Can you make money *and* do good?
It’s obvious why the economy is front and centre of any political debate (apart from being Rishi’s raison d’être). Not only is money on everyone’s mind, especially right now, but every government department is being challenged on funding and spending. Even in Bull times, it always comes down to the economy, and therefore, business.
Without tax receipts coming into HMRC, which are currently around £370bn pa in the UK, we can do very little. Business is the only band at the bar mitzvah, which leaves us in a moral quandary.
As a business, are you doing bad, doing no harm or doing good?
Where is your impact along that thread? This topic comes up a lot when meeting startups in SuperSeed Towers.
We all need money to survive at home or in business. As VCs, it’s even more raw: it’s how we place bets on the future, trying to outwit power law and probabilistic thinking. Making winning bets gives us the opportunity to survive and recycle, as we fuel the creation of products and services for the next generation.
I’d be so bold to state that without venture capital, there is no innovation (Corporates are crap at it, and it gets worse – they’re also net destroyers of jobs and opportunities). Just look around you right now and ponder what was venture backed? Starting with the super-computer on your desk, or in your pocket, plus the software they both rely on.
Now that’s impact.
But is it the right impact, for right now?
Because the game has changed.
Most accept that there are too many of us on this rock, doing too much too quickly, powered by too much fossil fuel. Consequently, our survival as a species is under threat. Yet business must go on – it too being the very root of our survival. (No Elon, moving to Mars isn’t any part of the answer.)
I was speaking to a fresh-faced German VC last week who raised his first €50m fund in 7 months from first ask to close. This is enviously unnatural for most of us in the emerging manager community. How did he manage it as a solo first-time manager?
It’s a climate fund.
Chris Sacca recently closed $800m for his LowerCarbon Capital fund designed to “unf**k the planet” stating “the commitments came exceedingly fast — in just a few days.”
As a theme, climate looms large over the economy. No air to breathe and, well… oh.
However, I’m going to be obtuse now: apart from carbon capture, heat pumps or solar panels, what really is climate tech? And is an impact fund the only way to create ‘impact’?
Which is where it gets interesting, and a big part of why I get out of bed in the morning.
There are many ways to slice and dice positive impact with two types of investment activity that drive the triple bottom-line – those being people, planet and profit. The explicit Sacca style ‘save the planet by funding impact startups’, and the implicit – making business smarter via efficiencies that boost productivity.
If I was being mean and self serving I’d suggest that the former are great at ‘impact’ headline grabbing, while firms like ours are busy making big business smarter from behind the scenes – transforming how the world works.
I passionately believe we need both strategies, although there are two more important caveats to note: Impact in private markets must align with making profit or it simply won’t work, and secondly, we must accept that politicians will not make too many bold moves as their only real mandate is re-election (smarter regulation would be nice).
So business must fill the gap.
What we don’t need are more zombie unicorns, faster e-scooters or grocery deliveries. So thank goodness those days are over, and we, as a community, can get back to investing in real business models solving real problems, which I believe is happening.
As you may have read in a previous note, we recently invested in a demand sensing / supply chain management platform called Garvis. They have a unique offering that saves up to 10% off the bottom line for large CPG, manufacturing or FMCG companies. If you’re a multinational with revenues in the billions, like many of their clients, that efficiency gain is not insignificant.
Or, look at ThingTrax who make legacy factory machinery smart with tiny IoT devices to feed actionable performance data to management teams. Or Ai Build who are literally creating the production processes of tomorrow via additive manufacturing.
There is a real and sizeable opportunity to create positive societal impact by transforming the everyday mundane services that power our lives.
Ultimately, I believe the smartest money is investing in enabling ‘more, for less’. Come bull or bear. But of course I would say this and my wife laughs at me when we discuss what I do and how B2B SaaS makes me fizz – yes I am that popular at dinner parties.
What I also love about what we do is that it’s not about making money doing questionable things, to then give back at some later guilt driven date. Personally I believe it’s important to do good and have a positive impact along the way – which is why we invest in startups that create real transformative change for the largest organisations on the planet.
To put all of this into a UK context, we’re around 20th on the list (26th on some) of most productive countries in the world per capita, with nearly all of northern Europe beating us.
We can and must do better.
As we realign supply chains, labour markets, and onshore production to mitigate the risks from shifting-sands monetary policy, China, Russia/Ukraine and weakened economies, I believe it’s paramount to counter these offensives by investing in Europe’s smartest founders, who are building the smartest tech, to create smarter business.
As a small aside – I do take issue with some of the nonsense headlines about Ai. It will not replace us humans – we will only see robots in sunglasses with pew pew laser guns roaming Camden in James Cameron flicks.
In the real world, Ai and other smart technologies will give us superpowers, making us part of the machine to radically improve efficiency and therefore productivity.
Productivity is for robots.
So yes – I believe there *is* real and positive impact out there being created in the strangest of places, in different shapes and sizes, from the unlikeliest of sources. You *can* (read must) do good as you make money.
Just don’t get caught up in the greenwash.
Unless green as in greenback, and making profit.
Nothing wrong with that.
… Dan