Making an Impact at the Builders Fund
I’ve been fortunate enough to spend the summer of 2021 as an investment associate and ICM Mosaic Fellow with the Builders Fund. My path into growth equity and impact investing has certainly not been straightforward — when I came to business school, it was with a single-minded intent to break into early-stage VC investing. Given my admittedly Millennial mindset and the hundreds of startup success stories that have been nearly mythologized in repute within my lifetime, I thought that venture capital was the best way to make a difference by investing in transformative ideas.
I believed in deploying capital to businesses that were solving the world’s most challenging problems — and while many early-stage investors are successfully investing in companies that fit this thesis, I found it difficult to gain conviction at the earliest stages of investing, with a dearth of financial data and a wealth of varying opinions.
When I first learned about the Builders Fund, I realized the mission of a growth-stage fund investing in impact was actually what I sought when I came to business school: mindful, purpose-driven investing to affect positive change. Builders has not only generated strong returns for its LPs, but has done so while investing in businesses that are sustainable and responsible.
As I worked with the Builders team to conduct diligence on several prospective deals across consumer products, regenerative economies, and health and wellness, I learned the importance of investing in management teams who have created value through capital efficiency. Many of the founders I spoke with had created successful businesses with over $10 million in revenue with minimal or no institutional capital.
Furthermore, I valued the Builders’ longer-term investment position, through which the fund aims to truly partner with teams to build sustainable businesses. It was enlightening to see Builders portfolio companies doing well by doing good and addressing some of our most pressing problems as a civilization, particularly climate change and resource efficiency. The recent release of the UN’s IPCC report on Climate Change served as a backdrop to the importance of the work we do as a fund.
Working in private equity for a summer really taught me how to think like an investor. It’s difficult to develop an instinct for deals without repetition, modeling out dynamics in varying situations, and having smart mentors to advise you. For the benefit of anyone who might be reading with an eye towards getting involved in impact investing and growth equity, I’ve compiled a list of my top learnings from this experience:
The Importance of Data
I’ve touched on this before, but a big differentiator in later-stage investing is the availability of market, financial, and sales data. Learning how to analyze, interpret, and derive insights from the dozens of data room documents is one of the most important skills I learned this summer and is a fundamental cornerstone of becoming a successful investor.
Investing Teaches You an Ownership Mindset
When I was evaluating deals this summer, I thought about every single opportunity as though I were putting my own money into it. This helped me develop a sense of conviction around companies I truly believed in and ones that I didn’t feel as strongly about. The responsibility of an investor to its LPs cannot be overstated, and I really valued the careful consideration we gave each deal and the healthy debate around every angle of the investment.
Valuation Is Willingness to Pay
By far the greatest lesson I learned this summer was how to value a company and that valuation is a subjective number rooted in best guess models that are also variable. I genuinely enjoyed modeling out various growth scenarios, gaining a healthy skepticism around revenue targets, and most of all, combining qualitative, market and competitor data with more quantitative financial data to inform models. Having had limited exposure to modeling and valuation in my prior career, I wanted to roll up my sleeves and climb the learning curve, which was steep, but worth doing, as this is a skill I will take with me going forward.
Learning from Founders Is a Free Masterclass
Every single time I got on a founder call, I was amazed with the depth and breadth of knowledge that could be gleaned from their experience in just 30 minutes. It’s free education, and it taught me humility. I have a complete reverence for the mastery that founders have over their business and domain. Working with founders and CEOs to uncover growth opportunities and areas for operational improvement this summer was invaluable and helped me learn why Builders has its name: Partnering with our portfolio companies by connecting them with top operators in their industry and working with them on their most challenging initiatives is central to the way the fund works.
Mentorship Is Everything
Nobody is an island — I would not be here without the mentorship and leadership of Tripp, Mike, Katharine, and Thomas. I am especially fortunate to have learned directly from Katharine through this process, study her approach to investing, and ask dozens of questions about modeling and deal dynamics. I feel blessed to have mentors who care about my success and want to help me grow. I’ve found that when transitioning into investing from a non-banking background, good mentorship is critical to success.
Finally, working in impact investing made me ask a central question: why isn’t everybody investing for impact? If returns and positive social externalities can be achieved simultaneously, why aren’t more funds doing it? I also found myself wondering how we can better quantify impact measurement, and, similar to the methodologies for impact measurement put forth by the GIIN IRIS+ and B Labs, I hope to see impact reporting included in financial statements and disclosures as an incentive for more companies and funds to invest at this important intersection of purpose and profit.
My summer with the Builders Fund has been an unforgettable and rewarding experience that has taught me so much about impact investing, private equity, running and managing growth-stage businesses, as well as myself. As I continue to grow into investing as a career, I will heavily lean on this experience and the skills I’ve developed to guide me, and hope to continue doing well by doing good.
