At The Money: When Your Investments Make an Impact. with Soraya Darab, TMV (July 17, 2024)
We expect our investments to generate positive financial returns, but can they also have a positive societal effect? Can your capital make an impact?
Full transcript below.
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About this week’s guest: Soraya Darabi, partner in the venture firm TMV. She has been an early investor in companies that went public such as FIGS, Casper, and CloudFlare, as well as startups like Gimlett and Lightwell, that were later acquired by Spotify and Twitter.
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Transcript: Impact Investing Soraya Darabi
Barry Ritholtz: We can expect our investments to generate a positive financial return, but can they also have a positive societal effect? Can your capital make an impact? As it turns out, there’s a strategy that can do that. It’s called impact investing, and it’s been having a good run for more than a few years, even as other forms of investing have been getting criticized.
I’m Barry Ritholtz and on today’s edition of At The Money, we are going to discuss how your money can not only generate gains, but substantially improve your community with To help us unpack all of this and what it means for your portfolio, let’s bring in Soraya Darabi of the venture firm TMV. She’s been an early investor in seven different unicorns, some of which that went public like Figs, Casper, and Cloudflare. Others were acquired like Gimlet and Lightwell.
So Soraya, let’s just start out with the definition. What exactly is impact investing?
Soraya Darabi: Well, first of all, Barry, thanks for having me on. It’s always nice to talk to you. Uh, impact investing is, is pretty straightforward. It’s simply a strategy that allows folks to invest in companies that create a positive social or environmental impact while also Generating great financial returns.
And so impact investing is pretty straightforward. It’s simply a strategy that involves investing in companies that create a positive social or environmental impact while also generating a financial return. And I emphasize the also because sometimes when people hear impact investing, they think it’s synonymous with philanthropy.
It’s not, it really is allowing people to feel good. about doing well in the markets while also doing right by society.
Barry Ritholtz: I like that answer. So how is this distinct from other forms of value based investing like environmental, social and governance or various religious affiliated investing? What makes impact so different?
Soraya Darabi: Well, I think it encompasses everything that you just mentioned, but everybody has a different definition. And when you’re an early stage investor, you are allowed to be a bit broader with your definition. And so at TMV, we just made up the rules for ourselves and said, We are going to be investing our capital and voting with our dollars by investing into some of the fastest growing CAGRs in the world, which happened to do right by society.
So we invest in tech enabled, sustainable solutions. We invest in accessible and equitable healthcare, which is considered to be value-based care. Now we invest in AI and the future of work so that democratizes access to work and wealth for middle class and low-income Americans. So as you can see, this is very specific and niche, but it’s our definition of impact and we’re allowed to make it up because we’re not subsiding to anybody’s rules but our own.
Barry Ritholtz: We know how to measure financial gains. Here’s how much I invested. Here’s what I got back. How do you measure the societal or environmental impact of investing in any given startup?
Soraya Darabi: There are great methodologies. to which we adhere. We, um, largely leverage something called Iris Plus. It’s sort of an industry standard these days, and it’s, it’s really good for measuring, um, impact alongside UN Sustainable Development Goals, SDGs. So we do do that. And we specifically do that, by the way, we report, for our limited partners who give a damn.
Some of them invest in TMV and I would put the Visa Foundation in that camp. Some of them invest in us specifically because they want to align with Those aforementioned verticals. Some of our LPs are investing in TMV because we just deliver great returns for them, full stop. So what’s interesting is,we’re neither a generalist firm nor a vertically specific firm.
We have both impact LPs and an impact initiative, but it’s not necessarily what we lead with. When we define who we are to the world, you’ll see on our website, we lead with the sectors in which we invest — 200 plus year old antiquated industries and ripe native innovation and re imagination. We invest in verticals that have founders at the helm who are successful, have had a front row seat to success before, who can consider creating new industries or re imagining ones in great need of investment of imagination. And so, you know, this might sound like generic VC-jargon 101, but breaking it down, we invested into Tali AI and ambient scribe, um, to help doctors dealing with burnout, um, you know, leverage AI to reduce 15 hours of note taking a week and to give patients more discernible and actionable access to their information.
You know, some might just say that’s a savvy AI investment. We see it as an impact investment to boot.
Barry Ritholtz: It sounds like some of your LPs are very intentional when it comes to impacting investing. Other investors are simply saying, Hey, you seem to have a formula for generating good returns on invested venture dollars. What’s that mix like?
Soraya Darabi: It’s really fun and interesting. So, uh, we’re one of the few funds I know that are backed by a pension fund, uh, for nuns. And I’m very proud of this by the way. And so clearly the nuns, care a lot about our impact bend and they would only be, you know, investing their well earned capital into TMV if, if they thought we were mission aligned.
And so, for the nuns, we’re really specific about the kind of healthcare investing that we do because, we want to do right by them. But then, you know, we’re also backed by, as I mentioned, five banks, including a European bank. And they love TMV because they’re, they’re extremely excited about all of the efficiencies and, disruption and, and hyper innovation that’s occurring right now with the advent of AI.
And as a firm, we’ve been investing in AI, albeit in those, in those Three verticals, but we’ve been investing for the last decade. And so, an example of a great and successful AI investment would be clockwise AI recently partnered with Microsoft, which, you know, oversees 98 percent of America and the world’s calendars, office calendars, and clockwise basically uses predictive analysis to go in and, and help you rethink how you’re spending your time, which is so important. I’m using it right now. And this is podcast time. And then right to follow, I have an hour focus time. And then, uh, clockwise, uh, combined two different investment meetings this afternoon into one to allow me to run my day more efficiently.
I’m using Granola AI. It’s not an investment. It’s out of London. I hope they let me invest, but I’m using it right now to record our podcast so it can send me a transcription after we speak, uh, about the main topics we discussed today. So all this to say, we’re good venture investors, um, but we happen to think whether it’s, um, AI for efficiency or healthcare investment that gives, you know, greater access to broadly healthcare for low income Americans. This is how we define impact at TMV.
Barry Ritholtz: So you’ve mentioned a couple of different sectors you’d like to invest in. My first, my assumption is these are all equity investments. You’re not doing any credit or fixed income type of lending. But second, so you’ve mentioned healthcare, uh, you’ve mentioned AI, what other sectors do you like to invest in?
Soraya Darabi: My business partner, Marina, comes from a 200 plus year old, uh, shipping family. And uh, my other partner, Azzy, is from the Anelli family and uh, they created XOR, Fiat, Piaggio, Ferrari, you name it. What’s pretty cool about these two next gen women is that, they’re not They are incredibly informed and accessed to say the least into traditional automotive and industrial industries.
And as such you know, we’re proud to invest in a business that is both a tech enabled sustainable solution as we coin it, and also a mobility company. Um, two examples quickly, uh, Ridwell privatized recycling business now available and subscribed to by over a hundred thousand Americans. We were a pre seed investor in this company back when valued at 5 million. (Valuation’s a lot bigger now)
What they do is they make it easy for Americans to upcycle. We call it the fourth bin. Not recycling, not trash, not composting, but upcycling things that are hard to recycle. [What do you upcycle?]
Paint, battery, plastics, um, and this is going to be a massive industry in the future, um, when, uh, regulation requires cities to be, uh, more efficient, their, their carbon footprint to be more efficient.
Um, and also, uh, as we think about, um, shortages of necessary materials. And so, uh, Ridwell is, uh, helmed by an incredible, uh, repeat founder. And, uh, the board now consists of, uh, spark and CRV. Um, we have investors from the Midas list, like John door and, and Sargur, actually SARS, uh, call I’m having later today.
And all this to say for TMV, we came in at the pre seed and we led that round because we saw something pretty remarkable at the intersection of mobility and sustainability.
Barry Ritholtz: Really interesting. So you mentioned some of your larger investors before. Who is the typical investor in an impact fund? Is it an ultra high net worth individual, institutions, pension funds, foundations, family offices?
Who puts money into impact funds?
Soraya Darabi: It’s all of the above. Um, and so we have, uh, which is, which is lucky for me. We have, foundations, as I mentioned, Visa Foundation being one. Pension funds. I mentioned the non pension fund, which is just a fun and colorful example to use. Uh, we are backed by five banks, including JP Morgan and bank of America and Rothschild bank backed by publicly traded companies like synchrony financial next era corporation.
We’re backed by innumerous. ultra high net worth family offices globally. In fact, some of the most recognizable last names around the world because the principles, especially next gen principles, especially them care so much about impact investing. And with this 1 trillion wealth transfer, that’s taking shape right now.
You better believe it that funds that don’t have an impact lens are going to suffer.
Barry Ritholtz: So I’m so glad you brought that up. There’s been a growing trend. particularly among younger investors and women towards impact. And let me throw some numbers that I found in my research. Over 40% of millennials report engaging in impact investing versus just 20% of baby boomers. I’m assuming you’re seeing that amongst your investors and potential investors.
Soraya Darabi: A hundred percent. There’s really nothing to add. It’s just mic drop. And this is, uh, this is showcased by two of my partners, um, and the families from which they derive. We’re living in a really complicated time.
And access to information is also access to anxiety. And for younger people growing up, they feel like the world was set up badly for them, and we won. Won’t shift all the blame onto baby boomers, but. Let’s point fingers where fingers deserve to be pointed. And so we’re inheriting this earth. If you are a sustainability freak, like I am, you believe inheriting it for a short period of time. And, you know, we have to think about how we’re spending our days on this planet. It’s an existential crisis. It’s a philosophical question. It’s a mental health question, as much as it is about driving great financial returns. So if you believe this and you speak about it, somewhat eloquently. I hope I have.
And you’re passionate. This will resonate with young people who will happen to be inheriting wealth. It’ll also resonate with young people who aren’t wealthy, who just give a damn and want to take ac]]tion. And so we think we’re in the right. Our fund has skipped over a lot of really interesting, but kind of wacky industries over the years.
We’re not chasing buzz or hype. We ignored web three for better or for worse. as one example, but we’ve stuck to our guns about investing in healthcare, sustainability and supply chain and mobility and AI as it helps access and democratize, um, work to give us back time and giving us back time, Barry means better mental health.
It means more time with our families. It means hybrid and flexible work. We think all this stuff just adds up to, to a better earth.
Barry Ritholtz: To say the least. So to wrap up areas like healthcare, sustainable agriculture, renewable energy. Affordable housing, AI and education allow us to generate not only a good return on your capital, but to have a positive impact as well.
I’m Barry Ritholtz and this is Bloomberg’s At The Money.
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