to innovate corporate social impact by investing in social entrepreneurs.
Bet on outstanding people
The best gambles bet on passionate, well-functioning individuals and teams… who stand out for their smarts, creativity, vision, grit, and determination.
Take calculated risks by knowing the investment landscape
Know the landscape and carefully vet each individual or group you back, to ensure that they are trustworthy, understand what the community needs, and can execute their ideas.
Amplify impact and sustainability by creating networks
Give startups more than money… foster invaluable connections that help those enterprises grow and thrive.
Look for opportunities on the leading edge of problem-solving
“Look for something entirely new,” rather than a company “that will create a ‘better version’ of something that is already being done.”
3. Corporate Venture Capital: A New Accelerant for Impact
October 17, 2014
This article explores “how corporate venture capital investors can work with traditional VC investors to nurture entrepreneurs and more space for impact investment.”
We find this content to be evergreen and important to laying the groundwork for corporate venture capital’s role in the social impact community.
Authored by the same people who wrote the Volans Investing in Breakthrough report, this article expands on their findings and projects future trends.
While the underlying report is no longer available on Volan’s website, we recommend exploring Go Long: The Case for Investing in Long-Termism.
This subsequent report makes the case for corporations and their investors to make capital allocation decisions based on the long-term implications of their actions.
As we have seen, the short-termism of our current political, economic and financial systems does not have a single source. It emerged — and got stronger — over decades as a result of the interactions between particular ideas, technologies, laws, regulations, cultural norms and more.
The same will be true for the long-termism we now need to instill in those systems if we are to future-proof both individual and collective wealth and wellbeing. There are no silver bullets: only a strategy of intervening across multiple domains concurrently is likely to succeed in meaningfully stretching our time horizons.
Some of those interventions will be about transforming the “core” of our current systems — rewriting rules, revising norms and redesigning institutions to shift default behaviours. Others will be about experimentation at the “edge” to develop viable alternatives to how finance, business and politics are practiced today. Both are necessary.
4. Corporate Impact Venturing: A New Path to Sustainability
March 18, 2014
This article examines the power of venture capital to source sustainable business innovations. Author Maximilian Martin makes the case for pursuing social impact goals via corporate venture activities.
Unlike in the early days of corporate venturing in the 1960s, sustainability is now increasingly driving value creation, and we need corresponding pathways for sourcing business innovations. The contributions corporate social responsibility (CSR) can make to this quest are limited, and corporate venture capital has traditionally not considered social impact. A fusion of the two is now starting to happen, and a clear roadmap for achieving the business transformation we need is beginning to emerge.
The article references the report “Driving Innovation through Corporate Impact Venturing: A Primer on Business Transformation (preview only).”
In a world where social and economic value creation is converging, venturing makes sense to drive both. However, the report cautions that there are a few questions to consider when contemplating engaging in CIV. One is how to deal with financial profit. When considering the relationship between the core business and impact, a CEO has the fundamental choice to: 1) interpret “impact” in a zero-profit sense and then reinvest any proceeds of the corporate impact venture, or 2) interpret “impact” in a for-profit sense, and focus on raising social and environmental performance through innovation that impacts some core aspect of the business but that allows for earning of the cost of capital.
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