Venture Capital: Calm or Quick?

Yesterday, I was talking to my friend Faye Wongso . We were discussing my quest for investors for our new Impact Fund ‘Archipelago VC’. She told me that at a conference of AVPN in Abu Dhabi earlier this year, she met a family office. Their approach is to keep part of their capital ‘as is’. $ 1 billion is invested in impact and their goal is not necessarily to grow their principal. They expect to not lose their capital. Now that might be an extreme case, but I do hope more rich people and funds take a similar approach.

I came across The Calm Fund , ‘An ecosystem of founders and funders of profitable, sustainable, calm businesses.’ I love their approach and their philosophy makes sense. Maybe it’s even ‘normal business’, how things used to be before the advent of ‘startups’ and ‘venture capital’. Here are some interesting thoughts from the Calm Fund:

• Are you the founder of a calm company?

We're in the business of keeping you in business. We invest early in profitable businesses that want to maximize their chances of success and build for the long-term.

• When we refer to a calm fund, here’s what we mean above all: an investment firm that backs companies that do not risk survival for growth. -The Generalist

• At Calm Company Fund, we invest at every stage in software and software-enabled businesses. We’re not a typical VC though. We’re not in the business of putting founders on a “unicorn-or-bust” trajectory. We don’t endorse blitz-scaling or growth at all costs.?
• Instead we invest in calm companies. Calm companies grow at a sustainable pace, are focused on being profitable, are capital efficient and raise reasonable amounts of capital but are never dependent on it, and have a much wider range of successful outcomes.

The past decades, Venture Capital seems to have grown into the ‘default way’ to start a business. Young founders believe that the (only) way to start a business is to raise capital. And oftentimes, raising capital becomes a goal in itself. It’s like a rat race: once you take the first investment, there is no way back. The VC model is typically opposite the approach described above. The VC needs to return money to the limited partners and the best way to do that is to score a homerun. Most home runs are made by pumping round after round into a venture until it is sold or goes public.

Apart from the fact that this model does not always work for the investors, it kills a lot of startups along the way. And the people hit hardest are the founders. They are left with the crumbles of a failed company and written off investments. Of course, there’s successes, loads of them. But the rat race type of capital isn’t suitable for every business, nor for every investor.

The word ‘sustainability’ might be the differentiator here: businesses that focus on solving problems for our planet, should also focus on being sustainable as a business. In it for the long run. Focused on solving the problem rather than (only) making a home run. Patiently working towards the impact outcomes they set out to achieve.?

For investors, a sustainable business also gives more ROI: it can give a steady stream of dividends, alongside a potential exit later on. The business itself works to solve problems for our planet (and ourselves). And the investors / the fund helps the founder build a lasting business, which is good for them personally.?

There are not yet many investors that fit the description my friend gave. People who look beyond just financial ROI, willing to focus on impact metrics, supporting founders that build sustainable businesses. I believe it’s still a rare breed, but with the results of our changing climate hitting us in the face, more people will hopefully invest in the change we all need.