Hatcher's dealflow as well as third party transaction information was analysed to determine the effect of Hatcher's "impact" choices on investment returns. For this review we will use the terms impact and ESG together. We observed that those with investments influenced by impact are significantly greater multiples .
This leads us to conclude that Impact strategies are more likely to be accretive than typical investments in the early stages. This post will focus on series A and the earlier investments. Hatcher has sufficient transaction volume to allow us to analyze these strategies.
The analysis looks at the changes in valuation over a time period. But, valuations may change but not necessarily reflect realized value as most investments fail to fully realize their full potential within the specified time frame. We disregard the most recent valuations (possibly zero) when there are no relevant signals.
The chart below illustrates this effects. Below is a summary for one view of data. This is a particular view of early-stage round investments and investment over a five-year time frame. It is representative of the relative performance of all the views we studied. The figures are dependent on changes in the parameters of the view and therefore are based on a specific scenario.
Impact Vs. Non-Impact Investment. Not Categorised
The review could be affected by other elements. We don't know for certain what the purpose of investing is, we can estimate the Impact investment performance relative to the pool that complements it.
There is evidence to suggest that Impact investors may be drawn to companies with a strong momentum. As such, they often pay a premium More help and are not able to realize portfolio gains. In a valuation multiplier basis however, the total performance of 'impact-touched' companies is better both in the short and long term.
We looked for investors that had clear mentions of the impact of their investments or similar goals on their websites or in the absence of an approach that resembles impact and tagged them as impact investors. When we tag high-frequency investors, we end up identifying a large amount of investments within our data. We flagged investments as either with a "known impact investor' or a blend or neither.
As this isn't an analysis of transactions in a moment that are based on time, many investments are definitely not appropriately classified. It is only a small sample, however, and investors who have recently included the concept of impact in their plans tend to be more Impact-friendly.
There are a myriad of factors that go beyond the original goal and the type of investment. The increased self-selection as well as scrutinizing that goes from aligning with the impact goals, even on a fuzzy basis, results in a greater focus on feasibility, scalability and team composition, among other factors that can influence the trajectory of valuation. Furthermore, many impact investment areas could be able to generate a substantial intrinsic return.
In summary, the aligned focus on impact investment and return on investment multiples for investors is extremely effective. This encourages positive feedback in the impact investing industry that may help to increase the impact goals.