Investing with a new purpose
Several weeks ago, I was hanging out with Lindsay Ullman of Sidewalk Labs and we were talking about some of the companies I’ve backed at RRE and Lerer Hippeau Ventures. She paused at one of them and asked, “Do you believe this company is good for the world?” Candidly, I was caught off guard. I wasn’t expecting such a direct question and didn’t consider it much when I was making the initial investment. I didn’t know what to say.
Over the last few weeks, I’ve thought about my conversation with Lindsay at least a dozen times. Her question forced me to be honest with myself about the reasons why I funded this startup, and the rationale behind some of my other investments too. I realized that my investment philosophy had been slowly changing for some time, and our conversation was a kind of tipping point. I finally arrived at the following conclusion: If a company doesn’t solve a worthy problem and make the world a better place, then I have no business investing in it.
That’s a big statement, I know. But this isn’t just another watered-down plug for “impact investing” or an attempt to make myself feel better about being a VC. This is what I believe, and I think it’s important to explain why I feel a responsibility to invest in companies that solve worthy problems and why I believe that doing so can make the world a better place and drive returns.
The longer I spend in the venture business, the more I realize that investors are in a unique position to help create the future. Let’s be honest. The large majority of VCs don’t perform the hard work that founders do on a daily basis. We don’t sacrifice years of life on a single company, and we don’t deserve the credit for successful outcomes. That’s just a fact. Where we do play a role is in deciding what gets funded. For better or for worse, that’s in our control. We’re enablers and supporters of change. I’ve come to believe that we have an ethical and moral responsibility to be supporters of positive change.
If I’m completely honest with myself, I’ve invested in some companies without seriously considering whether they actually make life on earth better. Those days are over. Starting today and going forward, I will not hear a pitch or make an investment unless I truly believe the effort is improving the world. While applying this filter will help me say no much faster and save time for founders and myself, that’s not really the point. And while I can only make so many new investments each year, that’s not the point either.
The point is that I genuinely believe values-led investors are better investors and values-driven investments drive superior returns. And personally, I feel a responsibility to search for companies aligned with my values and worthy of my time. What follows obviously isn’t a complete list of worthy problems that need to be solved, but these are some categories that are important to humans across the planet. It’s impossible to predict which problems innovation will solve next, so it’s critical for me to keep an open mind, but these are a few categories that matter to me as an investor:
1. Life extension: Products, services, and digital therapies that improve our health and extend our lives.
2. Self-expression: Products that enable us to create, express ourselves openly and be heard.
3. Productivity / automation: Apps and services that enable us to reallocate our time to more meaningful activities.
4. Financial flexibility: Services that enable financial freedom by helping us earn, save, borrow and protect money.
5. Sustainability: Apps, services and hardware that support the conservation of resources and production of renewable energy.
6. Mobility: Apps, services and vehicles that enable cost-effective, reliable and high scale mass transportation.
7. Brain boosters: Apps, services, hardware and institutions that educate and enrich the mind.
8. Food: Software, services and products that make it possible to feed and nourish billions cost effectively and efficiently.
9. Decentralization: Services and platforms that cut out a middleman or central authority.
10. Shelter and housing: Software, services and hardware that provide access to more affordable housing.
11. Exploration: Services and products that enable us to experience the world and discover new places.
12. Connectivity: Services that provide affordable and ubiquitous access to the Internet.
13. Diversity: Founders and companies that level the playing field.
14. Safety: Apps and hardware that help reduce injuries and deaths.
As I explore these themes and meet with individual companies solving specific problems, I’ll ultimately be forced to decide which few companies I’d like to partner with on. Of course, my decisions will inevitably be based on a number of factors. But now and going forward, first among those factors must be values.
I know that all sounds good in theory, but how about in practice? Let’s be honest about one more thing: VCs are in the business of making money for limited partners. We have to invest in companies that we think will make money, and stay away from ones that we fear won’t. That’s my job and I’m okay with that. Why? Because I really believe that in looking for founders and companies focused on solving real problems and making the world a better place, I’ll find massive companies that generate outsized financial returns. While making money and making a difference are too often seen as being in conflict, they don’t have to be. My job—today, tomorrow, and as long as I’m in this business—is to look for companies committed to doing both.
(Thanks to my colleague Cooper Zelnick for reviewing this post.)