The dealflow of Hatcher and third party transaction information was analysed to determine the effect of Hatcher’s “impact” choices on the return of investment. This review includes both ESG and more obvious sustainable. We discovered that multiples are significantly higher for companies that are investing in impacts.
We conclude that Impact strategies are more likely to be profitable than standard investments in the early stages. This post will examine series A, as well earlier investments. Hatcher's focus is on this topic and it has enough transactions to support the analysis.
Our analysis looks at the ways in which valuations fluctuate over time. This is because valuations fluctuate, but they are not necessarily attained values, as the majority of investments do not realize within the timeframe specified. Based on the time elapsed in the analysis, we eliminate any new valuations (possibly up to 0) in the event that no other applicable signals are available.
The following chart illustrates this impact. This is a summary of one data view. The chart below includes the early stages of rounds, recent investments and a five-year time period of time. This illustrates the performance of all views that we examined. The figures are dependent on changes to the views' parameters and, therefore, are specific to the scenario.
Impact Vs. non-Impact Investor
The review is a mix of confounding factors. Since we don’t know the motives behind individual investments the review will compare Impact's performance with the performance of the complimentary pool.
There is some indication that Impact investors may be attracted to companies that have already gained popularity, thus they may be taking a risk on scalability and choosing higher-quality outcomes, however typically paying a price that could be offset by portfolio gains. Overall, the performance of "impact touched" companies is superior in both a short-term and long-term valuation multiple.
We found high-frequency venture investors who explicitly mention "impact" or have similar objectives. We were able to discern large numbers of investments in our data through the use of tags for high-frequency venture funders. We then identified the investments that are either a 'known' blend more info or impact investor or as not having either.
Many investments are not properly classified as this is not a time-in-transaction analysis. This is a tiny sample, however, and investors who have recently incorporated impacts in their plans tend to be more Impact-friendly.
Other factors are involved beyond the purpose of the investment and type of investor. Most likely, the added self-selection and the scrutiny of aligning with impact goals however on a more fuzzy basis, causes greater attention to scalability, the feasibility of the project, team composition and other aspects that affect the trajectory of valuation. Additionally, many impact investment topics could have a very high intrinsic yield.
In short, there is a significant alignment between investor returns multiples (and impact investment focus). This allows for positive feedback from impact investments which can help further enhance impact goals.
