Here’s why the best investment funds in the world aren’t the ones you think
Take the story of two startups, both leveraging technology to facilitate real-time information sharing and connect people.
First, Instagram, based in Silicon Valley, in less than two years grew from the simple idea of sharing photos in a social network to a company acquired by Facebook for a billion dollars. Instagram’s roughly dozen employees and investors received huge payouts, and as users we got to enjoy a first hand view into friends’ vacations and day-to-day highlights.
Second, Spensa Technologies, in West Lafayette, Indiana, developed out of the engineering department at Purdue University. Like Instagram, Spensa connects people through real-time information sharing, but the company attacks a more important problem for society: they’ve built a system where farmers can collect and share information about insects — which destroy 30% of our crops (more than $60 billion in value) — each year. Spensa has grown to serve a customer base that includes the largest names in the agriculture business, and has created four times as many jobs as Instagram — while raising 10% as much venture capital.
Which is a “better” investment?
In a rapidly changing world, much of the innovation economy is working well for the types of people who invest in Instagram.
Instagram’s 13 employees and a handful of investors did great, but the billion-dollar acquisition was highly concentrated. Spensa’s technology leverages some of the same principles of growth and scale, and yet yields an outcome that we feel is much more vital for our long-term prosperity: sustainable food security. Their success won’t be concentrated with just a few employees and investors, but will instead create widespread value, which is why our fund, Village Capital, invested in them.
Spensa demonstrates how innovative ideas can lead to strong, sustainable companies that solve problems, generate revenue, and create good jobs. For our society to succeed in the long term, we need to think about how to continue supporting that collaboration, not just focus on trying to pick the next highly-concentrated win.
The best investors are both able to value what things cost and what things are worth. In today’s economy, however, most investors are only valuing short-term gains — from stock earnings to “built-to-flip” companies such as Instagram. These results might look great day-to-day, but the bill eventually comes due in the long term. The big political news of 2016, from Brexit to the rise of the Trump presidency, was in part caused by a rapidly changing economy where many people didn’t see their place. The concentration of capital in a few cities and among a few ideas was one of the root causes of today’s global unrest and economic uncertainty.
Fortunately, there are a group of investors who define “best” as delivering quality financial performance and a positive long-term impact for society. This week, B-Lab, which you can think of as “LEED certification for business,” released its first list of 50 Best for the World Funds. These funds invest in developed and emerging markets, backing companies that create more economic opportunity for more people and improve the environmental sustainability of the planet.
Thanks to the work of portfolio companies like Spensa Technologies, we’re proud that our firm, Village Capital, is one of these 50, and we’re excited to see great partners on this list as well. In a 21st-century America where many people feel isolated and left out, Access Ventures invests in the rebuilding of communities across the country. Gray Ghost Ventures has partnered with the DOEN Foundation to invest in early-stage enterprises providing catalytic innovation and leapfrogging technologies in the developing world. And Quona Capital was launched by pioneers improving the financial health of the four billion people living in poverty in emerging markets, by bringing affordable basic services to the majority of the world.
Two weeks ago, we hosted our annual meeting for our investors and portfolio companies in Detroit, where local company Shinola has created hundreds of manufacturing jobs building on Detroit’s expertise — making things — to sell beautiful items around the world. Two of our partners, venture capital fund Revolution and The Kresge Foundation, invested in Shinola. As Steve Case, the founder of AOL, recently said, “For the future of our economy, we need more Shinolas than Instagrams.”
The best investors in the world are the best investors FOR the world. Check out the Best for the World 50, and challenge yourself to invest in meaningful outcomes. You can’t afford not to.
Ross Baird is CEO of Village Capital. Victoria Fram is Managing Director at VilCap Investments, LLC.