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Founders must show investors that sustainability is more than lip service

By Walter Thompson
Todd Klein Contributor
Todd Klein is a partner at Revolution Growth, a VC fund that invests in growth-stage companies. During his 20-year career, Todd has been involved in financing and building over 150 venture and growth-stage companies in the media, consumer, technology, education and healthcare sectors.

Ending years of debates over environmental sustainability, the United States officially declared a climate crisis earlier this year, deeming climate considerations an “essential element” of foreign policy and national security. After recommitting the U.S. to the Paris Agreement, President Joseph R. Biden announced an aggressive new goal for reducing U.S. greenhouse gas emissions and pushed world leaders to collectively “step up” their fight against climate change.

At the same time, consumers are increasingly looking to do business with brands that align with their growing environmental values, rather than ignoring the climate consequences of their consumption. Even without regulation as a stick, consumer demand is now serving as a carrot to increase sustainability’s impact on public companies’ agendas.

Startups have already followed suit. Investors today view sustainability as an important pillar of any business model and are looking for entrepreneurs who “get it” from the beginning to build and scale next-generation companies. Startups interested in thriving cannot treat sustainability as an afterthought and should be prepared to enter the public eye with a plan for sustainable growth.

Today, companies of all sizes are being held to a higher standard by consumers, employees, potential partners and the media.

So what exactly do founders need to put in place to demonstrate that they’re on the right track when it comes to sustainability? Here are five attributes that investors are looking for.

1. A truly customer-centric feedback loop

It’s fairly easy for any company to claim that it understands customers’ wants and needs, but it’s challenging to have the tech stack in place to prove a company actually listens to customer feedback and meets those expectations.

Investors now expect startups to have both platforms and solutions — social listening channels, relationship management tools, surveying programs and review forums — that allow them to hear and act on the needs of their customers. Without the proper communications tools and actual people using them, your eco-friendly efforts will likely appear to be merely lip service.

Take the example of TemperPack, which manufactures recyclable insulated packaging solutions for shipments of cold, perishable foods and pharmaceuticals. The direct relationship between a packager like TemperPack and the end consumer is often invisible. But as we were looking into investing in the company, some of its life sciences customers told us about comments they had received from end users — people who were receiving medicine twice per day. Another supplier’s packaging required them to visit a recycler for disposal, a real-world pain point that was causing them to consider switching to a different medication.

Revolution Growth decided to add TemperPack as a portfolio company after directly seeing its customer feedback loop in action: End-user requests informed product development, proving both a market need and customer demand on the sustainability front. This firsthand example demonstrates how an investor, a packaging maker, a life sciences company and an end user are now interconnected in one relationship while underscoring how end-user feedback can connect the dots for sustainable product development.

2. Public commitment to sustainability goals

Over the past several years, we have seen millennials and Gen Z consumers demand transparency in sustainability efforts. As these generations grow in purchasing power, investors will look for startups that make their commitments to eco-friendly goals as transparent as possible to satisfy shrewd consumer needs.

For many VCs, making public commitments to sustainability goals is a sign that your startup is working toward becoming a next-generation company. Investors will look for goals that are thoughtful, with a clear understanding of where your company will have agency and influence, and that are S.M.A.R.T (Specific, Measurable, Achievable, Realistic and Timely). They will also expect regular reports on progress.

Although a company’s management establishes these goals, its board should play a behind-the-scenes role in driving the goals forward, keeping leadership on track and setting the playing field so executives understand that they’re being evaluated on criteria transcending positive EBIDTA.

Taking these steps will ensure goals are responsible and ambitious while also holding the company accountable to consumers and stakeholders to see the initiatives through to completion.

3. Purpose-driven culture

Even the best-laid sustainability goals will go unmet without a strong culture designed to guarantee leadership and employee alignment. Sustainability must be ingrained in a startup’s culture — from the top down and bottom up — and there’s a lot at stake if it’s not.

Another Revolution Growth portfolio company, the global fintech-revolutionizing startup Tala, demonstrates how young companies can imbue their cultures with purpose-driven values. While Tala’s mission is to provide credit to the unbanked, the company believes that the consumer’s best interests should always come first. During 2019’s holiday season, Tala contrasted with businesses fueling consumption by instead urging customers in Kenya to not take out loans, protecting them from predatory unregulated lenders amid a lack of functioning credit bureaus and loan-stacking databases. This forward-looking approach ultimately safeguarded Tala’s customers and its vibrant digital lending industry.

Beyond determining what they stand for, many of our portfolio companies face challenges securing talent. People have choices about where they want to work, and those with intrinsic motivations — such as concerns about the environment — will feel uncomfortable if their employers do not share their values. Regulatory risks and customer attrition pale in comparison to the human cost of losing star performers who seek other work cultures that better align with their values.

A clear values system should embed sustainability into the decision-making process, make obvious imperatives and empower employees to follow through.

4. Accountability

Companies aren’t only judged by their own initiatives — they’re also judged by their partners. As startups build new relationships or expand to work with new suppliers, investors will be keen to know that these outside parties align with their stated sustainability philosophies.

Before becoming publicly involved with another company, a startup should gauge each new supplier’s reputation, including insights into their employment practices. Take leading Mediterranean fast-casual restaurant Cava or healthy-inspired salad-centric chain Sweetgreen, both Revolution Growth portfolio companies; neither will source proteins from farms with inhumane policies. If companies are not aware of these factors, their customers will eventually let them know, and likely hold them accountable for the oversight.

Think of it this way: If a diagram of your partnerships and supplier relationships was printed on the front page of The New York Times, would you be comfortable with what it shows the world? Today, companies of all sizes are being held to a higher standard by consumers, employees, potential partners and the media. It’s no longer possible to fly under the radar with relationships that are antithetical to a company’s sustainability goals. So take a hard look at your supplier and partner ecosystem, and make clear that you are bringing your green vision to life through every extension of your business.

5. Financial realism

Financial realism acknowledges that a company can want to do good, but unless they have the economics, they won’t survive to make an impact. For most startups, beginning with financial realism as a mindset and incrementalism as an approach will be key to success, enabling all businesses to contribute to a more resilient planet. For startups that prioritize environmentally friendly business practices alongside a product or service, this strategy can prevent goodness from becoming the enemy of greatness. Founders in this position can commit to a stage-by-stage sustainability plan, rather than expecting an overnight transformation. Investors understand the delicate balance between striving to meet green goals and keeping the lights on.

Entrepreneurs looking to build a business that not only adopts eco-friendly practices but also has sustainability at its heart may have to consider starting in a niche industry or market that is less price-sensitive and ready for a solution today. Once that solution is firmly established, the business can build upon what they’ve created, rather than going big with something that doesn’t scale — and failing fast. Without an initial set of customers that value and love what you’re doing, you won’t get to the bigger play.

As the public and private sectors continue to address the climate crisis, sustainability will increasingly become a mandate rather than an option, and funding will increasingly flow to startups that have addressed potential environmental concerns. Unfortunately, pressure for companies to meet sustainability demands has led to “greenwashing” — the deceptive use of green marketing to persuade consumers that a company’s products, aims and policies are environmentally friendly.

Greenwashing has forced investors to look beyond mere words for action. As we move toward a more sustainable future, startups pursuing VC funding will need to prove to investors that sustainability is a priority across their entire organizations, aligning their outreach, public commitments and cultures with accountability and concrete examples of sustainable activities. Even if those examples are just steps toward larger goals, they will show investors and customers that startups are ready today to contribute to a greener and better tomorrow.

The hidden benefits of adding a CTO to your board

By Ram Iyer
Abby Kearns Contributor
Abby Kearns, chief technology officer at Puppet, has more than 20 years of experience scaling growth for numerous Fortune 500 and startup companies.

The pandemic forced companies around the world to adjust to a “new normal,” which caused many leaders to pivot their business strategies and adopt new technologies to continue operations. In a time of chaos and change, there is no senior leader that can navigate this sort of change better than a CTO.

Not only do CTOs understand the ever-changing tech landscape, they also provide invaluable insights to help organizations go beyond traditional IT conversations and leverage technology to successfully scale businesses.

Boards are facing pressure to be strategic and thoughtful on how to evolve in the rapidly iterating world of technology, and a CTO is uniquely positioned to address specific challenges.

There are now more reasons than ever to consider adding a CTO to your board. As a CTO myself, I know how important and impactful it can be to have technical-minded leaders on a company’s board of directors. At a time when companies are accelerating their digital transformation, it’s critical to have diverse technical perspectives and people from varying backgrounds, as transformations are a mix of people, process and technology.

Drawing on my experience on Lightbend’s board of directors, here are five hidden benefits of making space at the table for a CTO.

A unique mind (and skill) set

Currently, most boards of directors are composed of former CEOs, CFOs and investors. While such executives bring vast experience, they have very specific expertise, and that frequently does not include technical proficiency. In order for a company to be successful, your board needs to have people with different backgrounds and expertise.

Inviting different perspectives forces companies out of the groupthink mentality and find new, creative solutions to their problems. Diverse perspectives aren’t just about the title –– racial ethnicity and gender diversity are clearly a play here as well.

Deep understanding of tech

For a product-led company, having a CTO who has been close to product development and innovation can bring deep insights and understanding to the boardroom. Boards are facing pressure to be strategic and thoughtful on how to evolve in the rapidly iterating world of technology, and a CTO is uniquely positioned to address specific challenges.

China's Quiet Ecommerce Giant Thrives on Fresh Produce

By Kyle Mullin
Pinduoduo, which recently passed Alibaba as the shopping site with the most customers, connects 12 million farmers to more than 800 million users.

99 minutos, Mexico’s last mile delivery startup, raises a $40M Series B

By Marcella McCarthy

In 2014 Alexis Patjane was at a local hookah bar in Mexico City with some friends and the bar ran out of tobacco. They thought maybe they could buy some online and have it delivered to the bar in real-time, but it turns out that service didn’t exist.

At the time, Patjane was running a food truck-making business, which was responsible for about 80% of all the food trucks in Mexico, so he had experience doing business in the region.

A couple of weeks later, to solve the instant delivery problem he had faced at the hookah bar, Patjane launched 99 minutos, a website that sold products and delivered them within 99 minutes, hence the name.

Today, 99 minutos announced a $40 million Series B from Prosus and Kaszek Ventures which it plans to use to grow its business in Latin America. 

The company currently operates within 40 major markets across Mexico, Chile, Colombia, and Peru and offers four services: less than 99 minutes delivery, same-day delivery, next-day delivery, and CO2-free delivery. 

What started as an e-commerce company with fast delivery quickly became a last-mile delivery service for other e-commerce companies.

“We started to build the API connections and plug-ins, and any e-commerce could add our delivery service to their business,” Patjane told TechCrunch.

99 minutos makes money by charging the customer a flat fee for delivery and then offering the driver a flat rate as well, but today, the volume is so large on each route, that it’s become very lucrative.

“We ship about 60-80 packages per route,” Patjane said, and from the consumer’s perspective, the delivery app works similarly to Waze. “You can pause the delivery, you can change the address. You can say, “Oh, I’m not at home, I’m at the Starbucks on the corner, can you drop it off there?”’ he added.

Patjane said that initially, the company offered delivery only within Mexico City, but it quickly grew to offer its services between cities and now operates between 21 cities in Mexico.

“E-commerce is growing quickly in Latin America, but it is still [the] early days. E-commerce penetration in Latin America is at 6%, while China is reaching 30% and the U.S. is at 20%,” the company said in a statement.

“When we hear big e-commerce players saying that 99 minutos is ‘their most reliable partner’ and that they are ‘the provider with the most potential,’ it tells us that the team is executing extremely well and is on a path to disrupt e-commerce delivery in Latin America,” said Banafsheh Fathieh, Head of Americas Investments at Prosus Ventures.

Part of the funds will also be to speed up their city-to-city deliveries. “We’ll be doing same day [delivery] from city to city and will be using small aircraft to connect the cities,” Patjane said.

China Has Triggered a Bitcoin Mining Exodus

By Gian Volpicelli, Wired UK
The promise of a crackdown is sending the country's crypterati scrambling for the exit.

Admit It: The Facebook Oversight Board Is Kind of Working

By Gilad Edelman
Facebook has agreed to follow some of the board’s nonbinding recommendations regarding the Donald Trump suspension. That’s progress.

A Google Alum Wants to Make Search Pure Again

By Steven Levy
Plus: A lesson in macro Googlenomics, an audio jamming dream, and high-stakes cheesesteaks.

They Rage-Quit the School System—and They're Not Going Back

By Pia Ceres
The pandemic created a new, more diverse, more connected crop of homeschoolers. They could help shape what learning looks like for everyone.

The All-Seeing Eyes of New York’s 15,000 Surveillance Cameras

By Sidney Fussell
Video from the cameras is often used in facial-recognition searches. A report finds they are most common in neighborhoods with large nonwhite populations.

Help! Must We With the Virtual Meeting Small Talk?

By Megan Greenwell
Megan weighs in on the value of idle chatter.

Inside Silicon Valley’s Mayo Marketing Madness

By Larissa Zimberoff
The war on eggs started back in the ’70s, not with the company formerly known as Hampton Creek, but with a little cafe-grocery store in Los Angeles.

The Mayor of Reno Is Betting Big on the Blockchain

By Gregory Barber
Hillary Schieve invests in cryptocurrencies herself, and she sees the technology as a way to improve government services.

This Arcane Manual Could Lead to More Human-Friendly Cities

By Aarian Marshall
For decades, the federal government has issued a guide for designing streets. Activists want to make it better for pedestrians and cyclists.

How a Chaos Monkey Caused an Apple Uprising

By Steven Levy
Plus: A review of the book from 2016, the accessibility potential for AR, and a few too many sinking ships.

Uber’s Union Deal in the UK Doesn’t Mean Its Battles Are Over

By Natasha Bernal, WIRED UK
The company’s first-ever union agreement could distract from more changes that need to happen, in both the gig economy and governments.

When Driving Is (Partially) Automated, People Drive More

By Aarian Marshall
A study finds that users of advanced driver-assistance systems drive 4,888 more miles per year than similar drivers without the feature.
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