“Impact lock is where the impact is embedded in the revenue model. Why? Cause it can’t be stripped out. ”
— Will Richardson
Where does impact live in a company?
Most allocators still assume impact investing costs returns. Will Richardson doesn’t dismiss that: “in some circumstances, you will trade off financial returns for impact,” he says. Even so, he has spent ten years building Giant Leap around avoiding it. His test is what he calls impact lock. The impact sits in the revenue model, so nobody can strip it out.
That is stricter than it sounds. Who Gives a Crap is known for donating 50% of its profits to build toilets. Plenty of people assume that’s why Giant Leap invested. It isn’t. Donations can stop. Automation can undo a pledge to hire from disadvantaged backgrounds. What Giant Leap underwrote was the product: toilet paper made from recycled textbooks, with sustainably grown bamboo for the premium range. Amber Electric follows the same logic. Giant Leap backed it at a hundred customers, and it now has 100,000.
Health is harder. Close to half of Giant Leap’s portfolio sits there. What Will calls “the number one question in health” is not whether the treatment works but who pays. Clean Slate Clinic’s telehealth detox costs around $4,000. A residential stay runs around $16,000. Even with insurer coverage, many families pay out of pocket.
The other half of the conversation is how he got here. A private-equity career he had planned since a school careers fair. A conference near Geneva that mistook him for its impact-investing speaker. Fifty coffees. Then a decade of lessons, among them the deal Giant Leap lost by haggling on valuation.
KEY TAKEAWAYS
- Find where the impact sits before you underwrite it. Pledges to donate, or to hire from disadvantaged backgrounds, can be turned off or automated away. When the impact is in what the company sells, every sale adds to it.
- A returns concession isn’t built into impact investing by design. Will accepts the trade-off is real in some circumstances. Avoiding it is Giant Leap’s mandate. Amber Electric is the case he points to: 100 customers grew to 100,000, and basically no revenue became over $33 million.
- Health deals turn on who pays. Reimbursement helps. It isn’t always needed, because some families pay out of pocket.
- Think of a seed fund as a sprint coach. Its follow-on cheque is a small slice of later rounds. What it really brings is a contact list that gets later investors to take the call.
- The hardest part for a first-time fund manager is “finding your first believers.”
Will has his own bar for this episode. He wants a founder, or someone raising a first impact fund, to walk away “feeling hopeful and defiantly optimistic”, and to have a crack at whatever they’re drawn to.
Listen to the full conversation.
Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Castbox, YouTube Music, Amazon Music, or on your favorite podcast platform. You can watch the interview on YouTube here.
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What was your favorite quote or lesson from this episode? Please let me know in the comments.
SHOW NOTES:
[02:28] People queue after his talks: the pre-show moment
[02:58] Army postings, India at nine months, and a family of builders
[04:15] A great-grandfather who was kidnapped, then escaped
[07:52] Share certificates instead of toys
[09:23] A stockbroker at the careers fair, and the pinstripe-suit plan
[12:26] Seven years of turnarounds at CVC
[14:08] “Will, you’re asking the wrong questions”
[17:17] When the private-equity job stopped working
[19:26] Registered as the presenter at an impact conference he came to learn from
[23:00] Fifty coffees, and the one that changed everything
[24:18] Employee number one at Impact Investment Group
[29:03] Launching Australia’s first 100% impact VC fund
[30:38] The fund launch and a first child, same day
[32:08] COVID: triaging a portfolio in a week
[33:29] Spinning out, and why the second raise went differently
[35:49] Inside Giant Leap today
[37:56] “Impact lock” in 30 seconds
[38:45] It’s not the donations: the Who Gives a Crap test
[41:51] Does impact cost returns? 100 customers to 100,000
[44:33] From 100 deals a year to 1,500
[46:12] Where purpose has been a disadvantage
[48:02] From avoiding hard tech to backing it
[52:46] Sprint coaches, not marathon coaches: the follow-on math
[53:51] Climate, health and people with a small team
[55:11] Clinical evidence says yes, but who pays?
[55:59] Why should anyone believe an impact report?
[58:38] Ten years: what worked, what didn’t
[01:01:09] When kindness is the wrong call
[01:01:35] AI on slide two: where the impact bar sits
[01:03:53] Majority women-led, in a market that funds a fraction
[01:05:44] Great-uncle Jack’s advice
[01:06:33] The biggest obstacle for first-time fund managers
[01:06:55] Rapid fire, including the deal they lost on valuation
Additional Resources:
RELATED EPISODES:
Episode 51 — Lena Thiede, Co-Founder of Planet A Ventures — How Science-Based Impact Investments Are Saving Our Planet. Another early-stage impact fund, this one with an in-house science team that can veto an investment on impact grounds. Hear how a different fund decides what counts as impact and what gets turned down.
Thanks to Sarah Nolet, Managing Partner of Tenacious Ventures, for introducing Will to us (listen to Sarah’s podcast episode here).
