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I remember having successfully raised venture capital (VC) for our organic fairtrade fashion company ten years ago and being forced to part ways after one year because our values were not as aligned as we made ourselves believe they were. I wonder what would have happened had I used this methodology?”
Apoorva: “Can you talk about what kind of values you and the VC were not aligned with? I also think that VC funding is not always the best type of funding. VCs want fast cash and 10X return. Are we building companies that give such insanely high returns? Or do we want to have a slow yet stable growth trajectory?”
Gijs: “Those are two separate questions, but closely related. The values are part of the organisation’s DNA (forgive me for the bad metaphor) and they filter out the type of people who hold other values. In my experience common values and beliefs among impact investors include:
* professionalism trumps idealism. There are hard skills and soft skills. The hard ones include working with money and technology while the soft ones refer to people. Sure, motivation and inspiration matter, but there’s a limit and you owe it to yourself to take your mission seriously, hire the best brains in the industry and get the job done. When push comes to shove it’s the implementation that matters, not the intention. The road to bankruptcy is paved with good intentions.
* financial returns are a sign of effective impact in society. Ultimately money is the best indicator we have of popularity and peoples’ priorities. If the target group is not willing to pay they are not interested enough. If other stakeholders are not willing to pay for them either then apparently you did not solve the problem. Sounds rough, but somebody’s gotta break the bad news.
* bigger is better,
* And finally: to be recognised by mainstream powerful institutions is the ultimate sign of success. The end game is to turn capitalism into a force for good. This is why impact investors adopt the same protocols, jargon and organisation structures as mainstream investment firms.
In contrast, my personal values and beliefs include the following:
* passion is needed to hold professionalism accountable. Disciplinary bias is a disease that all experts are prone to, leading them to forget the reason why they were given the opportunity to specialise in their field and falling into the trap of groupthink and silo behaviour.
* financial returns are based on a flawed set of assumptions and agreements. The biggest and most risky assumption is that humans are utility maximising machines, operating on pure rationality and devoid of fear, laziness and emotional attachment to power, status and history. If after 50 years of science on global warming we still chose to ignore it (and hence pay for it) does that mean that green solutions are not relevant? And the most silly assumption is arbitrarily ignoring (“externalisation”) of social and ecological costs that are obvious to anyone with common sense. So unless we radically change the way we calculate returns such numbers don’t help us make sense of our progress.
* the optimal scale of solutions is determined by the scale at which high leverage interventions are found. If a group needs to change behaviour for your preferred future to manifest, then find out at which scale their habits and convictions are best addressed. For a group with a strong local identity this may be very small, but for a cosmopolitan group it might be large. Bigger is not better or worse, it’s just different.
* and big corporations became big due to an outdated selection process, so they are least likely to point the way to models that will stay relevant in the future – instead we should look at those initiatives that find traction among the grassroots communities, avoid common pitfalls such as egotism, and keep re-inventing themselves.
Excerpted from Yatra – The Journey to Social Entrepreneurship by Gijs Spoor and Apoorva Reddy