Today’s flashback post is directed toward college and graduate students interested in building a career in social impact investment. Some of these skill sets can be built through academic study, others through internships and employment. The last, creativity, probably requires that you go out and have fun every now and then! This isn’t meant to be an exhaustive or definitive list – it’s just a reflection of skills I’ve found valuable over the years. In addition, my focus has always been on emerging markets. If you are preparing for a service-oriented career in the US, you might want to swap “International Relations” for a more domestically focused curriculum covering economics, sociology, anthropology and political science.
1. PROJECT FINANCE: The beauty of project finance is that it requires the practitioner to identify risk factors and use financial structuring to mitigate these risks within a “fully funded” structure. I’ve seen some VC/PE types negotiate brilliant deals that were, in fact, so favorable to that particular investor that the entry of other investors was made impossible and the entire deal (and at times the entire company) collapsed. Impact investment isn’t just about getting good terms for your investment, it’s about crafting an investment structure that will enable your portfolio company to achieve its goals.
2. CREDIT ANALYSIS: Whether you are looking at debt or equity instruments, understanding the financial condition and business prospects of a potential portfolio company requires strong analytical skills and “context”. The clients served by a Microfinance Institution might be the same as the clients served by a health clinic venture, but the credit dynamics of the two organizations are quite different. In an ideal world, you’d have the opportunity to work on a range of equity and debt instruments in both the financial and corporate sectors.
3. INTERNATIONAL RELATIONS: Solid grounding in international economics, politics and history provide important context for the impact investments you hope to make. Language skills and the opportunity to study and live abroad also offer value in a professional setting. If you can throw in some anthropology and sociology, these disciplines can also provide insights into the complexity of social change. Sector knowledge, such as affordable health and housing, renewable energy, water and sanitation, can add substance to your impact investment work.
4. RELATIONSHIP BUILDING AND COMMUNICATION: Too often we assume that a shared vision or mission statement is adequate basis for a working relationship. In reality, building a connection with your portfolio company that enables you to understand operations and strategy, as well as add value in these areas requires investing in interpersonal relationships. Your ability to communicate – informally or formally, in writing or in an oral presentation – can enhance or hinder your efforts to finance transformative ventures.
5. CREATIVITY: Although you can’t teach creativity, you can nurture it. Allow yourself to “think outside of the box”. Consider wild and crazy new ideas. Look at the investment proposal on your desk and imagine how different structures, terms, conditions or strategic considerations might shift the risk/reward profile. My VC friends insist that pipeline is a problem because there isn’t enough deal flow for “pattern recognition”. After 25 years in social finance, I can tell you that there are rarely patterns you can identify regardless of how many deals you look at. The real opportunity lies in the ability to recognize a great idea (and/or a great management team) and figure out how to make it financeable.
By Lauren A. Burnhill aka @LaurenOPV