When considering an investment, DOEN Participaties looks at three components: whether a proposal meets the criteria of DOEN (see below), the results of the due diligence, and whether the proposal meets the funding criteria.
By Due Diligence we mean the process of identifying the risks and opportunities of an enterprise. This includes looking at the team, the market and competition, the business plan, the product, and legal aspects.
Finally, at the time when the team is considering investing, the funding criteria are examined (see below). If these are met, the team will submit an investment proposal to the Supervisory Board of the DOEN Foundation.
It is important to note that an investment decision is never linear, but a sum of various considerations. So although the above criteria serve as a guide for DOEN Participaties, the team can sometimes deliberately depart from this when writing an investment proposal if this benefits the impact. The Supervisory Board of DOEN ultimately decides on any investment proposal.
By the DOEN criteria, we mean the guidelines that we use to assess new investment proposals.
1. The DOEN Programmes
In the case of new investments and follow-up investments, DOEN Participaties first looks at the objectives of the DOEN Foundation.
a. Does the enterprise’s mission, vision and business model (still) fit in the DOEN Foundation’s programmes?
b. Does the investment fit the DOEN Foundation’s long-term plan and annual plan?
In addition to the criterion of whether the company fits the DOEN Foundation’s guidelines, the most important criterion when considering an investment is impact.
a. What impact does the enterprise intend to make?
b. How big an impact can be achieved?
c. Why is this necessary when viewed on the basis of the transitions that DOEN wants to make possible?
d. Will DOEN’s contribution be used to increase impact by setting up or expanding the enterprise and not, for example, to replace existing funding?
3. The role of DOEN
When an enterprise fits DOEN’s criteria and can make a major impact, it is important to look at the role that DOEN can play in the company.
a. Is DOEN Participaties fulfilling its role as promotor with this investment?
b. Can DOEN Participaties do more for the enterprise? (e.g. via its network)
c. Does DOEN already have past involvement in the initiative?
d. Has DOEN already invested in another company active in the same market?
e. Is the company an addition to the portfolio of DOEN Participaties?
f. Is it a former Green Challenge finalist?
4. Geographical Region
DOEN Participaties traditionally has a number of geographical regions in which it operates: The Netherlands (due to the link with players of the Charity Lotteries), India and East Africa. DOEN Participaties also sees a possibility of increasing its impact by investing in other geographical regions. Because DOEN Participaties does not have sufficient local knowledge there, it invests in these countries mainly through funds.
a. Does the company operate in one of DOEN’s geographical focus areas?
b. Does the fund’s intended impact and business model fit this region?
1. Form of funding
In consultation with the enterprise and any other investors, DOEN Participaties decides which form (loan, convertible loan, equity investment or guarantee) best suits the phase in which the company is operating. For example, a loan could be chosen to prevent DOEN from gaining an over-dominant position as a shareholder in the company and thereby demotivating the founders.
a. Which form of funding fits best?
b. Under what conditions?
2. Shareholders and other investors
In principle, DOEN Participaties requires a co-investor in order to spread the risk and validate the business model. The commitment of existing shareholders is also important. In this respect, DOEN Participaties looks at whether they also endorse the sustainable and/or socially inclusive mission. If there were sufficient other funders willing to invest in a company, an investment by DOEN would not be logical (point 3.a). DOEN Participaties focuses mainly on those initiatives that are relatively difficult to fund due to a high risk profile. Follow-on investments are an exception to this.
a. Who are the current shareholders, and what importance do they attach to the sustainable and/or socially inclusive mission?
b. Is there a co-investor? Who is the co-investor? How much is invested and for what purpose?
c. How much do other investors contribute and under what conditions?
d. What are the supervisory, decision-making and controlling roles of shareholders?
3. Valuation and DOEN’s stake
DOEN Participaties also looks at whether the valuation (if applicable) is realistic and what stake DOEN acquires through an investment. In principle, DOEN strives for a minority stake, but may depart from this if this serves DOEN’s objectives. DOEN is a funder and does not intend to manage equity investments itself. In order to protect its minority stake, DOEN will define in shareholder agreements how its interests as a minority shareholder are adequately protected. This may be in the form of blocking rights and appointing a member of the Supervisory Board.
a. What valuation is realistic and under what valuation will investments be made?
b. What stake will DOEN Participaties get?
c. How will our stake be protected in the future?
d. Does DOEN have a decisive say on issues that are important to it, such as social commitment and/or mission, the joining of new shareholders and financial sustainability?