It’s easy, everyday, to feel like the world is getting worse. I spent most of 2017 feeling that way. Our president has the lowest approval rating in history. We experienced a record-setting number of natural disasters last year. 82% of the wealth created in 2017 went to 1% of the population. Bad news (and fake news) is inescapable.
And yet.
As investors, we balance two competing default modes: the innate optimism required to believe in the potential and opportunity in lots of things that are statistically likely to fail, and the discipline and cynicism to not follow this optimism blindly (which is why we say ‘no’ to most opportunities).
In the first few weeks of this new year, I’ve been reflecting about whether things feel like they’re getting better or worse. Taking the lens of my limited personal experience — as an investor trying to deploy capital to address global problems that can feel overwhelming — the optimist in me is winning out. Here’s why:
First, the conversations around sexism, sexual harassment, and the #metoo movement — which many expected to last for only a few news cycles after last summer’s series of dominoes falling around Silicon Valley & Hollywood — have persisted, and prompted some real conversations about gender inequity in the working world. 40% of young men say that #metoo has changed the way they interact in potential romantic relationships. The movement has started critical conversations about intersectionality and power dynamics. While conversations are not in and of themselves a solution, behavior change needs a starting place. Record numbers of women running for office should help.
We’ve seen this translate to the venture world. While it’s discouraging that the statistics on funding of female founders aren’t getting better, we’ve seen a groundswell of initiatives, from female founders’ office hours to almost-weekly announcements of new female-founded funds or funds focused on backing female founders, to the (overdue) addition of female partners at traditional venture firms, that suggest that the industry is finally taking steps to address some of the pipeline issues that have contributed to keeping these numbers low. It feels like the tide is turning — still slowly — but turning. I have fewer conversations these days that dismiss investing in female founders — 50% of the population with 85% of the consumer spending power (!) — as a “niche” strategy. Unconscious bias shifts with slow and deliberate changes in everyday conversations and actions, and we’re seeing some important leading actions.
It’s also been a good year for entrepreneurs that live more than an hour from the startup playground of San Francisco. While it’s discouraging that new firm creation is down compared to 30 years ago — a bad sign for job creation and the entrepreneurial future of our country — we’re seeing more attention paid to cultivating entrepreneurial ecosystems in previously overlooked markets — for example, the Rise of the Rest seed fund, which will provide opportunity for entrepreneurs from Nebraska to Maine. New tax incentives may also help drive more investment attention to “Opportunity Zones” — parts of the US that need economic revitalization. It’s now more in vogue to admit you’re willing to get on a plane to find great startups.
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We’re also seeing new forms of deploying capital that offer promise of expanding opportunity to different types of founders, with different types of businesses, in any market. From Social Capital’s ‘Capital as a Service’, to alternative structures like we’re using at VilCap Investments or Indie.vc is offering, to ICOs…the power dynamics are changing around founders’ choices of how to build their companies, and will hopefully support a reversal of the downward trend in entrepreneurial growth.
Finally, the past year has seen more and more conversation around the segment of the market where we invest — in startups seeking to have both market rate financial returns and impact. There is more honesty about what’s not working and why this work is hard, which is healthy. But if the world’s largest asset manager believes in the business case for long-term thinking and social and environmental impact, the rest of the capital markets will likely eventually pay attention, too.
Within our own portfolio we learned plenty of lessons this year — including tough leadership transitions and a handful of companies that are nearing wind down — but we also saw our first exit from a company in East Africa, which has now enabled us to return capital to our investors from each of the four global markets in which we invest.