How do you measure the impact of your VC investments?

1 Why measure impact?

Measuring impact is not only a way to align your investments with your values and mission, but also a way to gain insights into the performance and potential of your portfolio companies. By tracking the impact of your VC investments, you can identify the risks and opportunities that affect your financial returns, as well as the value you create for your stakeholders and society. Moreover, measuring impact can help you communicate your impact story to your investors, partners, customers, and employees, and build trust and reputation in the market.

2 What to measure?

There is no one-size-fits-all approach to measuring impact, as different VC investments have different goals, contexts, and outcomes. However, there are some common elements that can guide you in defining what to measure. First, you need to clarify your impact thesis, which is the statement of how and why your VC investments will create positive impact. Second, you need to select your impact indicators, which are the metrics that quantify and demonstrate your impact. Third, you need to set your impact targets, which are the specific and realistic goals that you aim to achieve with your impact indicators.

4 When to measure?

Measuring impact is not a one-time activity, but a continuous process that requires regular monitoring and evaluation. Before investing, you need to measure the baseline impact of the potential portfolio companies and compare them with your impact thesis and criteria. During the investment, you need to monitor the progress and performance of your portfolio companies, providing feedback and support to improve their impact. After investing, it’s important to measure the final impact of your portfolio companies and analyze the results and lessons learned.

5 Where to measure?

Measuring the impact of your VC investments is a context-specific practice that takes regional and sectoral differences into account. You need to consider the cultural, social, economic, and environmental factors that influence the impact of your investments in different regions, as well as the industry, market, and customer characteristics that affect different sectors. This is not a straightforward task, but it can help you optimize your financial and non-financial returns, and contribute to a better world. To develop an impact measurement strategy that suits your VC investments, you can use some of the methods and frameworks discussed.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?