Erik Wallsten
Cofounder and Managing Partner, Adobe Capital
Defining Impact Investing
Erik Wallsten, ’04, cofounder and managing partner at the impact investment fund Adobe Capital, brings an international perspective to the Social Enterprise Initiative advisory board.
After earning his MBA at Chicago Booth in 2004, Wallsten eventually returned home to Mexico, working first in private equity and then launching the country’s first triple bottom line impact investment fund.
“When you are fundraising as part of a large fund, it’s very easy to get meetings,” Wallsten says of his time in private equity, “but when you decide to launch your own fund, there is basically nothing behind it other than an innovative investment thesis, and you need to be able to get people to sit down with you who probably have never heard of you before.” To this effect he adds, “I think being able to articulate an innovative idea, being convincing, being proactive, being able to reach out to investors, and being able to actually get meetings was largely due to my education at Booth.”
Wallsten’s big break came when a branch of the German Development Bank decided to invest, providing the fund with credibility and a strong vote of confidence from one of the largest institutional investors in the world.
Adobe Capital invests in Mexican companies whose social and/or environmental impact is self-evident. An example of this is the fund’s first investment in FINAE, the country’s leading provider of post-secondary loans for low- and middle-income students. The fund also is analyzing a potential investment in a company that performs low-cost cataract surgeries. “When you meet someone who previously was blind and now can see and become an active member of society, the impact is straightforward,” Wallsten says.
“I think the biggest potential [for creating impact through social enterprise] is in Latin America, Asia, and Africa,” he adds. “This is where a majority of the population lacks basic services. In the US, the impact conversation centers on getting better teachers in schools. In emerging markets, it focuses on actually building enough schools for children to attend.”
Changing the Landscape
Wallsten believes that Booth graduates are well positioned to change the social enterprise landscape for the better because of their focus on the fundamental principles of business. “I think we need to take down the current barriers [between for-profits and nonprofits] and invest in companies and organizations that promote good in the world. Whether they’re for-profit or nonprofit is secondary.”
Another way that Booth can make a difference in the social enterprise space, according to Wallsten, is coming up with an authoritative definition of impact investing.
“Anything that can be done by SEI to actually define impact investing [is important], because right now people are getting confused,” Wallsten says. “Impact investing has been one of the few pockets of liquidity in markets over the last couple of years, so the whole idea is getting hijacked by other players who just want money with no interest in development, no interest in doing good for the world.”