At the very least, your pitch should seem easier than saving the world.
By Lauren Cochran, Director of Private Investments, Blue Haven Initiative
It seemed like a good idea at the time: farming cassava in Mozambique to produce ethanol and bring safe, affordable cooking energy to communities that have traditionally relied on burning coal and other solid fuels, while also improving farming practices. Three billion people burn coal and other solid fuels for cooking, generating toxic smoke that causes an estimated 4.3 million premature deaths annually per the World Health Organization. This includes almost 600,000 deaths in Africa, primarily in sub-Saharan countries.
The entrepreneur behind the cassava ethanol start-up envisioned a scalable, self-sustaining ecosystem that would make money and save lives. The pitch found receptive ears among early-stage impact investors seeking ventures that generate financial returns and create sustainable social and environmental benefits.
Money came pouring in, but the intricate ecosystem never materialized. Managing the distribution of fuel tanks and stoves while ensuring timely refills for rural customers was unexpectedly complicated and costly. Ethanol production, alas, wasn't close enough to where the fuel needed to go and when the product wasn't readily available, changing existing habits was nearly impossible.
As impact investing gains popularity, many investors are driven by the desire to feel good, sometimes at the expense of commercial due diligence. To be clear, certain investors are in the business of taking gambles with the goal of de-risking a new business model or priming an ecosystem for commercial capital--an intentional concession of potential return in exchange for outsized impact. This is tricky business in a place like Mozambique where basic distribution infrastructure is non-existent and customers have been cooking the same way for generations.