Impact Methodology
Quantifying impact is not only possible, it’s essential
We only invest in companies that address one of the biggest challenges of our time. Companies for whom every unit they sell, is a unit of impact. If you remove the impact, you remove the business.
Background of Rubio’s Impact Methodology
We developed our social impact performance model together with the European Investment Fund starting in 2014. Rubio’s Fund I was one of the first funds in Europe linking impact and carry, and we are proud to say that we overachieved on our impact targets (impact multiple > 1). We are still one of the few impact funds in the world linking our carried interest completely to both financial and impact returns, which we hope will become the new standard for all impact funds. There is no golden standard in the market yet, so we will keep learning, developing, improving and sharing!
Rubio Impact Methodology
During the investment process we guide the entrepreneurs through our ‘theory of change’ methodology, which we adapted from the IMP – Impact Measurement Framework’s 5 dimensions of impact: Who, What, How much, Contribution and Risk. We adapted the IMP model to include systemic impact (crucial to our mission) and added other elements to better fit the reality of an early stage startup. We have put strong emphasis on additionality – what would have happened if the startup was not around – and on systemic impact – does the startup also have the potential to change the system on a more macro level.
The visual on the right shows an overview of our methodology.
Independent Impact Advisory Board
A crucial part of our impact methodology is the validation of the impact metrics. As impact targets can be difficult to objectify, we have chosen to add an independent validation within our investment process with the Rubio Impact Advisory Board (IAB) since the inception of our fund (in 2015). The IAB formally consists of four excellent independent impact experts (see below). The IAB validates the theory of change and proposed impact metrics of an investment before Rubio will proceed to signing and closing the investment.
100% carry linked to impact targets
The financial remuneration of team Rubio is linked to both impact and finance targets. Our first hurdle is impact (100% of our carried interest – the amount of money we take after returns to investors – is linked to impact) If during the time of our investment the combined portfolio does not reach their impact targets, we don’t see our carried interest. This mechanism avoids conflicts of interest between impact and financial performance as our VC’s return is tied to both: no impact = no rewards.
The weighted overall Rubio Impact Target
is calculated each quarter to determine the fund’s actual impact performance compared to the three-year impact target set at investment date. The Weighted Overall Rubio Impact Target is calculated as follows:
1-3 Impact Key Performance Indicators (KPIs) are determined per investment.
Each KPI is assigned an impact weighting within the specific investment – as some KPIs are more relevant than others.
For each KPI a three-year impact target is set and validated (pre deal) by our Impact Advisory Board and finally (post deal) determined and approved by the Investor Counsil.
The Final Overall Rubio Impact Target per investment is calculated by setting off the actual impact reached against the three-year impact target multiplied by the assigned impact weight per impact KPI.
The fund level Weighted Overall Rubio Impact Target is calculated by multiplying the Final Overall Rubio Impact Target per investment by the relative investment weight of that investment.
We report the Weighted Overall Rubio Impact Target of our portfolio companies to our investors each quarter.
The fund overall impact hurdle at exit is minimum 60%, but we of course aim to exceed 100%.
The Weighted Overall Rubio Impact Target per 2023 year end is:
Fund 1: 194%
Fund 2: 19%
Want to know more?
This Rubio’s Impact Methodology Policy describes Rubio’s Impact Methodology in more detail, including the agreements we make with our Members (‘LPs’) and several informal methods and practices that we have ingrained in our impact measurement process.
