Exits — don’t get stuck without a plan

hehenberger_300By Dr. Lisa Hehenberger

Do you have an exit plan? When you start supporting a social purpose organisation, do you think ahead to the time that they will need to stand on their own two feet? Or that you can no longer add value to them? Do you think about how to make sure that its social impact doesn’t evaporate after your partnership ends?

If you don’t, you are not alone. Venture Philanthropy and Social Investment (VP/SI) organisations look for a social return over or next to a financial return –making exits more complex than in the traditional field of investment. Yet, within this rapidly developing sector, half of organisations [1] do not always think ahead to an exit. Thus, lthey risk undoing successful partnerships, exiting at the wrong or less than ideal time, insufficiently preparing the social purpose organisation (SPO) for an exit, even- in the worst cases-, threatening the survival of the SPO.

But here is the good news: with ten years of practice behind them, venture philanthropy and social investment organisations are now starting to build valuable experience on exits, which can be readily and easily shared and learned from by others in the field.

Working off the idea that a well thought-out exit strategy is the key to a successful investment (both in terms of its development and lock-in of social impact), EVPA has gathered these exit learnings and published them within a “Practical Guide to Planning and Executing an Impactful Exit”.

Whether you are a VP/SI practitioner, a grant maker, a social impact investor or working for a foundation, locally or internationally, this guide offers practice based, concrete guidance. The Guide outlines the different steps to take towards an exit process, or to decide whether or not an exit is right for you in the first place, all the while keeping an eye out that social impact is maintained or amplified.

Concretely, the manual offers a number of recommendations to keep in mind in planning and executing an exit. These can be summarised along these lines:

Plan and monitor your exit; in the planning process, agree on agendas and strategic aims up front, formalise goals and milestones to monitor the implementation of the exit plan, being prepared to revise and adjust if necessary.

Involve your investee along the way; co-develop an exit plan together with you investee to ensure trust and transparency; be open in communication and clarify expectations up front so there are no surprises. Prepare the investee for exit and identify any threats to the exit.

Look at getting third party input at different junctures of your exit planning and execution; third party input can be used to establish exit readiness, to find follow- on investors and to evaluate and assess the success of the exit.

Make it worthwhile; look at using financing instruments that incentivise an exit, hybrid debts, challenge funds and decreasing support and guarantees. Incentivisation can also be considered as a way to encourage an SPO to submit data post exit which you can use to shape future investment strategies.

A well thought out exit strategy is the key to a successful investment- don’t risk getting caught without one!

Dr. Lisa Hehenberger is Research and Policy Director for EVPA.

[1] EVPA Survey Research 2013-2014

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