The Hague, The Netherlands - Empowering blind and visually-impaired people, simplifying solar energy sales, or increasing diversity in hiring - these are some of the solutions that 4impact has invested in.
4impact is a venture capital fund supporting Dutch ‘tech4good’ startups, which have both a societal and sustainable impact and a financial return. That’s what Pauline Wink, co- founder and Managing Partner of 4impact, is all about.
But how do they select which startups to invest in? What do they look for? We spent some time with Pauline to ask about their investment policy, attitude to diversity, the future of investment domain and how 4impact is managing during coronavirus.
Hi Pauline, thanks for joining us! Can you tell us more about the 4impact fund and your role in its creation?
4impact was born out of a desire to contribute to society and a dialogue with my co-founder, Ali Najafbagy, on how best we can mobilize our skillset to do so.
When we met each other, Ali was sourcing impact startups in the Netherlands for Mustard Seed, an impact fund in London. We realized that although there is enormous potential and talent in the Netherlands startup and innovation scene, there is limited (impact) capital, particularly at the early stage. That’s when we co-founded 4impact. We strongly believe that companies focusing on societal and sustainable impact, combined with financial return will outperform. We want to show that investing in impact can generate market-rate returns, and by doing so, attract more capital to impact investing.
What was your first investment, and how has your selection strategy changed since then?
Our first investment was in Envision. Envision is an inspiring tech4good business which helps blind and visually impaired people to live more independently, by speaking about the world that we see, like recognizing objects and faces or reading text.
Our selection strategy has not specifically changed since then. We usually need to see certain traction of a product/service through contracted or recurring revenues. If a company is early stage, we are extra diligent prior to proceeding with an investment. Envision was the example of an investment in a very early stage company. We had tracked their development for about a year and frequently spoke with the co-founders during that time. This gave us confidence in the team and product to move forward with the investment.
What inspires you to invest in a startup? What special spark are you looking for?
We recognise that investing in startups is not a short-term game and you need a solid team. It is a long-term partnership and it is important to get to know the people behind the venture. We seek to invest in and support those entrepreneurs who show dedication, ambition, vision and the right skill sets to create a winning product.
We heard about the #FundRight movement in the Netherlands! Can you tell us more?
4impact is a proud founding member of the #FundRight initiative. We strongly believe that diversity brings perspective when making decisions, therefore, businesses benefit from having diversity in their teams.
#FundRight has considerably increased awareness of gender diversity in the Dutch startup scene, but for us, diversity is broader than just gender equality – diversity is achieved through a variety of qualities. Other than the obvious differences of age, ethnicity and religion, it includes someone’s background, experiences and skill set.
Importantly, #FundRight does not only focus on the gender equality within management teams of startups, but also on the investing teams at venture capital firms. At 4impact, we have been able to achieve diversity through a combination of qualities and complimentary skills, and benefit from this in our daily conversations and ultimate decisions.
In the last few months the world has changed drastically due to the coronavirus pandemic. Do you foresee any changes in your investment policy during this uncertain time?
These times are indeed uncertain with a rapidly changing market environment. We foresee a huge effect on the global startup scene. It is critical that founders become aware of their runway as soon as possible. According to Techleap’s recent research, over half of startups in the Netherlands expect to run out of funds within three months.
At 4impact, we are at the beginning of our fund’s investment period, which is a benefit in this difficult environment. We have a small existing portfolio and capital available to deploy. We are therefore actively engaging with startups for investment opportunities. As part of our sourcing and diligence, we are reviewing what the impact of a prolonged economic downturn could be and we are proactively considering what potential systematic changes COVID-19 has on businesses.
Finally, what is your long-term vision for 4impact?
We are looking forward to teaming up with inspiring and ambitious founders of digital tech4good companies. The digital revolution will continue to transform our everyday lives and will only become more prominent. Technology transcends borders enabling us to reach many people and create positive global impact. Change the world for good is what we want to contribute to.
We will have reached our goal once the impact startups we invest in have become successful companies and we will have contributed to graduating impact investing from niche to mainstream.