The elea Way - Preview

elea’s FOUNDATION AND OPER ATING MODEL

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resources, and sometimes also a lack of experience in handling institu- tional capital. Therefore, an important part of any due diligence effort is to work together with the entrepreneurs and their leadership teams to build a factual base of relevant and plausible data – a task that is time- consuming and calls for extended on-site visits. Second, the founders are key. Much impact value at this stage is embed- ded in their personality traits. What drives their motivation? How com- mitted are they to their ambitions? How do they balance social impact and financial return goals? What is their skills profile in terms of strengths, development needs, and gaps? And, most importantly, what are their values and how ready are they to embark on an intensive, multiyear partnership with elea based on complete mutual openness, respect, and trust? To gain deep, possibly evidence-based, insights into these complicated questions is another reason why elea never invests in companies without extended on-site visits by at least one member of our professional team. In addi- tion, a top-level dialogue between the entrepreneurs and the CEO and/or Chairman of elea is a mandatory element of every due diligence process. Third, finding the right balance between what the enterprise is like today and what it aspires to become in the future is essential. Of course, the hockey-stick shape of business plans is a common phenomenon in any due diligence that involves expected future opportunities. However, because the enterprises often do not have much history, in philanthropic impact investing the emphasis is even more forward-looking. Thus, a common challenge for the elea team while working on a due diligence is how to get a sense of what are ambitious, yet somewhat realistic, objec- tives for the company, and what would the worst case scenarios look like? Finally, because the elea team is so deeply involved in due diligence – work- ing together with the entrepreneurs and their leadership teams to understand the current situation and get a sense for the mix of ambition, potential, and realism of their future plans – managing expectations is a major challenge. Sometimes, business models need to be questioned and changed or invest- ment proposals need to be rejected altogether. This can occur either because of surprising new facts being uncovered or for reasons that have nothing to do with the individual company; for example, due to portfolio concentration aspects or the lack of available capacity to fund and mentor an investment (see Figure 3.3 for a complete list of questions to be addressed at the board level as part of elea’s comprehensive due diligence package).