Derek Handley has a ticket to go to space with Virgin Galactic. But first the veteran of Richard Branson’s B Team has big ambitions here on earth. His new firm, Aera VC, has made six impact investments using its “social term sheet” and is building an “activist community” of family offices.
“These companies will do great: Positive impact on their communities or the world and they should also perform from a financial and venture perspective,” Handley tells ImpactAlpha. “We think there’s going to be more and more of them appearing and we think that there are still few early-stage funds that are specializing in this space.”
ImpactAlpha: You call Aera an “activist VC” firm. Why not “impact”?
Handley: First and foremost we are a venture fund. We have to invest in ventures that we believe will succeed and create really successful companies. Just our number one criteria, what that company is going to do, needs to be around the social or environmental causes that those founders decide that they want to address.
It's just a part of our mission and our mandate in the way that another venture fund might set up to back hardware or look at SAS-based software startups. They have a thesis, they have a discipline, they have expertise. Our thesis is: These companies will do great: positive impact on their communities or the world and they should also perform from a financial and venture perspective. We think there's going to be more and more of them appearing and we think that there are still few early-stage funds that are specializing in this space. If we do a good job of that, then we should get more of the best entrepreneurs wanting us to be a part of their fundraising.
ImpactAlpha: This isn’t then a mix of philanthropy and investing?
Handley: We're looking at the same kind of hurdle rate that a Silicon valley venture fund would look at. We want a company to be exceptionally successful, raise lots of capital. That's the kind of venture-backed company that we're looking for, and there is an element in it that our social mission is twofold. One is to accelerate these entrepreneurs, find them and help them succeed.
The other is to accelerate and build a community of family offices around the world, families from around the world who want to participate in this space and grow and understand how to invest in it.
ImpactAlpha: How did you end up at the helm of the B-Team?
Derek Handley: I had met Richard through Virgin Galactic, which was the first thing that I did with the money that I made from the company, I bought a ticket on Virgin Galactic. I'd met him through a variety of different forum and when I was at his home in the Caribbean I told him this story. I said next year I basically am giving a year away and people are proposing how they might spend it, how they might use that year.
He said I have this idea, we want to bring together some iconic leaders from global around the world who want to shift the dial of what the future of money and business and entrepreneurship and what capitalism looks like. We don't have a founder or a creator of that organization to bring it to life.
That was one of the things I knew how to do. I knew how to take something that's an idea and just make it happen. So that's the long story short, a fifteen minute conversation over some wine and playing some pool. I said ok, I'll start building this thing, whatever it is. And that eventually became the B Team.
ImpactAlpha: How’d you end up investing in mission-driven businesses?
Handley: Coming out of the B Team I didn't know if I wanted to build a company anymore but I knew I wanted to build new things so I started a small charitable trust in New Zealand. We piloted a lot of different things and ideas and I just started investing in startups that to me looked like they were trying to represent this new breed of entrepreneurship.
I did that for the last year and a half and decided to formalize it as a community and as a fund and a vehicle and scale it and grow it and become another early stage capital provider. That's much needed and is important for these startups when they're trying to keep and protect their social mission as much as their venture capital mission. And in a way I wanted to do it with some level of rigor, like actually put together some rigor around the social purpose and the measurement and that's why I created the social term sheet.
ImpactAlpha: Tell me about the social term sheet. How have entrepreneurs responded to it?
Handley: I think that people have really reacted strongly and positively to it and it's surprised people in terms of its simplicity. It's just a page and it catches a lot of the spirit of what we're trying to do. They often look at it and go, wow, this really encapsulates a lot of the things I've been trying to say about why I'm trying to build a business and what I'm trying to do.
I hope that it's something that can be used by people to explain to other investors or staff what they stand for. If you don't and it doesn't resonate with you then there's no problem at all but you could probably find some other partners that make more sense.
ImpactAlpha: Why build a network of family offices?
Handley: We want to get like-minded people to learn from each other. It's very specific though, we're only about early stage venture-backable companies, so we're not looking at any other sort of asset class, which you know if you're part of The ImPact, it's basically everything under the impact spectrum.
We're trying to appeal to next generation members of families who really are excited about technology, digital companies, startups, you know, the true kind of startup in the sense of the word that we know of in the US and the way that it's been kind of iconic coming out of Silicon Valley. That kind of interest we're trying to build a group of young people around.
We know that that's more interesting to younger people than maybe some of the other asset classes that they can get into like passive funds or microfinance or green bonds or those kinds of things. This is about exciting young entrepreneurs building really amazing companies and on the other side building a community of young, excited, next generation families around the world who want to help those companies. Maybe they want be involved, maybe help them move from one country to another country and learn how does this work. How do we find these kinds of companies, how do we back them, what criteria make a good one versus not a good one.
ImpactAlpha: What sectors is Aera excited about? Your early investments are in food, media, education.
Handley: We don't limit ourselves to those sectors. Those are obvious sectors so it makes sense. But it's not that we had gone out and said these are the only sectors we're looking at. They just happened to be ones that we liked.
ImpactAlpha: What other types of companies are you looking at right now?
Handley: We're looking at everything from food systems to media as you know, with News Deeply. We're looking at things in the space of sustainable finance, health, digital health technologies, we have looked at fashion, building a fashion digital presence, and culture.
It's pretty broad at the moment, we're just continuing to look at whatever is coming through and seeing what stacks up. So the six that we invested in, there's a couple in media, a couple in education, one is in philanthropy, online philanthropy, that's Good World out of Washington DC. And then Eat My Lunch is a food one in New Zealand, a food and poverty one.
ImpactAlpha: What's the size of the fund?
Handley: Well, our goal is to do probably 15 deals in the next year and a half at somewhere between $100,000 and 500,000 per deal. That gives you an idea.
Photo credit: Wharton Social Impact