ImpactAlpha, Feb. 10 – New solutions often look impossible, or at least implausible, before they seem, well, obvious.
Beyond Meat was a contrarian bet on conscious consumers until it became a Wall Street darling.
“Even along the way, there were a lot of raised eyebrows from our peers around whether this was really a venture play or not,” says Andrew Beebe, a partner at Obvious Ventures in San Francisco. “It turned into an absolute homerun.”
The ‘world-positive’ venture firm founded by Twitter co-founder Ev Williams just closed its third fund in six years at a quirky $271,828,182 to look for more obvious disruptions in energy and mobility, health and the workplace. “All of these areas are extreme growth areas, driven by that underlying behavioral shift of consumers and then ultimately, business leaders,” says Beebe in a Q&A with ImpactAlpha.
Contrarian bets on the sustainability disruption are the stock in trade of a growing number of tech-for-good venture funds including not only Al Gore’s Generation Investment Management and DBL Ventures, but relative newcomers like Fifty Years, Future Ventures and Obvious.
Purpose is a leading indicator. Beebe is excited about EVs beyond cars. “Cities are going to war on the internal combustion engine,” he says, opening an opportunity for all-electric trucks, fleets and shuttles. He says electric bus company Proterra, an Obvious portfolio company, is selling every bus it can make in its three U.S. factories as cities and delivery companies upgrade aging, polluting fleets. “We’re continually followed on in rounds by some of the biggest typical or more traditional brands in venture,” Beebe says. Still, he says, “People are, I think, still raising their eyebrows and I love that.”
ImpactAlpha: Obvious just closed its third “world-positive” venture fund. The fund has another funky size: $271,828,182. What’s the significance?
Andrew Beebe: We’re sort of math nerds at Obvious and we like to keep it fresh and not take ourselves too seriously. This time we settled on a great number, Euler’s number, named after the mathematician. He had a lot to do with understanding compound interest and that’s a pretty important number for venture. It’s 100 million of E, which is 2.71828459045. We just thought we’d have some fun with it. Each of our funds has been a little bit irreverent.
ImpactAlpha: You fairly quickly raised these three funds. Is that quick on Silicon Valley terms?
Beebe: Not of late. We are probably right in the typical zone these days for the deployment of funds, maybe even a little bit slower than some. There’s been really heavy activity over the last eight years or so in venture and a lot of great companies have started, so that keeps us busy. I could imagine the pace slowing down some in the next year or two, but we’ll see.
ImpactAlpha: Do you think the type of “world positive” companies you focus on are having a moment?
Beebe: I do. I think what’s really happening is that younger people want a couple different things they have shown very clearly, statistically, and in the broad trends and actions that I think most people feel. They have shown that they want to buy from brands and companies who they trust and believe in and that have authenticity. They want to work with companies that they trust and believe in and have authenticity. And I think that, as is often the case, they are leading other parts of the population as well. When it comes to climate change or the way that they think about their food or the delivery of their healthcare, all of these things are drivers for behavior and those drivers of behavior turn into economic opportunities.
Beyond Meat is a classic example. We were definitely contrarian when we first invested in Beyond Meat six years ago. Even along the way there was a lot of raised eyebrows from our peers around whether this was really a venture play or not. It turned into an absolute homerun. I think that when we look at electric vehicles, when we look at digital health, when we look at computational biology – all of these areas are extreme growth areas driven by that underlying behavioral shift of consumers and then ultimately, business leaders, who are that same generation.
ImpactAlpha: Do see more Beyond Meats coming out of those categories?
Beebe: For sure. We are a venture capital firm, so we look for omens and purpose-driven entrepreneurs who are disrupting trillion dollar industries. When you do that, and when you put it in that light, we’re continually followed on in rounds by some of the biggest typical or more traditional brands in venture. I think that’s just a sign of the times.
There is a sea change taking place. My hope is that it does not become bubble-ish like the cleantech bubble of 10 years ago, where there was a little bit of irrational exuberance applied to it. I don’t think we’re seeing that yet. I hope that holds.
ImpactAlpha: What have been some other early successes out of the first two funds?
Beebe: We invested in an amazing vitamin company called Olly, which makes adult gummy vitamins that was sold to Unilever last year. We have a number of companies that are in the later stages of growth that I think we can call successes but they haven’t become liquid yet. Companies like Proterra, the electric bus company. Recursion Pharma, which is a drug discovery platform using computational biology. Virta Health, which is reversing Type 2 diabetes. Devoted Health, which is a full stack healthcare company. It’s a pretty long list of fun companies. Then earlier stage companies like Lilium, which is a vertical takeoff and landing air taxi based out of Munich, Germany.
ImpactAlpha: Do you think Obvious’ “world positive” focus gives you an edge with entrepreneurs?
Beebe: We’re maybe a little bit different than both sides of that coin.
On the one side, we seek out purpose-driven entrepreneurs. If you believe that you’re purpose-driven in the way that you want to build your business, whether you’re building Gusto, the HR payroll platform that we’re invested in, or you’re building Mosaic, which is a solar-finance company, we absolutely have an edge because it’s a self selecting process. They seek out people who understand what it means to build a purpose-driven company and might be able to help them.
On the other side, from a pure venture standpoint, we are not the firm that asks you to fill out 20 forms every month about exactly how many kilograms of carbon you are offsetting net of your employees’ commute. We don’t mind if companies want to do that, we just don’t require it of them. We encourage them to focus on diversity in their executive teams and their board members, but we don’t require it of them. Going down the list in our firm, we’ve all been founders and entrepreneurs. We just know the tax that comes with additional requirements other than, “hey, here’s some money and we want to be extremely supportive board members and be partners with you to figure all of this out.”
ImpactAlpha: You are referring to the World Positive Term Sheet that asks companies about values, diversity sustainability, etc. Is that the extent of what you’re doing to capture impact?
Beebe: As companies mature and get closer to the public markets, there will be greater and greater requests and requirements for disclosures that we’d like to help them prepare for but it’s just not something that we mandate or force on them. We think it’s cumbersome and unnecessary if they’re purpose driven from the core and then ultimately, it would make us less competitive if we did do that.
ImpactAlpha: Have you had an experience with a purpose-driven company that created some sort of negative unintended consequence that you didn’t foresee?
Beebe: We haven’t. We’ve had companies pivot and change but this is why we really look to the values of the founders. If we can look into their souls and believe that they are really driven by purpose, and what that means to us is building a profitable long-term sustainable business that’s doing good and being better than what’s out there today, I think that helps to predict positive outcomes regardless of pivot. But the idea that you can just mandate your way into good behavior with founders is, I think, a false premise.
ImpactAlpha: You may not be able to predict a company’s impact but how do you manage it and help founders stay on that path over time?
Beebe: We rely on the founders to do that. However, the second part of your question is how do we help them. I think there’s a ton we can be there. Each of us as partners has different specialties. We work with them on purpose driven brand building. How to communicate your focus and your values to your customers, which is critical. If you start to build that bond from day one that actually cements your purpose, a lot more than some kind of board level dashboard.
Al Gore’s Generation Investment raises $1 billion to invest in “sustainability revolution”
I do a lot of work with founders on OKRs [objectives and key results]. I just published a post on Medium about how to build purpose-driven objectives and key results systems for management and burning them into the DNA of the team. That’s how you get it done. We spend a lot of time on that work. That’s work that the founders invite us in to do that, and I would say excitedly invite in. They’re pumped up to hear that partners will come in and do that work with them. It’s a differentiator for us in the market.
ImpactAlpha: Your purpose-driven OKRs are a dashboard-type of mechanism, no?
Beebe: Yeah, yeah. This is showing them a mechanism they can use to manage their organization. What we’re trying to do is help them also apply purpose to that effort.
ImpactAlpha: So this is internally focused.
Beebe: Yeah. We don’t tell them what their purpose needs to be we. We don’t tell them that they’ve got to be measuring carbon, or, removing slavery in the shrimp trade. We just tell them, “Here’s how you do it. You decide what you’re measuring.”
ImpactAlpha: What’s an up and coming sector that people are still raising their eyebrows at?
Beebe: EVs. I think people are raising their eyebrows and Proterra is selling electric bosses. It’s fun to say and I can’t say it enough: They cannot make them fast enough for their customers right now. We have three factories across the U.S., making “American made” all-electric buses for cities, airports, school districts. There are 5,400 municipal buses sold every year in the US. There’s something like 5X that in school buses and other forms of shuttle buses. They will all go electric. They’re not waiting for consumer choice to catch up. Those new city managers are saying, “you know what, my kid goes to school, my constituents’ kids go to school and they sit on the diesel buses and it’s bad for them and they’re old buses. It’s time for an upgrade. People are, I think, still raising their eyebrows and I love that. https://impactalpha.com/fifty-years-50-million-fund-signals-techs-turn-toward-impact/
ImpactAlpha: So electric vehicles beyond cars. Vehicles that are part of the infrastructure of cities.
Beebe: Cities are going to war on the internal combustion engine. I think we’re going to look back and call it the Ice Age. City after city is saying to UPS and FedEx, “we don’t want internal combustion engines in our cities.” Even better, there’s a truck you can buy now that will allow you to deliver in our city without spewing emissions on our streets. Now those products exist. There’s like a zero scenario that cities don’t just start… either they’ll start banning them outright. London is starting to do this. The deal with Uber is going to be, “you can come back into the city with electric vehicles, but otherwise you can’t.” That kind of stuff is going to make a big, big difference.
