The Inner Workings: INSEAD Student Impact Fund in Detail

Part 2 of 3

The primary mission of the INSEAD Student Impact Fund (ISIF) is to foster and support startups that are focused on generating positive social and environmental impact. At ISIF we collaborate closely with Loyal VC, a global venture capital fund founded by two INSEAD alumni, Kamal Hassan MBA’93D and Michael Kosic MBA’99D, to evaluate and measure the impact of new investment opportunities. Our partnership with Loyal VC is integral to our operations, allowing us to leverage their expertise and global network. Part 2 of this series outlines the lifecycle of an ISIF deal, detailing our processes for deal sourcing, due diligence, impact assessment, and portfolio management. We also discuss the ISIF community support for careers and growth within the impact investing sector.

ISIF Deal Lifecycle

Deal Sourcing

At ISIF, our deal sourcing process involves inbound interest from startups founded by INSEAD alumni. We aim to evaluate approximately three deals per month who are then considered for initial seed investments of $10,000 from Loyal VC. We present the companies on monthly investment committee calls where we discuss potential investments and make decisions based on the startups' alignment with our impact goals and their financial viability.

Due Diligence

Due Diligence at ISIF is a comprehensive process, particularly for larger follow-on investments ranging from $200,000 to $1 million. This process involves:

Market Dynamics: We thoroughly understand the market in which the startup operates, identifying the problem it addresses, the total market size and growth drivers, and the value chain it operates in. This includes analysing market stability, cyclicality, and key players at each stage of the value chain.

Competitive Analysis: We map the competitive landscape, evaluating direct competitors, substitutes, new entrants, and larger existing corporations. Key competitors and the startup are assessed across various criteria to determine competitive positioning and potential addressable market share.

Business Plans: We scrutinise the startup's business plan, evaluating assumptions related to costs, forecasted revenues, and market share projections. We assess the aggressiveness and feasibility of these assumptions to ensure they align with market realities.

Valuation: Using the business plan figures and insights from our market and competitive analyses, we support in performing the valuations employing multiple approaches (incl. ?DCF, multiples) leveraging our INSEAD learnings.

We present our findings and recommendations to a panel of seasoned investors during Investment Committee (IC) meetings. These investors typically question, challenge, and ultimately make decisions on the investment.

Impact Assessment

Our Impact Assessment framework is continuously refined to reflect current market trends and best practices. This involves evaluating carbon emissions, air and water pollution, resource use, waste generation, energy consumption, biodiversity impact, and social factors, such as job creation.

We adapt our framework to each startup, assessing key metrics relevant to their sector and operations. Additionally, we identify the positive and negative impacts of our investments in line with the UN Sustainable Development Goals (SDGs). This involves a detailed analysis of how each startup contributes to specific SDGs, ensuring our investments generate meaningful and measurable social and environmental benefits.

Portfolio Management

Effective Portfolio Management is crucial to our and the startup’s success. We support companies in Loyal’s portfolio with strategic projects aligned with the expertise of our team members. In this role, students put on a strategy consulting hat on to challenge assumptions, offer expertise, and ensure that decisions align with our impact objectives.

Strategic problem-solving and opportunity identification are key aspects of portfolio management. For instance, we might tackle challenges related to market entry strategies or operational inefficiencies, leveraging our network and expertise to provide solutions.

Fund Careers and Growth

Careers & Communications

ISIF is committed to fostering career opportunities within the impact investment sector. We develop partnerships with impact investment funds and connect INSEAD students with relevant career opportunities. Working with Loyal VC and other impact-focused venture capital firms will bolster students’ chances of internships and job placements at portfolio companies. It helps students gain practical experience and contribute to impactful ventures.

Events

To increase awareness of ISIF activities and the importance of impact investment, we organize workshops and speaker events across INSEAD’s Asia and Europe campuses. These efforts aim to educate the INSEAD community about the benefits and opportunities in impact investing. We also support club growth initiatives, enhancing recognition both within INSEAD and externally, and promoting the integration of impact investment principles into broader business practices.

The work we do at ISIF in collaboration with Loyal VC exemplifies a comprehensive and strategic approach to impact investing. From deal sourcing and due diligence to impact assessment and portfolio management, our processes are designed to identify and support startups that generate significant social and environmental benefits. Additionally, our commitment to career development and learning opportunities ensures that the next generation of leaders is well-equipped to drive the impact investment sector forward. In our next article in the series, we will dive into two past deals to give you more insight into the types of companies we invest in and the impact they have made.

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Written by Isabel Havens (MBA'24D) co-president of ISIF and Richard Dagher (MBA'24D)