The Dutch impact investment firm’s new fund has received backing from publicly-funded Invest-NL and development agency Oost NL, among other investors.
The Hague-based impact investor 4impact Capital (4impact) has launched its second venture capital fund investing in European early-stage digital companies effecting positive environmental and societal impact.
Fund II has reached first close with a €5m investment from publicly funded Dutch investment agency Invest-NL, and €3m from development agency for the Eastern Netherlands Oost NL. Other, undisclosed investors, include family offices, high net worth individuals and institutions and the company hopes to get to its fundraising target of €100m by Q1 of next year.
The fund will invest in circa 25 companies that ‘make a positive impact on the planet and people combined with strong financial returns’, which Ali Najafbagy, founding partner of 4impact, said included companies working to protect natural capital as well as those focused on the energy transition, circularity, smart industry and infrastructure, equity and inclusion and health and wellbeing.
Speaking to Impact Investor, he said: “We will invest in software solutions across these sectors, with a particular focus on remote sensing, using satellite-related technology, as well as Web3, blockchain and AI.”
The fund will target investments in the Benelux and DACH regions as well as the Nordics, focusing on companies in the seed to Series A funding stages that can demonstrate a strong financial business model with an internal rate of return (IRR) of 20%.
Fund II has already made it’s first investment in carbon removal company Carbonfuture, which specialises in building the tech infrastructure for carbon removal and in the trading of carbon removal credits, which it offers to companies.
“Carbonfuture has the world leading digital, monitoring, and verification software for carbon removal technology, such as biochar or direct air capture and we were really impressed with their global team’s expertise,” he added.
Access to expertise
4impact said it would provide founders with access to its network, as well as its knowledge and expertise.
Najafbagy explained this included taking a seat on company boards and providing commercial and sales support as well as assistance with team building, assessment and measurement of impact and helping clients to understand how to tie sales to impact.
“We will also support our investee companies with in-house software development and improvements, which is our area of expertise, and take a leading role in attracting additional investments through our global investment network,” he added.
Najafbagy said the 4impact team would also draw on the insights of its global venture partners, which include serial entrepreneurs, impact measurement and investment specialists and Web3/AI specialists, to provide advice on specific topics as well as help with sourcing the pipeline of investments.
4impact will also make use of its experience with Fund I, which launched in 2019 and has made 11 investments across the Netherlands, including in game-based recruitment company Equalture, climate investing platform Carbon Equity, software solutions provider for supply chain traceability Circularise and nature tech company Satelligence.
Impact management and measurement
Fund II is an Article 9 fund and will use 4impact’s proprietary impact assessment framework, which uses both quantitative and qualitative metrics to ensure investments align with the company’s definition of impact, based on six pillars.
As well as being able to demonstrate intentionality, additionality, significant target outcomes as well as measurable outcomes, companies in the fund portfolio will also have to prove they do not have any material ESG externalities and have an ‘impact lockstep’.
“We will only invest in companies that have a net-positive impact. This means that the sector and business model should have minimal risk of negative externalities,” explained Najafbagy. “Impact also has to be directly driven by the company’s product or services such that there is lockstep between the generation of impact and competitive risk-adjusted financial returns.”