Finance Matters Interviews Nathan Elstub, CIO at Nesta

09 Jul Finance Matters Interviews Nathan Elstub, CIO at Nesta

Bio

Base: London, UK

Position: Chief Investment Officer, Nesta Impact Investments

Tenure in current role: 2 years

By: Clare McCartney

Nathan, can you tell us a bit about your story and how you arrived at Nesta?

I started off life as an engineer but always had a keen interest in business so decided to train as an accountant…. being an engineer was far too exciting (laughs). Whilst I was training I was lucky to start working with clients on fundraising projects, which gave me an insight into the world of venture capitalist which I loved. As soon as I qualified as an accountant I hunted down a job and started doing PE investment full time. The work was great but in the aftermath of the market crash in 2007/08, I was finding it less fun felt detached from working with smaller businesses which I enjoyed so much in the beginning. In the end, I left the world of mid-market private equity to do something more hands on with smaller businesses. I got involved in a bit of angel investment and helped set up a couple of businesses in the digital content/technology space. About 18 months later in 2012, a close friend put me in touch with the CEO at Big Issue Invest and this is when I started thinking more deeply about impact investment. It struck me as a really exciting space that gave me an opportunity to use my prior skills and experience in investment alongside building up something that felt really meaningful. I learnt by doing initially- networking, meeting people, doing all kinds of work – sometimes paid, sometimes not paid – just to get experience. I helped set up the Emerge Venture Lab ed-tech accelerator and Social Finance’s fund management activity alongside mentoring at the Wayra Unltd accelerator and providing pretty hands on support with a handful of my angel investments. In 2015, the opportunity arose to come and join Nesta. I knew the team here and had a lot of respect for the fantastic start they had made in building an impact investment platform so it all came together very well.

So you have been CIO at Nesta for 2 years now. Can you briefly run through what NII does within the broader Nesta organisation, perhaps touching on any specific areas of focus?

Nesta is an innovation foundation. It started out as a non-departmental innovation unit under the department for business and went on to become an independent charity in 2012. The vision of the organisation is to support new ideas addressing big challenges in society. Nesta has used investment as a tool to support innovation for nearly 20 years now and is still really the only impact investor focussed on early stage profit with purpose investment. Our investment work is closely connected to Nesta’s broader work and our focus on health, education and community sustainability matches Nesta’s research and innovation lab work closely. This helps us enormously by giving us insight and deal flow drawing on Nesta’s network, knowledge and background in these areas of expertise where there is close alignment between impact and commercial success.

Is there anything in your view we need to be keeping an eye on across the industry in the future?

I think the most important aspect of impact investment to keep an eye on right now is rigorous impact data gathering and transparency. We are all learning and experimenting, hopefully getting better at everything that we do and so it is critical that we are transparent about our experience to allow our stakeholders to hold us to account and so that we can collectively develop a shared understanding of how we should evaluate and discern impact. The way we can be most effective is by being really diligent and thorough in understanding whether the organisations we are backing (and whether we ourselves) are really delivering impact, and then sharing as much of that experience as we can. At Nesta, we have made 13 investments so far through our impact investment initiative and this is still a really small data set. If the impact sector wants to get a good statistical understanding of what makes a good investment or what holds it back, we need a much richer data set. Initiatives that encourage people to share data, taking into consideration the commercial sensitivities of parties involved, are really positive and we are really keen to support and engage with them.

What do you enjoy most about working in the industry versus previous roles?

I think the best thing about what i do is the people I get to work with – whether it’s the entrepreneurs or people on the investment side, the industry is full of great people and this is invigorating and motivating for me. I also enjoy the challenge we have taken on in the industry – to change the way people think and behave when investing and create a new way of doing things. It can be hard work, not everyone gets the idea of impact let alone impact investment and I am still having to convince people how you can combine impact and commercial success. It’s not easy,  but I really relish that challenge – doing something a little bit edgy and a little bit new – particularly if you can feel like you are doing something to change the world a little.

Do you have any other words of advice for individuals wanting to pursue a similar career path?

Just do it – it’s the best thing you can do. To find a job that is both exciting and meaningful is fantastic, especially if you can work with excellent people in the field. In terms of specific experience, I think the thing that contributes most to success as an investor is having a deep understanding about what you are actually investing in – there are technical skills required but investing in high growth organisations is not a spreadsheet exercise. Here at Nesta, we invest in disruptive technology driving social change but you could also focus on different asset classes or causes such as community enterprises, social property funds and/or structured finance products like SIBs within the impact investment world. I believe you need to work out what it is that motivates you, what are you interested in/ passionate about and then build up expertise in this area. So if you are interested in investing in technology businesses, understanding how you create, grow and sustain a tech business is the most important skill set you can have.

Finally, is there an individual/group in the industry that you are following at the moment/ that inspires you?

I’m always inspired by the people who are genuinely taking risks to make the world a better place. Most of the entrepreneurs we back have left secure jobs to do something significant with no certainty of success.  The people who are making decisions to work in impact, graduating from business schools, leaving consultancies and banks to work in impactful organisations early on in their careers, have chosen to do something really valuable for society, often at a high personal cost.  These folks are really inspiring. Within the industry, there is a recognition that we are all learning from each other at the moment and there are a number of really helpful networks within the industry that are facilitating this learning. Organisations such as Toniic, The European Philanthropy Association, B-Labs and GIIN, amongst others are great at bringing people together to share knowledge and understanding. Engaging with these groups is always rewarding.