When you apply for impact investment, don’t make these mistakes in your application!

By Marcus Coetzee, 16 September 2020.

I have been increasingly working with impact investment funds around Africa, and with organizations that are trying to become ‘investment ready’.

As part of this work, I have assessed the applications of over a hundred organizations and conducted due diligence on several.

I have noticed how many organizations make the same pattern of mistakes in their applications. These tend to downgrade their ratings, even when their proposed business venture might be good.

This inspired me to write this article and share 10 recommendations for how to prepare a winning application. 

I hope that this will help organizations to submit better applications to impact investment funds in future.

Suggestion 1 – Use clear language 

When you use unclear language, we assume that your thinking is also unclear. 

This presents a risk to the investment fund. It also makes it difficult and frustrating to score your application. You will get higher scores if you have submitted a clearer application.

Don’t write very long sentences, especially those that consume the entire paragraph. It suggests that you have not taken the time to edit your application, or even read it aloud. It looks like you blurted out a ‘stream of consciousness’ onto the application.

Don’t use jargon. There are three types I encounter. The first is long acronyms without first introducing what they mean. The second is when you use too much business terminology in an attempt to sound intelligent and important, like you’ve just graduated with an MBA. The third is when you use too much ‘development lingo’, which is when you sound like a sociologist. When you write this way, we get the impression that you do not actually know what you’re talking about. We think that you are trying to distract us from noticing this. We become very suspicious of your application. 

I suggest you use a free tool like the Hemingway Editor to assess the readability of your writing. Alternately, get a proper editor to proof-read your application. I strive to write at an easily understandable level, such as the US Grade-9 level this article scores on Hemingway. 

Avoid contradictions or inconsistencies. I have scored too many applications where the numbers ‘don’t add up’. I suspect this is because they have copied and pasted text from previous proposals, and forgotten to check the consistency.

Don’t get a consultant to write your application for you. I can easily tell when this has been the case. The application feels less authentic. It tends to lack the passion and inspiration that arises from the entrepreneur themselves. However, this doesn’t mean you shouldn’t get help from a professional to help clarify your thinking or edit your final submission.

Suggestion 2 – Read the questions properly

When you provide an incorrect or oblique answer to a question, we assume that you have not taken the time to read the question and any supporting instructions. 

We then try to infer what you mean or hunt elsewhere in your application for answers to your question. This is frustrating. It also suggests that you are sending the same application to multiple funders as opposed to taking the time to prepare a proper submission.

Don’t copy and paste your answers from one question to another. Also don’t fixate on one part of the answer but at the same time gloss over other information that is also important. Think about the question and how you will answer it. Make some notes or create a mind map before you rush in and start typing furiously. 

Suggestion 3 – Reassure us with an oversight structure

When there appears to be no oversight body to provide strategic guidance and prevent your organization from mismanaging funds or making foolish mistakes, we assume that the investment is a risk.

Don’t treat a board of directors as a bureaucratic formality. We want to see an active board that provides close oversight and contributes meaningfully to strategy, without getting involved in the day-to-day running of the business. There is a delicate balance that must be maintained. 

Don’t use close friends and family members to fill up your entire board. We want to see some independent directors with the required skill sets. They can be objective and hold you to account.

Suggestion 4 – Explain your holding and partnership structure

When your corporate or partnership structure is opaque, we assume that you are hiding something and that someone else will benefit financially. 

Don’t say that you’re partnering with someone, without explaining your legal arrangement, and how the parties will divide the funding and responsibilities. I have assessed proposals where I suspect the applicant of ‘fronting’. This is where their supplier, or the person that licenses the intellectual property, is going to get most of the money.

Don’t mention that your company is a subsidiary or a ‘sister company’ without describing how the various legal entities fit together. I have assessed several applications where one legal entity is applying on behalf of another to get through some loophole in the application process. This is unacceptable. Consider which legal entity is best situated to apply for the investment. We’ve turned down several applicants because they’ve chosen to apply with the inappropriate entity.

Furthermore, you will need to explain if/how the holding company will extract profits from the applicant.

Suggestion 5 – Provide conservative projections

When you provide information that appears too optimistic, we assume that your business is unrealistic in its planning.

The ‘planning fallacy’ is a cognitive bias where you underestimate the difficulty of the task ahead, and the time and resources it will take, while overestimating your ability. When assessing your application, we must mentally downgrade the projections to something more realistic, and it suggests that your organization is poor at forecasting.

I see this tendency in financial, sales or impact projections, and the numbers of direct and indirect jobs that will be created. 

Don’t inflate your projections to make them look more appealing. It achieves the opposite effect. We become inclined to ignore them. Rather submit realistic or cautious projections based on historical trends or the growth of similar ventures. Be prudent and explain your assumptions. See if there are benchmarks that you can use from similar business ventures or from your historical data. Remember we have a good sense of what type of forecasts are reasonable for a business such as yours.

Don’t assume that the future will work out the way you planned. It rarely does. For example, back in January 2020, few organizations foresaw the impact of the Covid-19 pandemic on their funding and revenue.

Suggestion 6 – Provide a convincing market analysis

When you do not convince us of the demand for your product, we assume that your business is unlikely to succeed. 

A market drives a business venture. Without customers there is no business, regardless of the quality of your product. I call this the ‘inventor syndrome’. It is the incorrect assumption that every good invention or innovation is guaranteed to have a market, instead of providing the starting point for building a business.

Don’t see all your customers as the same segment of your market. Different customers have different needs. Describe how they differ. This shows that you know your customer base.

Don’t focus on your customers’ markets; focus on yours. While their customers may help to ‘pull’ your products through your value chain, they are not your target market. For example, if your enterprise sells organic fertilizers to agricultural shops, then these are your customers and not the farmers who buy from them. However, we are cognizant that your customers’ customers may be your beneficiaries, in which case you need to discuss your impact on them.

Don’t describe your market only in qualitative terms. Provide some order volumes (e.g. tons, units) and approximate value in your currency. For example, do not say something like, “the Department of Education buys lots of food for feeding schemes and are always struggling to find quality meals”. Rather say that “The Department of Education feeds X million children and spends Y amount on 15 different suppliers.”

Don’t make assumptions about interest in your product. Rather, describe evidence such as existing supply contracts, pre-orders, and letters of interest from potential customers.

Don’t use census or high-level market data to make top-down assumptions without more ‘ground-up’ evidence of the demand for your product. For example, do not say something like, “because there are 140,000 Spaza shops in South Africa, and assuming that that 1 in 100 will stock our product, this means there is a market of 1,400 shops”.  Rather build your assumptions from the ground up. Say something like, “we’ve met with 100 of the 540 Spaza shops in Soweto and 20 of them are interested in buying our product. This suggests that our market in Soweto is approximately 100 shops and we can reach them in the first year.” Extrapolate from there. 

Don’t ignore competitive forces. Your competitors are not sitting around idly. They are also launching new products and lobbying your customers, and trying to meet their needs better than you. A market is a competitive playing field. Your business does not exist in isolation. As you do something new, so do they.

Don’t assume that your customer has money, regardless of the long-term benefit that this will bring them, or how rational you think the choice to buy your product is. I see this mistake all the time, with products ranging from solar power lights through to silage bags. For customers to decide to spend money on your product, they must either stop buying a competitor’s product or stop spending their money on something else.  You must work hard to convince us that your customers will be prepared to depart with their hard-earned money.

Suggestion 7 – Focus on the intended outcomes for the beneficiary

When you give insufficient attention to how the investment will improve the lives of your ultimate beneficiaries, we assume that you are just looking for money.

Remember that impact investment is a strategy of creating positive social, economic and environmental change. We want to know more about what this change will be. For example, we may want to know how the livelihood and well-being of beneficiaries is likely to improve because of the investment. We want convincing evidence, and not groundless assumptions and speculation. Provide us with numbers. These may be metrics like household income, dietary diversity, meals per day etc.

We also want to understand the outputs (i.e. numbers that reflect levels of activity) as well as outcomes (i.e. numbers that reflect genuine changes in the world because of your product.)

Don’t treat all your beneficiaries the same. Be sure to disaggregate your description of them. They are unlikely to all be the same, and unlikely to have the same needs. You are also not likely to affect all of them equally. Show us how well you know the people you are trying to help.

Suggestion 8 – Show that the business is feasible

When the building blocks of the business don’t appear to fit together properly, we assume that the business model has not been properly interrogated and is likely to fail. 

This might be a problem with the organization’s customer value proposition, beneficiary value proposition, inputs, processes, or method of earning income and profits.

Don’t submit an application for a business venture that tries to do everything. Focus your application on one part of its value chain. Aim to conclusively improve one or two parts of your business where possible. Don’t spread your efforts too wide and strive for a hundred improvements that will have moderate success.

Don’t submit an application for an untested business venture. First create a minimal version of it to see how it will work. This might involve producing a small batch of your product, testing it on the market, and gathering feedback. Alternately, it might involve replicating a business model that already exists elsewhere.

Suggestion 9 – Convince us that the underlying business is sustainable and viable

When your financial story is built on too many assumptions and excuses, we assume that this business is not likely to work out financially, and therefore will not be a worthy investment.

Don’t provide financial results that are weak or deteriorating without clearly explaining the reasons for this, and why things will change in the future. We are not averse to investing in a business that is experiencing financial difficulty. But we must understand this situation and what caused it. I have evaluated too many applications where poor performance is blamed on outside circumstances such as the market, or exchange rate or weather conditions. They do not go into sufficient detail into the agency of the company – what mistakes it made and how it has learned from them.

Don’t build a business based upon grants. This is not a viable business. If your business is receiving grants, then explain exactly how these are being used. In my work with social enterprises in South Africa, I have noticed that too many of them would not succeed in an open market, where their activities are not being subsidized by annual grants or prize money. Such organizations do not make good investments.

Don’t build your business around one customer. This is very risky. Something inevitably happens to threaten or change this relationship and put the sustainability of your business at risk. However, having a good anchor customer can provide a valuable launchpad for your business. It can help you get started, but we want to see a marketing strategy that reassures us that you are pursuing other customers and streams of income.

Suggestion 10 – Build on your position of strength

When you suggest a business venture that is too different from what you’re already doing, or an illogical extension of it, then we assume that you’re being opportunistic with your proposal, and that you’re underestimating the complexity of setting up this business.

Don’t submit applications for a business venture that is only slightly related to your existing activities. We want to help your business to grow its impact. To be assured of this, you need to operate from a position of strength. 

You might need to broaden or strengthen your supply chain or position yourself to win more customers. Perhaps, there is a level of back or forward integration that makes logical sense and is part of your strategy. For example, you might want to work directly with your suppliers (as opposed to through a middle-man). You might want to develop or expand your ability to add more economic value to your inputs, such as by manufacturing something. This all depends on your type of business.


If you are going to prepare an application, then please take the time to do it properly.

Keep this list with you. Run through these points before you submit your next application. Try not to make these mistakes as they will sabotage your chances. 

Good luck. I hope my article helps you to get through the first round of applications.

Thanks to the insightful input into the article from Andy Simpson, Philip Anastasiadis, Catherine Torrington, Chad Capon and Isla Farley. 

In pursuit of strategic clarity

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