Wharton MBA candidates Julia Enyart, Alice Tang, and Boyce Whitesides reflect on what they learned while working with an early-stage venture capital firm focused on “profit and purpose.”
Founded by social entrepreneur Derek Handley, Aera VC is an early-stage venture capital firm that seeks to be a catalyst for the new era of innovative ventures defined by both purpose and profit.
By forming a global investment network of family offices, Aera establishes access to financial capital to back entrepreneurs who demonstrate a business model with exciting and scalable technologies, early traction and a clear commitment to social impact. Given the Aera team’s expertise, it focuses on investing in ventures targeting large markets in developed countries, particularly in North America and Asia Pacific.
Through the Wharton Social Impact Fellowship, we had the opportunity to work with Aera VC to experience its unique approach to impact investing first-hand. Our tasks focused on deal sourcing, mapping of a high priority sector, as well as a landscape study of accelerators and incubators. Over the last few months, we’ve found that the path to achieving impact for impact investors like Aera is increasingly converging with that of traditional venture capital firms pursuing companies developing disruptive technologies.
Because these impact investors review a similar pool of opportunities as the traditional venture capital firms, they often compete for the most compelling deals. Would the impact investor usually be at an advantage? What would be the best way for impact investors to source the best deals delivering both strong financial and social returns? With these questions in mind, we present you with some of our reflections and thoughts from the fellowship.
As a first task, we explored the post-animal sector, which describes enterprises innovating across food consumption and material production. These companies include global meat substitutes, synthetic biology, and ag-tech, with products spanning from synthetic burger patties that sizzle and “bleed” to leather jackets made in a lab to organic preservatives that triple the shelf life of a strawberry. In essence, these companies execute on making the sci-fi prospect of using synthetic biology and alternative proteins to feed and clothe us a reality. Fueled by the very real threat of food insecurity as the global population reaches 9 billion by 2050, the race to perfect new sources of protein and raw material is ever more urgent: a 2016 Oxford study anticipates that the shift away from meat to more plant-based diets could save as many as 8 million lives and reduce food-related greenhouse gas emissions as much as 70% in the next 30 years.
The impact of enterprises striving to make dairy without the cow, eggs without the chicken, and even coffee without the beans is evident. It would be fair to assume that this space is dominated by impact-focused investors like Bridges Ventures, Omnivore Capital, and the Gates Foundation. However, in clear tribute to the profitability of the post-animal sector, premier VCs like Andreesen Horowitz, Google Ventures, and Kleiner Perkins have led some of the largest rounds in the space with food tech investment growing by 4.8 times up to $758 million in mid-2015. Edging their way into the scene are the corporate venture arms of chemicals-focused agribusiness giants Monsanto, Syngenta, and Cargill, who see the obvious advantage in ensuring access to key innovations in synthetic biology and chemical preservatives. Naturally, plant-based food startup Beyond Meat received funding from the Human Society of the United States; however, Beyond Meat also depends on less likely investors, including General Mills and Tyson, illustrating a growing willingness among massive food producers to experiment with products as the growing plant-based consumer segment signals a change in the tide of a meat-heavy American diet.
We also witnessed the convergence of impact oriented and traditional VCs during our second project with Aera. The goal was to develop a robust map of start-up contests, events, accelerators, investor communities or VCs that Aera could use to identify investment opportunities meeting their impact and financial goals. Aera hopes to use this information to identify the right events to attend and organizations to connect with as they look to grow their presence in the VC landscape. Initially, we set out looking for social impact focused events and organizations, and found a number across pitching competitions like MIINT, conferences like SOCAP, accelerators like GoodCompany Ventures or Unreasonable Institute, and communities like Echoing Green or the Social Enterprise Alliance. It was exciting to learn how many impact-oriented organizations existed, and even more encouraging to see how many are based here in Wharton’s backyard in Philadelphia.
As we continued identifying events and organizations, we started seeing more and more of the traditional names in technology start-ups and accelerators, like South by Southwest, TechCrunch Disrupt and Y Combinator. We were surprised by the number of companies participating in these organizations’ demo days that were driven by an inherent social purpose. This bleeding of boundaries between pure-impact and traditional start-up networks made it challenging to choose which events or organizations an impact-oriented VC should focus on within the broader start-up landscape- after all, whether the motivation is profit or purpose, the destination leads the investor to several of the same companies. Despite the ambiguities, we found it quite encouraging to see desire across the start-up landscape to find scalable and sustainable ways to create lasting social impact using technology.
The convergence between pure-impact and traditional VCs presents an interesting challenge for impact investors. Increased numbers of investors interested in social impact companies may lead to more competition for those deals, though it is unclear what will happen after the investment. Pure-impact oriented VCs have the ability to force entrepreneurs to commit to their impact goals, while traditional VCs may not force that same commitment. Thus, it is even more important for impact oriented VCs to tightly define their investment thesis and use their impact focus as a differentiator.
Julia Enyart is currently pursuing an MBA from The Wharton School and M.A. in international studies from the Lauder Institute, specializing in Africa regional studies and working towards fluency in French. A former international development professional, Julia spent three years helping to lead business development for Chemonics, a private international development company that implements projects for the U.S. Agency for International Development (USAID). As a New Business Manager, Julia was charged with pursuing and winning projects worth $650 million worth of USAID funding; during her tenure, she amassed over 10 months of fieldwork conducting in-market assessments and due diligence across Southeast Asia and Africa. Julia also brings a year of fieldwork with economic development NGO TechnoServe, through which she advised an impact-based private equity firm in Johannesburg, and two years as a management consultant with Booz Allen Hamilton. Within Wharton, Julia serves as the Associate Director of Partnerships and sector lead for Wharton Impact Investing Partners, helps to plan and execute the Wharton Africa Business Forum, and finds herself in dance studios performing to jazz and hip-hop whenever possible. Post-MBA, Julia is especially interested to pursue global strategy for multi-national corporations, impact investing, and venture capital in emerging markets.
Alice Tang is a first-year Wharton MBA student with concentrations in Finance and Multinational Management. Interested in pursuing a career in the social sector post-MBA, Alice is very active in the social impact community on campus through the Wharton Social Impact Club and Wharton Global Impact Consultants. Prior to Wharton, Alice worked at Accion International, a non-profit dedicated to providing affordable and quality financial services to the underbanked and unbanked populations around the world. Specifically, Alice was part of the Gateway Fund and Venture Lab teams, sourcing and evaluating impact investment opportunities in financial inclusion space in Asia, with a primary focus on China. Before joining Accion, Alice worked as an investment banker at HSBC Hong Kong for three years, supporting capital markets and M&A transactions in the Power, Utilities and Renewables sector in Asia Pacific. Alice graduated from the Stern School of Business at New York University with a Bachelor of Science degree in Finance and Statistics.
Boyce Whitesides is a first-year MBA student studying finance and management. Prior to starting at Wharton, Boyce worked in management consulting with Bain & Company’s Atlanta office. During his time there, he worked across numerous industries and capability areas, including private equity due diligence, consumer goods go-to-market strategy and retail operations. In addition to client work, he consulted local non-profits and did a six-month externship at a Georgia non-profit, Families First, where he helped develop an online learning platform and evaluate strategic funding decisions. Boyce is passionate about applying business concepts in innovative ways to create social change. At Wharton, he is the Sector Team Lead for the Health & Wellness sector of Wharton Impact Investing Partners and a member of the Social Impact Club. He enjoys playing basketball, cooking and exploring Philadelphia on foot – a welcome change after spending so much time sitting in Atlanta traffic.