Front row: Kazu Umeda and Reiri Miura, Representative Partners of SIIF Impact Capital, Inc.
Back row: Nanako Kudo, Executive Director, and Noriko Sawai, Head of Healthcare Team, Japan Social Innovation and Investment Foundation
The appetite for impact investments in Japan has been steadily growing, and the numbers are speaking volumes. However, the crutial question remains: How much of this substantial pool of impact investment capital is genuinely translating into real-world “impact”? At SIIF (Japan Social Innnovation and Investment Foundation), we find ourselves at a pivotal juncture where we are earnestly grappling with the fundamental question of whether impact investments are indeed catalyzing positive societal change.
To truly tackle societal challenges, we recognize the need to direct our focus towards the very structures and systems that give rise to these challenges. With this in mind, in 2022, SIIF embarked on a journey to address this issue by identifying and comprehensively analyzing three critical societal challenges. SIIF’s endeavour culminated in the creation of “ Vision Papers,” which encapsulate the current state assessments, Theories of Change, and proposed action plans for each of these challenges. Among these, one of the core areas of focus emerges as “Healthcare”.
In the realm of healthcare, SIIF has taken tangible steps towards impact within the broader wellness landscape. SIIFIC（SIIF Imapct Capital, Inc.）was established last September to drive investments that actively engage with and bring about system change. In June this year, SIIFIC has successfully launched its inaugural “SIIFIC Wellness Fund” and have completed first closing.
Today, we invite you to delve deeper into the journey of SIIFIC Wellness Fund, as we sit down with Kazu Umeda and Reiri Miura, SIIFIC’s Representative Partners, along with Nanako Kudo, SIIF’s Executive Director, to discuss the genesis and objectives of this groundbreaking venture.
Unlocking the Necessity of IMM from Healthcare Startup Investment Experience
Nanako: Creating the Vision Papers was primarily about analyzing the root cause systems generating societal challenges before delving into investment strategies. With the establishment of the “SIIFIC Wellness Fund”, it seems like we are now at the starting line of bringing about “system transformation” through investments. SIIF aims to leverage this fund to drive systemic change through investments in startups. Furthermore, as ecosystem builders, we must actively share the insights, analyses, and methods we have gained through this fund’s implementation with the industry. Welcoming talent from external sources and having them take back experiences and learnings is also one of SIIFIC’s objectives. The fact that professionals of your caliber, Kazu and Reiri, who have extensive experience in healthcare businesses, have taken an interest in impact investing and joined this venture is truly remarkable. However, I cannot help but wonder if, after working on impact strategies and IMM (Impact Measurement and Management) in launching this fund, you might find impact investing quite challenging. Could you share what rekindled your interest in impact investing?
Kazu: I previously led m3i, the corporate VC arm of m3, Inc., where I invested in healthcare startups. It was during my time there that I keenly felt the necessity of impact assessment. My first encounter with the concept of impact assessment dates back to 2018 when I co-founded a medical device startup with Makoto Sawada, a highly successful medical device regulatory consultant. Despite the company’s success in developing medical devices with substantial unmet medical needs, it was undervalued due to the lack of “sales performance.” Startups cannot compete on profit because they lack sales networks. However, this company held tremendous market potential. To prove it, we conducted surveys among more than 180 physicians, who were actual users, and measured the social value to be brought about by the company’s product. This led to a contract at a fair evaluation price with a large corporation and eventually enabled a significant investment return.
Next, in 2019, a biotech I had invested in that was expected to become a unicorn had gone public. Unfortunately, it did not become a unicorn, despite having significant potential. I received candid feedback from international institutional investors, and what I understood from their feedback was that they did not comprehend the business of this company. It seemed like all Japanese biotechs appeared the same to them. This realization served as a catalyst for recognizing the need for impact assessment using global common indicators, using Theory of Change and logic models, and the 5 Dimensions approach to attract institutional investments to Japan. These firsthand experiences pulled me into the world of impact investing. However, when I started discussions with scholars about the impact assessment of four invested startups, I realized its complexity. Outcomes they pointed to were general concepts like “improvement in quality of life”, “extension of healthy life expectancy”, or “reduction in healthcare expenditure”. When I questioned whether all healthcare companies would end up with the same outcomes, they responded that these were the general outcomes.
Outsourcing impact assessment seemed challenging, so I thought, if that’s the case, I need to practice what I have learned from experience and, eventually, develop IMM that would resonate worldwide myself. It was with this determination that I crossed paths with SIIF, and here I am.
From Managing Healthcare Companies to Impact Enthusiast
Nanako: What about you, Reiri?
Reiri: Throughout my career, I have been involved in corporate strategy and business development of healthcare companies. It was during this time that I encountered the concept of “Creating Shared Value (CSV),” as advocated by Professor Michael Porter. In 2018, I had the privilege of taking his course at Harvard Business School. I firmly believed that companies should co-create value and contribute to society through their businesses, and I learned methods to visualize this value.
Looking back at 2018, I used to speak to young professionals at the pharma company I was with at the time about the “Three Forces for Changing Society”: the power of crowds, the power of AI, and the power of social impact. It was around the time when impact entrepreneurs and impact startups were emerging, and I, too, began to take an interest in the realm of impact.
However, I had no direct exposure to impact entrepreneurs or impact startups. So, I enrolled in Japan’s only fundraising school, operated by the Japan Fundraising Association, to prepare myself in terms of both mindset and fundraising skills. Here, I systematically learned how to acquire supporters and raise funds for social purposes. I also gained like-minded lifetime friends who are tackling societal challenges from different backgrounds. It was an immensely enriching experience for me.
Immediately before joining SIIF, I held a position as Chief Strategy Officer at a company owned by a PE fund. The company had recently gone public, and at that time, I truly understood how investors, through the power of capital, could exert significant influence on a company. This experience motivated me to establish SIIFIC, where I aspire to drive positive social transformation through impact investing.
Navigating the Impact Investing Journey: Insights and Challenges
Nanako: Could you share your thoughts on your experience with impact investing and the challenges you foresee?
Kazu: To be honest, when I first started, I was not sure where to begin my learning journey. It was not until I participated in SIIF’s training sessions on the “Theory of Change” and “Systems Thinking” last autumn that I began to see a clearer path.
Reiri: Every week, through discussions within the team that includes Nanako and myself, I am learning different ways of thinking, and I feel that my perspective is gradually expanding. Building on this knowledge, we are currently engaged in concrete discussions with potential investment targets and progressing with Impact Due Diligence (DD).
Kazu: Impact DD, which is different from traditional VC DD, has been an entirely new experience for me. One aspect involves systems thinking, and I realize that the quality of this approach directly affects the quality of impact assessment in the future.
There are three main aspects I’d like to highlight:
- Firstly, establishing the baseline for measuring impact. We need to find the data and evidence that form the basis for impact assessment, and this is quite challenging and a critical juncture.
- Secondly, considering the perspective of “negative impact.” Prior to this fund, I never really thought about investments leading to negative impacts. Systems thinking forces us to understand the bigger picture of the investment, and this is also a new experience.
- Thirdly, in conventional investments, we identify solutions for issues that are visible and then proceed with evaluations and due diligence. However, in the case of impact investing of SIIFIC Wellness Fund, we take into consideration the entire system. This deeper analysis prompts us to think more profoundly about the sustainability of the company and even questions the purpose of its existence. Through these discussions, we have noticed that partner companies are gaining fresh insights, and especially, founders seem to be returning to their initial fervor.
Impact DD does not replace traditional VC DD; it complements it. It’s about uncovering what’s not written in a company’s business plan through systems thinking. This process is akin to a deep dive into the essence of a company.
Reiri: Both Kazu and I come from the life sciences background, so being able to engage in discussions with partner companies based on our expertise is advantageous. Rather than finance and impact professionals learning science, it might be a shortcut for science professionals to delve into finance and impact investing. I have received feedback from entrepreneurs like, “I was pleased that we could discuss not only impact but also the business aspects, particularly the scientific aspects,” and that is a good engagement starting point.
Nanako: I’m truly grateful and find it highly meaningful that both of you, who have been involved in the healthcare and wellness investments for so long, are now diligently studying impact investing and systems thinking and working on both.
Shaping the Standard for Contributions to System Transformation
Nanako: I believe that impact investing can contribute to system transformation. From this fund, I want to create at least one example that demonstrates what it means to approach a system. Not just superficial impact but truly engaging with the system and making this visible to as many people as possible is what I aim for.
Kazu: One crucial point lies in measuring outcomes. If you cannot measure it, you can’t control it, and therefore, you can’t manage it. Our goal at SIIFIC is to establish a system that doesn’t rely on individuals but has a mechanism within the company that benefits both society and the economy. A system that contributes to system change and continues to generate impact returns and financial returns in Japan 100 years from now. To achieve this, I’ve been documenting what I’ve done wrong so far. I want to compile the “traps” that impact novices are prone to, based on where I went wrong even when I was giving it my all. I hope this can help newcomers navigate without stumbling.
Reiri: It’s all about working diligently, respecting principles and guidelines. It might seem unexciting, but quantifying as much as possible and promoting impact investing that everyone can participate in is the way forward. Impact investing is our future.
Stay tuned for more insights into our bold pursuit of wellness equity through the transformative power of impact investing.
For Japanese Blog please goto SIIF Note
”ウェルネス領域でシステムチェンジを起こすインパクト投資を。「SIIFICウェルネスファンド」の挑戦”