Better Ventures 3.0
By: Wes Selke
Tags: Better Ventures, Artificial Intelligence, Better Ventures News, Venture Capital, Impact Investing

Better Ventures 3.0

At Better Ventures, we back founders on a mission to build a better world. We invest in pre-seed and seed-stage software, data science, and life sciences startups that are innovating across industries in ways that will generate big profits and measurable progress towards achieving the Sustainable Development Goals. We’ve been backing mission-driven founders since we launched our first fund and accelerator program at the Impact Hub San Francisco back in 2011. Last month we held a final close on our $32M third fund, and we wanted to take a moment to reflect on the incredible journey that got us here and discuss what we’re excited about as we look ahead.

Humble beginnings

It all started over a beer. I was working at Good Capital, a pioneer impact investing firm that I joined out of business school, and I met Rick at one of our monthly networking events we were hosting back in 2009 (Rick likes to say he met both of his significant others — his wife and me — at a keg). Rick was making a transition out of his tenure doing venture investments and acquisitions at Sun Microsystems, and he shared my vision for working with early-stage mission-driven technology companies. After a series of meetings over the following year, we decided it was time to launch something together.

Around this time, the Impact Hub co-working space opened in San Francisco (think WeWork for impact startups), and it immediately filled up with mission-driven startups seeking capital and advice. With support from Good Capital, Rick and I launched an accelerator called Hub Ventures and a small fund to fill that gap. That first fund was a micro micro fund with total capital of $490k (yes, “k” as in thousands), and we invested an average of $25k in inception-stage startups, primarily through the accelerator. We hustled just like any good startup founders do and scraped and clawed our way to making it happen — Rick doing some consulting on the side, me continuing to do work for Good Capital, and both of us sourcing sponsorship dollars for the accelerator to keep things afloat. Hub Ventures was a great opportunity for us to start working together on a small scale, and it became the predecessor to our work at Better Ventures.

In those early days, we had a broad mandate around the types of mission-driven companies we backed, as can be seen in our first fund portfolio, which ranges from mobile communications in Africa (Africa’s Talking) to cloud-based cardiac diagnostics (Eko) to fair wage digital work opportunity (LeadGenius). Fund I included a wide variety of companies and has gone on to become a top decile performer thanks to an early exit and 3–4 other emerging breakout companies, which enabled us to springboard into a $21M second fund in late 2014. Note that when I say “springboard,” I really mean it took quite a while to raise that second fund, sort of like cycling Tour de France epic climbs Alp d’Huez and Ventoux, and then throwing in Tourmalet for a final kicker. With the launch of our second fund, we transitioned out of the accelerator model into a high-engagement pre-seed investor and rebranded as Better Ventures.

The evolution of our thesis

With Fund II, we began to narrow our focus on technical teams building mobile, enterprise software, and data analytics businesses pursuing impact in three vertical areas: opportunity, health, and sustainability. Our investment thesis was three-fold: (1) near universal low-cost access to the web has the potential to shrink the opportunity gap in society; (2) always-on connectivity and cloud-based analytics are improving diagnosis and treatment, leading to better health outcomes; and (3) information technology services are lowering the costs of transitioning to a more sustainable economy.

Within these three themes, we made investments, while expanding our networks and building our knowledge base, in digital health (Apostrophe, K4Connect), clean energy services (SunFunder, UtilityAPI), future of work (Localwise, Werk), and early learning (BookNook, MyVillage). Towards the end of the Fund II investment period, we began to see more “deeper tech” deal flow, and we made investments in three such companies including Sail Internet (fixed wireless internet access for underserved communities), KETOS (smart water analytics) and Mission Barns (cellular agriculture for clean animal products). These later investments would set the stage for an evolution of our investment thesis heading into Fund III.

All told, we made 19 investments in Fund II, and as of the time of this writing we have 12 mark-ups and our portfolio companies have raised over $100M in capital. On the impact front, our Fund II companies have provided 6M people with access to essential services (healthcare, energy, education, etc), avoided 1.2M metric tons of CO2 emissions, and created 400 jobs. We’ve been pleased with the results so far, and our emerging track record across our first two funds, combined with the growing interest in impact investing among the LP community, has enabled us to go on to a successful Fund III raise.

Fund III — Doubling down on science and technology

This summer, we held a final close on our third fund at $32M and crossed over the “institutional threshold.” We’ve assembled an exceptional group of investors including a university endowment, a European insurance company, several foundations, and a number of family offices and individuals — many of which are repeat investors from prior funds. With Fund III, we’re doubling down on technical founders leveraging “breakthrough innovations” in science and technology to build a more sustainable and equitable economy, in which both people and planet thrive.

In the years since we launched Better Ventures, we’ve seen new and exciting technologies explode onto the scene that provide mission-driven entrepreneurs with even more tools to build world-changing companies that generate big profits and significant impact. Some of the innovations we’re most excited about include advances in AI and machine learning applied across a number of fields, from tracking climate change to drug discovery; data science and informatics leveraged to tackle chronic health conditions and disease through personalized medicine; and evolutions in synthetic biology that enable the re-engineering of microorganisms into the climate-friendly factories of the future.

As we’ve witnessed these technological breakthroughs, we’ve evolved our investment thesis, capabilities, and networks to take advantage of the big opportunities they present. While our focus on mission-driven founders remains unchanged, the types of business models we invest in has broadened from enterprise software and data analytics to also include AI/machine learning, data science, and the life sciences (particularly the intersection of computation and biology). To summarize our current investment thesis, we are looking for science and technology-driven solutions that: (1) re-tool industry in ways that will significantly reduce greenhouse gas emissions and drive a Sustainable Economy; (2) leverage Data Driven Health to tackle disease and improve health outcomes; and (3) enable an Adaptive Workforce that will thrive in the disruption and dislocation being driven by new technologies.

In particular, we are sourcing deals in the following areas:

Sustainable Economy (future of food, bio-manufacturing, closed loop production & consumption, clean energy & electric mobility)

(future of food, bio-manufacturing, closed loop production & consumption, clean energy & electric mobility) Data Driven Health (personalized medicine, value-based care, behavioral health, drug discovery)

(personalized medicine, value-based care, behavioral health, drug discovery) Adaptive Workforce (future of work, personalized learning, upskilling)

We remain focused on pre-seed stage companies, and we like to be first money in with an average initial investment of $500k. To date, we’ve made four investments in Fund III with two more on deck. In future of food, we’ve invested in Emergy Foods, an alternative protein company that leverages mycelium fermentation to produce plant-based meats at scale. We’ve made two investments in data driven health including 54gene, which is building the 23andMe for Africa to fill the global gap in African genetic information and benefit drug development; and Unnatural Products, a drug discovery platform that leverages data science and the power of large molecules called macro-cycles. Lastly, we invested in RideReport, a software and data platform that helps cities take full advantage of the many micro-mobility solutions available today. We also have two new deals we’ll be announcing soon, one in AI for health and another in synthetic biology production scale-up.

Committed to Mission-driven founders

Underlying all of this is our fundamental investment thesis that mission-driven companies outperform the market thanks to the magnetic force of purpose, which fuels intrinsic founder motivation and drives competitive advantages in hiring talent, attracting resources, and building enduring brand loyalty (more about this in our Mission Driven podcast). That is why from day one we have exclusively backed founders who are motivated beyond just profit but also by building truly world-changing companies to address the most significant challenges of our time.

We love what we do, and the fact that we get to play a part in catalyzing world-changing founders every single day is what gets us out of bed in the morning and excited to hop on our bikes to head to the office. We are incredibly grateful for where our journey has taken us thus far and for the amazing support we’ve received from many people along the way. We are excited to work with our founders, LPs, and co-investors with this third fund and to build something truly special together.