If you are wondering if your company might be a fit for our fund, please read through the following before seeking capital from our group.
Investment Criteria for Next Wave US Impact Fund I
The Next Wave US Impact Fund I seeks to demonstrate that impact investing can provide attractive financial returns. We will build a diversified portfolio with a goal of maximizing both social and financial returns. The fund will follow a triple-bottom-line model of investing (people, planet, prosperity).
We will seek a portfolio that is more angel investments (early stage) than venture (later stage). On the early side, we want to see both proof of concept and some market traction. Investments at the pre-revenue stage would be an exception and would require a proven entrepreneur, amazing idea, and/or incredible backers. The fund will emphasize diversity by investing not only against stage, but also industry and geography, and a diverse set of underrepresented entrepreneurs.
Portfolio Company Characteristics:
We will look to invest in companies that we feel meet the following criteria:
- Sustainable Competitive Advantage: Competitive advantages can include high barriers to entry (if no IP, then trade secrets that can allow a reasonable amount of time to become market leader), disruptive technology, etc. Company should foresee creating some type of unique marketing position.
- Strong, Well-Balanced Management Team: Should include knowledge of the industry, their product and competitor’s product as well as an understanding of where their product fits in the future trending of their industry. Should have enthusiasm and ability to execute their plan.
- Strong preference for serial entrepreneurs who have successfully exited in the past, are coachable, and communicate well with their investors.
- Market Opportunity: The market ideally would have room for growth and offer opportunity to capitalize on attractive industry trends.
- Balanced and diverse growth strategy which addresses both vertical as well as horizontal growth.
- Product/Service Differentiation (No “Me-too” companies)
- Has a Plan B as well as Plan A, in addition to a clear exit strategy (or, in cases of alternative financing vehicles, a clear path to repayment of investment + return).
- Our fund investments will focus on firms that we believe have a significant positive impact on people, communities, and the planet.
- We are interested in companies that have shown traction in solving a large-scale problem in education, health, food sustainability, and opportunities in clean / energy saving technology, as well as companies that are focused on the aging population.
- We will not invest in pharma and medical devices that include FDA approval unless the approval is imminent.
- We should have geographic diversity and a portfolio weighted more heavily to women entrepreneurs, but not necessarily exclusively women-led companies. We’d like to see women and/or minorities on the founding team.
- Valuations: Reasonable valuation for the stage of the entity > should be comparable to market median prices. Unless at a later stage, valuations above $6M should be thoroughly reviewed and have disruptive technology; most early stage company valuations should be between $2 – 4M.
- Funding Ask: Should be in line with their stage of growth
- Our aim is to have investments of $100K to $250K per company in the first two years of the fund, and follow on investments of $250-$500K in years three and four. We may ask for a board seat. Observer status at a minimum.
- Number of expected funding rounds: the company should have looked at this and provided their answer, which we can then evaluate as to what amounts of money have to be put aside for follow-on round investing.
- Diversity in terms of Stage of Company – at a minimum, company should have proof of concept. Most companies should be already in the market and earning some revenue. Some investments should be later stage so exits are possible in the near term. Some companies should be quick to cash flow break even, not requiring multiple funding rounds
- To achieve diversity, we plan to invest in 6- 8 companies each year for the first two years. Our typical first investment size will be 100K-150K.
- We plan to syndicate all deals and not be the sole funder. Ideally we should invest no more than 30% of the round. We will aim to syndicate deals with our networks including: Toniic, Investors Circle, Golden Seeds, Astia Angels, Pipeline Angels, 37 Angels, Blue Tree Angels, Portfolia, and other angel and early stage and impact VC firms.
- A ‘quick’ win or 2 relatively early would help to grow the reputation of the fund. We plan to make follow on investments in a subset of our portfolio companies in years 3-4, as well as possibly a few more seed investments. Our follow on investments will be in the 200K-$500K range.
- Our due diligence will focus on ensuring the social/environmental impact is core to the companies’ business models and clearly define it for each company. Early screening can ensure the impact isn’t, but detailed due diligence will need to prove out how the impact mission is core to the company, so ideally that is preserved post-exit. The fund will follow a triple-bottom-line model of investing (people, planet, prosperity).
Focus Areas (Drawing from GIIN Impact Targets)
- Financial Access/Inclusion/Security
- Green Technology/Cleantech
- Agriculture & Food, including Agtech
- Sustainable Consumer Products including Food Products/Organics & Green Consumer Products/Services
- Employment Generation
- Aging and Longevity
- New social enterprise business models
- Solid Team with sector expertise
- Generating revenues (or ready to go to market if pre-rev)
- Currently raising at least $500K with some committed capital (other funders already on board) (our minimum investment is $100K and ideally don’t want to take more than 20% of round)
If you are seeking capital from our group, you should be referred by one of the members of our investment committee or one of our LPs. Please note your referrer in your application to us. You can apply to our fund by submitting your information to our fund at https://nextwave-impact.proseeder.com/application/start
Thank you for reading until the end!