Most of the thinking to date focuses on acquisitions, mainly because they're the most common type of exit in the impact ecosystem, and they are potentially the most complicated to get right from an impact perspective.
See a recent blog from Big Society Capital on impactful exits for a more comprehensive view.
Below are the key dimensions to get right when considering an impact acquisition.
It's important to bear in mind the visibility and influence early-stage investors have over board discussions, and how this evolves over time. Pre-seed/seed stage funds often come off the board by the time exits are relevant. In these cases, it's important to maintain a more regular/ongoing relationship with the founder, to keep as much visibility as possible of how the team is thinking about the trade-offs presented for different exit opportunities as they come along.
Understand the buyer and why they want to buy the startup
A key consideration here is the nature of the acquisition, in other words who the buyer is in terms of mission, vision and values, as well as their purpose for acquiring the company. These factors will determine how successful integration is, and how aligned the two entities will be in decision making and strategy. Ultimately this is what determines whether impact is achieved over time or not.
Ensure the acquisition and integration go smoothly
Ultimately, if the acquisition fails from an integration perspective, then no impact will be achieved, and so the traditional considerations about cultural alignment, communication etc all play a role here. This is covered by others in much greater depth.
Ensure impact is a source of value for the company
If impact is driving value in the company being acquired, then even impact-agnostic acquisitions would want to sustain and enhance impact. In these cases, the success of the business model or product or service is tightly linked to impact delivery, and so incentives are aligned.
Impact governance and accountability mechanisms pre- and post-acquisition
Impact startups are experimenting with several mechanisms, to ensure that impact is embedded directly into governance. These can all help to preserve impact upon exit. These include the B-Corp certification; having a dedicated body responsible for impact oversight (eg Togetherall’s‘Guardian Council’) or measuring and publicly reporting on impact (eg Second Nature, Wagestream and Olio).
Hire impact-driven talent and create a culture of impact
Focusing recruitment and retention on individuals who care deeply about the impact mission of the company, helps to ensure that post-acquisition there are still champions of impact working for the original cause. Similarly, creating a culture that prioritises impact will help to sustain this focus post-acquisition. See our list of questions on assessing founder's impact intent for some ideas on what might be relevant when selecting impact-driven talent.
