Conventional corporate charters and deal documents include clear mechanisms to protect the economic interests of stakeholders. But how do investors and entrepreneurs protect the impact-related aspects of a business?
Explicitly addressing questions about ownership, fiduciary duties, corporate governance, and the enforcement of impact-related agreements at the term sheet stage can help investors and entrepreneurs remain aligned around mission, and avoid conflicts and improve results.
Understanding and evaluating financial performance is relatively easy for most investments, but typically only financial success is rewarded. But how does one assess and potentially reward successful social and environmental outcomes?
Many investors and entrepreneurs have found that explicitly addressing these central questions at the term sheet stage can help them remain aligned around mission, which results in less conflict and better results.
Conventional deal structures and legal documents are designed for companies that are seeking to provide a return to investors by way of a sale or IPO. But what if a sale or IPO is unlikely or undesirable, yet there is the potential to provide financial returns to investors and generate meaningful social or environmental benefit?
Many investors and entrepreneurs are experimenting with alternative deal designs that target lower returns than might be available in a conventional sale or IPO, but may provide more certainty and faster payouts than those conventional exits.