RP: We don't do a deal that relies on co-investment. The reach out to partners comes after [we have found a deal that we are interested in]. After that, we figure out when they do fit in. We communicate that to the investee too. The concern is really in getting too long a list of co-investors.
It’s a time consuming process.
NL: We have been talking about alignment of interest and timing, now what about commercial investment vs. social investments
what kind of questions are you asking your partners? HN: Our philosophy is to get alignment at the fund level. There should be a good clear working relationship at the fund level. 1) We target deals that are appropriately sized and leave room for co-investors. 2) After identifying investment, identify LPs
they want to understand costs and fees; they usually leave the evaluation to us too 3) Use of proceeds and timing of proceeds need to be clearly defined upfront 4) Tranche deals
agree upon monitoring as well. Our key thesis is alignment up front
Q: Why would a lead investor share their best deals? What would encourage you to do more of that?
RP: Personally, I think this is where we see the difference between impact investing and traditional investing. It is about getting more ideas to scale. It is competitive, but collaborative. The benefits are: 1) diversifies risks (biggest one from our perspective
less so in terms of capital, but getting good brains around the table and how they can take organizations forward through networks and expertise); 2) getting more capital into impact investing space. A fair amount of the work we do is ecosystem building
so we share all of our due diligence and notes. NL: For us, diversification of people around the table is importa
not so much about filling out the wrongs, but what do the
se people bring that we don’t? W
e need to find the good partners that can fill that out. NL: What about the post-investment? How do they manifest? Is it through board? Management? Etc.? HN: We are a sector-focused fund, so the relationship with company is maintained with us. We do proprietary deals based on relationships with the industry. We are a mid-sized fund, but we go after large deals. When we go after co-investments, we believe you can diversify risks. I was on the investment team for Medtronic--all deals were syndicated. Question from audience: So what is the value-add? Is it a systems change?