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Measuring impact in venture capital

Oyin Oduya, CFA, Impact Measurement & Management Practice Leader
5 min read
2025-11-01
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
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The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.

Impact measurement and management (IMM) are two related but distinct practices that we believe are critical to effective impact investing. Impact measurement helps to identify and track both the positive and negative social or environmental impacts of a company’s products and services. Impact management uses this information to try to maximise positive outcomes for people and the planet.1

In this piece, we highlight how we view IMM, why venture capital (VC) matters to impact investors, how IMM can be applied to this asset class and how to authentically measure impact in venture capital.

Impact measurement and management in practice

At Wellington, a holistic assessment of impact is core to our investment process in both public and private markets where we are explicitly investing to drive real-world positive outcomes alongside strong financial returns. For these strategies, several IMM activities are central to the investment process, including clearly defining what impact criteria qualifies a company to be part of a portfolio ahead of each investment, conducting detailed research to evidence that the specified impact criteria can be met and, finally, reporting on and analysing this data to seek to maximise real-world positive impact.

Why venture capital matters for impact investors

The Global Impact Investing Network (GIIN) estimates that the impact investing universe is developing rapidly, surpassing over US$1.trillion in assets under management globally in 2022.2 Notably, in its most recent annual survey, 55% of respondents had an allocation to venture-stage companies, demonstrating that impact investors are deploying capital in this segment of the market.3

Many venture-stage companies are innovative, fast growing and on a mission to change the entire ecosystem in which they operate. Combining these characteristics with products and services aligned with making real-world positive social or environmental progress is an extremely attractive proposition for impact investors, particularly those looking to bring about widespread changes through their investments. The climate crisis represents a useful example here given that many venture-stage companies are developing new technologies that may play a key role in helping every sector of the economy transform by reducing energy consumption, increasing energy efficiency and making global energy supply more sustainable.

In addition, the next generation of entrepreneurs seeking venture capital may be more likely than the last to include sustainability considerations in their business models. In fact, entrepreneurs in their 20s and 30s are more likely than those in their 50s to view social impact as a personal motivation.4 A company’s positive impact is likely to become an increasingly important part of its mission and pitch to investors. Impact investors therefore need to develop the tools and skill sets to accurately assess these claims in order to allocate capital effectively to those companies making the biggest positive impact.

Why impact in venture capital needs a considered approach to IMM

IMM has been a core part of our public market impact investing strategies since 2015. However, IMM in private markets, and particularly in VC, has specific considerations we believe investors should take into account. In our view, the following points are the most crucial:

  • Data availability: Typically, companies at the venture stage have fewer resources available to collect the data necessary to demonstrate the impact of their products and services. This means that the available data either needs to be transformed or proxy data must be used to approximate the impact of the company in question.
  • Data uncertainty: Given that many of these companies are innovators and disruptors, they are often aiming to transform their industry. This means that the impact of their products and services may be realised in a world where key parameters (such as the emissions intensity of the grid or the cost savings from increased energy efficiency) could be significantly different from today, making the forecasting of future impact challenging.
  • Individual versus ecosystem change: At the early stages of growth, there may be a substantial difference in magnitude between the individual impact a company has through its products and services (for example, the GHG emissions prevented by each electric vehicle sold or the waste avoided from every item recycled) and the sector-wide changes they could contribute to in the long term as their market develops. If the investment thesis involves an innovative company with a new, first-to-market solution that is eventually expected to be widely adopted, it is important to consider both the individual and the system-wide impacts.

How to authentically measure impact in venture capital: things to consider

We believe there are a few best practices that can help companies and investors navigate the unique challenges of measuring impact in this constantly evolving space. Below, we share four ways to authentically measure the progress companies create.

  • Use existing wisdom to inform your approach. The impact investing industry has made real progress over the past several years to coalesce around some generally accepted frameworks and principles. One example is the Impact Management Norms,5 which provide a holistic view of impact, encompassing what outcomes the company is contributing to, who is affected, how significant the change delivered is, how a company may change outcomes versus business-as-usual and the risk that the impact will differ from what was expected. In addition, GIIN’s IRIS+ system6 provides free guidance on how best to derive impact key performance indicators (KPIs) that are clear and comparable across companies, funds and asset classes.
  • Commit to assessing real-world impact with KPIs. The research completed during impact due diligence ahead of an investment typically relates to expected impact. Gathering regular data over the life of an investment speaks to actual outcomes. As noted above, data is not always easily available so there needs to be some level of commitment from the investor to spend time and resources working with the company to reach the desired outcome through proxy metrics or by transforming existing data. Transparency is key here. Any assumptions made or data transformations completed should be clearly stated. For example, consider a company selling an innovative solution that increases energy efficiency in an industrial process. This company may not directly track the amount of GHG avoided through use of their products, but by using evidence-based assumptions about the energy savings of their products compared to commonly used alternatives and the expected average energy usage of their customer base, the amount of GHG emissions saved per unit sold can be estimated. This can then be scaled up to estimate the company’s overall contribution to GHG emissions avoided through total units sold.
  • Ensure business model alignment. Developing structured frameworks to confirm that a company’s business model is fully aligned with the social and/or environmental outcome targeted is a crucial part of due diligence. This is especially relevant when considering companies that may have several different growth options ahead of them. We believe impact investing is most powerful when there is strong alignment between the profit-seeking objectives of a company and the ability to solve a pressing social or environmental problem. A strong evidence base is needed to demonstrate why positive impact is inherent to the core products and services a potential portfolio company may offer and why this is likely to persist over time, especially in a relatively young company. Gaining a deep understanding of the company’s mission and values is also a part of this work. The KPIs selected to try to measure impact over time should be linked to this evidence base and the desired outcome so that the data being monitored ties directly to the initial rationale for investing in the company.
  • Do more than report the data. Collecting impact data serves to validate the assumptions made in due diligence about the societal or environmental benefit of each company. However, this data should also be analysed and benchmarked over time to embed feedback loops into the investment cycle. For example, using impact KPIs to assess whether the intended impact has been better or worse than expected or higher or lower than peers can inform ongoing discussions with the company as well as influence future investments in similar sectors.

Bottom line on measuring impact in venture capital

Impact measurement and management are essential parts of the impact investing industry. In our view, a holistic, considered and authentic approach to IMM is particularly relevant in venture capital, where the earlier-stage opportunity set can make this process more complicated.


1Source: Global Impact Investment Network, “Getting started with impact measurement and management”. | 2Source: Global Impact Investing Network, “Sizing the impact investing market 2022”. | 3Source: Global Impact Investment Network, “State of the Market 2024”. | 4Source: HSBC, “Essence of Enterprise - A new age of Entrepreneurship”. | 5Source: Impact Frontiers, “Impact Management Norms”. | 6Source: Global Impact Investment Network, IRIS+ system.

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