The Future of Capital
This week’s Economist cover The Next Capital Revolution (and some uninterrupted flight time) motivated me to finally get my thoughts together on fundraising, starting a company and how access to capital needs to change. I’m sure this could be a much longer post, but for now 5 thoughts:
Although I was taught in business school that investors only care about ROI and the bottom line, I find my conversations with actual human investors, particularly those in the private markets, are much more concerned with the whole picture, the human, societal and environmental impact of their investments. I would not call this impact—I would call it “wholistic” and I personally want to believe in a future where some version of the triple bottom line (people, planet, profit) is the true measure of success.
Along these lines, I’ve recently seen interest in alternative investment forms from crowdsourcing, to B-corporations continue to rise as there is certainly a gap between great companies being built and the scalability necessary for venture capital investment and returns. Many companies I meet with I am confident will build successful businesses that will improve people’s lives, but I cannot invest in if we require venture scalability ($50M in revenue, in 5-7 years, with 50% EBITDA margins).
I recently met with Suzanne Andrews, an angel investor who is looking at the entire ecosystem for entrepreneurs. I thoroughly enjoyed our discussion which pushed me to think about this problem holistically and systematically. She recommended the The Purpose of Capital —will circle back on my thoughts once I finish it.
One instrument for investment that aligns managers interests with owners—the ultimate principal agent problem—is the SHARE investment vehicle as opposed to the SAFE. I learned about this from Adam Huttler and invite you to read his Medium post here.
Coming back to the Economist and how this all impacts the worker, we’ve seen a rising distrust in institutions, unions and capitalism over time. This is lockstep with the falling rate of labor’s share of GDP, reduced purchasing power and flat productivity. If the trends in inequality continue, then the system itself will implode. A new way of creating and harnessing value that rises all boats with it is not only welcome, it is required.