Impact VC

Placeholder ImageWhile talking to VC firms, I have always found it difficult to pinpoint and eloquently describe exactly the area I was interested in – is it B2C? B2B? FinTech? E-commerce? On one hand businesses like marketing analytics aren’t super interesting to me (though I am sure there are wonderful companies working on this problem), so that would rule out B2B…but at the same time I love companies like Slack and WeWork. Similarly I was able to get excited for some consumer products but not others (even if both have raised money and/or gone public). The challenge was compounded when I realized some firms invest only in a particular function such as commerce enablement or business analytics. Communicating interests across consumer and enterprise, different industries, and numerous horizontal functions was a struggle.

Recently, I went through the exercise of identifying areas I am passionate about I discovered an important insight: it’s much easier for me to think about investing in terms of the impact the companies would make on the world. One example is improving wellbeing, be it psychological, physical, or otherwise. Another is improving asset utilization, also known as saving consumers and/or businesses time/money. Once I thought of things in terms of impact and social benefit, things clicked.

Below are some thoughts on the two spaces I mentioned and some companies I like in each. What other impact areas or companies excite you?

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Investment area 1: Improving wellbeing

With the advent and spread of companies like Blue Apron and ClassPass, it has become in vogue and increasingly easier to stay active and eat healthy. Consumers are more than ever aware of the benefits of taking care of themselves. Let’s split wellbeing into three categories and discuss investment areas in each: staying active (fitness), eating well (nutrition), and being emotionally balanced (mental health). Their combination represents well over a $1T market and has numerous investment opportunities.

Fitness: there is a gap in analyzing and tracking performance to ensure maximum efficiency during training. A Fitbit can tell me how many steps I walked but it doesn’t help me with my form or account for the fact that my step may be twice as long as another person’s. Companies like Rithmio and Shapescale are aiming to fix this. Rithmio developed software that wearable manufacturers can integrate into their products and that can independently learn gestures to give customized advice to the consumer. Imagine your fitness tracker suddenly able to give you specific insights about your jogging form to improve stamina and energy. With investment from Intel, Rithmio has insider access to their partnerships with Oakley, ESPN, and New Balance. By licensing this software to wearable manufacturers and developing a B2C app in parallel, the company stands to become a solid business. They have limited competition and a technology scalable to numerous industries. Shapescale tackles the “dumb tracker” aspect of the weight scale. Instead of giving a single number, the device uses a 3-D scanner to create a digital model of the body and can help track day-to-day progress, including changes in muscle size and fat composition. As a YC company, Shapescale has access to a great network that will maximize their marketing and distribution. This technology can be incredibly helpful and informative to the consumer and change the way they think about weight loss.

Nutrition: this space is getting crowded, with numerous delivery and food options to choose from; at the same time, consumers increasingly demand more organic, farm-to-table, responsibly sourced food with no added preservatives or refined sugar. I have recently taken up a paleo diet and find it fairly frustrating having to read every food label at a grocery store while not being able to afford to shop at a purely organic and healthy store. It would stand to reason that growing the supply of such ingredients would be instrumental to lowering the price and thus accessibility of healthy food. One way to do that is through precision agriculture, where rather than spraying an entire field with pesticide, a drone can determine and treat a specific source of plant malaise. A farmer may know what to look for but doesn’t have the technical know-how of how to accomplish this. A company like DroneBase, that is a marketplace for drone operators, could help bridge this gap.

Mental Health: there is a trend amongst the millennial demographic to value self-fulfillment in all aspects of their lives. Certainly I have seen the trend across MBA programs where fewer people are content taking corporate jobs and skew towards entrepreneurship. In parallel, things like meditation and self-improvement are becoming more mainstream. These trends demonstrate consumers’ willingness and interest to learn more about themselves and to seek happiness in their lives. One company that is enabling this is Talkspace: by lowering the perceived barrier to therapist services, it enables the average person to seek mental and emotional help. Access to therapy can be key to enabling the workforce finding fulfillment in their chosen field. In a similar vein, Akili is a great example of a company taking steps to treating cognitive disorders using modern technology. Rather than resorting to synthetic and often habit-forming medications, the company uses video games to help patients at home, with doctors tracking remotely.

Investment Area 2: Improving asset utilization, i.e. saving consumers and businesses money

Robotics and AI can go a long way to improving asset utilization. The automotive industry is a good example. If we assume that self-driving technology will permeate to the average consumer, then we can imagine a world where a person “allows” their car to drive around on its own and collect fares while the owner is at work, effectively diminishing the lifetime cost of the vehicle. This is compelling since 90% of the time a car goes unused and is one of the main reasons I don’t own one now. Another avenue of improving asset utility is marketplaces. An example is Flexe, which enables businesses to leverage existing warehouse space that is being unused by another business. This enables a business to allocate less money to storage costs and spend it on employees and developing great products. A third category is tools that enable more efficient transactions, such as the hire of an employee. The startup Interviewed creates automated tests that employers can use to evaluate how a potential hire would perform on the job rather than just going off their resume and interviewing skills. This minimizes the time that an organization would expend on recruiting and improves the happiness of employees since they have a better understanding of what is required of them in their new job.

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