IESE Business School in Spain hosts an annual Impact Investing Competition as part of their Doing Good Doing Well conference. The Competition, which is now going into its 7th year, brings together teams from leading business schools across Europe. Now students at IESE are taking it one step further. They have recently come together to raise money to create the school’s first 100% student managed impact investment fund. I spoke with Luca Venza and current MBA Students Rachel Messina and Michael Davis about this initiative.
(This post is part of Impact Investing month on PRiMEtime. Click here to access more posts on Impact Investing).
What is IESE’s Impact Investing Competition and how did it come about?
The Impact Investing Competition (IIC) is a dynamic competition that guides participants through the key phases of impact investment including due diligence, term sheet development and negotiations with real-world entrepreneurs and a panel of impact investment professionals acting as the Investment Board. We ask all schools to hold internal rounds with the winner going to IESE for the final. The top business schools in Europe compete alongside top schools from Asia and often the U.S. at the IESE final round. The teams are judged by the entrepreneurs and impact investment professionals invited for the event. This competition started about 6 years ago due to the passion of IESE Professors and Students, eager to expand the understanding of Impact Investing, especially as it changes dramatically into a maturing asset class. The competition is part of our annual Doing Good and Doing Well conference which we organize annually which brings together 50+ speakers and 500+ attendees.
How is the competition organised and how do students participate?
The competition is designed to simulate the impact investment process as closely as possible within an accelerated timeframe. Each participating school first organizes an internal round to nominate the representing team for the final round, which takes place on the IESE campus. A few days in advance of the competition day, teams will receive information about the investment opportunities, which are typically 3 real impact startups identified by the competition organizing team. On the day of the event teams arrive early in the morning to prepare for a fast-paced series of simulation rounds, which are each judged by the panel of real impact investment professionals and entrepreneurs. The exact schedule may change slightly year-to-year, but generally it goes as follows: 1) entrepreneurs pitch their companies in front of all teams 2) due diligence sessions take place between each team and entrepreneurs (judged round 1) 3) teams choose which investment to make and prepare term sheets 4) teams present their term sheets and investment decision in front of the investment committee to win approval of the board (judged round 2) 5) teams negotiate terms with the entrepreneurs in front of the judges (round 3) 6) Judges vote on winning team and the day concludes with an awards ceremony and networking cocktail.
Why do you think it is important for students to understand impact investing?
Although relatively new and still a small sector, impact investing resonates well with MBA students because they see the connection between private sector, for-profit strategies and the generation of positive social and environmental impact. More and more individuals would like to align their investment decisions with their personal values. Most importantly, many students (and professionals) want to make the world a better place while investing, and are even willing to accept a lower return. The good news is that some studies show that impact portfolios are resulting in higher returns than the average portfolio. It’s also a fun way to learn about typical Venture Capital deals which is useful for Investors and Entrepreneurs alike.
What have been some of the successes? I would say that we have been successful in two ways. First, by bring on actual social entrepreneurs to compete in this event, we help prepare them for professional fundraising outreach. Our students have a similar skillset to most investors and highlight many of the questions that will be key for entrepreneurs to understand while raising funds. They value getting practice with our students in a “low-risk” environment. Second, the impact on students is to give them a small but practical insight to the sector to help them understand their relative value to the sector and start to network with actual investors on the Investment Board. It is still a small sector in the sense of MBA recruitment so all contact and experience helps.
The competition is organised by students (generally the winning team of the previous year), so it’s important to ensure good handover and transition every year. Busy MBA schedules certainly make this challenging, but the opportunity to organise such an event is a great learning experience and also provides networking opportunities for students to develop relationships with impact investment professionals. Each year student organisers aim to find new entrepreneurs to feature in the competition, and the research and sourcing process of these companies takes a significant amount of time and effort.
In 2017, a group of graduating students founded the school’s first impact investment vehicle, the IESE For Impact Community fund (IFIC). This year’s organising IIC team is also acting as the Board of Directors for the new IFIC fund and will be going through the first real investment process. IFIC was established for three primary reasons: one is impact, supporting businesses driven by an aim to positively impact society; the second is learning, providing hands-on and valuable experience for students; the third is to put the IESE mission into practice, in line with our school’s objective to educate leaders with the highest ethical standards. IFIC will invest in and provide consulting services for impact startups—enterprises that demonstrate that positive social and/or environmental impact is an intentional and integral part of the business model. The winning internal team of IIC will have the opportunity to act as the next year’s IFIC Board, and we believe there will be opportunities in the future to consider the IIC investment opportunities for actual investment via IFIC.
Any tips for others looking to organise a similar competition? Get in touch with the IESE organising team. We are looking for collaborators to create a global competition with regional semi-final rounds similar to the Venture Capital Competition, VCIC. Identify champions within your community, starting with your school’s faculty who should be able to share their network to invite judges and help find financial partners / sponsors.