10 Years, 10 Lessons

Reflections on a decade of impact investing, leadership, and entrepreneurship from Collaborative Fund’s founder, Craig Shapiro.

1. Solve a real problem

Every person, every organization, has itches.

An itch for Bill Gates: Finding a vaccine for COVID-19.

DonorsChoose: Connecting hundreds of thousands of teachers with donors who can make their classroom dreams come true.

Tesla: Creating a low-cost battery that can last for a million miles of use and enable electric Teslas to sell profitably for less than a gasoline vehicle.

As Rev Run says, the bigger the problem you solve, the more money you can command.

Collaborative Fund is attracted to brands that satisfy large-scale consumer needs and solve problems that bother millions of people. We want to team up with and support entrepreneurs who are picking a big fight.

2. Perception is not necessarily reality

Dreaming big was encouraged when I was growing up. My parents and teachers said it to me, my college experience echoed it, and I came to believe that anything is possible — just aim high.

This sentiment gave me the confidence to take risks with my career and to pursue an entrepreneurial path — and I have been privileged enough to do so.

Not everyone gets this message repeated and reinforced throughout their life. I believe this is one of the more systemic reasons why we don’t have diversity in the startup ecosystem.

We tend to follow the path we think we are capable of. Our perception of ourselves either inhibits us or propels us forward. We learn so many hard skills in school: math, science, humanities, even computer programming. But what about the soft skills? Can we build curricula that encourages students to see themselves as doers, as capable of starting and building something? How do we empower people to believe there are no barriers to achievement?

It may sound silly, but understanding how self-perception works is a complex challenge that is at the heart of entrepreneurship and our future economy.

3. Values are a competitive edge

Creating a product that solves a big problem is incredibly valuable. But I would argue that the businesses that will drive the greatest long-term financial returns and impact need to deliver on more than just their product. They need to build relationships with customers that extend beyond the transaction.

Increasingly, younger consumers are using their purchasing power to elevate companies that more closely align with their personal values.

Case in point: Uber versus Lyft. The product and service are nearly identical. But despite Uber’s massive capital advantage, Lyft is able to command significant market share — in part because customers feel better about how the company is run, beyond just the ride.

Ultimately, to compete and win in an increasingly competitive global market, a company has to build a clear and lasting brand that aligns its values with its customers, employees, and shareholders.

4. Don’t hide failures

Mistakes are unavoidable when building a business. When the inevitable happens, companies that are more transparent — with their investors, customers, and other stakeholders — have a better chance of correcting course.

As an investor, it concerns me when I get consistent updates that all is well, only to hear later that a problem has been allowed to snowball into something intractable. Investors (and generally all stakeholders) want companies to succeed and understand that virtually any misstep can be corrected — but only if it’s shared early and given proper context. Tell the whole truth about what challenges you are facing if there’s going to be any chance of fixing them.

It’s hard to be an entrepreneur. I know one of the most difficult things to do is report bad news, especially to someone who has trusted you with their money. I try to think of that feeling when I have to update Collaborative Fund’s investors and have less-than-rosy information to share.

So this is what I try to do: Be up-front. Figure out the problem and own up to it. Then create a plan to reverse or minimize it.

5. Tension breeds solutions

The qualities that interest me the most in entrepreneurs are those in direct conflict with each other: between making money and doing good; between altruism and selfishness; or between naiveté and experience.

The fascinating effect of these contrasting traits is that they breed a tension that I have seen is vital to success.

Often, the best resolution to the conflict that emerges between competing values is self-awareness. Self-awareness allows you to put your ego aside and understand where you are on the spectrum of any important decision.

Invest time in knowing and accepting where you are today (not where you want to be), and encourage the countervailing voices that create productive tension. Your business and your conversations will be better for it.

6. Create social fabric

Critical to the success of any effort is finding and connecting with people who share our values. The resulting communities can be powerful agents of change. But how can we find our people?

Online, backers of a common cause might update their avatars — think of the millions who changed their Facebook profile picture in support of legalizing gay marriage in 2015, or those adding masks to their Twitter photos as part of the #masks4all movement today.

You see it offline too: the Ironman tattoo, an “I ❤️ NY” T-shirt, or a PETA sticker. These symbols signal our affiliations and memberships and are a shorthand for what we stand for and care about.

Sending these signals is important, so much so that we incorporate them into our online and offline identities. I’m excited that we now have a symbol for our professional identities as well.

Much like the profile pic (or the Ironman tattoo), the B Corp logo sends a powerful signal to the world. A signal of what type of business you are building, what you value, and what you aspire to — and a signal of the importance of impact as a pillar of your business.

We’re seeing common threads emerge among the B Corps we’ve invested in: an ease in hiring best-in-class talent, lower employee churn, and greater customer loyalty — all key ingredients in a successful business.

Communicating your values to the world in a quick and efficient manner creates an advantage. And we’re thrilled to see this manifest within some of our favorite businesses.

7. Use a magic wand

There are two different ways to predict the future of business. The first is to explore current trends and their adjacent possibilities. And the second is to start from a vision of how the world could be and work backward to discover what is needed in order to get there.

At Collaborative Fund, we’ve been challenging ourselves and our companies to unburden ourselves of current limitations so that the ambition of their desired outcomes is exponentially increased.

One exercise I use frequently is challenging a project lead to use a magic wand and dream up the circumstances that will mark the project’s success. This allows that person to set ambitious goals and then work backward to determine what steps would be required to achieve those goals.

It does not consider present obstacles — only the vision of an outcome that exists wholly independent of a current reality.

Those are the goals we want to strive for: the ones for which there is no obvious path, but the founders are so passionate and obsessed in embracing their outcomes that they will find a way to make a path exist.

8. Lots of hard work in small increments is the key to success.

Just like exercise, doing a little hard work at a high frequency can be more effective than trying to do too much at once.

It’s hard to put this into practice, as the world is competitive and opportunities don’t wait for you. But the older I get, the more I realize that pacing yourself is critical for both the health of the business and your personal well-being. No amount of short-term gain is worth burning yourself out and missing the long run.

Charlie Munger said it best: “Someone will always be getting richer faster than you. This is not a tragedy.”

9. Build a brand that matters.

At Collaborative Fund, we talk a lot about the importance of brand — not just the logo and design, but the core identity: the DNA.

A brand reflects familiarity, accountability, and consistency, for better or worse. It reflects the consumer’s pact with the company to trust it as it innovates and navigates a changing landscape. One of our main goals is to invest in strong brands, because brands are what remain constant when so many other factors may be in flux.

And because we invest in startup companies in their earliest stages, the landscape is inherently rocky, making it all the more important for us to find companies whose brands reflect our values.

When you build a company on values that resonate with your customers’, you’re investing in your own brand — and that’s the type of company we like to partner with.

10. All investing should be impact investing.

It’s increasingly clear that backing companies that don’t consider both profit and progress as part of their mission is a losing proposition — not just for people and the planet, but for investors.

Brands with a purpose set on improving our quality of life outperform the stock market by 120%, and 1 in 4 dollars of the $46.6 trillion in total assets under professional management in the United States are invested sustainably. I’m proud to say Collaborative Fund’s returns are in the top quartile for all venture funds in our cohort, according to Cambridge Associates.

As someone in a position to exert influence, I want to lead by example and be counted among the institutions advocating for — and benefiting from — an economic system that works for everyone.

Impact works. There’s no excuse.

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