“I need more hard financial modeling skills.” I hear this over and over again from young professionals interested in building careers in impact investing. Yet, if you ask many impact investors what it takes to succeed, financial modeling rarely comes up. Instead, you will hear things like multilingual leadership, emotional intelligence, and understanding a diverse set of investment vehicles.
Financial modeling is one of many important skills needed to succeed in impact investing and not the differentiator that will land you a job. Impact investors tend to hire professionals with traditional investing experience, but this isn’t because of their financial modeling skills. It’s because of their experience structuring deals, raising investment, and assessing outcomes. These experiences demonstrate a range of skills, including persuasive communication, analytical thinking, and creativity.
This means that young professionals can’t just take a financial modeling course to land a job in impact investing. They need real-world experience.
If you don’t have real-world investing experience, it’s important to assess what role you want to play in impact investing. There are many ways to engage in the impact investing ecosystem through policy, entrepreneurship, and capacity building roles. But if you are totally committed to working in a due diligence or portfolio management role in impact investing, here are your best paths for building the experience you need.
Work for a mainstream investor. Mainstream investment firms hire far more people than impact investors and have the internal capacity to train entry-level staff on the job. After a few years of real investment experience, you will be able to demonstrate many of the skills that impact investors look for. The challenge with this path is that you will likely find yourself in a professional environment that is devoid of the meaning and purpose that resonated with you about impact investing. You also risk building a lifestyle around a well-paying corporate career that the impact investing space will not be able to support. In my experience, impact investing pays well by nonprofit standards, but significantly below-market-rate by investing standards.
Find a non-investing role. Impact investing organizations hire for roles in admin, program development, communications, or portfolio support. This will expose you to opportunities in due diligence and portfolio management which might even allow you to transition into an investing role within your organization. The challenge with this path is that non-investing roles are few and far between in impact investing. If you get one of these roles, you will likely need to volunteer for stretch assignments and projects that give you real experience and demonstrate your ability to success in an investment role.
Find an early-stage impact investing initiative. This could be a new fund, a new program within a nonprofit, or a new service offering within an advisory firm. These initiatives are often hungry for talent and don’t have the capacity to wait for the perfect hire. They are more willing to take bets on professionals who show potential even if they don’t have all of the skills. The challenge with this path is that there is a lot of “right time, right place” involved in landing these roles. The best way to position yourself for these opportunities is to plug into the impact investing space as much as possible and readily offer your time and support to new initiatives.
Whichever path you decide to pursue, don’t forget about all the qualities that impact investors look for beyond finance skills. Finance might get your foot in the door, but a strong understanding of different investment vehicles, the challenges of entrepreneurs, and how to collaborate with other sectors will be how you stand out. It can feel like a lot to take on. But if you simply focus on building experience and staying plugged into the impact investing space, opportunities will emerge.
I covered a few ways that you can build the experience needed for impact investing. Mission Driven can help you stay plugged into the impact investing space. Check out my upcoming free webinar – Accelerate Your Impact Investing Career.