Nesta gives impact measurement some Oomph!

There are now 20 impact investment funds in the UK and an estimated $60bn of investment under management globally. Alongside this growth, there has been an increasing interest in how we understand and measure the social impact of our funds. 

Social impact is the raison d’etre of impact investing so having a language and set of metrics to understand social performance is key if the sector is to develop. For social entrepreneurs it’s also important to understand what investors are looking for when it comes to impact.

Over the last two years, Nesta Impact Investments has made ten investments and we have learnt a number of valuable lessons about implementing impact measurement. Our investees are now integrating evidence into the daily running of their ventures and making real life decisions about balancing evidence and commerciality. 

So, what have we, and our ventures, learnt? 

1. Importance of iteration: naturally enough, operating in a start-up environment means that the products and services of a venture will change and develop as time goes by. Keeping impact measurement relevant to this shifting landscape is key. FutureGov overcame this by developing Theories of Change to help it understand the main benefits of its products. This highlighted outcomes that do not change even if the product does. Futuregov also prioritised products for evaluation that had reached a greater stage of maturity and traction. This helped focus their resource on areas where evaluation was more valuable. 
2. Using impact measurement to avoid mission drift: ventures that need to make a financial return can often be pressurised to find revenue generating activities that may not be wholly consistent with its impact mission. Impact measurement can ensure that a venture remains accountable to its social mission. For example, one of our investees, Ffrees, aims to provide a current account service to those who are underbanked or financially excluded. Therefore key to the investment is data showing they are reaching this group. Ffrees now use quarterly surveys to show that they are targeting people who were underbanked prior to signing up with them. 
3. Invest in an impact lead and external support: if ventures are to embed impact at the heart of their business, it is key to have a point person who takes responsibility for research and evaluation. Oomph!, a social enterprise providing innovate exercise classes to care homes, has capitalised on partnerships with academics to bring rigour to their evaluation. This has also opened up a route to external funding for impact work. 
4. Take small steps on evidence: it can be worthwhile to trial a number of evaluations, learning about what works and what doesn’t before progressing to a higher quality evaluation. Digital Assess has taken this approach, running one or two small evaluations before investing in a larger project.
5. Impact and financial growth might not happen at the same time: It is important to understand that these two things do not always occur in parallel and so we, as an investor, have learnt to focus our support on wherever a company is falling behind. This means that over a longer period of time we see development on both the commercial and the impact side.

Alex Letts, CEO of Frrees

We talk about these lessons and challenges and how ventures are implementing impact measurement in our paper, published today. The impact investing market is going from strength to strength and that means more opportunities for social entrepreneurs. However, like all early stage markets, systems, standards and structure have yet to be formed. Sharing on-the-ground practice is key to developing this and we hope our report will help to provide a starting point for ventures and other funds.

To download Nesta's impact investment and impact measurement report, click here.

Photo credit: McKay Savage