Global Impact Investors’ Assessment of Early-Stage Social Ventures Through Digital Signals

Abstract: Over the past decades, social impact investment has become popular because of its potential to solve pertinent world problems by financing social enterprises. This study focuses on assessing the influence of digital signals towards impact investors’ decision-making process when evaluating early-stage social ventures using digital media, by conducting exploratory qualitative research (semi-structured interviews) with 14 global impact investors (equity) who are investing in social ventures from pre-seed to series A stage. The result suggests that impact investors use digital signals to shortlist social ventures based on impact investors’ business, impact, and founders criteria during the deal sourcing stage. However, the assessment using digital media within the screening process is mostly applicable to assess only the authenticity of the founding team and some of the business criteria, though there are some nuances that indicate impact investors look into customer reviews to evaluate the social impact through digital narratives. However digital signals do not independently influence the selection process of a social venture. Impact investors will use other means to verify the information found on digital media to make decisions. Our findings contribute to the nascent literature in impact investing by identifying the investment criteria assessed when impact investors use digital signals in the deal sourcing and screening stage which influence the discoverability and investability of social ventures. The results also reflected nuances that exist based on the different structure of investment teams i.e. centralised or dispersed in all regions of focus. Additionally, the study also has practical implications in the field of impact investing for both investors and social ventures.