Building an Impact Investing Team
Today, we launched Building an Impact Investing Team, a guide for families who are beginning to tackle the many strategic questions involved in assembling the right staff and structure to achieve their impact investing goals. In this guide, we’ve distilled lessons from our work advising more than 150 families, our commitment to supporting peer learning networks for high net worth (HNW) individuals, and our own impact investing journey into a four-step process brought to life by several case studies. Our hope is that, by sharing our experience and that of other families, we can make it easier for those new to impact investing to enter the market with confidence.
Our founders, Pam and Pierre Omidyar, know just how many questions there are to answer after making the initial decision to build an impact investment team. They initially created the Omidyar Family Foundation but quickly realized that structure and team weren’t well-suited to their goal of leveraging the power of markets to create change at scale. So in 2004, they established Omidyar Network as a hybrid structure – we are both a limited liability corporation (LLC) and a 501(c)3 – and have built a team of nearly 150 people across eight offices, globally. Through our hybrid structure, we’ve committed more than $1.3B to impact, split roughly evenly between for-profit and nonprofit organizations.
Needless to say, the past 14 years have been a journey, with many turns along the way, but our experience has highlighted the unique role that HNW families can play as catalytic adopters of impact investing—with tremendous resources, flexibility, and appetite for risk, HNW families are uniquely positioned to deploy capital against the most pressing issues of our time. Yet we hear time and again that many seeking to enter impact investing for the first time are overwhelmed by the diversity of the market and simply don’t know where to start. In particular, many families struggle with the numerous strategic choices involved in building an impact investing team: whether to create a new entity or house their impact investing team within an existing structure like a foundation or family office; whether it’s better to experiment on a small scale or to make a larger commitment; or whether it’s possible to get started using their existing advisors.
Perhaps the most important thing we’ve learned is that there are as many ways to build a team as there are reasons to pursue impact investing—which is why the first, and most important, step in the guide is to get clear on your shared goals and motivations. With this as a guiding star, you can begin to explore operational needs and constraints to realizing those goals. In step two of the guide, we’ve suggested four frequent guiding inputs that influence families’ talent decisions. Together, these factors will help determine the team structure that will best achieve families’ goals (step three), whether in-house, outsourced, or a mix of the two, and give them the tools, resources, and confidence to get started (step four).
To help bring these steps to life, the guide includes case studies from seven families, three of which also share their experiences in this recorded webinar. Each has a team structure unique to its specific goals and motivations, yet despite the diversity of each family’s paths, three common themes emerge from their stories.
Look no further than your own backyard
As they think about where and in what entity to build their teams, many families find that they already have relevant resources and capacity within existing infrastructure (e.g., talent and teams within current family offices, foundations, or even their current wealth advisors). For those with an existing business or family office, building an impact investing team within that structure can allow them to start with a lean team, while benefitting from existing talent and back-office support of the broader organization. For example, the Salesforce Impact Fund was able to recruit just a single person to do everything from sourcing to portfolio management because they were able to take advantage of the existing infrastructure and processes of Salesforce’s robust corporate venture arm. Without the ability to leverage these resources, this team structure wouldn’t have been possible. For Bill and Melinda Gates, impact investing was first and foremost a means to speed progress toward their ambitious philanthropic goals. As a result, it became clear that their impact investing team would need to reside within the existing Bill & Melinda Gates Foundation to facilitate coordination with grantmaking teams.
Specialized goals often require specialized teams
The more that families prioritized flexibility in investment structure, control over investment decisions, and a desire to execute bespoke, direct deals as part of their impact investing goals, the more likely they were to build in-house teams. In Ceniarth’s early days, Diane Isenberg leveraged external talent to manage investments focused on market-rate returns, public markets, and private equity funds pursuing a broad definition of impact. However, recently, her impact strategy has evolved to focus increasingly on direct investments in underserved communities. As a result, she is increasingly leveraging in-house talent to execute these transactions, which external advisors don’t currently offer. Charly and Lisa Kleissner took a different approach and rather than hire an in-house team, they’ve chosen to be very hands-on in their own direct investments, while leaning on external talent for other parts of their portfolio. Finally, Jesse and Betsy Fink saw that building individual in-house teams wouldn’t be possible for all families with ambitious impact goals like theirs. To address this challenge, the Finks created MissionPoint Partners, a Registered Investment Advisor that serves multiple families as separate accounts, in 2015. This approach allows families the flexibility of a more customized impact investing strategy by achieving economies of scale through a shared staffing solution, while also driving greater collective impact.
The impact investing market’s growth makes it easier than ever to get started
As the market has matured, so too has the supply of strategic consultants, advisors, and other service providers, and it’s now easier than ever for families to get started and build their teams via external talent. For some families, such as Ruth Shaber of the Tara Health Foundation, starting the conversation with current advisors may be a logical first step. For others, it may make sense to hire a new investment advisor, and there is an ever-wider range of candidates from which to choose. When they issued an open call for letters of interest, the Jesse Smith Noyes Foundation received 34 responses, ranging from mainstream investment firms like UBS’s private wealth management team to highly focused impact investing specialists like Flat World Partners.
Additionally, peer-to-peer networks such as Toniic, The ImPact, and PYMWYMIC can also be an invaluable resource to families as they build their first impact investing teams. Networks offer a chance to deepen your impact investing knowledge, learn from the hands-on experience of others, and inform your talent search with the reviews and experiences of others.
Finally, if we heard one piece of advice consistently across all of the families featured in the guide, it’s to just get started however works for you today. With time, your strategy will evolve, and so will your team!