Skip to main content

The Impact Terms Project: Defining the Standard for Impact

The Impact Terms Project (“ITP”) was launched as a platform intended to provide guidance on best practices to entrepreneurs, investors and other stakeholders in the rapidly-evolving social enterprise space. To this end, the ITP covers a broad range of topics from corporate formation and financing to exit terms, building a foundation of resources on “what’s market” for those involved in impact. The ITP’s effort to build institutional knowledge in the space not only better enables entrepreneurs to tackle the complex questions that arise in the formation and growth of impact-driven businesses, but also help establish a framework of knowledge on impact investing for potential investors.

As the impact investing market continues to grow, developing a framework of best practices for entrepreneurs and investors alike is critical for social enterprises to successfully scale and grow while preserving a socially oriented mission. Moreover, a standardized framework helps more investors enter the space with a stronger understanding of how to evaluate the risk and return associated with different impact investment opportunities. Although there is considerable variation in the goals and needs of social enterprises, resources such as the ITP provide a helpful baseline of information critical to successfully build your social enterprise.

Entity Formation

The ITP dedicates a section to guidance on corporate formation, including tips on pursuing alternative forms of incorporation and suggested language to codify the company’s socially-driven corporate purpose in its governing documents.  Incorporating as an alternative entity, such as a benefit corporation or a low-profit limited liability company (“L3C”), can be an attractive option for a social enterprise, as these alternative forms provide the business with a level of flexibility to pursue its social mission that may not otherwise be possible within a traditional form. Options to incorporate as alternative entities more conducive to the formation and growth of social enterprise have become increasingly available in the United States. Since 2009, 35 states have enacted legislation allowing social enterprises to incorporate as benefit corporations, and eight states have passed laws for businesses to seek incorporation as L3Cs. Notably, in 2013 Delaware established the public benefit corporation (“PBC”) as a corporate form that social mission-driven entities can adopt to commit to both profit and purpose. In a recent publication, we outlined strategies social entrepreneurs can employ to take advantage of the PBC form and successfully raise capital.

Strategically crafting a defined corporate purpose in a company charter or other governance document helps to establish a robust blueprint of the company’s commitment to impact. A well-articulated statement of corporate purpose can also help the company protect such commitment with respect to management’s decision making authority and the growth and development of the company.

The shifting landscape in the U.S. for corporate forms available to impact-driven companies proves there is no one-size-fits-all corporate structure for businesses in this space. Utilizing the ITP’s resources on corporate formation and consulting with legal counsel can help impact founders determine the optimal form for their company and articulate a clear social mission at the earliest stages of their business.

Growth Strategy

It is no secret that investing in a mission-driven entity presents potential investors with a set of considerations separate and unique from that of investment in traditional business ventures.  The ITP provides a solid framework of considerations to take into account when structuring your company’s growth financing strategy. The ITP lays out sample term sheets for capital raising transactions consistent with a social enterprise’s continuing commitment to impact, such as note financings with impact-triggered default terms. Also included are common impact investment terms containing sample language for terms frequently included in impact investment transactions.

In line with establishing investment terms attractive to investors and indicative of an impact company’s pursuit of profit with purpose, the ITP suggests implementing certain accountability metrics, such as regular auditing of impact performance to measure a company’s success in pursuing and implementing its mission. Such audit requirements would be pre-negotiated and built into investor agreements similar to traditional investor information rights, setting forth specific tracking metrics and a reporting schedule. The ITP also refers users to widely used public frameworks which may be used in shaping standardized metrics, including IRIS. Strong internal reporting mechanisms can help impact companies prove out their performance to investors and other stakeholders, and provide a reliable standard of accountability attractive to future investors.

Committing capital in the social entrepreneurship space is one part due diligence and another part identifying terms that demonstrate value to investors. The ITP’s sample investment terms make an important contribution towards the critical effort of defining the standard for investors considering providing capital to businesses in the impact space.


The Impact Terms Project lays out a solid foundation of knowledge for stakeholders in social entrepreneurship and impact investing.  At Mintz, our Impact Capital & Social Innovation Practice advises clients in all aspects of the impact space. Whether your enterprise is a seasoned player in the impact economy or a startup seeking to develop and implement growth strategies, the Mintz team can provide you with the experience and tools needed to achieve your business goals.


Subscribe To Viewpoints