As a generalist VC, we can use our position to influence the world around us primarily through:
Investing with an impact mindset: The most important influence that we can have is how we choose to invest our funds. By steering our investments towards entrepreneurs who are actively working to solve significant global issues, we can support the development of a new generation of socially and environmentally-conscious entrepreneurs. We are also convinced that climate and social challenges represent some of the largest business opportunities of the coming decades.
"Climate investing is recession-proof, even without the IRA. Everything we’re doing is providing a substitute good. That’s what almost feels unfair. You spend years building Twitter and you put it up in the app store and you hope somebody gives a damn. It could be a really well-designed product, but maybe no one cares, whereas everything we’re building right now, we actually know the demand for it. And if we deliver a better, cheaper, faster, cooler, easier-to-use, sexier product, then we’ll even grow the market. So I actually think this is some of the easiest investing we’ve done." Chris Sacca, Lowercarbon Capital
However, we are also conscious of the fact that we don’t want a re-run of the 2008 Green tech wave that discouraged many generalists from the space. This time around, we should be cautious about how to use our comparative advantage to really make these investments key fund returners. We also need to carefully understand our own additionality - i.e: where in this space are we a relevant partner? In which impact investments can we use our experience and network in the best possible way?
As generalists, we also have the opportunity to inspire entrepreneurs initially less driven by impact to consider how their companies can be part of creating a more regenerative economy. We can place greater emphasis on highlighting the business opportunities of the sustainable transition and the associated risks of not doing so and by doing so better future-proofing our companies.
Responsible Scaling: Many of the change makers that we support will influence how we live our lives for the coming decades and more. If the sustainability agenda shall have any chance of succeeding, these companies will need to have a sustainable mindset from the start. And here lies a great part of our potential - we have the possibility to support a more sustainable mindset amongst all future makers, regardless of the industry in an efficient and value-adding way. Our position allows us to gather best practices, develop a data-driven understanding of the correlation between these practices, impact and commercial viability and enable collaboration and knowledge sharing in the portfolio.
A short reminder: ESG is process driven — it focuses on the how — the internal principles, processes and practices that dictate the way in which an organisation operates, or behaves. Impact is outcomes driven — it focuses on the what — the social or environmental outcomes of an organisation’s operations or behaviour.
Source: VentureESG
CSR: Finally, we can use our profits to give back to the communities around us, mitigate our negative climate footprint and support social/environmental value creation. Also here we see great opportunities to link to our business model. More about this here.
Venture capital has always been an engine for societal innovation and market disruption. As the world faces significant challenges related to climate change and the Sustainable Development Goals (SDGs), venture capital could be one of the key pieces of the puzzle. Its business model focuses on speed and scale - two of the very aspects needed if we are to find innovative solutions to allow for a rapid sustainable transition. Especially solutions for climate and environmental tech need early-stage funding and bets on higher risk.
In theory, this should be the perfect VC setting and we’re also seeing how the venture industry is transformed by a rapidly increasing number of dedicated impact VCs targeting societal and environmental challenges by looking at impact first and thereby identifying a new breed of unicorns.
Funds such as Pale Blue Dot, Lowercarbon Capital, Rubio, AENU and Norrsken VC are not only clearly defining impact investments, but also ensuring that their governance models support their vision. Through dedicated impact due diligence processes, heads of science, independent scientific boards and linking their own carry to impact outcomes, they strengthen their competitive advantage as dedicated impact VCs.
Impact unicorns 2022