Venture Capital for Profit and Purpose

The Obvious Ventures Hypothesis

Here’s a simple hypothesis: startups that deliver positive environmental and social benefits with every dollar of revenue will have a market advantage. They will attract better talent, experience lower customer acquisition costs, and demonstrate greater customer lifetime value.

That’s the idea that inspired Obvious Ventures, our new venture capital firm founded on the belief that it’s good for business to combine profit and purpose. We call this #worldpositive investing, and today we’re launching a custom-built fund focused on it.

Our team is made up of three co-founders: Evan Williams, Vishal Vasishth, and me. You can read more about the origins and evolution of Obvious in Ev’s recent Medium post, and Vishal’s work on Patagonia company culture here. We’re also fortunate to have Sami Inkinen, co-founder of Trulia, join us as a Venture Partner.

Ev, Vishal, and I have all tested this #worldpositive hypothesis in our entrepreneurial careers. We’ve helped build great companies from Twitter (giving hundreds of millions of people the power to share ideas), to Xoom (helping foreign born immigrants move money across borders and currencies), to Patagonia (proving how you make your product is as important as what you make).

As investors, the proof points of our approach can be seen in our past investments: Nest (acquired by Google), Opower (2014 IPO), Plum Organics (acquired by Campbells), and TenMarks Education (acquired by Amazon). Each of these companies started with a #worldpositive mission and incorporated that into the core design of their product or service.

These past experiences have led us to the creation of Obvious Ventures, and our next chapter is to lead #worldpositive investing at scale. We’re focused on three investment themes — each one a huge category with the potential to build many large, profitable businesses.

1. Sustainable Systems
As world population grows, there’s increasing pressure on the world’s systems to generate and consume resources. From energy to food to everyday products, there is a growing need to remake and reimagine resources in a sustainable way.

We believe this is a huge business opportunity, and McKinsey & Company seems to agree. In the March 2014 McKinsey Quarterly they write about:

an unprecedented opportunity to produce and use resources far more imaginatively and efficiently, revolutionizing business and management in the process. Indeed, rather than facing a crisis of resource scarcity, the world economy will be revitalized by an array of business opportunities that will create trillions of dollars in profits.

Our investment in Beyond Meat is a great example of this new, more sustainable approach to resource creation: utilizing plant protein to replace animal protein.

2. People Power
As the world becomes more connected, new solutions are emerging that disrupt technology barriers in big markets like payments, education and employment. The massive growth of smartphone use enables us to put the tools of big business in the hands of all businesses, grow new platforms for collaboration, and create new disruptive learning models to improve student outcomes.

Bringing “power to the people” is not just #worldpositive, it’s a big underserved market. The Small Business Administration reported that in 2011 there were over 28 million small businesses in the US, with these small firms consistently leading job creation in our nation. Three of our initial investments target this long tail of the US economy: ZenPayroll, Workpop and Breezeworks.

3. Healthy Living
The rise in healthy living and wellness is one of the biggest consumer trends of the decade. Across nutrition, fitness, and health information technology, we believe we’re in the early stages of innovation in human health and performance. This is a large market and it’s growing fast. Accenture explains in their “Changing Future of Consumer Health” report that:

Consumer healthcare is a $502 billion market that will grow by almost 50 percent to $737 billion over the next five years. This growth will be driven primarily by preventive health and wellness categories such as vitamins, nutrition, weight management and fortified foods and beverages.

Across these three broad investment themes, we’re on the hunt for startups creating disruptive solutions to big world problems in a way that is both profitable and impactful. To be clear, this is not corporate philanthropy. Rather we believe that our portfolio companies, by fulfilling their mission and solving big problems, will generate strong financial performance through market advantages that help them outperform their traditional peers. And they’ll deliver truly sustainable positive impact because their profits further their purpose and their margins drive their mission.

That’s our investment thesis, and that’s our secret sauce: authentically focus on #worldpositive investing. For us, it’s Obvious.