Impact Investments Can Change the World – Interview With Cecile Blilious From Impact First Investments

In this episode of the podcast, I got to interview Cecile Blilious, the founder and managing partner of impact first investments. Impact First is an investment company that has several AgeTech startups in its portfolio.

Cecile is a pioneer of impact investments in Israel. Prior to her work at Impact First, she managed Noaber Foundation’s Israeli investments and led several companies as CEO. The following text is a transcript of my conversation with Cecile, edited for length and clarity.

Tell us a little bit about Impact First, It’s an investment company, How does that work?

Impact First Investments was founded in 2011 with the notion that technology and impact must go together. If we want to address challenges, the biggest challenges that our society is facing, then technology has to be a catalyst. 

Having worked in impact investing before, I thought that Israel could be a really serious hub in creating social impact with its technology abilities, and with that notion, I founded Impact First thinking, let’s be Israel centric in terms of finding the right technologies, which by definition always look forward to global markets. No Israeli start up really focuses on the Israeli market, but instead looks at the global market and think about how these technologies can really do something positive and impact the world positively.

How did you get into impact in the first place?

So I was really very lucky because I was an entrepreneur and founder and manager of start-ups and worked with Dutch Family Foundation. The Noahar foundation in the Netherlands. And they happened to be one of the first movers of the whole impact movement. Of course we didn’t know that at the time, we just thought right after the dot com bubble burst in 2000, 2001 that there must be a reconnection between capital, values and technology. 

And with that notion, started thinking about how to make investments in start-ups that would do something positive for the world in a profitable manner. And that’s all we had in terms of our thoughts. I was really very lucky to be in the room, thinking about what does it mean to have an impact? What is the negative impact? How do you measure impact? Why should you measure impact? 

All these questions that you can now just Google and get some answers to. We had to invent these things and that was very exciting. We really invented this new thing that eventually took off and became what is now called Impact Investing.

We called it venture philanthropy, social venturing, the fourth sector, all kinds of names came up and some didn’t stick. These were really the very early signs of blending capital and values and thinking about how technology can really create both of them. I had the best training in the world in plowing a field that was totally virgin and had the best mentors. So, here I am.

And you’ve got to do all of this in Israel?

Yes, I’ve been with the foundation for many years and I represented them in Israel. I manage their investment portfolio in Israel, but I was also involved in all the processes that happened in the global foundation. When I decided to focus on Israel with Impact First investments, I thought that Israel had a lot more to offer. The foundation was focusing on only two themes and I thought that actually any technology for anything that would do positive impact should be included and that there was no home for social start-ups in Israel, so, I said, okay, I will be the home for social start-ups in Israel.

So, Impact First is actually the first investment company that invests in start-ups that are making a positive impact on society in Israel?

Yes, that’s correct.

And it started in what year?

In 2011.

2011, before impact was even a thing here in Israel?

No, actually, well, impact investing; the term itself was minted in 2007 and 2008, so, people started talking about it. A lot of people still talk about it without really understanding the definitions. I think that now it’s really become something that is like in the centre of every conversation of investors and entrepreneurs. There are still a lot of confusion and some social washing, like you had green washing before, I guess that happens too, but basically people are getting that there has to be more than just profit to corporate. 

People are thinking very seriously about stakeholder value. Just last month, the 200 CEOs of the major companies in the US talked about how corporations should be looking at stakeholder value, not only shareholder value. The CEO of Black Rock has been talking about stakeholders and impact for a long time. All the major financial institutions have massively invested in impact. So, there’s definitely something going on and it’s growing exponentially. But when we started in 2011 in Israel, nobody knew what that was about.

And you had to go and explain to people what impact is.

I still do but yes, I had to explain to people on both sides of the financial equilibrium. So, for people that are from the business side, investors and entrepreneurs, I had to explain that you actually don’t have to compromise on your profit, if you want to maximize your impact when you’re in the technology sector, there’s no reason why there should be a compromise or it should be either or. I’m for the and methodology, which means, the more you sell, the more your company’s successful, the more impact you make. That’s on the financial side. There’s still a lot of suspicion by investors thinking that if you’re making something that has an impact that is embedded into its business and the company talks about it and measures it, then you must be giving away something and you’re not going to maximize profits.

So I have to explain that to the financial investors. On the other hand, people from the philanthropy sector are very concerned that we’re going to be taking away all their donation capital because money’s going to be flowing into these kinds of companies instead of going to social causes, which in a way is partially true. It’s not 100% true, there’s still going to be a lot of money invested or donated into philanthropy. But some of it is going to go into social businesses and entities that are trying to achieve solutions for social and environmental challenges by using the business practices and not non-profits.

Do you think that is because people want to see some return for their money or because they want to see the impact measured, which sometimes non-profits don’t do?

First of all, the whole idea of measuring your impact is something that is terribly important for anyone, particularly for the non-profit sector. That was not the practice when the impact investing domain started sprouting. One of the reasons it’s happened was because on the non-profit side there was a lot of criticism on how the non-profits are being managed with lack of transparency and lack of accountability and a really unknown amount of impact that they were making. On the other hand, there was a lot of criticism on the business side saying you cannot just be capitalistic pigs and just think about your returns and maximization of shareholder value, because when you do that, then you’re by definition going to be hurting society and the planet. 

Those two notions have created this middle ground where people started saying the capitalistic method of setting up corporations that are there to maximize profits is fine but, the maximization of profits should consider society and the environment. It should consider stakeholders.

It should be run in an ethical way. So, it should think about the inclusion and diversity. It should think about age, it should think about anything that is not like what was then thought of as the business of business is business. So, actually the business of business has to be a business that is also serving its society, its community and its planet.

So, we’re making progress?

I think so. So, first of all, the impact investing domain in 2018 was at more than $500B. That is growing a hundred percent year over year. So, that’s really massive.

It’s a big deal. In Israel we’re still very much behind. But I think that Israel’s aptitude to develop technology and new solutions for anything; will really make Israel jump to the head of the pack. In the sense that once the idea that you can make a positive impact on society, on the planet, and you don’t have to compromise your profits. Once that is accepted in the mainstream, then a lot of companies are going to be speaking about their impact, measuring their impact in thinking about how to do more of that. Because they understand that this is going to be drawing the talents that they want to draw, keep the good people in the companies, support their brand and bring new investment capital that was not available to them before.

All in all it’s going to really bring a lot of good things to the company. Once we take away the suspicion that is still there by investors and by founders of start-ups, that if you’re doing something good, you might not be maximizing profits. Once we take that off the table, then it’s just going to take off. And Israel will be a leader in developing tech for impact.

What do you think should happen for us to make that final leap?

A lot of things. One is that mainstream investors will have to start adopting the idea that you can do the and theory. Profit and purpose. That is already happening. One of my partners in Impact First Investments is Pitango Venture Capital, it’s Israel’s largest venture fund that manages more than $2B. They have now decided to start adopting the methodologies of impact into their screening process.

One thing that’s we’re going to do together is look at their existing portfolio companies, ones that can be migrated into creating impact. It’s not only about making the actual impact, but it’s also about saying what is the intended impact, measuring the risks, measuring the potential negative impact, and then tracking the net impact that these companies are doing and bring that to the forefront, and also applying that to new screening of companies in the sense that first you look at the ESG so, the environment, social and governance.

You look at diversity, you look at inclusion, all these things have to built into the corporate DNA. Your carbon footprint, all the kinds of things that are currently very important and very widespread. More than that for the companies who can address social or environmental challenges with their product, to embed that into their products.

That is going is the first step. It’s a very courageous and very important move that Pitango is taking. To look at the market of start-ups in Israel and they say, okay, we have more than 6,000 start-ups in Israel at any given moment. About a third of them are addressing some of the sustainable development goals, 17 goals that the UN has declared that must be addressed by 2030 if we want to have an equitable society and a good planet to live in.

Why not think about the impact that these companies are making and embed that into our practices. So, mainstreaming it is one thing and that will also reduce the suspicion level of investors. The other thing that has to happen is that entrepreneurs, many of them do want to make a lot of positive impact, sometimes they just don’t know how to verbalize it. Sometimes they know but they’re afraid to mention it because they’re afraid that they’re not going to get funded because they say it. Sometimes they just need help from a professional to measure it (in a professional way that is unbiased) and really help them track the impact that they’re making. So, it’s an important thing. 

I think on the entrepreneur’s side, we’re going to have to bring more education to people in companies, in start-ups that work across the board in any position about how they make or they blend, the impact that they can make with what the company produces. I think that mainstreaming it is going to make a big difference. Of course the government has a lot to do with it. Israel has a very strong support from the government to start-ups. Already it has four different tracks with the innovation authority that are supporting impact.

That has to grow because in fact start-ups still are at a disadvantage. That needs to be addressed by bridging that gap through governmental funding. At the end of the day it’s going to be about the institutional investors who carry the biggest chunks of capital to go into impact investing as part of their portfolio.

I’m looking forward to when that will happen.

Me too.

Can we talk a little bit about your investment strategy? What are you looking for in companies that you might want to fund?

Since Impact First is not a fund but rather, an investment company, it means that we’re serving individuals and family offices who want to make these kinds of investments. They are looking for deal flow that blends technology with impact that could be measured, but then maximize profits because impact investors have a tendency or in particular private impact investors to be either a thematic or with a particular liking to a certain type of investment. They have different risk return profiles and risk appetite. We can accommodate all of them. Our investors can actually choose the companies that they want to invest in and build their own portfolio. So far we’ve funded early stage companies, and that has been (among other reasons) because one of our investors is willing to take more risks so we can with him go to earlier stage companies which are more risky and allow that capital to flow into these companies. 

Our investment strategy is very simple. We’re looking for the best entrepreneurs that have a clear vision of a problem, which is an environmental or a social problem that they want to address with a technology product that is massive enough, it’s big enough to create a good market, and they know where the market is. 

Sometimes it’s a niche market, which many times is a good thing and, are able to deliver on the on the premise. 

Obviously we are aware that start-ups don’t usually end where they start, and they have to change their business models, they have to adjust their product market fit so, we’re always very flexible with them. But again, we’re looking at top entrepreneurs that want to create a positive impact and are willing to measure it together with us and actually think it is beneficial. They also have to be Israeli or Israeli related and have access to global markets.

You have some Age-Tech start-ups in your portfolio. Can you give some examples on what made you invest specifically in those?

So aging, is, it’s actually extremely important and extremely interesting because when we look at aging, many of the technologies that were at least initially thought of for the disability market are actually also good for the aging market. A lot of these technologies actually treat a very wide segment of the population. For example, we have a company called MyndYou. MyndYou tracks the cognitive decline of people through passive collection of voice data when they speak on their phones. 

You can compare it to listening to music. If I listened to the music of your voice and I know that this is how you sound when you’re okay. I will know via the AI technology that MyndYou developed, when the music has changed. That can imply that there is a cognitive decline, which can also imply that there is a physical decline. That is very helpful to track elderly people who might suffer from dementia or Alzheimer’s.

It can also help people who are discharged from the hospital and need to be tracked, or people that suffer from more than one or two chronic conditions. 

Another company is called AngelSense that is currently focusing on the autism market. 

They created a tracking and monitoring device that helps parents of autistic children track their children and know there’s anything wrong with them, including if they get lost. That is totally relevant for the aging market. We think that once the company’s established in the disability market; they will also expand into the aging market. Which is very close in terms of product itself, but different in the business model. These are just two examples of companies that we’ve invested in that are related to aging.

What separated those from the pack? I’m sure you get a lot of decks sent to your inbox. What made those two stand out?

A lot of times it’s the quality of the entrepreneur and their experience, their ability in our eyes to carry the company all the way through. So, we don’t believe in changing horses in the middle. It used to be a notion that you could invest in a company that you’ll just at some point appoint a CEO and the founder will move aside, we don’t believe in that. It doesn’t work very well. I mean, it does work once in a while, but it’s rare. It’s better to find entrepreneurs that we believe can take the companies all the way. 

It’s the size of the market and understanding the acuteness of the problem and the solution, and sometimes it just timing. A lot of entrepreneurs think that maybe a fund or an investor didn’t invest in them for all kinds of reasons. Sometimes it’s just timing. If you’re busy making two deals maybe you’re not going to make a third one right now. 

There’s a lot of things that happen. We track the companies we invest in for a long time and it’s never happened that a company walked through the door and a week later we’ve invested. It’s always a process. We want to see where they’re going, what’s the product market fit that they’re looking for? What’s the market saying? It’s a complex process.

Plus, I have an affinity for women, I want to promote women founders and women entrepreneurs. For example the MyndYou CEO and founder is a woman, Ruth.

And they’re doing really well.

I’m very proud of them.

You’ve been a part of the tech industry for many years and you’ve worked with people who are based all over the world. Are there any characteristics to the Israeli ecosystem that make it unique in your eyes?

First of all, Israel really does have a culture of entrepreneurship. We’re really not afraid to fail. This is part of our process. A lot of people ask me when I travel, can Israel teach other countries to be more entrepreneurial? And we do that a lot. I think there’s a lot going on in terms of transferring of methodologies but, when you come from a culture where failure is regarded as a disaster, people are not going to take risks. That’s something very present in Israel. People are audacious, they are courageous, and they’re willing to put themselves on the spot and go all in and set up a company. Even if you know, a few months or a few years later, it will have failed. Never mind, their next venture is probably going to be even better. 

Number two, is what I call the curse and the blessing of the Israeli market size. Companies that are being started in Israel can never look at Israel as their final markets. They can look at it as a beta testing, and of course the Israeli market needs to be served as well, but this is never like the total intent, which is a curse because it forces you to think about global markets from day one. How do you approach them? How do you choose the right market? How do you think about your product market fit in that particular market? It’s overseas, it’s complicated, it’s costly, but that’s also a blessing, because that means that from day one you’re an international company, which doesn’t happen in a lot of other countries. A lot of times companies that are based in Germany or in France or in Brazil, first of all, they serve their own markets. And then when they need to expand and grow beyond that market, that’s when it’s really hard for them.

Israel doesn’t have that problem. Everybody thinks about global markets from day one. I also think that the talent here is quite remarkable. Obviously the Army’s producing a lot of knowledge and talented people go through the system, the army system and come out both talented and knowledgeable, which is great. 

The prices here are still lower than they are in other countries. If you invest in a US-based start up, it’s going to be more expensive than investing in an Israeli start up. That’s why the R&D is usually stays here in Israel. All in all, I think Israel has the secret sauce, if you will. But we’re not going to keep it for long if we don’t pay attention. So, first of all, other people are really learning. The younger generation is looking at global markets and thinking how do people in Israel for example or in Silicon Valley succeed and there they’re copying it. So, that’s not going to be for us forever.

Number two, we really need to tap into new people that can join that market. If we don’t do that, then the Israeli high tech market is going to just keep being a very closed environment that only serves like an 8% or 10% of the population. We must bring in many more women, people from all ages, people from the Arab community, people from the ultra-orthodox community. Everybody has to be participating in the high tech sector. 

That will really create the strength, and the diversity will bring us strengths that no one else has. We have to keep the advantage going and we need to work on that.

What’s your take on the Age-Tech market? There are opportunities in this market because it’s very much a blue ocean. What do you see? What are the opportunities in your opinion?

First of all, the size of the market, it’s huge and it’s very diverse. If you think about baby boomers that are just retiring and you think about people that are over 80 that’s a different market, but they’re still looked at as one market, but actually these are very different market segments. 

Just by thinking about the sheer numbers of people who are aging on one hand, and younger people who can take care of them, on the other hand, there’s a gap and the gap is going to just keep widening over time. The result is going to be that you will have to think of a different solution to bridge that gap and take care of these people that are aging. Technology is the only thing that can really help bridge that gap. So, that’s where the massive opportunity is.

Having said that, it’s still a very conservative market. It’s a market that is different, difficult to penetrate. Sometimes it doesn’t have any money. In many cases, people are thinking about traveling for, people who are retired. That’s all very nice and these are just general good business practices to create a travel opportunities for people that are above 65. That’s great; these are people who do have money. But when you think about people who are bedridden or need some protection or have medical conditions, many of them don’t really have the ability to pay, which creates a challenge for start-ups that need to be paid for their product. Somebody needs to pay. So, the structures are still not there. If you look at the US market for example, then there really is no structure. I mean, it’s not like the government is going to step in and pay for products or services.

The business challenges are still very, very big. I think the product opportunities are massive. The need is certainly there, but the business models are still challenging.

Where do you see this market in 5 to 10 years?

Oh, it’s going to just grow and grow. It’s just sheer numbers. Even more so if you look at the East, look at China for example, these are really massively growing markets where you have less and less young people and more and more older people. And just something needs to give there’s really no other way that we can take care of our elderly unless we use tech solutions. It’s only going to go in this direction. The question is what are we going to do about it?

Well, hopefully we’ll have lots of start-ups coming up with great solutions and we’ll solve everything.

I think the start-ups are there and there will be many more, if the business issues are solved. We’re still stuck with the business models.

I think that insurers and governments starting to realize that these are also their problems and they’re taking steps to meet start-ups, not necessarily where they are, but somewhere in the middle.

Yeah. Even the Israeli government. I was part of a group that was appointed by the Israeli government to think about aging and technology and we met for several months, a large group of people, and we came up with some conclusions that we presented to the government. We talked about the inclusion of more technology solutions, the import of existing technology solutions from around the world that can be implemented in Israel and set up to fit the Israeli needs.

Also to look at just general technology solutions for anything, and think about a way to implement them in the aging market because sometimes you don’t need to invent something, you just need to tweak it to make it work for a particular demographic. 

Aging people, again, it’s not just one market, but in many ways there are existing technologies that all you need to do is just think of them in a different way and apply them in a different way that will solve issues that the elderly are facing or need to be addressed. That can also bring a lot of content or a lot of the existing and proven technologies into the aging market. That’s another conclusion that we drew. I think this is relevant for everywhere in the world.

So, if I’m an entrepreneur and I want to get into Age-Tech or just any entrepreneur going into any business, what advice would you give me?

First of all, you have to know your market. Really deeply, intimately know your market. In the AngelSense case for example, the founder of AngelSense is the father of an autistic child, and his co-founder has a nephew who’s on the spectrum. So, they are the market. They understand it very deeply, they understand the problems of the market and that’s easier for them. Knowing the market will cut a lot of the costs and time that it takes for start-ups to take off. The technology is a critical part, but without the market it’s almost worthless. So, setting up excellent technology is really great, but if you don’t know where you’re going with it, then this is not the right order of things.

When I see an entrepreneur, I always recommend to them, even if they’re a tech star, a stellar entrepreneur and they know exactly how to develop a solution for a problem, to first make sure that the problem really exists, that there’s a market for it, and that people are willing to pay for it. At least, you’ll know when you start where you’re going. I can guarantee that you’re going to change, but you have to start by knowing the market.

Number two, being an entrepreneur is very hard. All the glory and these TV shows that show you all like all the glory and fun that people are having as entrepreneurs, some of it is true, but it’s a lot of hard work and ups and downs and funding is hard. There are really a lot of hardships. I look at entrepreneurship a little bit like running a marathon, but in sprints. If you don’t understand that you’re going to have to run sprints, but actually the total run is a marathon. Maybe don’t go into it. It’s very tough, very intense. Most of the entrepreneurs I know, maybe all of them have a hard time balancing their personal lives with families with their entrepreneurship. So, that’s something to consider. This is also, I think one reason why women are sometimes deterred from being entrepreneurs and that needs to be addressed, and it needs to be done in a way that the work life integration works. So, it’s not only a domain that’s reserved for men. 

After you know what the problem is, you relate to the market, you understand that you’re capable of delivering a solution that is a good solution that can be defended and you have the stamina to bring it all the way, that’s what you need in order to get started.

That’s very good advice. Is there anything else you would like to add?

Well, you know, impact entrepreneurs are people who want to change the world for the better. So, entrepreneurs want to change the world, right? They see a problem, they want to change it. They’re not people who take problems lying down. They see a reality and they don’t like it. So, they want to change it and that’s the nature of an entrepreneur. 

To me, I have the best job in the world because all day long, all I see is entrepreneurs who are coming into my office with a social problem that they recognize and they think about how to address it. They really do want to save the world, they do want us to help them think about how to do that in a comprehensive, measurable, quantitative way.

In the impact space, I think this is really one of the best benefits that people have. Is that they go to work in the morning and they think, wow, you know. I’m doing something with a purpose, I’m doing something important. I highly recommend that to any entrepreneur. 

I recommend it to anyone. Even if you’re working in a bank or you’re an investor or you just happen to have some capital that you inherited. Or you work in, I don’t know, Google campus you can still make a lot of impact. Think about this as part of your DNA. When you have that, first of all, you wake up in the morning with a smile on your face. Having a purpose in your job which is higher than just yourself and your salary really creates a sense of achievement I would say.

I would highly recommend to entrepreneurs and investors in particular to think about the impact that they make and how they can make a bigger impact. I think that would lead them to look for professionals that can help them really achieve that. And this will result in just any investing, any investment being an impact investment. 

I think the word impact just needs to get out of the system. Any investment should be an impact investment. Any company you set up should be there to solve a problem that people experience or the planet experience. Any investor should think about how his capital is directed at doing something that has a meaning and a purpose. And when we do that, we don’t need the word the impact anymore. It’s just going to be mainstream investing.

I couldn’t agree more. And on that note, we are done for today. Thank you so much Cecile for being here.

Thank you, Keren for having me. And have a great day.