Measuring non-financial indicators will become new normal beyond ESG — why we invested in Atlas Metrics
Demand from regulators, investors, customers, and employees for environmental, social, and governance (ESG) data is a megatrend that affects an increasing number of companies. However, there is no global ESG standard yet. Quite the contrary, different stakeholders are demanding ESG data based on different frameworks, including GRI, SASB, CDP, and IIRC. In addition, ESG data is often fragmented across different geographies, departments, and IT systems. Amid this continuously changing ESG landscape, large companies and SMEs are overwhelmed by the requirements across all these dimensions.
It is, however, not only about compliance and being reactive to evolving regulations, but also about our responsibility as investors and entrepreneurs to evaluate how technology will shape the future and how we can ensure that it is done for the better. Back 2019, we asked ourselves and more than 100 investors at the START & btov Think Tank 2019 this questions (see here for a summary of the outcome). Since then we are continuously exploring different ways to guide both entrepreneurs and investors in fostering sustainability and identifying the impact of technology and early ventures. We strongly believe that measuring non-financial metrics to access a company’s sustainability and external impact will become the new normal and that it will be crucial to do so from the early company days ons— only what gets measured, gets done.
That’s why we are super happy to welcome Atlas Metrics as latest member to the b2venture community. Atlas Metrics is building a global data infrastructure that is universal in its conception, enabling companies to easily collect, report and exchange any ESG data. Features include a universal ESG standard compiler, collaboration and workflow functionalities to streamline the collection process, and microsites to report ESG indicators in line with regulations.
We are excited to join forces with the team, co-leading their Seed round with our friends at Cherry Ventures, as well as VR Ventures, Rivus Capital, GFC, another.vc, and TD Veen and a number of fantastic angels, including Charlie Songhurst, Matthias Hilpert and Martin Blessing.
Our investment thesis is based on the following pillars:
Superior product with clear USP compared to competition: having looked at several ESG reporting solutions over the past two years, Atlas’ product clearly stands out due to its strong focus on building a “smart and flexible logic model” (i.e. every ESG KPI/indicator is expressed as a small data structure), which enables Atlas to harmonize any data input and make it accessible to any standard request. We deem this approach to be the most attractive and robust solution as such a flexible logic model will enable Atlas to scale beyond pure reporting functionalities and become an essential data infrastructure player.
First market validation and pipeline: in line with the company’s go-to-market strategy, Atlas was already able to win customers such as venture capital funds (e.g. Cusp, Cherry, Kreos), insurance companies (e.g. IDEAL Lebensversicherung), banks (e.g. VR Bank Südpfalz, Rheingauer Volksbank), which act as multipliers, opening up access to their portfolio companies and business partners. Moreover, Atlas was ranked as one of the two recommended solutions by VentureESG, a leading VC community that guides venture capital funds that aims to drive the adoption of ESG in the VC industry.
Evolving product category driven by current market trends: the tightening regulatory environment and market pressure is leading investors, regulators, stakeholders and the public to hold companies accountable for sustainable practices. Moreover, recent legislation requires an increasing number of companies to report on sustainable indicators. We believe non-financial reporting will not only become mandatory but that ESG indicators are also increasingly directly tied to investment decisions and access to capital. As a result, the number of companies that will need to report and disclose ESG related indicators will increase radically over the next few years.
Attractive network effects and strong lock-in: looking at how ESG data will be used, it will be key to create a common location to collect and share data. On the one hand, customers will invite their suppliers to submit data, given that the biggest ESG risk usually lies in a company’s supply chain. On the other hand, customers will need to share their ESG data with their buyers as well as banks (to access funding). In view of this, the upcoming two years will be essential for Atlas to execute and gain market share. Moreover, the company’s approach allows for a strong lock-in effect: similar to accounting systems, Atlas will be the system where data, evidence and documents accumulate.
Given all the potential, we are very excited to welcome Atlas Metrics to the b2venture team and to co-lead their Seed round!
For more info about Atlas Metrics: check out their website: https://www.atlasmetrics.io/
To all fellow entrepreneurs and investors: Feel free to reach out to us — jhb@b2venture.vc & ab@b2venture.vc — if you are interested to learn more about our view on the market or if you would like to get in touch with the founders.
