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The first question is, why are you here?

Many experienced impact investors, entrepreneurs, and advisers have found that conventional deal terms and structures are not always entirely suitable to their needs. They’ve developed their own deal terms to define, measure, protect and reward impact. In situations where an IPO or sale is undesirable or unlikely, they’ve experimented with alternative structures to provide returns to investors.

The Impact Terms Project is a catalog of some of these new terms and approaches, and provides sample term sheet language for you to consider when designing your own deals.

Protecting a company’s mission over time.

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.

Defining, measuring, and rewarding impact.

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.

Alternative exits for impact investments.

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.