Robert Rubinstein: Are you an impact investor or a unicorn hunter?

January 14, 2022

By Robert Rubinstein, Chairman of the TBLI Group

Over the last 5-10 years, there has been a tidal wave of investment funds, all claiming to have Impact Investing focus. In a time where we need more investment going into societal and environmental restoration, this development is encouraging.

We often don’t see so many investment professionals raise money, governmental institutions allocate money or asset owners invest their own to fix or improve society.

That’s admirable and noble. Billions have been raised to help fix societal and environmental challenges. Should we be thrilled or skeptical? I choose the latter.

If one looks at some of the mission statements or ambitions of several of the funds created recently, we can only feel that the tide is turning:

• “investment platform focused on generating superior returns aligned with sustainable principles.”
• “Assist great entrepreneurs developing products and services for the three billion people in the bottom half of the world’s economic pyramid.”
• “We invest to build more inclusive and equitable societies.”
• “We back founders on a mission to build a better world.”
• “dedicated to startups leveraging exponentially accelerating technologies to address humanity’s grand challenges.”
• “investing into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return.”
• “seeking deeper positive net impact across the spectrum of capital.”
• “We believe that investment capital can help meet large-scale global challenges.”
• “enables private sector investment in projects aimed at climate adaptation and mitigation in developing countries.”
• “We back entrepreneurs building climate tech for a regenerative world.”
• “Our ambition is to identify and invest in high- impact solutions for climate mitigation, as well as to catalyse and multiply capital to scale them.”
• “family office investing in regenerative food systems.”
• “vision to invest in entrepreneurs building sustainable enterprises that can catalyze development impact for excluded communities and remote geographies across the globe.”
• “support promising entrepreneurs, with growth capital and proven business tools to reach their full potential and enable them to achieve systemic change.”
• “backs technology businesses committed to having a positive impact that answers the most pressing social and ecological challenges of our time, in a way that is both scalable and sustainable.”
• “invests in companies driving measurable social impact alongside business performance and strong returns.”
• “we believe that we can address and alleviate some of the world’s challenges by investing with purpose.“

False packaging

Mission statements are intended to inspire and act as a flag in the ground and where the organization intends to go. My question is: are these investment funds or investors really purpose driven or do they revert to a traditional investment mind set of ‘hunting unicorns’?

We are talking about those companies that will have a 1 billion dollar valuation. Isn’t that the purpose of investments to maximise returns for the investor. That is why they are hired and compensated. No issue there.

My issue is with the false packaging. If you are just hunting unicorns, just say so, so the entrepreneur won’t lose any time whose mission is not to be a unicorn, but a zebra (focusing on improving society and environment, not exponential growth) . Most investments will never be unicorns.

When the fit is wrong

It is hard to start and run a company and do the continuous capital raise. They should not be wasting their time with investors that want to be entertained, informed or are pretending to be interested when they are just researching competitive investments.

Perhaps the most important question to ask an investor is: ‘Are you an unicorn hunter?’ If they are and your ambition is to drawdown carbon by improving the soil and livelihoods of small holder farmers, without any apps, then the fit is wrong.

If you want to create meaningful jobs for unemployed youth by doing vocational hospitality training then unicorn hunters are not going to help or invest. If you are a long term developer to de-commoditise the food system then don’t bother with unicorn hunters.

If the mission or purpose is your raison d’être, then you are not helped and won’t get money from unicorn hunters. They are looking for an app, few employees, super-fast scaling, warp speed growth and monopoly. It is a win-lose approach mindset.

Be discerning

Many investors and most VCs are fund managers driven by achieving the carry, asap. Few ever ran a company. Growth, market share and IPOs are the mantra. They are looking for that big payoff asap. Zebras won’t do that, unicorns will. Maybe they will. At least in the eyes of unicorn hunters they will.

If you are looking to fundamentally restore the social and environmental balance first and foremost, as well as make a profit to fund all your activities and growth, avoid unicorn hunters. Especially those pretending to be impact Investors. Those are the worst. They wrap themselves in something that is important to you, but has no value at all to them. Be discerning. Ask them are you a UH (unicorn hunter) or II (Impact Investor)?

As Groucho Marx stated it: 'The secret of life is honesty and fair dealing. If you can fake that, you’ve got it made.'