Impact Investing: Anchor LPs are a Catalyst for Change
A look at how Anchor Limited Partner Investors are a signal for the Impact Investing Ecosystem.
Just like blue checkmarks verify creators on Twitter, Anchors verify funds and catalyze change for the community.
*Anchors can be described as the first investors to make a substantial capital commitment to a fund and are often a marker for a fund’s ability to raise capital.
Anchors play a market-building role
Anchors play a vital role in the Impact Investing ecosystem and create a ripple effect in the space.
Here’s how:
Quality over quantity — Anchors historically tend to invest once to catalyze change and have a low reinvestment rate. Anchors are motivated by the ability to create change which is why they typically do not invest. Anchors provide a catalytic role and view themselves as such.
Early investments — Early investment support funds from the start. Anchors provide early investments which bolster efficiency and uplift newly launching managers who might not have a breadth of resources at their disposal (distribution, sales, etc.)
The green checkmark — A reputable Anchor investment is a green checkmark and essentially “verifies” a fund. Anchors place more weight and emphasis on the first investment knowing the ripple effect of having an established fund invest (and shy away from reinvestments.) An early endorsement from a reputable investor creates a halo effect. Anchors create a halo effect for the funds they invest in.
Anchors are a catalyst for change
A respected Anchor investment is a signal to the investing and entrepreneurship ecosystem. This investment serves as a green checkmark or “vetted” fund for those who are newer or more risk-averse.
With great power comes great responsibility — Anchors have the power to gift financial and social capital. Further, they serve as a beacon of light and guide the way for newer investors. In this position, Anchors can swiftly push innovation and impact forward.
Opportunity for impact — Looking forward, I hope to see Anchors evaluate societal and financial factors as they invest. There is a great opportunity to uplift and empower investors and founders and Anchors are perfectly poised to push impact.
I’m excited to see Anchors support funds and founders building a sustainable future. If you found this article interesting, let me know on Twitter!
If you want to read more about this topic, check out this analysis from Harvard Business School.
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*An Anchor Investor is generally the first investor to make a substantial capital commitment to a fund. They help gather momentum for the fund and, through their credibility and network, attract other investors. As in the commercial PE world, anchor investors are often identified through existing relationships the GP may have from their successful investment experience, serving as a syndicator of investors or simply as a champion gathering others from their own network. In the impact investing world, anchor investors can have various motives. Source: The Global Impact Investing Network (GIIN).
