Our Mission Driven Thesis
Purpose Fuels Motivation and Drives Competitive Advantages
Our core investment thesis at Better Ventures is that mission-driven companies outperform the market due to the magnetic force of purpose, which fuels intrinsic founder motivation and drives key competitive advantages in hiring the best talent, attracting resources to the table, and building an enduring brand. We’re highlighting examples of this thesis in action with stories from our portfolio and beyond in our new Mission Driven podcast series.
Mission-driven defined
Before getting more into this thesis, first a few words on how we define mission-driven. When assessing a potential investment, in addition to doing the typical diligence on team, market, defensibility, etc., we also assess a company’s external and internal impact. We look for measurable external impact created by a company’s products or services that scales as revenue grows, which can be quantified by metrics such as CO2 emissions offset, jobs created, and health outcomes achieved. We also look for strong internal impact within the company that can be characterized by the mission intentionality of the founders, team diversity, treatment of employees, and sustainable/ethical supply chains.
On the external impact front, we back companies that are building technology solutions to solve the United Nations Sustainable Development Goals (SDGs). We like to think of the SDGs as what needs to be achieved in order to build a society and economy in which both people and planet have the opportunity to thrive. We’ve been using the SDGs as an impact framework for several years now and find them to be helpful in qualifying and categorizing the impact of potential investments as well as externally communicating the impact generated by our portfolio companies.
When assessing internal impact, we look for founders who have strong mission intentionality and are passionate about solving a problem. We’ve found that some of the best entrepreneurs are “problem insiders” who have experienced a problem first-hand and have dedicated themselves to solving it. Great examples include Meena Sankaran who, having contracted multiple waterborne illnesses as a child growing up in India, would later go on to found clean water analytics company Ketos; and Erica Mackey, who founded in-home childcare provider MyVillage after struggling to find a high-quality daycare for her newborn daughter. Team diversity is also an important element in assessing internal impact, and we look for companies with both women and underrepresented minorities in leadership positions. 50% of our Fund II companies have at least one female or underrepresented minority co-founder, and we aim to continue this focus with Fund III.
A great way for companies to effectively communicate their external and internal impact to the market is by becoming a certified B-Corporation. We’re big fans of B-Corp, and we’re undergoing the assessment as we speak (we should’ve done this years ago, but we’re finally getting around to it!). B-Corp is an impressive community that includes the likes of Patagonia, Etsy, Ben & Jerry’s, and Method. We encourage our portfolio companies to become certified B-Corporations over time, and we can help guide them to get ready for that process.
Mission as a competitive advantage
We’re backing mission-driven companies because solving the world’s most pressing problems depends upon them. However, we also see an added financial benefit to this investment strategy. Our fundamental investment thesis is that mission-driven companies outperform the market due to (1) intrinsic founder motivation (i.e. they’re not just in it for the money), (2) their ability to attract and retain top talent, and (3) creating enduring brand loyalty (think Whole Foods, Tesla, Patagonia). In particular we’re seeing #2 play out across our portfolio with many of our companies going head to head with big tech to compete for the best talent in a highly competitive labor market because they can offer something the larger tech companies cannot: purpose in work.
In fact, a 2014 Net Impact study revealed that over 80% of Millennial workers would be willing to take a pay cut to work for a company that seeks to make a social or environmental difference in the world. This is a sea-change from 10 years prior, when only 26% of workers said impact was important in job selection, according to an Aspen Institute study. Ability to attract resources — both financial and human — is a key determinant of startup survival and success. The evolving attitudes of today’s workers are giving a big boost to mission-driven companies, which is a trend we’re tapping into at Better Ventures.
One key area that differentiates us from other investors is our focus on helping companies leverage their mission as a competitive asset in hiring, building their brand, and raising their next round. We work with our companies to draw out their impact stories and communicate effectively in their interactions with customers, employees and potential hires, partners, and the broader market. Every story and strategy is different, which is why we’re highlighting great examples from our portfolio companies and elsewhere in our new Mission Driven podcast series.
At our core, we are mission-driven investors, and we’re finding that many of the best and brightest mission-driven founders chose to work with us because they see great alignment of purpose along with the experience and networks we bring to the table. We not only embrace mission, but we help our founders turn it into a competitive advantage. We’ve just launched our third fund and we’re always seeking founders leveraging science and technology to make a big impact on the world. If this sounds like you or you’re interested to find out more, send us an email at missiondriven@better.vc.
