PadSplit: Why We Invested

By Elizabeth Coston McCluskey and Sarah McGraw

As more and more people migrate towards urban areas in search of education and economic opportunities, cities and suburbs across America are experiencing a housing crisis. Complicating matters, new housing production has not kept up with demand. Taken together, this imbalance has led to a rapid rise in home prices that has displaced lower income families and workers.

By affordable housing standards, households are considered cost-burdened when they spend more than 30% of their gross income on housing expenses, regardless of income level. Today, 48% of American workers earn less than $30,000 per year. This would leave almost half of American workers with just $750 per month for housing — an impossibility in many U.S. cities. With limited options, too many Americans are faced with an impossible choice — overspend on housing, thus threatening financial security, or move away from city centers, increasing transportation costs and time strains.

Solution

PadSplit is helping address this market inefficiency by expanding the existing housing supply, without requiring government subsidies. PadSplit is a digital housing marketplace that allows private landlords to convert single-family homes into affordable, co-living residences. These residences are fully furnished, renovated up to specific standards, and include private bedrooms alongside a shared kitchen and common space.

Individuals seeking housing are matched with options closest to their place of employment and become members of PadSplit. Once a resident moves in, their membership is paid week-to-week through the platform to match paycheck cycles, and includes all utilities, on-site laundry, parking and internet access. Average costs for PadSplit residences hover around $550 per month and no long-term commitment is required. PadSplit is also launching a savings platform for members.

Why We Invested

PadSplit offers a secure and affordable solution for a large, yet underserved, segment of working-class adults who face severe cost burdens when seeking suitable housing. The market is complex, however the team — led by Founder and CEO Atticus LeBlanc — has deep experience across real estate and affordable housing, as well as a thoughtful approach to navigating the legal and regulatory environment. They believe in building partnerships with all stakeholders — including members, property owners, city governments and NGOs — to ensure compliance with local standards and Fair Housing requirements. This has earned them support from Enterprise Community Partners and Urban Land Institute, among others, as well as generated excitement about the model’s potential across the sector.

Impact

By providing affordable housing solutions, PadSplit aims to radically improve the financial lives of working-class Americans while enabling them to live within reasonable commuting distance of their place of employment. To date, the company has secured and placed over 200 individuals, helping them save an average of $460/month between housing and transportation costs. Consider the case of Tiffany Ellis, who moved to Atlanta in the summer of 2017 looking to start over after a series of personal setbacks. After securing a job as an overnight security guard, as well as a PadSplit unit, Tiffany was able to save enough each month to purchase a car and move into her own apartment within 6 months.

By expanding the market, matching individuals with appropriate homes, and facilitating weekly payments to match income flows, PadSplit is enabling more affordable, convenient living for a critical segment of working adults.

Press Highlight

“This cohousing startup wants to help the working class”

Candidly: Why We Invested

By Elizabeth Coston McCluskey and Tasha Seitz

Editor’s note: In 2022, FutureFuel rebranded to Candidly.

Challenge

Student debt has reached a crisis level. Recent estimates show there are 44 million borrowers in the US owing a total of $1.6 trillion in student loan debt, with those figures continuing to grow. The average student in the class of 2016 has $37,172 in student loan debt from 4 to 6 different loans. Beyond those staggering numbers, the student loan industry can be opaque and difficult to navigate, especially for inexperienced borrowers. Meanwhile, employers’ benefits packages skew towards savings and retirement instead of the more pressing issue for many of their employees — debt management and reduction.

Solution

To tackle these problems, FutureFuel.io has developed a platform and suite of services enabling employees to reduce the effective cost of their student debt. The multi-faceted platform includes:

• Roll Up — enabling borrowers to view all their loans and payment schedules in one place. By consolidating loan information in the same place, borrowers can better manage their existing student loans

• Repay — giving employers a platform to contribute directly to the repayment of their employees’ student loan debt

• Refinancing — offering a marketplace where borrowers can find the best deals to refinance their existing loans

• Round Up — providing a tool to accelerate the repayment of student debt by rounding up spare change from transactions to put toward paying down debt

• Read — educating borrowers on how to best manage their student debt

Why We Invested

Student debt poses a major challenge for an entire generation, and we believe FutureFuel.io has high potential to make an impact for several reasons. First, the team — led by Founder and CEO Laurel Taylor — has proven their ability to hustle and learn from the market, adjusting their strategy accordingly. They have strengthened their team by adding a deeply experienced financial services executive to their board. Second, FutureFuel has gained early traction with employer customers and partners including Colonial Life, First Data, and Student Choice. In initial pilots, 60% of employees have refinanced via the platform. Third, the breadth of FutureFuel’s product offerings enables them to upsell within employers and provides an array of tools to combat student debt.

Impact

FutureFuel’s platform gives employees the opportunity to dramatically reduce the overall cost of their student debt. Through refinancing alone, it is estimated that FutureFuel users can save $19,000 and reduce their interest by 1.7%. Employer contributions through Repay and accelerated repayments through Round Up also give employees the chance to more quickly eliminate their debt, while additional resources like Roll Up makes organizing and managing loans easier. Finally, FutureFuel gives employers a platform to align their benefits packages to better meet the needs of their employees.

Press Highlight

This ex-Googler thinks she’s found the trick to end Millennial job hopping | Business Insider

CancerIQ: Why We Invested

By Elizabeth Coston McCluskey and Tasha Seitz

10% of people have a genetic predisposition to breast, ovarian or colon cancer, and the field of genetic testing to identify those populations is moving very quickly. Understanding an individual’s risk factors through genetic testing can inform a personalized cancer screening and care plan that will increase the odds of early detection and enhance survival rates, yet many individuals whose family histories suggest they are candidates are not being tested. This issue disproportionately affects African American women, who have three times the genetic risk of early onset, aggressive breast and ovarian cancers. Even when individuals do get tested for hereditary cancer risk, they often aren’t receiving care plans that reflect current national recommendations as the field is evolving and there are not enough professional genetic counselors to meet demand.

Solution

CancerIQ’s workflow process automation system — developed for cancer centers, breast centers and OB/GYN practices — collects family history information and automatically identifies patients who qualify for genetic testing, then streamlines the genetic test ordering process and records test results alongside recommendations for care plans based on the test results (whether positive or negative), and helps providers track and manage patient adherence to care plans to ultimately reduce risk over time. By streamlining the upfront process for genetic testing and leveraging technology to connect with current national recommendations, CancerIQ ensures that more individuals have the appropriate, personalized care plans in place to detect cancer early and treat it more successfully — or prevent it from occurring in the first place.

Why We Invested

Each year, over 450,000 Americans are diagnosed with breast, ovarian or colorectal cancer, and CancerIQ’s platform enables patients to take advantage of genetic screening and has the potential to drive early detection and improve survival rates. The company was founded by a strong mother-daughter team with both business and medical credentials. Dr. Funmi Olopade, a founder and board member, is a professor of medicine and human genetics and director of the University of Chicago’s Cancer Risk Clinic and has led important research in the field regarding hereditary cancer risk for specific patient populations. She has been part of a collaboration to create training in genetic counseling to generate more capacity to conduct, interpret and apply genetic risk screening to develop personalized patient care plans. Feyi Olopade Ayodele leads the company as founder and CEO and has a background in private equity and investment banking. Prior to launching CancerIQ, she served as project manager at the University of Chicago’s Center for Clinical Cancer Genetics where she developed a data platform to drive medical research in oncology. Ayodele and her mother — who took a sabbatical from the University of Chicago — joined with analytics specialist Haibo Lu to start CancerIQ.

The company has strong customer traction (30+ multi-year contracts, and renewal revenues and internal expansion across multiple health systems) and a distribution partnership with Myriad, the largest genetic testing provider. This partnership has the potential to accelerate adoption of CancerIQ in the market, and the company is already generating new customer opportunities from that relationship. They are also in late-stage discussions with a second large genetic testing partner and other specialty HIT vendors that will provide them additional reach into the market.

Finally, the field of genetic testing and understanding of hereditary risk factors is advancing quickly, and we believe that CancerIQ’s technology can successfully address the limited supply of professional genetic counselors by automating the process around testing and recommendations.

Traction

CancerIQ has several dozen paying customers, who have have screened over 150,000 patients and ordered more than 6,000 genetic tests. The Myriad relationship has potential to accelerate customer adoption. The value the company has created for Myriad has made it compelling for other genetic testing labs to partner with CancerIQ, and a number of additional potential partnerships are now in their pipeline.

Impact

Earlier diagnosis of patients with high hereditary cancer risk will lead to better health outcomes, and the company conducted a two-year study with OSF HealthCare’s Center for Breast Health to demonstrate their ability to enable early detection. Dr. Olopade’s research suggests that CancerIQ can have a disproportionately higher impact on African and African American populations, given their higher risk for early onset, aggressive cancers. In addition to financial metrics, we expect to track the number of patients screened by ethnicity, geography and customer type, the number of patients implementing personalized care plans based on CancerIQ recommendations, and the number of patients diagnosed early.

Impact Investing in Public Equities: Recap

By Elise O’Malley

The relationship between impact investors and public equity markets began long before the recent boom of traction and media coverage we see today. For decades, institutions and individuals have used public equity strategies to support their personal values or influence corporate behavior. Priya Parrish, Impact Engine’s Managing Partner of Private Equity, spoke to her experience as an institutional investor while moderating our “Impact Investing in Public Equities” panel, hosted by Legal & General Investment Management of America (LGIMA). Joining her was John Hoeppner of LGIMA and Steve Mesirow of Mesirow Financial, both of whom are veterans within the sustainable investment space. The panelists discussed their paths to sustainable investing, strategies, challenges, and expectations for the future.

Historical Evolution of Sustainable Investing in Public Equities

Priya began the conversation with an initial introduction to the divestment movement of the 1980s: “Much like a consumer boycott, investors can choose to divest from a company or actively engage with a board about specific business policies, with the theory that the company may change their practices. That’s exactly what happened when asset owners stopped investing in companies operating in South Africa, ultimately driving business out of the country and contributing to the end of the Apartheid.” In the latter half of the same decade, mutual funds began incorporating negative screens into their portfolios, with investors intentionally avoiding products like tobacco, gambling, and firearms manufacturers. Instead of a focus on shifting corporate behavior, asset owners sought to align portfolios and values.

Investors then began asking, “What is the materiality of these social and environmental factors?” The emphasis transitioned from alignment-focused investing to ESG factor integration, which is a more nuanced analysis of the different drivers of profits and revenues. And with this nuanced approach, mainstream asset managers began responding to client demand and creating products that considered these factors.

“As public markets strategies focused more heavily on factor integration, the causal relationship weakened,” Priya said. This is when she personally began gravitating towards impact investing, which entails investing in companies that are deliberately contributing to social issues as part of their business model. Priya noted that impact investing represents $224 billion of AUM today, saying “it’s smaller than the ESG AUM but it seems to have influenced a revival around the initial pillar of seeking to affect corporate behavior with public markets strategies.”

Public Markets Impact Investing Strategies

John Hoeppner, now the Head of US Stewardship and Sustainable Investments at LGIMA, was able to shed light on a few impact strategies he has encountered throughout his tenure:

• Market theory is a style in which asset managers withhold investment, with the expectation they can influence price and consequently send a signal to the public company that they do not endorse their practices.

• Transparency theory involves investors requiring companies to report on their gender pay gaps, environmental impacts, etc. with the expectation that the market will change prices as a result of transparency.

• Rare theory assumes change occurs when an asset manager owns a significant piece of a company and uses that ownership to influence its practices so that they align with the manager’s values. This approach is the most proactive and aggressive, and normally requires that the asset manager owns a large portion of the company.

Steve Mesirow is a third-generation wealth advisor at Mesirow Financial, where his team manages money for high net worth families. Steve recently incorporated impact investing into the 81-year-old firm and uses deeply ingrained business values as a screen: be good to employees, treat the clients’ money as well as your own, and give back to the community. Steve noted that companies who treat their employees well ultimately develop a superior workforce. Additionally, companies who give back to their community and environment are more likely to recover after making a mistake, as they have better relationships with the public and government. “Superior corporate culture is a competitive advantage that’s unseen by the market. These advantages are very real but just overlooked,” Steve said.

Challenges

A major challenge that the panelists, as well as some guests, shared was the pressure for mass customization. Clients sometimes want to select impact objectives so specifically that they become limited in their options. For example, a client may want to only invest in companies that address the challenges of water scarcity or they want to avoid carbon entirely. As a result, they have eliminated so many companies and industries that they have reduced their potential for generating strong returns. Panelists noted that taking an approach of seeking to optimize financial and social returns across a broad portfolio may achieve stronger results.

Panelists also mentioned that a lack of advisors who are knowledgeable about impact investing can present a challenge as well, as many investment advisors will routinely advise clients to just invest regularly and donate to their desired charities.” Additionally, a bias still exists within the investment community that impact funds give up performance.

What We Can Expect

The ESG industry has grown significantly over the last 15 years. Today, 9 out of the 10 largest asset managers have an ESG offering. “Where does it go from here?” Priya asked of the panelists and audience. Both John and Steve emphasized the emergence of effective technology tools. With the introduction of new data software, asset owners will be able to have a much more precise understanding of their impact investments. Asset managers will claim their impact, but the data will be able to confirm their legitimacy. Steve noted, “The data from even the past 3 years is so much better than it was 4 or 5 years ago. It’s easier to make changes. Solutions are coming.”

Interested in attending an event like the one you just read about? Sign up for our newsletter, where you can receive information about our upcoming events.

Does Your Company Have the Right KPIs?

By Chris Wu

Impact Engine recently had our annual portfolio summit where many of our portfolio company CEOs gathered together to share their successes, learn from each other’s experiences, and discuss key challenges. One of the highlights of the event was when Mike Evans and Josh Evnin from Fixer, one of our most recent investments, led the group through an extremely useful exercise on developing and evaluating key performance indicators (KPIs).

Here’s a recap of the exercise:

Performance Takes Priority over Measurement

Mike began the session by setting performance indicators (PI) in the proper context. He made it clear that tracking and measuring business performance should be subordinate to making sure the business is actually performing well. The primary goal of every business is to achieve success (regardless of what constitutes success for each individual company). It’s far more important to ensure that the company is performing well than it is to always have an exact value to report. Reporting on performance metrics has limited benefits if your business has little to no sales revenue; your time would be better spent on building up the business before worrying about measurement.

Every Measurement Needs a Reference Point

If a company’s odds of success shoot up dramatically by achieving the target for a particular PI, or if the PI is necessary in order to have a proper handle on the business, then it is actually a Key Performance Indicator (KPI). Generally, it’s recommended to track no more than 10 KPIs at a time, any more than that can be too cumbersome and less effective.

A KPI value is meaningless unless you can evaluate it against a reference point, a foil, in order to determine whether that value reflects positively or negatively on the performance of the business. Josh and Mike went on to describe four main types of references:

• Gut Feel — Early-stage companies often lack the requisite amount of historical data necessary in order to make meaningful archival comparisons. In situations like these, gut feel can serve as a valuable foil.

• Comparison to Historical — While past performance is not necessarily an indication of future results, when done properly, comparing KPIs to historical values can be a helpful tool to understanding the health of the business.

• Comparison to Ideal — Some KPIs have optimal values that represent an upper bound; the goal would be to maximize their value (i.e. # of clients, MRR). Others KPIs have optimal values that represent lower bound numbers; the goal would be to minimize their value (i.e. downtime, defect rates). Also, there are certain KPIs that should ideally shoot for a local maximum, in other words a sweet spot between the lower and upper bound values (i.e. sales pipeline conversion rate)

• Comparison to Projections — Modeling helps provide clarity about the key levers of the business, but it can require a significant commitment of time and/or resources in order to generate that level of insight. If you’re able to incorporate elements from the other three reference types (gut, historical, and ideal) into its design, then the model becomes a much more powerful and effective predictive tool.

KPIs values should be reviewed and compared to its benchmark reference point on a regular basis. Every delta from the benchmark serves as an indicator of which aspects of the business management should focus on, and the company must act to resolve the underlying cause of the deviation in order to improve the performance of the business. Furthermore, the company needs to put in place a framework that prioritizes or ranks the different deltas in terms of importance.

Figure 1: Cycle of Model Refinement

KPIs Aren’t Theoretical, They’re Actual

As startup companies set about determining which KPIs make the most sense for their business, they should bear in mind that KPIs aren’t some theoretical construct, rather they are grounded in real numbers that are directly related to how the business is actually performing. KPIs are empirical, which means that they have inherent flaws. The act of measuring and recording them will typically introduce a certain degree of inaccuracy and error, which needs to be taken into account during post-analysis.

The Dualities of Metrics

Next, Mike and Josh broke down some of the distinguishing factors of KPIs:

• Maximal/Optimal — There is a clear distinction between optimal and maximal KPIs. For certain metrics achieving a maximal level is ideal (i.e. # customers — no upper bound), whereas for some KPIs reaching a local optimum is sufficient (i.e. optimal # clinicians on staff per day — bell curve/sweet spot).

• Leading/Lagging — Weight loss regimens are a classic example of leading and lagging indicators. In order to reach your weight loss goal, you must measure and record both the amount of calories consumed and the amount of calories burned. These are leading indicators. Stepping on the scale to track change in weight over time represents the lagging indicator.

• Influenced/Not Influenced by Macroeconomics — Is the KPI sensitive to system level changes in the aggregate economy (i.e. net profit margin, net burn rate)?

• High/Low context — High context KPIs have an implied meaning that are context-specific (i.e. operating costs, market share). They typically require further explanation in order to be understood properly, whereas low context KPIs are clearly and explicitly spelled out, and can stand on their own (i.e. cash & cash equivalents).

Mapping KPIs Graphically

Plotting all the company KPIs graphically (Relevance versus KPI-Type) can be a useful exercise and lead to meaningful internal team discussions.

Figure 2: Mapping KPIs

Placement along the Y-axis will clearly illustrate which metrics are closely tied to the health of the business versus other metrics which are less relevant. The metrics that lie close to the top are true KPIs, while the metrics that fall closer to the X-axis are essentially just PI’s.

Placement along the X-axis refers back to the different reference or foil types described earlier. At first, the company will most likely have a broad mix of KPIs across the different foil types. Over time, you may start to see more of the company KPIs bunch towards the upper right corner. Modeling involves a thoughtful combination of the other 3 categories, and as the business matures its ability to build more accurate predictive models also improves.

KPIs are like vital signs for the current health of your company, they can validate past success and lend support to claims of future growth, or they can serve as an early warning system when the business is in trouble. Every startup is aiming for success, however they choose to define it. Having the right set of KPIs and foils in place will allow you to keep your finger on the pulse of your startup.

Want more from Impact Engine? Click here to sign up for our monthly newsletter!

Glimpse: Why We Invested

At Impact Engine, one of our four impact areas of focus is education. Time and time again, we have heard from companies that the best edtech products have to fight against mediocre ones because of the relationship-based nature of sales in many school districts. The reality underlying that frustration is that administrators haven’t had great tools to foster informed decision making. Traditional achievement systems simply present outcomes without capturing the data in the context of what educators or programs did and how effective their actions were at impacting student outcomes. At the same time, traditional financial systems have lacked the correlations between expenditures and student achievement. As a result, districts have struggled to align their spending on products and programs that produce the best student outcomes.

Solution

Our most recent investment in Glimpse seeks to address that challenge. Glimpse has developed a data platform that connects budgeting systems with data on student outcomes, enabling districts and schools to calculate an eROI, or education return on investment. What drew us to this investment was the potential for systems change within education. By providing data to districts, Glimpse enables decision makers to include impact in their purchase decisions, and it also helps them ask the right questions when they see discrepancies in performance within or across schools. The US spent $12 billion on edtech alone in 2017, and that figure is substantially higher when you consider spending on programs and curriculum. We believe Glimpse has the potential to meaningfully impact how those dollars are spent.

Why We Invested

In addition to the compelling market opportunity and potential for impact, we were impressed by the team. The company is led by co-founders Nicole Pezant and Adam Pearson, both experienced edtech entrepreneurs who previously worked together at Chalkable. They’ve demonstrated an ability to grow and scale (and exit) companies in this space, and we are excited to work with them. Despite a small team size, the company had already achieved meaningful traction by the time we invested.

Impact

While Glimpse is able to infer correlations, they are not utilizing randomized control trials (RCTs) and do not purport to evaluate causality. However, they do provide a more granular level of detail that helps administrators connect the dots between spending and outcomes. To that end, the impact metrics that we are tracking for the company include the spending efficiency or eROI (the % of spend that is driving student gains); the number of districts using Glimpse, including a breakdown of Title 1 schools and the number of students within each district; and improvements in student performance.

Our Investment

We invested in the seed round that Glimpse raised earlier this summer which will enable the company to invest in product, grow sales, and demonstrate improvement in spending efficiency at customers. We look forward to supporting the company alongside co-investors Fresco Capital, Govtech Fund and GSV AcceleraTE.