How NYU uses MDIF to teach impact investing

For the past three years Andrea Armeni, founder and Executive Director of Transform Finance, which works to make impact investing truly transformative, and Jackie Roth, MPA candidate and Course Assistant to Professor Armeni, have used MDIF as a case study in their teaching at the NYU Wagner Graduate School of Public Service.

Andrea and Jackie use MDIF's mission and processes in a simulation for MPA students to work through, enabling students to engage with an investment from deal sourcing through deal structure to exit and beyond. We asked Andrea and Jackie why MDIF's approach to investing in independent media is a good teaching tool and how working through scenarios can inform his students.

Why did you select MDIF as an example impact investment fund for your class?

AA: A typical impact investing course looks at the core topics in a sequence - impact thesis, impact measurement, deal structuring, and the like - by exploring different examples for each topic. I thought it would be useful to connect all the topics by following one impact investor (a fund manager, in this case) alongside the discrete examples. This has the advantage of really lifting up how everything interconnects: how the thesis ties to what you measure, how the deal structuring is connected to the type of risk an impact investor is willing to take, and so on.

MDIF was a natural and perfect fit for this for several reasons:

• I truly admire MDIF's work and find it to embody the best of the field.
  
• Media investments are not the most obvious topic when students think abstractly about impact investments, so it helps broaden their aperture. As part of its field-building role, MDIF has made available a treasure trove of information that can be parsed in class.

• Harlan [Mandel, MDIF CEO] is such a compelling speaker and is generous with his time and insights; I knew that having him come to class toward the end of the semester would really make everything click for the students.

JR: As a graduate school for public pervice, we approach teaching impact investing with perhaps a different lens than a traditional MBA or finance program. MDIF's impact-first investment approach to building open, free, thriving societies resonates well with this group of students.

How did you use MDIF to teach the class?

AA: We introduced each topic in the course through readings and a lecture, then went through one of the examples typically used (such as Root Capital, Bridges Ventures, and so on). Then we had the students apply that knowledge and reasoning to the MDIF context, both to practice it and to spot differences in approaches.

We prepared handouts for the students to fill out, from fleshing out MDIF's impact theory of change, to mapping an MDIF investment onto the Five Dimensions of Impact framework, to drilling down on where MDIF adds value - and acts differently from a traditional investor - at each stage of the investment process, i.e. from how it sources to how it structures deals to how it exits and what it does post-exit. MDIF helped us introduce the topics of alternative deal structures and alternative fund structures, impact risk at exit, and how raising an impact fund needs to tie into so many variables around LP preferences and pain points, check size, catalytic capital, etc. In past iterations, we also used MDIF as an example of how to align fund manager compensation with the achievement of impact goals.

For part of our midterm exam, we created a simulation loosely based on a few real MDIF investment prospects and had the students:

(1) compare the prospects against the goals and priorities of MDIF;

(2) consider which scenario change would have made an investment prospect more compelling;

(3) explain a trade-off that MDIF would have to be willing to make in this deal in order to optimize for the right balance of impact and deal logic;

(4) set forth two metrics that would be fundamental for MDIF to track in this case.

JR: Specific course materials applying MDIF as a case study covered the following topics: Impact Logic, Impact Measurement & Management and Impact Across the Investment Lifecycle.

What do you think students learned from MDIF's investment work, mission and model?

AA: It worked out exactly as we had hoped (maybe because this is our third iteration with MDIF, and it keeps improving).

It really helped students see the difference in approaches possible in the impact investing context and how much it matters to constantly revert to the fundamental aspiration of the impact investor regarding the outcomes sought. It also highlighted how each element is interconnected and, in a sense, how much easier it is to execute once you are clear on your goals and your strategy.

JR: Offering students an end-to-end learning experience that starts with MDIF's investment thesis and theory of change at the beginning of the semester and concludes with hearing directly from CEO Harlan Mandel about the current portfolio and investment approach is invaluable.

How did students respond to MDIF as an example impact investment fund?

AA: Students were generally blown away to see that this is what impact investing could look like. Many came to the course with an idea that impact investing was a matter of picking winners among companies with some positive (however defined) product or service.

This being an MPA program, many students also come into the course with an impact-first approach, accompanied by a healthy skepticism about the power of capital to drive change without creating countervailing negative impacts. Using MDIF helped them envision how impact investing done well can indeed be a powerful tool in a toolkit of social change.

The mission of supporting an informed citizenry as a way of advancing free and open societies really resonated as something that most can rally around, as opposed to other goals that are more subject to personal preferences.

Interestingly, on this point, students were really surprised by the fact that MDIF does not seek to have editorial control over the media companies it invests in. They saw this as the ultimate embodiment of MDIF's thesis, and it crystallized for them how an investor can take a true "servant" role, rather than trying to mold the recipients of capital to the investor's own preferences.

In a healthy way, they were blown away by the difficulty of doing this work well and by MDIF's willingness to intentionally take on risks that others don't. We were thoughtful about not leaving the students with the impression that any of this comes easily.

Did students have any surprising insights about MDIF's work?

AA: Nothing too surprising, in the sense that I have been following MDIF for a long time. Not to end on a negative note but, perhaps in line with the current tough times, some students seemed pessimistic about the ability of media to still contribute to an informed citizenry in a polarized world full of slop. I can't fully blame them for that.

JR: One topic of discussion students found particularly stimulating was the current media landscape in the U.S. compared to that of the countries in which MDIF invests. This surfaced important questions around power, capital and additionality, particularly in the age of AI and tech.