‘Lock-Step’ Venture — How Impact Wins
There was a time when common sense truth held that the Earth was at the centre of the universe. Considering that the bulk of human progress has occurred through radical breaks in received wisdom, what might be possible if we applied the same lens of disbelief to today’s prevailing financial wisdom?
It’s Mustard Seed’s contention that understanding the social dimension of business in a millennial age will be key in assessing competitive differentiation, and thus, economic outperformance.
While the common view still holds that the objectives of seeking profit and pursuing social impact are at worst fundamentally opposed or at best unrelated to each other, Mustard Seed exists precisely to help change this outdated paradigm. Not only does Mustard Seed reject the inevitability of a trade off, it believes that the two can ultimately be made synonymous and mutually reinforcing through what we term the Virtuous Venture Cycle (VVC). In this process, the vicious cycle of negative externalities is replaced by a system of value creating positive impact aligned with commercial return, whereby the bottom line and impact are not only strongly correlated but also mutually reinforcing.
Mustard Seed was incorporated in February 2015, and we felt it was about time that we took stock of what we have done to date. We rather naively set out to back ventures solving global social issues, under the ‘lock-step’ model described above. How have we done? Are we making a difference? We have now backed 14 ventures, of which 11 are based in London, 1 in the Philippines, 1 in Portugal and 1 in the US. Measuring the impact generated by these ventures is no easy task, in light of the very wide ranging areas in which they operate — how do we equate the impact of a geolocation company providing addresses to the 4bn unaddressed, to another company that reduces food waste in commercial kitchens? More essentially, how does the creation of an address for a family in a favela compare with a tonne of food waste saved? We explore the quantitative impact of our ventures towards the end of this publication, using our imperfect impact measurement method (which may improve over time, but will remain nevertheless imperfect — ultimately, it will never be possible to compare the worth of one life with another).
We thought it might be best to ask the Founders directly, and conducted a series of interviews. In particular, we were keen to explore the motivations of our founders, and the complex thread of life that has conjured these inspired ventures. As a capital allocator, with a fiduciary responsibility, and a stated mission to change the way capital is allocated towards societal and environmental good, we have also asked our members and investors how their interaction with Mustard Seed has shaped their outlook on ‘good’ (in every sense of the word) investment.
This report is in its first iteration. It remains very much a work in progress and is a reflection of our continually evolving learnings since our own genesis in 2015. We appreciate there may (indeed) be flaws in our approach and see this as an open opportunity for improvement as we continue working with and alongside our founders. Although we are steadfast in, and dedicated to, our belief around lock-step ventures, we equally acknowledge that there is no “wrong or right” way to impact investing. Each entrepreneur and investor’s approach provides an additional lens to examine and reflect on the effects of capital allocation in this sector. The Virtuous Venture Cycle remains a concept to be proven, with every venture we work with hopefully a testament to realizing positive social change at scale.
Please find the full version of our report here.