Starting an impact investing fund is no small task. Case in point: Stanford Graduate School of Business’s Impact Fund has been in the works for three years.
In 2013, a group of students approached Stanford GSB’s Center for Social Innovation about creating a fund that would give students hands-on experience in impact investing. Now, that fund has made its first investment.
For the fund’s inaugural investment, students organized into five teams, each focusing on a different area: education, energy and environment, food and agriculture, health care, or urban development.
The teams considered hundreds of companies initially, then narrowed down their options from there. Along the way, they had to tackle questions like how to balance impact and profitability.
Once the research was done, teams brought their most promising companies to the fund’s Investment Committee, made up mostly of professors and alums, to make the final call.
In this case, the company that won out for the fund’s debut investment was pharmacogenetic testing company Geneticure.
The company is currently working on a genetic test to improve treatment of hypertension. As it stands, diagnosing hypertension and finding the right medicines for a given patient can be a drawn-out process.
However, genetic testing could help doctors quickly figure out which medications a patient will respond to best. This in turn would make treatment faster and less costly.
Dan Liss, a student in Stanford’s MBA Class of 2016 and JD Class of 2018, said Geneticure caught the fund’s attention because of its potential for expanding access to care for hypertension: “Our hope is that Geneticure can deliver a test that significantly reduces time and costs, in turn improving outcomes.”
Just because the investment has been made, though, doesn’t mean the Impact Fund is done with its work.
According to Paul Pfleiderer, a GSB professor and member of the fund’s Investment Committee, “The investment must be monitored and maintained until there’s an exit. We need to have students focused not just on the initial investment but also on due diligence over the years.”
To this end, Stanford GSB’s Center for Social Innovation manages the transition in leadership as some students graduate and others join the fund.
Overall, the fund’s investment process is designed to be as close to that of real-world impact funds as possible. The idea is give students hands-on experience that will be useful later on.
In the words of Collin Galster, a Class of 2016 alum who helped create the fund, “We hope that our fund will be the bridge that will get them to impact investment fund jobs.”