Our approach to due diligence on early-stage impact ventures

As a philanthropic impact investor, researching and evaluating innovative ventures is the essence of our work. In 2022 alone, we have reviewed more than 1'000 opportunities. After identifying those with the most promising impact models, we conduct due diligence to verify our initial hypothesis and decide whether to prepare an investment recommendation.

Due diligence the elea way means that we closely collaborate with the ventures to understand their business and impact models, see if they are commercially viable, get to know the entrepreneurs and find a clear role for elea to support future growth. This year, we aim to conduct due diligence on about twenty organizations with investment potential. Running such an in-depth analysis within the impact sectors of emerging economies is usually a complex endeavor due to the early-stage nature of the ventures, the innovative fields they are active in, and their social impact first approach that requires more patience regarding break-even and revenue expectations.

elea has developed a due diligence process that allows a deep analysis of new investment opportunities while building a solid foundation for a future partnership with the venture team. Our approach is structured, but we do not just tick off boxes. For each impact venture, we identify the key questions and topics that must be understood before making an investment decision.

Some examples include:

• How does the company create impact for people living in absolute poverty?
• How is this impact linked to the company’s business model?
• Is the company’s business model commercially viable and able to scale its impact further?

We are convinced that investors have the responsibility to be transparent with entrepreneurs about their due diligence process. During our first calls, we communicate essential topics, jointly agree on which questions need to be answered and how long it will take, and build upon the initial feedback once we start the due diligence process. In that way, we avoid long, drawn-out processes that take up too much of the venture’s time.

Whenever possible, we align with co-investors of the financing round to make the due diligence process more efficient for all stakeholders. This way, we want to ensure that the entrepreneurs do not have the same conversation multiple times. It likewise helps us to identify synergies with other investors regarding post-investment support.

We always visit ventures before deciding to invest (with some exceptions during the Covid-19 pandemic). Meeting entrepreneurs and their teams in person is essential for understanding their operations, seeing the social impact firsthand, and forming close partnerships.

As a philanthropic impact investor with the mandate to alleviate absolute poverty, impact takes center stage during the due diligence process. While our team can do some of the analysis remotely by reviewing a venture’s theory of change and impact metrics, being on the ground gives us an entirely new perspective. No number of telephone calls can replace speaking face-to-face with the entrepreneurs, their teams, or a person whose life has been positively impacted by the venture’s work.

The impact venture BluLever Education has developed a skill-building program that equips apprentices with the technical and work readiness skills to succeed in formal employment. A key part of their success are strong partnerships with employers. A model that convinced us immediately and led to the start of the due diligence process in January 2023.

Together with my colleagues Lisa Jean-Mairet and Greta Carioli, we prepared the key topics we wanted to dive into and which questions we needed to answer for our Investment Committee and Board of Trustees to make an investment decision. We focused on the venture’s growth strategy, employer engagement, and the student perspective during our meetings with BluLever’s team, employers, and students in Johannesburg.  

1. Growth strategy: BluLever aims to create a blueprint for vocational training models that can be replicated across Africa. We, therefore, spent a lot of time on understanding how the company intends to reach the proof points needed to scale its model. We did this through multiple in-depth strategy discussions with the management team, as well as by speaking to relevant partners and third-party stakeholders to validate BluLever’s strategy.
2. Employer engagement: A crucial part of skills-building models is how they can provide a clear pathway to education and employment. BluLever’s apprenticeship model relies on strong partnerships with blue-collar employers, so it was important for us to understand how committed BluLever’s partners are to the company’s model. During our visit, we talked to multiple employers who have hired BluLever apprentices and attended a South African plumbing event.
3. Student perspective: Since BluLever is changing the narrative around blue-collar jobs by endorsing them as aspirational career trajectories, we wanted to gain their students’ perspective on the training program and subsequent career prospects in sectors like plumbing. We spoke to many first- and second-year students who shared how BluLever has completely changed their lives.

The due diligence process has further strengthened our partnership with the BluLever team. This is especially important to us as creating close partnerships between entrepreneurs and our team rooted in mutual understanding, respect, and trust is paramount to us and deeply anchored in our DNA. We agree wholeheartedly with the statement of Jess Roussos, Co-Founder and Co-CEO of BluLever Education:

Months of intensive work resulted in a detailed 28-page investment report that Lisa, Greta, and I presented to the elea Investment Committee, followed by subsequent in-depth discussions. BluLever’s innovative impact model and projected growth path resulted in a favorable investment decision. We are delighted to be reimagining blue-collar education in South Africa with their team and students.

BluLever Education is a skills-building company that seeks to transform the blue-collar sector for youth from South Africa’s lowest-income areas. Their three-year apprenticeship program equips apprentices with the technical and work-readiness skills necessary to succeed in formal employment. As of June 2023, BluLever has enrolled over 300 students – fifty percent of which are female.

Authors: Martin Buess, former Senior Associate (March 2019 to June 2023) at elea & Romy Sauer, Communications Specialist at elea