We launched Collaborative Fund in 2010 with a simple idea:
This was a novel concept at the time.
Private investors have historically fallen into two categories: People trying to make as much money as possible, and people trying to make the world a better place.
Those trying to make as much money as possible traditionally operated in a “good ol’ boys” network. It was a clubby system, and they could count on raising big money from institutional investors who saw them as the gold standard. Those trying to do good were effectively philanthropists.
It worked like that for decades.
But the world evolved.
Two trends started a tectonic shift in the venture capital ecosystem:
- Access to information
- Shifting cultural values
In the old model, access to good investment opportunities was proprietary. For entrepreneurs, just connecting with good VCs was a challenge. And large investors had a hard time picking which VCs were positioned for success. There just wasn’t a lot of information.
That changed as VCs – normally a private bunch – started blogging, and the social web matured thanks to Facebook, LinkedIn and Twitter.
The curtain came down, and everyone could see what others were doing. The market became more efficient. New, smaller firms were seeded by investors who shifted from relying on fund-of-funds to investing directly in emerging VC managers. Entrepreneurs could also quickly get to know an investor’s philosophy, and select potential investors based on taste and values. This trend isn’t over: We’re still seeing the massive effects of this flattening of access to information.
Also in the last decade, “doing good” became a driving force for building successful, impactful businesses.
Once seen as sacrificial to growth and returns, pursuing a social mission now plays a big role when attracting both customers and employees. We went from labeling do-gooders as the kids who got beat up at school to celebrating Elon Musk with Tesla and SolarCity.
Collaborative Fund is on the forefront of both trends. It’s a good place to be. We’ve recruited like-minded investors and entrepreneurs who were attracted to both our mission and our approach.
And we’re not alone. We increasingly see more investors joining us at the intersection of for-profit and for-good. Established partnerships like Sequoia Capital and Founders Fund have evolved to stress world-changing aspirations. New entrants like Obvious Ventures, Social Capital, Sherpa Capital, and others have joined the fun as well.
We’re encouraged by the influx of investors in this space. But we see an opportunity to evolve our strategy and stake out leadership in a few key categories.
Inspired by thematically focused funds like Closed Loop Fund and GovTech Fund, we want to be at the top of everyone’s mind in five areas that interest us most: Cities, Money, Consumer, Kids, Health.
In short, these areas are where we see the biggest opportunities.
Cities: For the first time in history, more people are living in cities than rural areas. This trend is expected to increase dramatically in the coming years. By 2030, an estimated five billion people will live in urban areas. International tourist arrivals will rise from 1.1 billion in 2014 to 1.8 billion by 2030. Travel between cities will surge accordingly.
The biggest technology companies in the world (Apple, Google, Uber) are working on transportation infrastructure and mapping technology. The proliferation of sensor-enabled devices, at seven billion today, growing to a projected 50 billion by 2020, adds networking intelligence to the real world that allows for software-scale opportunity.
Incumbents in this space: Not many. Infrastructure has traditionally relied on government resources.
Notable new companies: Uber, WeWork, Waze, Airbnb, Hyperloop.
Collaborative Fund investments: Lyft, Tazca Connects.
Money: Broad-based access to, and understanding of, money is critical to the success and stability of the global economy. Yet 80% of Americans don’t know how much they pay in 401(k) fees. Banks are struggling to make loans to small businesses. Individuals with thin credit files can’t access basic capital to lift themselves up, or to easily start a small business. This is criminal.
We want to invest in platforms and technologies that solve these problems and provide capital in ways that are social, equitable, and transparent.
Incumbents in this space: Citibank, NYSE, John Hancock, Western Union.
Notable new companies: TransferWise, Stripe.
Collaborative Fund investments: Bond Street, Upstart, CircleUp, Tala, Earnest.
Consumer: Consumers increasingly demand products that are healthy, sustainable, and rooted to an authentic brand and mission. Natural and organic food sales have grown at a 10% annual rate, capturing 9% of industry sales in 2015. There’s room to run: Eighteen-to-thirty-four year olds are on track to increase their buying power by 20% by 2018.
The products and companies that emerge as leaders today also focus on design and user experience. Modern consumers have a preference for beautiful packaging, easy purchasing options, and aspirational products that are viewed positively by their peers.
Incumbents in this space: Unilever, LVMH, P&G, McDonald’s.
Notable new companies: Warby Parker, Casper, Peloton.
Collaborative Fund investments: Hampton Creek, Sweetgreen, Walker & Company.
Kids: Child development is often overlooked by venture capitalists. It’s a tough market to navigate, and big wins aren’t common.
But we think that’s about to change.
The generation of people who know how to use tools to harness technology is just now having children. Entrepreneurs like Mark Zuckerberg, Evan Williams, Julia Hartz, Dennis Crowley, Marissa Mayer, and others are starting families. It’s only a matter of time before these entrepreneurs use their talent and resources to build a new set of companies to compete with child-development incumbents. Max Ventilla is a great example. He’s an experienced founder from the software world who, after having children, dedicated his next venture to fixing education.
Incumbents haven’t kept up with shifting needs of parents and families. While the number of mothers working outside the home has roughly doubled in the last 40 years, many products and services have barely changed. Millennial consumers, accustomed to technology that streamlines their life, have huge unmet demand for technology-enabled tools and services to help them become better parents.
Incumbents in this space: Club Penguin, Fox Kids, Nickelodeon, Lego, Chegg.
Notable new companies: YouTube, Minecraft, Magic Leap, ABC Mouse, Osmo.
Collaborative Fund investments: Kano, Hopscotch, Revolution Foods.
Health: Our health system is stuck in the Stone Ages. We know less about our cholesterol, blood pressure and genetic makeup than we do about Google’s corporate health (which is available in one click). Despite the amazing advances in areas like genomics and nutrition, we have yet to provide useful consumer-health tools on a mass scale.
As technology evolves and consumers grow comfortable sharing data, there is enormous opportunity to upend medicine’s traditional R&D model. Increasingly, “People are the CEO of their health” which requires arming themselves with the best tools and information on a more frequent and transparent basis.
Incumbents in this space: Blue Cross, Equinox, Johnson & Johnson, Walgreens.
Notable new companies: MyFitnessPal, Fitbit, Flatiron Health, Color Genomics, 23andMe, Oscar.
Collaborative Fund investments: Science Exchange, Zipdrug.
A beautiful feature of the information age is that there are fewer and fewer places to hide. Investors can no longer rely on hiding behind proprietary networks, and companies can no longer hide behind bad products and practices. Everything’s now out in the open – and we’re happy to be out in front.