NB Financial Health

Thursday
June 5
2014

James Militzer

What Makes Toniic Tick?: Part one of an interview with Stephanie Cohn Rupp, CEO of the impact investor network

As anyone who’s looked at their stock or retirement portfolio in the past six years can attest, investing can be a risky business. And investing for social impact presents uncertainties that go beyond market crashes and economic crises. For instance:

  • The cost of due diligence and performance monitoring can be higher for geographically remote companies;

  • Investments may involve complex legal structures, requiring comprehensive investor education and continual engagement to complete deals;

  • There may be increased financial risk and limited governance due to a lack of experienced co-investors;

To help navigate these and other challenges and make full use of their investable capital, it helps if impact investors can leverage the time, talent and knowledge of like-minded peers.

That’s a key rationale behind Toniic, a global network of impact investors whose goal, according to its website, is “to harness the incredible potential of socially minded impact investors to catalyze the broader impact investor movement and support the growth of high-impact entrepreneurs and funds.” The network aims to benefit social entrepreneurs, by expanding their access to investment, professional networks and knowledge that can amplify their impact. And along with increasing the quality and volume of impact investing by existing investors, it hopes to inspire others to include impact investments in their portfolios.

I recently spoke with Toniic CEO Stephanie Cohn Rupp to discuss the network’s approach, and the evolution of the impact investing sector in general. In part one of our interview, Cohn Rupp discusses the need for more connections among investors, and the tactics Toniic uses to bring investors and entrepreneurs together.

James Militzer: Could you give me an overview of Toniic and what makes it different from other impact investor networks?

Stephanie Cohn Rupp: Our goal is to become the largest network of impact investors, and we’re growing significantly throughout the world. We’re the only global angel impact investing network, as all of them are regional or national, like our partners Investor Circle or Clearly So in the UK. We feel there’s a really significant need for a global network, because a lot of these deals – whether it’s solar energy or education technology or whatnot – are very similar from one region to the next. And there’s a lot of learning to be shared between investors, so being regionally siloed represents a missed opportunity for knowledge transfer.

JM: In providing a platform to share information among investors, do you find it hard to get people to speak openly – considering that they may be in competition for investing opportunities?

SCR: I find the seasoned investor in the impact space is much more amenable to sharing information than your average commercially-minded only investor, and the reason for this is that it’s difficult to invest cross-nationally to start with and the impact space remains a nascent sector. Collaboration trumps competition, especially as we are all mission aligned, hoping to improve outcomes for planet and people. There’s a lot of information that a single investor won’t have, and you’re much stronger in a syndicate – there are economies of scale regarding due diligence, local intelligence, legal fees, deal structuring, risk assessment and mitigation, etc. – and the more seasoned impact investor knows this. What we bring to the table is a network of investors who have each a comparative advantage, a different purview, a different context – and also different contacts in terms of expert counsel or any kind of advice. As you probably know, when you due-diligence deals you really need to understand the reputation of the entrepreneur and the team on the ground and so on. And so the more data you have access to, the stronger you are in making your investment decisions.

So generally we find that members do enjoy sharing their position on entrepreneurs and asking questions to one another. That collaboration is very key to our value and to how we work, since we’re all about syndicating deals. Going forward, I don’t know how collaboration will work with the newcomers to this space, especially those who come from the traditional venture world, for whom this is not a natural way of behaving. But we’ve tried to invite into our network these investors who are already quite socially minded, and who do understand the basic Prisoner’s Dilemma, that if you collaborate the outcome is higher.

And so that collaboration is key, which is why we have a community-building piece – we’re just launching our new social network that we developed, we call it the Toniic Lounge. We’re the only angel network in the world to have developed a proprietary social network which is completely designed for impact investors. So unlike Angel List or others, it’s focused on community building as well as investing. We’ve invested quite a bit in it to ensure that our members really are in constant contact with one another – not just through our events and our calls and the deal platform, but through a really strong cyber community. And that is an art that’s really hard to do. But by building that community and that trust we hope to also engender more collaboration on deals; that’s the philosophy.

JM: How do your investors interact with entrepreneurs and enterprises through Toniic – is it mainly powered from the investors’ side where they talk among themselves, or do you have a mechanism whereby entrepreneurs can get access to your network of impact investors and sell their business models to them?

SCR: Basically, we use a deal flow platform called Gust, which is used by angel networks throughout the world. This platform is different from the social network, because that is only about posting deals, investor decks – so it’s much drier, but the focus there is just having the entrepreneurs present their deals. We have hundreds of deals on our deal flow platform, which are organized by sector of impact and geography of impact. It’s basically a scaling global platform for impact investing deal flow, and my ambition is to really have us represent the largest deal flow in the world in the impact space.

We present direct deals, funds and fund-of-funds, and now Social Impact Bonds, and we have thirty different dealflow partnerships throughout the world with other angel networks, and with incubators and accelerators, etc. And we organize a lot of events. We organize pitch sessions and meetings, almost every week. We organize webinars and discussion groups. We’re definitely an events organizer, but that’s necessary because in-person pitches are really key for the entrepreneurs to connect with and respond to investors’ questions.

The deals come to us through a dealflow partner or cold – a lot of entrepreneurs just ping us and ask us to vet them and introduce them to investors. We have a whole vetting process, our own scoring system with our own analysts. When they make the cut, the investment opportunities go on our dealflow platform, and then we select deals based on timing of close for the fundraising, fit with the needs of our members, and then we organize pitch events, live and on the phone. We also train the entrepreneurs and fund managers to present to our members according to a certain format.

JM: So there’s no gatekeeper prior to the vetting process. Anyone can apply and they get vetted?

SCR: Yes that’s correct. And if they are already invested in or supported by a member, then they get priority. That’s one of the benefits of being a Toniic member; you can find co-investors directly through us. That’s one of our value propositions.

James Militzer is the editor of NextBillion Financial Innovation.

Categories
Entrepreneurship, Impact Assessment
Tags
impact investing, investment fund, social business, social capital, social enterprise, social entrepreneur, social impact