Raising the Bar on Impact
As a venture firm partnering with founders on a mission to build a better world, we are constantly thinking about how best to measure impact. We back companies leveraging emerging technologies and breakthrough science to decarbonize industry, improve human health, and democratize prosperity. But how do we measure the tangible outcomes these companies have on society?
In recent months, there has been a robust discussion and increased scrutiny on impact & ESG investing. It has ranged from The Economist’s special report on whether measuring impact is really possible to some states banning the consideration of ESG by investment firms. This renewed discourse is timely given our own internal discussions.
Over the past year, we’ve invested considerable time and energy updating our impact methodology. We’ve always measured and reported on the impact of our portfolio companies since the founding of Better Ventures in 2011, but this new and improved approach will allow us to be even more rigorous in measuring company outputs and comparing how our dollars align with our mission.
At the outset of determining a solution for measuring impact, we explored other organizations’ methodologies extensively to glean best practices, auditing dozens of frameworks and reports. However, it became clear that other methodologies were either too expansive for our firm’s specific focus on climate, health, and economic opportunity or didn’t closely align with the external impacts we were trying to measure. To best serve our purposes, we aggregated existing protocols into the most specific and relevant units, while maintaining rigor.
This has been an extensive undertaking rooted in research, exploration, and value alignment. We landed on an approach that combines the frameworks put in place by the UN, B Corp, and IRIS+. At the core, we are implementing a system rigorous enough to show true effects on society, while simple enough to be applied to our main investment themes.
Taking this blended approach, we have settled on measuring five main impact metrics across the portfolio: people served, metric tons of CO2 emissions avoided or reduced, gallons of water monitored and protected, quality jobs facilitated, and metric tons of waste avoided or reduced. In most instances, we include additional criteria where relevant.
Boiled down to these five metrics, we aim to measure the impact our companies have in improving climate change, health disparities, and economic inequity. Not every metric will be relevant to every company; for example, an education startup concerned with increasing equity to underserved students will not report on CO2 emissions avoided or gallons of water use monitored. We ask companies to report on their metrics annually so that we can track trends.
In addition, the report includes an update on our DEI goals that we set out in 2020 (here’s the latest update on Fund III diversity). We’re seeing tremendous progress here, but we know there is much more work to be done before the racial makeup of venture-backed founders represents the diversity of our society. Until our portfolio reflects broader society, we’re not done.
We recognize that measuring impact is an important element of getting results and making a difference in the world. However, because there is not yet one agreed upon standard approach to measuring venture fund impact, we will continue to align our methodologies with the most respected frameworks, refine our approach, and strive to lead the industry.
A special thanks to Rick Moss and Eva Greene from our team on leading the efforts on this report and for driving the research and thought leadership.
Take a look at our impact report here. We hope you enjoy it!
