Search Funds & Impact Investing

In September, here at the Sustainable and Impact Finance initiative, we launched a new program on Impact Search Funds. In partnership with impact investors Gratitude Railroad, we brought together a team of MBA students and investment professionals to explore how this unique private equity investment vehicle could be leveraged for social impact and sustainable business practices.

Over two sessions, search funds investors, MBA students and impact investors dove into the theoretical and practical aspects of such an effort. Our sessions focused on the opportunities and challenges of adopting an impact lens in this competitive investment market. Discussion questions included:

• Can social impact exist in how a company operates or just what it produces?
• How did would-be searchers conceive of impact and does it map to market opportunities?
• How to get investor alignment on expected returns and impact measurement?
• What sectors are best placed to align with an impact-driven search?

One MBA student and perspective searcher identified that their impact focus (in this case in sustainable agriculture) was useful in connecting with organizations and generating deal flow. But when speaking to business sellers, having real knowledge, background in the industry and a commitment to ‘good management’ often generated higher interest.

Ultimately the group identified that each searcher could clearly articulate their vision of impact in their investment thesis and then identify aligned investors. This removed the need to identify a singular definition of ‘what is an impact search fund?’ and enabled greater organic collaboration between a diversity of searchers and investors whose values aligned.

Each searcher could clearly articulate their vision of impact in their investment thesis and then identify aligned investors.

Several investors challenged a traditional perspective in the search fund field that any restriction or criteria would be detrimental to a searcher’s pipeline and ultimate investment possibilities. They pointed to a rise in geographically focused searches, increasing diversity in the search fund community, and collaborative search partnerships as ways that can help increase the likelihood of success.

For more information about this program, contact SAIF Program Director Kat Baird at kbaird@berkeley.edu.