Money can solve a lot of problems. Maybe not ANY problem, but it can solve a LOT of problems. In many ways, I am a gatekeeper between people who want to solve problems and people who want to invest in having these problems solved. Our startups are passionate about solving major built environment challenges to save the planet. Our investors want to deploy capital to solve these problems and make a nice financial gain. And our corporate partners are looking to startups to accelerate solving problems they have identified.
This is all good news. So what’s the problem? Well, this is just the Shadow Ventures ecosystem. When it comes to saving the environment on a larger scale, the challenge is that the billions of dollars that are being deployed to solve the problem lack efficiency. The amount of capital becomes less important if it does not reach the people who are actually solving the problems. So let’s take a look at what’s happening and what needs to happen.
For startups to save the environment, they need to be focused on solving real problems. Find the problem you want to solve, solve it, and remember that you don’t have to go it alone. Surround yourself with supportive people who understand your goals and your methods. And remember: how do you solve massive problems? One bite at a time. Don’t try to take on the whole world at once. Scale appropriately, making sure to sell the first $1M yourself.
Like I mentioned, we have many startups in our ecosystem that are focused on solving serious problems in the built environment. Since the built environment is the largest single cause of waste, solving problems in this area has a potential for massive impact. If you can be successful as a built environment tech startup, you can truly change the world. It’s important to note here that we need more real tech solutions, not more startups who think they are tech. We won’t save the world with tech-enabled service companies, marketplaces, e-commerce, or arbitrage. But that’s another article.
Saving the planet and humankind? Check the box. Our investors understand that when we invest in entrepreneurs who are passionate about solving these problems, we make amazing financial gains. As I’ve explained before, saving the world and making lots of money are not mutually exclusive. In fact, when it comes to the built environment and waste, saving the world and making money are intrinsically tied.
Not all investors recognize this yet, but we’re moving in this direction. Many investors are considering ESG (environmental, social, and governance) criteria before they decide where to put their money. The importance of investing in a socially responsible way will continue to become more widely accepted. If you’re interested in joining this group of people, make sure you know what it takes before you jump in.
This is where the bulk of the problem lies. Our corporate partners understand that saving the environment should be intertwined with their own financial pursuits. But on a larger scale, this is not the case. Clearly, in post-Davos 2020 almost every major corporation has identified that climate change is real. And they’ve committed to saving the planet: Bezos $10B, Microsoft $1B, Blackrock $500M, etc. While saving the planet has been the largest “problem” for humanity for decades, it is now finally a priority. There is finally a burning desire by the users (humanity) to solve the problem. But here is where the corporates are failing: they are viewing this as grant money and not an investment.
Don’t get me wrong; the focus of capital on solving this problem is necessary and good. But the strategy is wrong. Corporations should be getting this capital to entrepreneurs who will efficiently use the money to create companies that will solve a series of smaller problems. Instead, a lot of the money will be deployed as grant money to fund programs that treat the symptoms without actually solving the problems. Recycling is great, but it is not solving the problem of creating waste in the first place. Enough money can solve most any problem, but that money must be correctly applied.
If corporations stop viewing this as a charity and start viewing this as a financial opportunity (perhaps larger than their core business), then the money will flow to startups that will passionately work to solve the problem every waking hour of their lives.
The ideal solution:
Imagine if the $20B that has been announced went to fund 2,000 startups at $10M each. Conventional VC math (humblebrag: ours is very different) is that 1 out of every 10 is successful. So, 200 startups would be successful at solving problems that save the planet. These 200 startups would also generate returns that could re-deployed to other startups, thus creating a virtuous cycle.
This type of strategy could also attract the greatest minds to focus on the problem. Instead of building the next new pizza delivery app, those super smart recent college grads would concentrate on the planet. The optimism of turning a problem into an opportunity in a very efficient way is fundamental to the entrepreneurial mindset. This efficiency of capital is what creates billionaires like Bezos and Gates.
So if you want to actually save the planet, invest in a startup. If you want to save the planet and make some great financial returns in the process, invest in venture funds that are focused on saving the planet.
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