LBS Impact Ventures Fund: A world-first in business education

Josh’s interest in impact funding was first sparked by a talk on financial engineering at the Brookings Institution in Washington, DC in 2014, when he was struck by “the power of finance to mitigate the gap between social return and economic return.” As he points out, however, “there is no shortage of social enterprises and social causes that have a clear benefit – it’s a question of finding the right investor base to be able to take on the risk of financing the enterprise.”

And while one bond in particular, Educate Girls in India, impressed him as having the potential to achieve social goals that would lead to significant and measurable economic returns, he was also struck by the fact that, because US investors tend to be wary of investing outside the country, US impact funds mainly target social enterprises that are nationally focused.

This was one reason why he decided to do his MBA at LBS. Another was the fact that, tellingly, he believes London is “a little ahead of the curve” compared to other financial centres like New York, Chicago and San Francisco: “There is just so much more collaboration between funds, the government and schools like London Business School.”

With the MIINT competition tending to feature US-based enterprises (LBS is one of the few schools to have sourced a company from outside the US in which to invest), the LBSIV has a unique competitive advantage in that its network is truly global, so that it can source start-up opportunities anywhere in the world.

This ‘realness’ characterises the LBSIV in all respects. As Josh says, “Fundamentally, there is great education in the classroom, but it always has to be complemented by what happens outside the classroom. Having a fund with real money and real companies is a very powerful experience for students to then go into the job market and say, ‘I have made an investment deal with my classmates at LBS.’ It makes it much more real – it moves it from a student conversation to something that has real-life investment impact.”

And while this is “the main benefits to students,” the fund has key benefits for other stakeholders. One, of course, is the end use of the funds; the social-impact investment itself. Another is that LBS faculty get immediate exposure to start-ups around the world with new and innovative business models. Depending on how successful the fund is, there is also potential to raise money for the School, which could be ploughed back into the fund or used for other initiatives, such as providing scholarships in impact investing.

On top of these benefits, there is one which further distinguishes the LBS fund from the MIINT competition and similar experiential programmes. Whereas these begin again every year from scratch with a new intake of students and judges (and the knowledge and expertise they have gained is ‘lost’), the LBSIV will have a dedicated investment committee who will oversee the process from start to finish, thereby putting the students in much closer and more sustained contact with the impact investment community in London – and, hopefully, a portfolio of companies that will be the recipients of the investments.

Students will engage on strategic projects with the companies, providing advice and resources on operational issues; a potentially huge value-add to resource-constrained start-ups. As a result, it is envisioned that their relationship with LBS will grow and be maintained over many years – adding a whole new dimension to the term ‘sustainable investment’.

LBSIV plans to make minority investments via equity in the ticket size of £20,000 to £40,000, consistent with the MIINT competition and dependent on available funds. Jeff Skinner, Executive Director of the Institute of Innovation and Entrepreneurship at LBS, who currently manages the internal MIINT process, will oversee the formation, organisation and oversight of the flagship fund. He said: “This really capitalises on the huge interest in social enterprises and impact investing among students and the business community at large. The main aims are to give students a great learning experience, help build sustainable, high-impact social ventures and build a sustainable fund that makes a return that can be invested in other ventures and programmes. It’s an incredibly exciting initiative.”

The question how the start-ups could get the maximum benefit from the fund was a central part of Josh’s thinking: “Having a consistent, ongoing relationship with LBS and having access to LBS students, faculty, network and brand can really move the needle between an enterprise failing and thriving. This has the potential to be a game-changer in the impact space.”

Further reading: Nicole Kamra on winning an investment in the MIINT for an innovative healthcare start-up in Pakistan www.london.edu/lbsr/iie-7-things-ive-learned-about-impact-investing