ImpactAlpha, Dec. 9 – Fifty Years has always been something of an odd fit among both tech venture capital and impact investment funds.
The San Francisco venture firm has raised two funds totaling $55 million and made investments in more than 50 companies. But Fifty Years’ focus on companies that can put a dent in the Sustainable Development Goals has been seen as too soft in Silicon Valley. Its insistence that such firms could be massively profitable made it a misfit among some impact investors.
“Deep tech” may be the category that fits best, given Fifty Years’ bent toward companies pursuing high-risk breakthroughs in science or engineering. The firm’s name comes from a 1931 essay by Winston Churchill, who predicted nuclear power, cell phones, genetic engineering, artificial intelligence and even cultured meat.
Seth Bannon, who founded the firm in 2016 with his partner Ela Madej, shared limited performance data with ImpactAlpha that signals the potential of deep tech for both financial returns and outsized impact. The data suggests the performance of Fifty Years’ $5 million first fund ranks in the top decile of venture funds of similar vintage.
Fifty Years is considered a seed, or even pre-seed investor, which in Silicon Valley terms means companies valued in single-digit or low teens in millions of dollars. Follow-on financing for the firm’s portfolio companies have been led not by other impact investors, but by premier VC firms like Andreessen Horowitz, Founders Fund, Union Square Ventures, Sequoia and Khosla.
Based on those financing rounds, companies in Fifty Years’ portfolio have increased in equity value by at least $3 billion, says Bannon, with at least eight companies now valued at more than $100 million.
After years of making the theoretical case, Bannon says, “We’re finally able to show some data that at least one fund taking the approach of backing really high risk, really high reward startups that, if successful, will be massively profitable and make a massive positive impact, is working.”
Accelerating solutions
If the impact investing case for high-risk investments in science- and engineering was theoretical, COVID-19 and the fast-arrive climate catastrophe have brought it home. Case in point: 2020 has been a banner year for venture capital investments in biotech, agrifood and climate tech, and a breakout year for Tesla, Beyond Meat and other sustainability-themed companies.
To be sure, Fifty Years’ portfolio gains are as yet unrealized. But some of the valuation gains are indisputable. Memphis Meats, for example, which Fifty Years’ backed in 2016, raised $161 million in January, in a round led by SoftBank Group, Norwest and Singapore’s Temasek. The Berkeley, Calif.-based company is developing lab-grown meat from animal cells, offering a pathway to cut greenhouse gas emissions from meat production.
Fifty Years has backed Boulder, Colo.-based Meati Foods, which makes a meat alternative from high-fiber, high protein Mycelium, the thin roots produced by fungi. Fifty Years invested in last year. In October, the company raised $28 million led by Acre Venture Partners.
“If you can make the exact meat people love, but just in a sustainable way, that’s a huge win,” says Bannon.
Houston-based Solugen uses plant derivatives rather than petroleum inputs to produce safer and cleaner chemicals for agriculture, energy, water and personal care. Fifty years invested in early 2017. Last year the company raised a $32 million round led by Founders Fund.
Biotech company Helix Nano is developing a pan-cancer mRNA therapeutic platform, leveraging technology similar to what BioNTech and Pfizer, along with Moderna, are using to develop their Covid vaccines. Helix Nano pivoted to making its own Covid vaccine in March.
“If you’re looking at the intersection of ‘can do a lot of good’ and ‘can make a lot of money,’ you’re gonna have healthcare on that list,” says Bannon.
The economics of building a pharma company are changing, as upstarts deploy robotics and machine learning to more quickly and cheaply develop therapeutics and vaccines. Investments in Manifold Bio, Octant and Billion to One, as well as Helix Nano, are part of strategy to back therapeutic platforms across modalities, increasing the chances of a hit.
Early on in the pandemic Fifty Years green-lit more than a dozen companies to focus on healthcare solutions. Robotics company Opentrons, for example, helped New York City ramp up testing infrastructure, with a testing lab that reduced turnaround time to 24 to 48 hours at a lower cost than the bigger laboratory companies.
As if to prove the deep tech point, Google’s deep-learning program last month solved one of biology’s biggest challenges, outperforming a hundred other teams to determine a protein’s 3D shape from its amino-acid sequence. “It’s a game changer,” Andrei Lupas of Max Planck Institute for Developmental Biology, told Nature. “This will change medicine. It will change research. It will change bioengineering. It will change everything.”
Fifty Years is deepening its focus on sustainability tech, from decarbonizing industries to removing carbon already in the atmosphere.
Bannon says Fifty Years wants to “put a stake into the heart” of the notion “that big tech approaches to impact” are not a great approach. “You can find these profit models that sync so beautifully with these impact models.”
Impact continuum
As the pendulum of impact investing has swung back to basic-needs businesses, or ‘infrastructure’ plays with steady revenue streams, Fifty Years’ thesis represents a counter-example. Bannon and Madej’s swing-for-the-fences approach is more akin to tech venture capital – with the distinction that they’ll only consider companies that can demonstrate the potential for exponential positive impact toward at least one of the Sustainable Development Goals.
The approach is not for everyone. But unlocking the capital needed to address challenges, from poverty to climate change, requires the full range of investors, and more.
“Our message would be, ‘See the full continuum of capital and be intentional about where you play,” as Robynn Steffen, then with Omidyar Network and now with the Climate Leadership Initiative, put it in ImpactAlpha’s ‘Beyond Tradeoffs’ series last year. “The challenge is not only to crowd everyone into the big tent, but also to empower and inspire asset owners to align their capital with the market segments best poised to deliver on their unique expectations for risk, return and impact.”
At one end of that continuum is ‘catalytic capital’ that is “patient, risk-tolerant, concessionary, and flexible.” The Catalytic Capital Consortium, led by MacArthur Foundation, Rockefeller Foundation and Omidyar Network, is demonstrating the value of such capital for crowding in commercial investors and making deals work in tough markets and for low-income customers (see, “Indispensable element in many impact investments: ‘catalytic capital’”).
The family office Ceniarth is bringing together other high-net worth families around ‘impact-first capital-preservation’ strategies that fight poverty and deliver “a yield in line with inflation and reasonable expenses” (see, “For Ceniarth’s impact-first portfolio, ‘catalytic’ just means reasonable”).
At the other end of the spectrum has been ‘market-rate’ impact investing that offers returns in line with conventional portfolio approaches. Impact Capital Managers, for example, is a network of 56 funds managing $12 billion in assets that have an explicit commitment to drive, and measure, positive social impact while seeking “competitive, market-rate returns.”
Bannon is not looking only for ‘market-rate,’ or average, returns. Rather, he says Fifty Years is seeking impact unicorns that can reap outsized rewards with solutions to big challenges – and is willing to take risks to find them.
“We think we can push ourselves to be even a little bit bolder,” he says, “in backing teams that can potentially eliminate entire problem-sets using these technologies.”
