Sustain: Successful Beta Test ✅ (and why doing the right thing is profitable)
Sustain is a Sustainable Investment Fund where members can invest between $1 and $1,000,000 and then vote on which stocks the fund invests in. Check out our website or original blog post for more info!
It’s been a whole 6 months since we launched the Sustain Beta Test. Last September we set about finding 100 participants to each invest $100 with us. By October we were actually oversubscribed with 115 people each investing $100 in the Sustain Fund. For the mathematicians out there that’s $11,500: mere peanuts for an investment fund but in the spirit of moving fast and remaining lean it was just what we wanted. 👌
Our goal was to test two simple hypotheses: “There is a customer need for Sustain” and “Our concept works”. We designed our beta test to prove or disprove these assumptions.
The appeal of Sustain is that we have no investment managers taking fat fees and playing god by investing in whatever they please. With Sustain you don’t need to outsource your morals to a suit in an ivory tower. Instead, everyone who invests in the Sustain Fund gets to vote on which stocks we buy and sell. It’s investing, democratised. 🙋🙋♂️
On Monday October 1st 2018 we invested our participants money equally into 10 stocks: Tesla, Alphabet (née Google), Microsoft, Prologis, Next Era Energy, Etsy, Xylem, Kroger, BorgWarner and Ecolab. Starting the same day, we sent an email to each participant every Monday and every Friday.
Monday’s email contained sustainability issues curated by Sustain founders Andre and Sylwia Zieba. We asked each participant to vote on an issue for each stock. As participants voted stocks up (SUSTAIN) or down (UNSUSTAIN) each week, we collated the data and used it to power our investment decisions. At the end of every month we moved to the funds into the top 5 stocks according to our user votes, the other 5 stocks were sold!
After 1 month our engagement was looking good: 75% of participants were opening each email and 60% were actually taking part in the voting. Fund performance, however, started off pretty dry. The general market was down just over 1% and we were down nearly 2% 😭
As we reached the end of the year, engagement became polarised. Some participants were very active, voting every week and giving strong opinions in the optional comments box. Others, were never voting; some not even opening emails. In our middle-of-test feedback calls we heard opinions that ranged from “I love Sustain, when can I invest all my savings?” to “To be honest I don’t really have time to vote on anything”.
While initially disheartening, this feedback grew to comfort us. Sure, some users didn’t need our product — but some did! For some, Sustain solved a real pain that they were experiencing: namely that it’s near impossible for the every day person to invest profitably and with a conscience.
By February talented Sustain founder Nick Foden had finished the first iteration of the Sustain app. This was rolled out to the participants who had shown most interest in the beta test so far.
The move from email voting to app voting was motivated by two things. On one hand, we wanted to test if some users would respond better to an app than an email. If you’re anything like me, emails are annoying and I try to avoid them. Apps however are fun – if anything they can be too much fun!
On the other hand we wanted to launch our app because we had successful validation that our newsletter had worked. What’s more, an app was a step closer to the final product that we had been envisioning from the start. One step in the right direction.
By the time the beta test finished in April, half a year after we kicked off, we had significant data on how the participants had been voting as well as on how the fund had performed. Average engagement numbers had fallen from 60% of member voting to around 40%: a number we cared about but were focussed more on how the keenest users were acting.
As for financial performance, our fund significantly outperformed the the market. The S&P, the most common indicator of general market performance, was actually down around 3% over the course of our beta test. The Sustain Fund on the other hand, was up a whopping 17%! That’s nearly 35% on an annualised basis — significantly more than you’d make putting your money in a bank and way more than any comparable index made over the same period.
Now this is just one 6 month period, so time will tell if we can sustain this performance (get it?). It’s very encouraging though to see how much we managed to return for our participants.
Strictly speaking it’s the Sustain participants who generated this return for themselves. Look at the chart above: if we had remained invested equally in our 10 initial stocks, we would have made a 5% return. Voting on which stocks to buy and sell each month managed to generate an additional 12% alpha – wow!
Our goal was to test two simple hypotheses: “There a customer need for Sustain” and “Our concept works”. We designed our beta test to prove or disprove these assumptions. We believe we proved both correct ✅ ✅
So what’s next? The beta test is over and it was successful. If you’re a participant we are going to call each of you up for a quick chat and return your money – the $100 you invested plus the $17 return.
Excited by these results and want to get involved? Sadly we aren’t accepting any funds right now until we have passed the required regulatory hurdles. That said we’d love for you to sign up for our newsletter at www.SustainInvesting.com!
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