Raising Capital from Impact Collectives

Out there in the wild, there exists an elusive source of capital that is poorly understood by most entrepreneurs. Unlike more conventional funders, impact collectives feel like a black box with a poorly defined set of steps and practices for engagement. Yet, they can be an invaluable source of early-stage capital, networking, and operational support.

To better understand how you can approach and engage with these groups, we sat down with our board member Olympia De Castro. In addition to being a seasoned CFO in the tech space, she serves as a board advisor to Gratitude Railroad (an impact collective and investment fund).

What the heck is an impact collective?

Impact collectives, or impact investor groups/networks/etc (they have many different names in the industry), are loose affiliations of high-net-worth individuals, institutional impact investors, family offices, and private foundations that collectively review deal flow, conduct diligence, and often co-invest. These groups are not limited to a single type of capital (like venture syndicates) and can deploy debt, equity, and sometimes philanthropic capital.  A few prominent impact collectives in climate are Gratitude Railroad, Toniic, and CREO.

Unlike the syndicates you’ll find on AngelList, collectives generally have no single lead making decisions. They often have a centralized body and staff that either brings transactions to the collective’s community or facilitates the circulation of transactions discovered by its community members. Community members, or Partners, will sometimes have capital committed to the group or the group’s fund, but also invest on their own. When you pitch an impact collective, you pitch to their partners. However, investment can come from either the partners or the centralized body itself– this can include the group’s venture fund or affiliated alternative funds in the case of Gratitude Railroad.

With collectives, it’s all about the long-game

If you’re an unknown commodity for the partners in a collective, it can be more challenging to get an investment out the gate. These groups are often slower than angels or other early stage investors due to the collective decision-making, more complex internal processes, etc. However, they write much larger checks than angels, and are faster moving than many institutional investors. As impact investors, they are also stickier and more patient than traditional VCs. Building a relationship with an impact collective can create incredible long-term value given the sheer sum of capital managed by partners, the flexibility of allocations, and their large networks.

Approach your first meetings as an opportunity to let collective partners know who you are and build relationships for your next round, your next debt facility, etc. With groups like these, maintaining contact, providing regular updates, and taking opportunities to build trust are all key to long-term success.

How do you get in the door with an impact collective?

This can often be the trickiest part and where most founders struggle. You can take one of 3 paths:

• Go through a Partner: Going through a collective Partner is the best option, as Partner recommendations HAVE to be reviewed by the group. The challenge is that you may not know who is connected to the collective (unless they list partners publicly; some do). So, as you fundraise in the impact space, make sure to ask investors if they are part of such a network. And keep in mind that impact investors want to help other investors have impact (and make money at the same time), so referrals can be your doorway into the networks of private wealth that are otherwise nearly impossible to find.
• Go through a Portfolio Company: Founder introductions are a strong second –and sometimes easier– path. Connect with other founders in your community that have raised capital, and see if any of their investors are members of prominent collectives. You can do this through some of the big Climate Slack channels, your accelerator community, on Twitter/LinkedIn, etc. Don’t forget: founders love helping other founders raise.
• Go through staff: If you are targeting a specific collective, you can often find one of the staff “managers” on LinkedIn and take a shot at getting their attention. It helps to approach the conversation as an opportunity to learn about the group, the investment process (it can vary widely from group to group), and the background of the staff member. Collective staff are generally NOT very receptive to cold outreach, but with the right hook, you may be successful.

Impact growth is as important as business growth

Unlike conventional investors where decisions are purely a numbers game, impact collective partners want to see your social effects scale, alongside revenue and profit. Generally, Partners will not only want to see a compelling impact narrative, but also frameworks for measuring and evaluating impact over time. You need to make it clear that impact will NEVER take a backseat to business growth.

Keep in mind, though, Partners have different opinions about what makes “impact” — what will resonate with one family may deter another. Do your best to go beyond the group pitch sessions that are common with collectives and get one-on-ones with Partners so they can connect personally with your impact mission (something that can’t always be achieved in a 10-minute pitch meeting).

Final tips and insights

• Is this a side hustle or primary focus for collective members?
  • Impact collective partners are generally managers of funds, family offices, or have other full time roles. For some, all of their dealflow comes through the collective, and for others just a small portion. This is worth keeping in mind as you consider timeline/process.
• How it works/looks once you get in the door:
  • For most collectives, there’s a multi-stage process of engaging with entrepreneurs. Once you’re “in the door”, you can expect to do a short pitch of your business during a large group Zoom, often together with other entrepreneurs. There’s often a Q&A followed by an internal meeting where Partners debate the merits without the founder present. If you’re seen as a quality prospect, the process then varies across collectives: some will do additional group pitch/diligence sessions, others will move towards 1 on 1’s with individual partners, and others still will have a mix of the former and latter. It’s worth asking collective staff about the process early so you can effectively manage expectations.
• How to build momentum once there’s been some interest:
  • As with any investor relationship, it’s all about communication. Once you’re past the initial pitch, make sure to regularly update collective Staff and interested partners on your process. Add them to your monthly updates, schedule recurring check-ins, and do anything else you can to keep them engaged with your growth.

Olympia De Castro is a finance and impact investment leader focused on driving capital toward social and environmental investments. She serves as Board Member to Enduring Planet and as Board Advisor to Gratitude Railroad, an alternative investment platform. She is also currently the Chief Financial Officer and Treasurer of the Board at Datacubed Health, a life-sciences technology company. Formerly, Olympia was Co-founder and Partner of Community Investment Management (CIM), an institutional impact investment firm that provides debt funding to scale responsible innovation in lending to underserved communities. She has engaged in a number of global efforts to advance sustainable finance solutions across India, East Africa, and Brazil. Olympia holds a Master’s degree in Economic and Political Development from Columbia University School of International and Public Affairs and a Bachelor’s in Finance from the University of Miami.