Why investors are increasingly drawn to impact-focused growth capital

Impact-focused private equity investment has come a long way over the past decade. What started mainly as wealthy individuals making small, goodwill-driven angel investments, where a loss wouldn’t significantly impact their overall portfolios, has transformed into impact investment becoming practically mainstream.

Back then, investments were frequently made in singular innovations and ideas, which meant the chances of losing out by ‘going all in’ on single deals were much higher. In turn, this left some believing the sector is the problem, rather than the strategy.

Perhaps at the time, some took this route as there weren’t really any professionally managed schemes around to bring a well-aimed strategy, whilst adopting traditional techniques in portfolio building to manage risk and get investor returns alongside the impact.

Fast forward to today and impact is now a key part of many investors' alternative portfolio allocations, managed by professional firms that incorporate these investments into their overall strategies, all while maintaining solid commercial returns. With a multitude of options from listed equities and real-estate, to private equity, this change has opened up profitable opportunities that benefit both our planet and communities.

The Next Evolution:

Growth Capital is a strategic investment approach that sits within the private equity investment vertical. In this strategy, the investor places capital into strong companies to expand, where they already have a proven market demonstrated by customer demand and somewhat de-risked technologies.

Dragonfly Enviro Capital may be the only impact focused growth capital investment firm in Australia and its strategy is to identify and invest in businesses tackling significant environmental problems, underpinned by strong business models and that are poised for long-term success. This approach decreases risk and allows meaningful impact to transform whole industries.

Still relatively untapped here in Australia, we foresee growth capital impact investments will continue to make a steady incline. Here’s why:

1. The potential for attractive financial and impactful returns make it perfect for an investors alternative’s portfolio allocation: 
   Many sophisticated investors desire to leave a positive legacy by aligning their investment portfolios with businesses generating impact they are proud of. The appeal of doing this increases further when values-driven, growth-focused investment strategies achieve competitive financial returns.

1. Diversification and risk mitigation:
   Growth capital can serve as a valuable diversification strategy within an investment portfolio. Growth-focused companies that have already passed certain market validation milestones are somewhat ‘de-risked’ by the time they take on growth capital.

1. Regulatory environments will drive growth:
   Governments are under global pressure to move towards a better future for the people and planet and thus these sorts of companies are often supported by significant regulatory tailwinds. These companies are established and growing where there is market demand, often these markets are influenced by regulatory frameworks requiring the need for the solutions these companies provide.

Here's how we approach Growth Capital Investing at Dragonfly:

We invest in high-value businesses for growth: 
The companies we invest in, if not already, are on track in the near term to hit breakeven or cash positive operations, demonstrating strong commercial ability to scale and grow profitably in the future. Alternatively, they may have instruments in place that guarantee future income to support the investment, like off-take agreements.

Our investments in companies with strong competitive advantages, large addressable markets, and proven business models, are accompanied by our strategic guidance and long-term commitment to their growth.

We target the industry adaptation, resilience and transformation:
Our focus is on addressing climate and regenerating biodiversity. We operate a multi-asset portfolio, with particular interest in investing in companies that are positively revamping industries that will continue to exist.

We build evidence to fuel more growth of the Impact Investing landscape globally:
We aim to provide clear evidence-by-example that high positive impact outcomes come with financial returns and that impact is best-in-class.

In Conclusion:
Growth capital impact investing provides sophisticated investors with the opportunity to lead the charge in genuinely positive difference in the world whilst achieving financial success.

Working with experienced Impact Investment Fund Managers that run multi-asset portfolio approaches, which include growth capital can create a significant opportunity for investors to maximise quality impact for the planet and achieve great commercial returns.

Drop us a line to learn more: hello@dragonflyenvirocapital.com