Marcel Neutel is the Managing Partner and Chief Investment Officer at Capital 4 Development (C4D) Partners. C4D has been a partner of IIX for over five years and recipient of the 2016 IIX Trailblazer Award. To date, C4D has made four investments in high-impact enterprises via Impact Partners.
We sat down with Marcel Neutel for an interview on his experience as an impact investor. See what he had to say:
1. Tell us about yourself and how you came to join C4D Partners.
I am Dutch and have always had a strong interest to work internationally and solve complex business issues in developing and emerging markets. I started working in private equity in Central Africa when the impact investment term was not yet coined. At that time, I could say my work revolved around impact investing without me really knowing it.
It was only a few years later that I came across a job opening as an impact investor at ICCO Foundation, a leading NGO in the Netherlands. Joining the investment arm of the foundation from day one with my partner, we witnessed first-hand the rise of the impact investing eco-system and have been running a global impact fund investing in SMEs worldwide for the last 5 years.
ICCO Foundation’s fund later became an independent impact investing unit with Capital 4 Development (C4D) Partners as an independent fund manager. At the end of 2018, we raised $30 million USD from various investors for our C4D Asia Fund.
2. What is your investment thesis and which sectors/markets are you looking at closely?
C4D typically looks at innovative growth stage SMEs which bring positive social, environmental and economic change to the lives of marginalized communities. We aim to contribute to inclusive local economies by supporting SME companies that address and solve for local challenges and/or industry inefficiencies. We also integrate a gender lens in our investment strategy and aim to invest at least 30 percent of our capital in women-led or women-owned SMEs.
Currently, we cover three countries through the Asia Fund, namely India, the Philippines and Indonesia. In India, we usually support (Pre) Series A funding in established companies as we find the market to be relatively developed.
The approach in Southeast Asia has been a bit different. As we find the market to be more nascent and still developing compared to India, we have adopted more of a (debt) mezzanine investment approach.
In both types of investments, we are an active partner and support the company’s growth going forward so as to attract future investments.
3. What do you look for when deciding to invest in an impact enterprise? What are your key growth metrics?
First and foremost, we look at companies that achieve high social and environmental impact. Once we believe in the impact they are trying to achieve, we look at the company’s management team. We need to believe in the team’s capabilities and determination to feel confident in the growth of the company.
4. What does your post-investment strategy entail?
Following an investment in an impact enterprise, C4D adopts the role of a typical fund manager. In equity deals, this entails continually providing support through our representation on the board, but we can also have positions on the board for mezzanine debt deals.
Additionally, we also provide what we term an ‘investee support facility’. This is a separate facility of grant money which we use to co-finance support to our investees to enable them to strengthen specific areas in the company such as human resources, conduct market studies, coach entrepreneurs, improve management information system, etc.
5. What would you advise new investors in navigating impact investing?
The first advice that comes to mind if talking to other investors would be the importance of having a local presence to build closer relationships with the entrepreneurs.
It is crucial to be able to provide close-up support and investors should really ask themselves if they are the most effective partner or if there are any local partners on the ground that may be better for the enterprise.
At C4D we have seen both of these realities by being both a global fund while also having a growing local presence in the countries we work in.
6. What would you advise impact enterprises when they are raising capital?
As an investor, we appreciate knowing the whole story of an enterprise’s creation and like companies to explain how the whole project came to life. For example, how did the idea start? When raising capital, companies should share how their ideas and business models have evolved and improved over time.
7. What convinced you to invest in Green Enterprises?
At the end of 2018, we invested in organic virgin coconut oil producer Green Enterprises because we thought they were generating deep impact through all levels of their work.
We felt that Green Enterprises had a strong and committed management team with potential to scale by serving both a domestic market in Indonesia while also being able to expand globally. Overall, Green Enterprises’ triple bottom line approach and strong potential for growth was very attractive to us.
8. What has it been it like working with IIX?
I have had a very good experience working with IIX so far. We have worked together since the start of our first fund – both with our India team and our Southeast Asia team – and really found IIX’s pre-investment work to be effective and of high-quality. We are looking forward to continue and expand our cooperation with IIX in the next decade.
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