The 12 C's of Faith-Driven Investment Screening
In the world of private investing, investors benefit from using robust frameworks when evaluating potential investments. The faith-driven investment environment is no different.
Over the past few years, I’ve had the privilege of participating in over 12 Lions’ Den pitch events (think Christian Shark Tank, where Christian founders pitch their businesses to Christian investors). In that time, I've heard many pitches from companies across a variety of industries and geographies.
Additionally, I am frequently asked by other faith-driven investors how I personally screen/evaluate companies when they pitch. For better or worse, here is my current discernment framework used when assessing potential faith-driven investment opportunities. I make no claims of its comprehensiveness. No doubt others have differing/enhanced frameworks (if so - please share in the comments below!). Even so, my hope is that this in-progress list will help you to discern which companies are well suited for your partnership and investment.
NOTE: This resource is not a replacement for deep due diligence! Please consult your financial advisor when considering any investment opportunities, especially those in the private investment space.
The 12 C's below act as a simple initial tool for you to utilize and customize when screening companies that you hope will align with Christian values and principles.
1. Customer
Market Potential: Who is their customer? How are they making the lives of their customers better? Does the company have a large and growing target market with purchasing power for their product or service? Does the founder(s) intimately understand the needs and desires of their target market?
Traction: Do they have traction proving they can sell this product or service to their target market? Are they presenting a minimum viable product in their pitch or is this a pre-seed or early seed investment to build out their initial MVP?
2. Credibility
Credibility: How have they built or established credibility in their industry (e.g., education, background, relevant experiences, etc.)? Can they show me that you know what you are talking about? I want to invest in founders who extensively understand the sector they are working in. Is there a prototype that actually works? I’d rather see a working prototype than a pitch deck any day of the week.
3. Creativity
Innovation: Is there market-creating innovation in this pitch? What is their competitive advantage as a company?
Drawing on Clayton Christensen and Efosa Ojomo’s teaching, assess if the company can potentially draw current non-consumers into being future consumers by taking something this is:
Complicated and making it Simple,
Expensive and making it Affordable, and/or
Unavailable and making it Accessible.
4. Character
Faith and Ethics: I desire to partner with people not projects! Does the founder or leadership team passionately love Jesus? Do they exhibit godly character and integrity? How does this godly character shine through in their management of the company? Where do they go to church? Who are their references (CALL THE REFERENCES)?
5. Competency
Leadership Team: It typically takes more than 1 determined founder to make a company successful. Who is on the leadership team of this company? How did they get there? Does the leadership team have the competencies and skills to work together effectively to deliver on their desired outcomes (inclusive of their experience, expertise, and abilities to execute their business plan)? I like to see a variety of the 6 Types of Working Genius and CliftonStrengths across the leadership team.
6. Calling
Conviction and Passion: Does the founder exhibit a Spirit-driven calling towards this business? Have they prayed about it? If so, what do they hear from the Lord regarding this opportunity? Is there passion in this pitch? Do they really want it or is this just the “next thing before the next thing”? Do they feel stirred by God to steward this business for His glory? Is this their Ephesians 2:10 good work prepared beforehand for them to walk in?
Determining Calling: A simple way of determining this calling is to ask the question: “If you were offered more money to do something else would you do it?” or “would you feel disobedient to the Lord to not do this?”.
7. Compensation
Stakeholder Compensation: How are all stakeholders being compensated? Are fair and just compensation practices that reflect the value and dignity of all employees, directors, and investors being considered? Who is getting compensated? When is that compensation happening? What triggers that compensation (i.e., WHY)? Is the compensation adequate for the amount of risk involved?
8. Community
Support Ecosystems: What are the supporting networks in place to see this business through to its desired outcomes? Strong community engagement and local support can be vital for long-term success. This is especially vital when considering investments in frontier markets or emerging economies. What are the ecosystems of local support that will support this company during the challenges ahead in the hopes of allowing it to deliver on its desired outcomes?
9. Capital
Skin in the Game: Does the founder and/or the founding team have their own capital invested in the company? Founder investment shows commitment and belief in the venture’s success.
Financials: Do the financials demonstrate sound stewardship and a sustainable business model? Does the founder(s) have a prudent and transparent approach to managing resources? Is that approach observable during your dive into the company's Balance Sheet, Capital Position, P&L, and Unit Economics. What assumption are they making when building their future financial forecasts? - If I have heard Derek Kessen of Heron Venturs say it once, I have heard it 1000 times, “I wonder if those assumptions are true”.
10. Creation Care
Environmental Stewardship: In Genesis, we received the creation mandate - to cultivate and keep all of creation. How is this company being a good steward of creation, reflecting responsible environmental practices? Faith-driven companies should prioritize sustainability and care for God’s creation. Neutrality here is fine, but I personally work to avoid companies that are clearly destructive toward creation. I award bonus points for businesses that are regenerative/redemptive in their care of creation!
11. Great Commandment
Love for God and Neighbor: How does this company contribute towards the Great Commandment, encouraging a love for God and a love for our neighbor? This should be reflected in their corporate culture and community impact. Maybe it’s internal or maybe it’s external. Inputs or outputs… Either way, I want to clearly see how the company produces great commandment outcomes where those in or around the company grow in their love for God and where those in or around the company experience a love for neighbor.
12. Great Commission
Discipleship: How does this company contribute towards the Great Commission, making and multiplying disciples of Jesus Christ? This could be through direct proclamation and discipleship activities or by supporting initiatives that spread the Gospel and serve others. Again, this is my personal investment criteria, so if this is not a focus point for you, that’s fine… I personally want to invest in companies that see Great Commission & Great Commandment outcomes.
Measuring Impact: HUGE thanks to our friends at the Christian Impact Framework Project as they seek to standardize language, framework, and indicators for Christian Impact Investing and Philanthropy.
Conclusion
I hope you’ve found this resource to be beneficial! Using these 12 C's as an assessment framework has helped me make informed and values-aligned decisions as I seek to continue my faith-driven investment journey. By integrating these principles into the investment process, I hope to better pursue investments that not only have the potential to yield financial returns but also bring glory to God and the collective good to others.
What other analysis tools do you use? What other criteria are you evaluating before moving a company into your due diligence processes? I’d love to hear your thoughts in the comments below.