19. December 2018
Silke Horáková: The future belongs to investments with social impact
Silke Horáková used to be a classical investor. However, when she heard about the British fund Bridges Ventures that invests exclusively into projects with a social impact, she decided to found a similar fund in the Czech Republic. It was 2011; the sector of social entrepreneurship was in its infancy and impact investing was an unfamiliar concept. Step by step, she became engaged in building a new sector of social businesses and after eight years when the time was ripe, she co-founded the first social impact fund, Tilia Impact Ventures.
You’ve been actively engaged in the social sector since 2011. How has it changed since then?
In 2011, there was almost no support for social entrepreneurs in the Czech Republic. Over the years, the sector began to expand and new programs like jako Lepší byznys from Nadace Via, Social Impact Award, Impact First Award from Česká Spořitelna, #třidvajedna program from Nadace Karla Janečka, Laboratoř Nadace Vodafone and Edison were created. Despite that, only a small fraction of investment goes into companies with a social impact.
Why is that? Are there too few investors?
I wouldn’t say that; finding investors was my smallest problem. On the contrary, I was surprised that when we were preparing this fund, we met many Czech investors who told us they do a bit of impact investing but that they would like to do more, even if the return on investment in the beginning isn’t great.
If there are enough generous investors, then where’s the problem?
There are not enough entrepreneurs who would found a company with the intent to create social impact. I’d say that inclusive businesses work well because the government supports them. However, I rarely see people with big ambitions who want to bring systemic change. People who have verve rarely found social businesses. On top of that, the whole social sector is dependent on grants and subsidies and hence there are only short-term projects that are not financially sustainable.
Did these reasons lead you to founding Tilia Impact Ventures?
Yes, Petr Vítek and I wanted to create a fund that would support entrepreneurs who wish to create a measurable impact. The fund should reach 59 million Czech crowns and our goal is to invest into 8-10 projects over the course of the next four years. And besides that, we also want to test the market, develop it, attract new investors to it and find out what financial instruments work best in it.
How does Tilia Impact Ventures differ from other funds?
So far, we’re the only Czech fund that focuses on impact investing. We aim towards enterprises with a clear positive social impact mission and measurable, scalable impact that have both a financially sustainable business model and ability to grow.
Do you already have any projects in your portfolio?
Yes, we’ve already invested in Datlab, a company which processes and analyzes economic data and runs a unique database of public procurements across all of Europe. Together with its sister organization EconLab, they publish an index of public procurements called zIndex every half year. They monitor the transparency and efficiency of cities and show good case practices. Apart from their nongovernmental activities, they are also active commercially. They offer consulting and products that improve the efficiency of public procurements and thus help the state sector. If you consider that 50% of your taxes are used on public procurements, then any change in this area has a big impact.
What other examples can we find of social businesses that work long-term and efficiently?
What first comes to mind is a great inclusive business called Ergotep, which employs 300 handicapped people and creates legislation around social entrepreneurship. They’ve been in the market 14 years now and they’re financially independent. Another good example of a social business is Rekola – besides supporting bike sharing, they provide a lot of data about public transportation to city councils and have also received a significant investment. Pragulic, a company that enables homeless people to earn a living as tourist guides, and Czechitas, a company that supports women going into IT, are nice projects with a functioning business model.
Despite many nice examples, impact investing makes up less than 1% of overall invested money globally. Do you think it can become more widespread?
When I think of how investing has evolved over the years, I am convinced that impact investing will become increasingly more important. Earlier investors were only interested in return on investment. In the 90s came the responsible investing trend, which wanted to avoid investing into areas like arms or drug trade. Then came sustainable or socially responsible investments, which emphasized the importance of environmental, social and governance criteria alongside the financial aspect of investing. This approach is now mainstream and it’s shifting towards impact investing. In 2015, the UN published 17 Sustainable Development Goals. More and more investors are now taking these goals into account when they make an investment. Globally, impact investing may make only one percent, but in Europe alone, the volume of funds in this area has grown by 385% between 2014 and 2016.
Silke Horáková is a co-owner and a board of trustees member at Albatros Media as well as an initiator of the Albatros Foundation. She is also a private investor, having worked in private investment funds and led the Czech Private Equity and Venture Capital Association. Silke Horáková supports social entrepreneurship, leads seminars on the principles of successful entrepreneurship in the social sector, and mentors social businesses. Together with Petr Vítek, she co-founded the first Czech impact investing fund Tilia Impact Ventures. She also co-founded the Fund for Independent Journalism. In her free time, she likes to read and draw.