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Devin: What is your superpower?
Aunnie: I don't mind going out and saying things and being a little bit crazy and radical because I think it's needed.
Oxford professor and author Aunnie Patton Power joined me for a conversation about her domain of expertise: impact investing. In her book Adventure Finance, she writes to both investors and founders, helping them see how they interrelate.
She has a crucial message for entrepreneurs, “There are funding options that do not require you to sell your soul, or to promise exponential growth, or to try and be something that you're not.”
“You can be a community-owned organization and find funding,” she says. “You can be a small-scale–and continuing to be a small-scale organization. You can be very committed to your social purpose and not be willing to compromise that. It's about finding the right type of funding for you.”
She notes that the trick is figuring out the right type of funding for your social enterprise.
For investors, she says that good due diligence combined with portfolio construction can provide better than venture capital returns from investing in slow-growing, high-impact social enterprises.
First, she notes that “most venture funds lose money.” It shouldn’t be hard to beat that level of performance! (Of course, many VC funds do.)
With careful diligence, investors can find social enterprises that can double or triple their money over reasonable periods, often using revenue-based financing rather than venture-style forms of equity. Building a portfolio of companies likely to repay debt can yield impressive results.
Venture capitalists often invest with a gambler’s eye for risk, hoping one or two investments in a portfolio skyrocket to the moon. This risky approach sometimes leaves portfolios with more holes than one winner can file. More careful analysis, paired with setting aside moonshot investments, allows investors to build portfolios of high-impact companies.
Aunnie's superpower could be described as audacity, but she uses the term “crazy” to describe her willingness to confront conventional wisdom and chart a new path.
AI Episode Summary
The podcast features Aunnie Patton Power, an author, Oxford professor, and expert on impact investing.
Aunnie's book, Adventure Finance, focuses on creating funding journeys that blend profit and purpose, exploring alternative funding options beyond traditional avenues.
The book addresses founders and funders interested in mission-driven funding and offers various options for them.
Aunnie highlights the importance of understanding oneself and the organization when embarking on a funding journey.
One key message from the book is that there are funding options beyond traditional routes, allowing organizations to align with their values and mission without compromising.
The conversation shifts to impact investing and the need for investors to create toolkits, including various funding options tailored to specific challenges like supporting female entrepreneurs.
Aunnie emphasizes the importance of impact-linked incentives in funds, urging investors to design strategies that align with their mission and goals.
The discussion delves into due diligence and portfolio construction, stressing the need for thoughtful scrutiny and diversification to achieve better-than-venture returns with lower risk.
Aunnie shares insights into her superpowers, including her ability to convene and facilitate discussions, as well as her fearlessness in pursuing innovative and radical ideas in the field of impact investing.
Aunnie discusses a recent accomplishment, challenging the impact investing industry to adopt impact-linked compensation, and shares ongoing research on the subject, aiming to change the conversation and make impact-linked compensation more prevalent in the field.
How to Develop Audacity As a Superpower
Aunnie’s audacity–forgive me for using my description over hers–is powerful. She shared a story to illustrate how she uses it:
About a year ago, I was at the GIIN conference, the Global Impact Investing Network conference, and made, I would say, what I kind of thought was a bit of a controversial statement on the stage. I said that I didn't think that impact funds should be able to call themselves impact funds if they didn't have some sort of impact-linked incentives in there as a fund.
It sparked some controversy. There were some great discussions on some of the different platforms and things like that. I got a lot of people saying, “Well then, how do we do it? How do we do impact linked carry? How do we do impact linked bonuses?”
So, for the past ten months, I've done a piece of research work with a research team. We've done a survey of 200 GPs and LPs, and we're about to release the report. That is quite a substantial report on the considerations you need to consider and the framework to do impact-linked compensation.
We had over 100 funds that do impact-linked compensation that we were able to engage with, which is more, I think, than anyone in the industry knew was possible. So, even though it's more mainstream than most of my work because it's dealing with traditional funds, I'm quite proud of the fact that now we have this data and this guide to impact-linked compensation.
That guide to impact-linked compensation is excellent evidence of both Aunnie’s audacity and her ability to back it up.
Aunnie offered some tips for being more audacious:
Take courage!
Remember, you can shape the world.
Lean into what you think is right.
Start with small steps.
Push yourself to be more radical and push boundaries and perspectives.
Recognize what needs to be done and take responsibility for doing it.
By following Aunnie’s example and advice, you can make audacity an arrow in your quiver. With practice, you could make it a superpower that enables you to do more good in the world.
Remember, however, that research into success suggests that building on your own superpowers is more important than creating new ones or overcoming weaknesses. You do you!
Guest Profile
Aunnie Patton Power (she/her):
I like to say that I am an Academic, Author, Advisor and Angel Investor. The ImPact and Oxford.
Biographical Information: I specialize in creating innovative financial structures and strategies to create positive social and environmental impact. I teach innovative finance at the University of Oxford and the London School of Economics. I write and research on innovative finance. My first book, Adventure Finance, was published in 2021, and I'm currently writing my second. I also advise family offices, foundations and other funders globally around innovative financing. Finally, I invest in female founders.
Website: www.adventure.finance
X/Twitter Handle: @Aunnie
Linkedin: linkedin.com/in/aunniepatton
Author to Founders: ‘There Are Funding Options That Do Not Require You to Sell Your Soul’ - s11 ep39