How to become a millionaire investor while scaling sustainability impact in the world
“If you could, would you make the world a better place?”
When US startup Eat Just developed the first plant-based egg alternatives, it was nearly ten years ago. Until now, the company hasn’t achieved its profitability milestone. But last December, the first lab-grown chicken produced by Eat Just, which is now a unicorn valued at US$1.2 billion, has been given the green light to be sold in Singapore, following its plan for the last capital raising before an initial public offering.
“Companies like ours can help meet the increased demand for animal protein as our population climbs to 9.7 billion by 2050,” Eat Just CEO Josh Tetrick said when the company earned the world-first regulatory approval of slaughter-free meat in Singapore.
Apart from the initial success of Eat Just this year, the shares of Beyond Meat Inc., a Los Angeles-based producer of plant-based meat substitutes founded in 2009, have also more than doubled.
Those are definitely not quick achievements, explaining how patient investors should be when investing in a typical “impact startup” – company that satisfies environmental, social, or governance (ESG) targets while pursuing a scalable financial return.
“If you’re looking for an impact investor, it’s someone who understands either the domain [the industry] or understands the need for ‘patient capital’,” said Pratap Raju, founding partner of the Climate Collective Network based in India.
Keith Ippel, co-founder and CEO of Spring Activator, an impact accelerator located in Canada, listed cleantech, foodtech/agritech, medtech, edutech, and the industrial manufacturing industry in a circular economy as the best high-return impact investing domains.
“That’s the future. That’s where all the money is going to be made,” he said.
In Climate tech or Cleantech, venture capital firms’ investment has increased from US$418 million per annum in 2013 to US$16.3 billion in 2019, which is three times higher than the growth rate of investment into Artificial Intelligence over the same period, according to a new study conducted by PwC.
In the last few years, we have also seen a surge in impact innovations among big corporations, including Tesla, Nest, Amazon. Especially, global fashion brands such as H&M, Ralph Lauren, Lululemon Athletica are highly involved in sustainability startup financing. Those capitals serve as considerable funding for later-stage impact startups.
BlackRock, one of the world’s largest asset management firms, noted in its recent report that sustainable investing would be no longer a niche area but turning mainstream without compromising financial goals.
International investors are expecting that this millionaire opportunity would prevalently occur within developing countries.
“People in developing countries are very committed to improving their standard of living,” said Ippel, while underlining that these countries account for three-quarters of the world’s population. “They are more committed to growth than entrepreneurs in North America or Europe.”
As IDG Ventures, one of the first movers in the gaming ecosystem in Vietnam 15 years ago, reaped a bonanza with its early-stage investment in gaming unicorn VNG, foreign investors could apply it to the nascent impact startup ecosystems in developing countries.
“This is the right time for investors to explore this risk-return trade-off because it [impact startup ecosystem] will change in five to ten years,” stated Raju.
Although Raju expressed his concerns over the lack of connection with broader funding sources for this field in the region, several recent events have shown positive signs.
In December 2020, UOB Venture Management, a wholly-owned subsidiary of United Overseas Bank Limited (UOB), announced that it had completed the first closing of its Asia impact fund at more than US$60 million.
One month earlier, APEC Business Advisory Council (ABAC) Indonesia has teamed up with venture capital firm Mandiri Capital to establish a fund to invest in startups with social impacts.
Currently, impact startups in these countries have increasingly contributed to addressing the world’s most pressing challenges, such as pollution, climate change, poverty, gender inequality, and health shocks like the COVID-19 pandemic.
“It’s not one is better than the other. It’s finding the right capital that matches that mission,” Raju said.
An Do, principal at Patamar Capital, a venture capital firm (VC) with over ten years of experience investing in Asia’s mass market, said at Techfest Vietnam 2020 that the VC firm assesses three sustainability aspects when investing in an impact startup, which are measurable impact, scalable impact, and long-term impact.
“The most successful ones seem to be those that can combine both technologies and social impacts, which make them much more ready for growth and attract more investment opportunities,” added Lan Phan, Head of Exploration at UNDP Accelerator Lab.
This combination could be in line with the advancements of breakthrough technologies listed by the World Economic Forum, including AI, CRISPR gene editing, quantum computing, 5G networking, Blockchain, Robotics, Virtual Reality, and Ubiquitous storage.
Alán Aspuru-Guzik, professor of chemistry and computer science at the University of Toronto and a Canada CIFAR AI Chair at Vector Institute, said that the connections between these revolutionary technologies and the world’s issues would form “a matrix” of future impact solutions.
“This is where I think your new deep tech startup will lie,” he added.
“The future return opportunity is far higher in impact than in regular investments,” Ippel stressed. “Who wouldn’t want to make the world a better place for themselves and for their kids?”
If any investor said yes and want those opportunities, Ippel said that we could congratulate him or her. “You are already an impact investor!”
“Whatever your return target is, that can be achieved while making the world a better place.”
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