What I Learn (And Unlearn) Through Impact Investing

Adi Sudewa
6 min readDec 26, 2019
Image credit: vbecker through Flickr. License: Creative Commons

By end 2019, I would have spent more than half of the decade in the impact investing sector. I am using this slowdown period at this time of the year to reflect on my experiences so far in the sector to set up my development goals for the coming decade.

Looking back to 2014, my past experiences were largely in sectors that were relatively mature, i.e., Enterprise IT, Management Consulting, and Retail Banking. My roles had always been very well-defined, with short projects and clear quantitative targets to achieve. When I started with working with a pioneering impact investment firm, I immediately realized I had a lot of learnings to do that would take years to master. At that time, little did I know that in addition to learning new skills, I had to unlearn many aspects from my previous experiences and, most importantly, adopt a different kind of mindset.

What I Learn

Listing all the skills and perspectives here does not mean I have already mastered them. These are the important aspects of the job, useful as some sort of “curriculum” to guide my personal and professional development over the years. Please note that the skills are listed here in order of increasing difficulties to master.

1) Core Skills on Private Equity/Venture Capital Investing

Let’s start with the core technical skills. I studied finance and took a course on PE/VC investing in business school, in which the professor made it look easy, but to put the knowledge in practice is a different story. Even after making multiple investments, I am still learning new things about equity investing on the daily basis.

Equity investors are the ultimate generalists. We have to know a bit or more about corporate finance, financial modeling, corporate laws, financial accounting, ethics/fiduciary duties, fund management, valuation, corporate governance processes, and also the technicalities of the sectors that we are investing in. None of these subjects are easy, though we are not expected to go deep on each one, but we have to know enough to drive the process, give meaningful input, and guide the decisions.

2) Core Skills on Social Impact & Sustainability

Impact investors need to learn additional core skills in the topics like the environmental sciences (because no human activities are not impacting the environment in any way), psychology of the poor, and what I call “strategic impact management”, basically monitoring impact metrics and use them to drive business decisions. These skills are very hard to master, especially because they are so dynamic, with new findings published every day; as well as so subjective, with no clear consensus on what is right and wrong.

3) Portfolio Company Counseling

Portfolio counseling is a mix of listening skills, providing motivations/encouragements, reading body languages, managing expectations, identifying blind spots, knowing what make people tick, and thorough understanding of the situation. It is to know when to give them “tough love” and when to go easy, when to sense imminent danger to the company and when to let the managers run the show. Some investors are naturally good on this, but it will take a few more years before I can be truly effective doing this role.

I am listing this skill here not only because it is extremely important, but also because many investors think they should give “value-adds” to their portfolio companies in the form of various services (recruitment, marketing, design, legal, etc.) when in essence all these services can be provided by external parties. In my view, what the startups need the most from their investors is the right kind of counseling, delivered at the right time.

4) Stakeholders Alignment

In private equity investing, the structure for decision making authority is very well-defined in theory. There are shareholders, then board of directors are representatives of the shareholders who make major decisions, and then management who runs day-to-day operations and report to the board. All of them have stakes in the company and should have alignment on what the company need to do to ensure success, with the shareholders agreement act as a formal documentation of the aligned interests.

In practice, the captables of a startup can be very long and diverse, management are typically also founders with large shareholding, and some shareholders want certain special rights or demand early exits (or just behave in inexplicable manners). Along the way, some founders can experience burnouts or in violent disagreements with one another. Startups are risky by definition, and any disagreements between stakeholders add to the riskiness. And we haven’t mentioned external stakeholders like the regulators, and the one major set of stakeholders that typically has no representation in the decision-making process: the low-income community that the company engages with.

Navigating this treacherous water is easy when the Company is on track to achieve its business goals, but immensely difficult otherwise.

5) Sensemaking

For me, there are two aspects of sensemaking. The first one is about the Company, are they going in the right direction? Are they relevant in the market? Are they inventing the future? Can a well-funded competitor crush them? Are other investors interested in financing the next round, with the right valuation?

The second aspect is about impact investing industry in general. Are the portfolio companies making the impact we originally intended, or just a regular company slapped with some impact metrics reporting? Is impact investing a legitimate vehicle of economic development, or just another fad? Will the mainstream finance industry adopt impact investing principles, and how and when will it happen? Ultimately, is impact investing the right industry for me, and how can I contribute?

What I (Learn To) Unlearn

I started with the intention of learning as much as I could, but then I found that learning is hard, but unlearning is so much more challenging than learning new skills.

1)S̶t̶r̶u̶c̶t̶u̶r̶e̶d̶ ̶W̶o̶r̶k̶ ̶E̶n̶v̶i̶r̶o̶n̶m̶e̶n̶t̶

Formally I am reporting to someone, but practically I have to develop my own learning and action plans, and then align it with the team. The sector is so dynamic that it is close to impossible to stick to a rigid way of thinking and working.

2) M̶a̶k̶i̶n̶g̶ ̶P̶e̶r̶f̶e̶c̶t̶ ̶A̶n̶a̶l̶y̶s̶i̶s̶

No data is available about the future, so while we are free to gather as much data as we can about the present, there’s not much point to be buried with analyses. Scenario planning and financial modeling are useful and we still do it regularly, but we have to be cognizant about the context, when to use them, and their limitations.

3) K̶n̶o̶w̶-̶I̶t̶-̶A̶l̶l̶ ̶M̶i̶n̶d̶s̶e̶t̶

As a consultant, I had to learn to think on my feet, especially in front of clients and partners. In impact investing, I have to know what I need to know and able to say “I don’t know. I will find out” or even “I don’t know. We will never know / there is no point of knowing” when it is necessary.

4) I̶l̶l̶u̶s̶i̶o̶n̶ ̶o̶f̶ ̶C̶o̶n̶t̶r̶o̶l̶

We can put as many clauses as possible in the legal documentation to assert control, and spend as much time as we want to enforce them, but the complexity of the market and the company environment would take control away from investors. At some point, I stopped trying to know everything about the company and adding unnecessary complexity to the management, and prioritize working on areas where I can make a difference.

5) E̶x̶p̶e̶c̶t̶a̶t̶i̶o̶n̶s̶ ̶o̶f̶ ̶I̶n̶s̶t̶a̶n̶t̶ ̶F̶e̶e̶d̶b̶a̶c̶k̶

I used to work on short-term projects, where feedback is given on the quality of the work products (presentations, reports, success of pilot projects). Disproportionate time and effort were given in perfecting these work products. In private equity investing, the ultimate judge is the market. Failures and setbacks can come relatively quickly, but successes can only be declared after several years of putting unrelenting effort.

Note: When I started writing this article, I wanted to list things that I have learnt so that I can suggest the same to you, the readers. In the process, the list has evolved into a list of things that I have yet to learn, and I added a section about things to unlearn. I hope this does not come across as a sign of negativity, but more on learning as a never-ending process in this dynamic space. I will close this article, the last one in 2010s, with a poem:

Never think you are capable, let others judge

Like sweeping the yard, there will be new trash

When trash is gone, dusts remain

Despite wisdom, lessons abound

(Translation of a Balinese poem)



Adi Sudewa

Venture Builder. In Medium to share perspectives on how industries are being transformed by digital technologies.