Ask Richard: What makes a start-up stand out for investment?

Thank you once more to everyone who penned such great questions for my newsletter this month. When I read a question from?someone called Mike?about what I look for when investing in a new start-up, I thought?it was a great opportunity for my daughter Holly to share her insight. Holly has?posted?a?whole?series of blogs?about investing in purpose-driven businesses and what she looks out for. She has shared interviews with founders from some incredible start-ups she has invested in, that are changing the world one idea at a time. I wholeheartedly agree with this investment approach of bringing innovative ideas with the potential to solve big problems to scale. Here’s Holly…?

Hi Mike (and all),?

I was really excited to answer this question, as purpose-driven investing is a great passion of mine. Over the past?13?years of my career and in my more recent role as Chief People and Purpose Officer on Virgin's V Team, I’ve seen how purpose-driven businesses go further, faster and reach greater heights. So when we look for a new start-up to invest in, we really look for sustainable businesses that are driven by a strong purpose to make the world a better place and use innovation to drive this forward. We evaluate every potential investment through a ‘purpose filter’ to ask critical questions such as: Does it balance the needs of all stakeholders (not just shareholders)? Is it innovative? Is it inclusive? Can it scale? Is it solving a problem or a pain-point? Is it future-focussed? Are we the best fit to amplify their impact??This filter ensures we're considering the health and wellbeing of all people, as well as the planet, and it pushes us to be as bold as we can be.

As Impact Investing becomes increasingly popular – with more and more consumers demanding businesses step up and be a force for good in the world – I would highly recommend that you clearly define your purpose (why do you exist?) and passionately communicate it to investors. To give you more context, here are some of the companies we’ve invested in, and the reasons they caught our eye.

mOm Incubators?

mOm Incubators?was Virgin’s first Impact Investment back in 2016.?From the moment I met the team, I knew we’d found a game-changing and purpose-led company that would be a great match for Virgin’s portfolio. They presented us with the design of a?compact, lightweight, cost-effective and energy efficient infant incubator that could save the lives of thousands of babies around the world. Although it was just a sketch on paper at the time, it was clear they had the determination and the skillset to bring this innovation to life.

Fast-forward six years, and mOm Incubators is saving lives around the world and tackling barriers to healthcare. It went through clinical trials in 2021, and in 2022 the team shipped a delivery of the incubators to Ukraine, following reports that?the stress of the war was causing a sharp rise in premature births. Right after mOm Incubators completed its clinical trials in the UK, I sat down with the team to discuss the journey and to see the product for myself.?

It was incredible to see how?the team never wavered from its core purpose, even with?the immense challenges of bringing a medical device to market. In part, this was achieved by literally building purpose into the design process. You mentioned your start-up is focused on engineering and design, Mike, so I thought this would be particularly useful! According to Gemma Singer, mOm Incubator’s senior design engineer, this purpose-engineering was achieved by:?

• Taking critical information from healthcare professionals to understand their core needs.
• Quantifying the information.
• Embedding it into the product design.
• Frequently running checks to ensure they have addressed the initial needs.?

Amazing.?

Zero Acre Farms

Zero Acre Farms?is a start-up I've invested?in?that is showing the world what happens?when purpose, science and entrepreneurship combine. I was drawn to the start-up’s mission of giving the world an oil change by replacing vegetable oils with healthier and more sustainable alternatives. Vegetable oils are the most consumed food in the world after rice and wheat, which is deeply concerning when you see how destructive they are to the planet (through deforestation) and to our health. Horrifyingly, they also increase our risk of death by 62% - more than heavy drinking or moderate smoking - and they can be found in pretty much everything we eat.

The mission drew me in, but it was the innovation that led me to invest. To tackle this enormous issue, the team at Zero Acre Farms developed a Cultured Oil made by fermentation (instead of deforestation) and can be used as a direct replacement for vegetable oils. The Cultured Oil has now hit the shelves, and the team is ready the scale. This is critical when you realise that if only 5% of vegetable oils in the US were replaced with Cultured Oil, we could save…

• 5.1 billion square ft of biodiverse rainforest.
• Over 50 billion gallons of fresh water.
• 3.6 million tonnes of?CO2?equivalent?emissions.?

I was able to taste the product before it went to market, and it really did handle the heat. This is another important point when seeking investment – on top of a strong purpose, the product still needs to hold up.?

Oxwash

Oxwash is one of my favourite sustainable start-ups and is going to strength to strength.?Co-founder Kyle Grant is an ex-Nasa scientist who started the business while doing his PhD. Frustrated by a lack of good eco-friendly laundry facilities, he partnered with Oxford engineer Tom de Wilton and decided to build their own carbon-neutral laundry business! Five years later and Oxwash is now a certified B-corp; has raised nearly ￡16 million in funding; completed?Virgin StartUp’s?Collective Impact programme; and is now running in London, Oxford and Cambridge while working on a nationwide rollout.?

The way the team uses innovation to tackle every element of the industry’s sustainability issues is the main reason I invested in Oxwash. From filtering microfibre plastics, to reducing water usage, avoiding toxic chemicals, and delivering laundry on zero-emission bikes – Oxwash’s approach truly is disrupting the industry for good. Last year, I took a tour through their London ‘lagoon’ and it was inspiring to see their positive impact in action. The growth of Oxwash shows just how much appetite there is from consumers and investors alike to support sustainable and purpose-driven businesses.?

I hope this has been both inspiring and useful Mike (and everybody looking at funding opportunities). The bottom-line is that we take a triple bottom line approach (people + planet + profit) to investing, and I would encourage all founders and investors do the same!?

Thanks,

Holly