Many Investors in Venture Capital Say a Big Return Isn’t Enough
Bloomberg – Niklas Zennstrom, whose technology investments helped make him a billionaire, said venture capital financiers are demanding a higher purpose from their funds. Managers of endowments and pension funds increasingly ask VCs to prioritize companies with an element of sustainability or humanitarianism, he said.
One byproduct of the shift is related to guidelines from the United Nations, Zennstrom said Tuesday at Bloomberg’s Sooner Than You Think conference in London. The UN’s General Assembly set 17 objectives, known as Sustainable Development Goals, for member countries to achieve by 2030. They include eliminating poverty and hunger, promoting gender equality and conserving the environment.
Achieving social impact was once the exclusive domain of academia, charities and government, but Zennstrom said businesses can help accelerate progress. “Grants and subsidies, that is not scalable,” said Zennstrom, a founder of Skype and founding partner of London-based VC firm Atomico. “You have to be able to produce these products and services in a commercially sustainable way.”
Zennstrom appeared onstage with two Atomico-backed companies to demonstrate the firm’s commitment to impact investing: Infarm, a Berlin-based startup that builds small-scale, soilless vertical farms, and Memphis Meats, a Berkeley, California, company seeking to produce meat in laboratories from cultured animal cells.
“Food production and the food chain is a huge problem for the environment and human health and animal welfare,” Zennstrom said. “It is one of the big core problems when you think about the climate and about our health.”
Memphis Meats has attracted investments from other socially minded billionaires, including Bill Gates and Richard Branson, said Uma Valeti, co-founder and chief executive officer of the startup. Investors are salivating over the possibilities for alternative meat products. Beyond Meat Inc.‘s stock is up fivefold since it first started trading last month, and Impossible Foods Inc. has raised more than $800 million in venture capital, according to research firm CB Insights.
Although Memphis Meats doesn’t yet have a product for sale, Valenti talked up the world-changing potential and, just as important, the potential to make lots of money: “We have profit aligned with purpose.”