How not to lead in 2023

Emerging Managers, brace yourselves for the latest IPCC paper on climate change. Natural disasters, rising sea levels, and other devastating impacts are already happening worldwide, making it an urgent call to action for investors to address the crisis. But wait, there's more. The recent global banking crisis and the impending recession add to the challenges that you will face as an Emerging Manager. Are you prepared to lead, take on the workload and make a difference despite all odds?

I had the privilege to hear from LaDawn Townsend this week in our weekly 2X Global GP circle and hear 3 great pieces of advice on making it up to the top of that mountain with your team. LaDawn Townsend is the creator of Recalibrate Leadership and CEO of the VOS Group . She believes that business can be a force for good and that begins with the leadership at the helm.

Why Leadership Matters Most

Leadership is crucial in the face of climate change investment for several reasons. First, climate change is a global issue that requires collective action and coordinated effort from various sectors, including government, businesses, and civil society. Effective leadership can help bring these stakeholders together to align their efforts towards a common goal of addressing climate change.

Second, climate change investment involves significant risks and uncertainties and requires making long-term commitments and strategic decisions that may not always have immediate benefits. Leaders who have a vision and can communicate that vision to their stakeholders can create a sense of purpose and direction that motivates and inspires people to take action towards climate change adaptation and societal resilience.

Third, leadership is needed to drive innovation and promote the adoption of new technologies and practices that can help reduce greenhouse gas emissions and mitigate the impacts of climate change.

Leaders who are willing to take risks and invest in new ideas can help accelerate the transition towards a low-carbon economy.

Leadership is essential for mobilizing resources, building partnerships, fostering innovation, and driving change towards a sustainable future. Without leadership, climate change investment efforts may lack direction, coordination, and the necessary resources to make a meaningful impact.

The IPCC report paints a grim picture of the devastating consequences of rising greenhouse gas emissions and the need for immediate action to mitigate the risks. However, it also highlights pathways towards reducing GHG emissions, increasing carbon removal, and building resilience, offering hope for a safe and livable future.

The Need

The report's key findings include the unprecedented changes to the Earth's climate due to human-induced global warming of 1.1 degrees Celcius and the intensifying risks if we fail to take action.

Governments, businesses, and investors are increasingly committing to ambitious climate targets, and there is growing recognition of the need to transition to a more sustainable and low-carbon economy. But we need to move faster and accelerate the emerging technologies that are going to transform our futures.

IPCC's Sixth Assessment Report is a significant event for the global investment community, as it provides a comprehensive scientific assessment of the state of the climate crisis.

The Opportunity

While 2023 is expected to be a challenging year on both an environmental and macro level, it presents a favourable climate for launching new climate funds and investing in new emerging technology companies to address these urgent challenges.

With trillions set aside for deployment by governments, development finance organisations, and institutional allocators, the time is now to deploy programs for the transition to value-based healthcare and climate adaptation.

In fact, Recessions have always produced great fund vintages, particularly when led by Emerging Managers. Seed and pre-seed investment levels and valuations continue to remain healthy, with an abundance of talent in the market and less competition. The emergence of new technology tools such as generative AI has also made it possible to accomplish tasks with fewer resources and at a higher speed.

Given the key advantages that come with being a startup, including speed and innovation, Fund Managers like R3i Capital, and our founders are ready to support the global transition and are seizing the opportunity to capitalize on these favourable conditions.

But before you do too, there are 3 keys to unlocking your vision.

1. Know your why

While it's true that not everyone may be immediately aligned with our purpose for climate and value-based healthcare impact, I believe that listening deeply to the concerns and feedback of our potential partners and investors is key to building a successful and sustainable investment fund.

My number 1 business belief is that I have a personal fiduciary and fiscal responsibility, to lead a responsible investment fund for tangible climate and healthcare impact that will invest in emerging technology companies that deliver both persistent and outsized environmental and financial returns.

2. Listen deeply to the power of the Nos

But the reality is that not everyone will want to get on board. In fact, statistically, the reality is that 99% of women GPs will not receive the allocation.

In fact, every "no" is an opportunity to learn and grow, to better understand the concerns and motivations of those who may not be initially aligned with our vision, and to explore the nexus in their "why". By engaging in open and honest dialogue, we can build stronger relationships with our investors, our founders, and our communities to achieve our shared goals of driving impact and generating strong financial returns.

3. Know who you are and how you operate

When building the foundations for a multi-fund franchise, not leading effectively can be just as important as leading effectively, as it can serve as a cautionary example of what not to do.

We have all worked for leaders in the past, which made us recognise directly how we would never operate when we built our own firms. This defines "who we are", "what we stand for" and the "way we do things around here". It should align with our "corporate identity" and be representative of "who we say we are and how we operate".

When we are honest with ourselves about these questions, we can be intellectually honest about the brand and the identity of our company that we want to forge.

Activity: Take back to the office

Action: Take a pen and paper and get away from your desk, away from the noise, and write down the key elements that define how you absolutely do not want to lead in 2023. LaDawn Townsend

When I went away to write mine down, the following came up as common pitfalls I should avoid when it comes to leadership of our global venture capital firm:

• Lack of communication: Failing to communicate effectively with team members can result in confusion, misunderstandings, and a lack of trust. As Leaders, we should be clear and transparent in our communication, and ensure that team members have the information and resources they need to succeed. We should also encourage open and direct communication among team members, and create a culture where feedback and ideas are valued and encouraged. Direct communication can help to build trust and ensure that everyone is working towards the same goals.
• Micromanagement: Micromanaging team members can create a toxic work environment and erode trust and morale. As Leaders, we should trust our team members to do their jobs and provide guidance and support when needed without stifling creativity and initiative, and recognition to acknowledge their value and support to the objectives.
• Lack of accountability: Failing to hold oneself and others accountable for their actions can undermine the effectiveness of the team and damage the organization's reputation. As Leaders, we should set clear expectations and hold ourselves and others accountable for meeting those expectations. Trust your instincts - and make the hard calls and have the difficult conversations early. You won't regret it.
• Inflexibility: Refusing to adapt to changing circumstances or ideas can limit the effectiveness of the team and stifle innovation. Leaders should be open to new ideas and approaches, and be willing to pivot and adapt as needed to meet evolving challenges and opportunities. At R3i we have faced a warzone 4 hours from operations, a rapidly changing funding landscape, and a global pandemic, and learned that adaptation and flexibility are fundamental to not only survive but thrive.
• Lack of empathy: It's mostly about the journey not only the destination, especially when working through the challenges together of wars, pandemics and climate change. Failing to understand and empathize with team members who are often going through their own local challenges, can result in a lack of trust and respect, and limit the ability of the team to work together effectively. In 5 weeks our Climate Impact team had an earthquake, a flood and a cyclone! Life is no longer as we knew it. As Leaders, we should take the time to listen to team members, understand their perspectives, and demonstrate compassion and empathy in all interactions.
• Focusing on transactions over relationships: Manifesting our collective ambition to invest 1 billion into climate action through the R3i franchise will make a small dent to drive the transition to a more sustainable future and reduce the devastating impact of climate change. But it is going to take a global village, and prioritizing transactions instead of relationships will damage trust and limit any fund's long-term success.

Yes, as GPs, we should be honest and transparent in our communications, and provide regular updates on our company's performance, activities, and goals. But even more importantly, as responsible global leaders, we must focus on building meaningful relationships with Governments, LPs, founders, co-investors, team members, clients, and stakeholders, and prioritize collaboration and cooperation over short-term gains.

For it takes a village to deliver tangible climate impact and societal resilience.

Leading the Fund through turbulent times

With SVB bank runs, massive market volatility, and the challenges of a volatile, uncertain, complex and ambiguous environment, there is no doubt, that leading a venture firm in volatile markets can be challenging. Here are a few tips I have learned to navigate uncertain times effectively.

1. Being overly reactive: In volatile markets, it's crucial to maintain a long-term perspective and avoid making impulsive decisions based on short-term fluctuations. Stay focused on your investment strategy and fundamentals, and do not allow market volatility to dictate your actions.
2. Neglecting communication: During uncertain times, it's vital to maintain open and transparent communication with your team, investors, and portfolio companies. Make sure to keep all stakeholders informed about market conditions, investment decisions, and any adjustments to your strategy.
3. Ignoring risk management: In volatile markets, effective risk management becomes even more critical. Do not overlook the importance of identifying, monitoring, and mitigating risks associated with your investments.
4. Failing to adapt: Market conditions can change rapidly, and it's essential to be flexible and adapt your strategy as needed. Do not become too rigid or attached to your original plans, as this may hinder your ability to respond to new opportunities and challenges.
5. Overlooking portfolio diversification: During volatile times, it's crucial to maintain a well-diversified portfolio that can withstand fluctuations in the market. Avoid concentrating too heavily on a single sector or investment, which can leave you more vulnerable to market volatility.
6. Micromanaging portfolio companies: While it's essential to support and guide your portfolio companies, avoid the temptation to micromanage them. Allow the management teams to execute their strategies while providing strategic advice and resources when needed.
7. Neglecting team morale: Volatile markets can create stress and anxiety among your team members. Do not overlook the importance of maintaining a positive work environment and providing support to your team during challenging times.
8. Failing to learn from mistakes: In volatile markets, mistakes can be costly. Do not shy away from acknowledging and learning from any missteps to improve your decision-making and strategy moving forward.

By avoiding these mistakes and maintaining a proactive, adaptive, and communicative approach, you can lead your venture firm effectively in volatile markets, positioning it for success amid uncertainty.

The time is now

Ultimately, staying true to our purpose and remaining open and responsive to the needs of our investors, our founders, our team, and the broader community, is essential to building a successful and sustainable investment fund.

The IPCC's Sixth Assessment Report provides a comprehensive scientific assessment of the state of the climate crisis, painting a grim picture of the devastating consequences of rising greenhouse gas emissions and the need for immediate action to mitigate the risks.

We should know - we are all now living it.

However, it also offers hope, highlighting pathways towards reducing GHG emissions, increasing carbon removal, and building resilience, providing a clear pathway for climate action.

LaDawn Townsend invites us to reflect on our personal compass:

1. Know your why
2. Listen deeply to the Nos
3. Know who you are and how you operate

To deliver on our purpose as emerging managers, it is important to avoid common leadership mistakes such as lack of communication, micromanagement, lack of accountability, inflexibility, and lack of empathy.

Leading a venture firm through volatile markets requires maintaining a long-term perspective, transparent communication with stakeholders, effective risk management, flexibility and adaptation to changing market conditions, portfolio diversification, avoiding micromanaging portfolio companies, maintaining team morale, and learning from mistakes.

But most of all, it is crucial to prioritize building meaningful relationships and collaboration with investors, founders, co-investors, team members, clients, and stakeholders to drive the transition to a more sustainable future.

For only together can we accelerate impact.

Let's build tomorrow together!

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About the Author

Leesa Souldore ?is the General Partner of R3i Capital,?a global sustainable development venture capital fund ?investing in climate change adaptation and the transition to value-based healthcare. Reach out if you would like to learn more about our mission in the?R3i Future Fund.

What’s in our name?

R3i stands for returns, resilience and reliability — three characteristics that are often used to describe or evaluate investments, businesses, or other assets.

Together, these three characteristics can be important factors to consider when evaluating the potential risks and rewards of an investment or asset.

3 i’s — “Intelligence, Innovation, Insight” are the three characteristics that are often used to describe a venture firm’s edge. R3i synthesises these into its collective and inclusive “impact”.

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