BGV's Investment Committee Chair on Investing in Tech for Good
March 16, 2022
Steven Clarke is the independent chair of BGV’s investment committee. He joined us three years ago, bringing a wealth of investment experience with him. He’s been involved as Chairman or Board Member in seven growth businesses - three with successful exits. He’s also spent 21 years in the European Technology investment space, including roles with 3i, August Equity, and ICG.
Steven has spent the last nine years working as an advisor, non-exec, and investor to founders scaling software and data businesses. He puts a lot of focus into helping founders build their teams, and is a huge advocate for developing compelling go to market strategies. Here he shares three insights into the practicalities of investing in tech for good startups. From how to spot a potential super-star to how to make robust investment decisions in the context of impact-driven companies.
How can investors identify a promising tech for good founder?
I think there are probably three components that you're looking for in early-stage companies. One is around technical ability, the second is their ability to find product market fit, the third is the ability to sell. In a more traditional tech startup you may find a founding team who are very technical and very good at selling, but don’t really understand their market. I don’t think that’s enough in the context of impact because of the necessity of delivering purpose and being really confident about that. Thinking about how you need to influence the market is absolutely crucial to what we’ve seen in terms of success of BGV portfolio companies.So I think the founders of businesses with impact need to be really good campaigners. People who talk very broadly about campaigning with different stakeholders, not just customers or employees, but thinking about how they need to change the industry. They ask: how do we need to influence potential customers’ outlook? How do we need to influence government policy? It's a really difficult thing to do. It's a very broad thing. But gosh, if a founder is good at it, and is truly driven by that purpose, that’s a very good sign.
What challenges do you think tech for good companies face?
I think there is a lot of opportunity in the health area but it's a sector that comes with many challenges. I’ve personally invested in and been part-time chairman of a health-tech company but it was one of the toughest rides. For example in terms of getting sales traction because of the inertia, the bureaucracy, and the lower budgets than in other sectors such as financial services.However in these types of sectors I think it’s about making sure you raise enough money and allowing for those obstacles. If a founder can bring people in who've got strong track records in influencing that industry, then the upside both financially and impact-wise can be huge. As an investor you just have to allow for the fact that it can be a much longer game. Maybe that's what puts a number of investors off playing in this early stage part of the market, but the upside is definitely there.In contrast to the health sector, the likes of the energy and agriculture sectors have got less history of change and transformation. In these cases there's more of that educational process that people have to go through. Both of these industries and markets take very long-term views and therefore are very evidential in their decision making. So you have to build up evidence and decent sample sizes of information for people to want to trust you and then go wholehearted with you.
What makes an effective impact investment committee?
You have to really want to live and breathe it. That's what will help you work with the executive investing teams and founders.I think an important aspect is clarity around how you build the focus on impact into the investment discussion and debate. In financial terms, it's fairly clear what accounting policies are, etc. However, when measuring impact there aren't so many standards. One of the really good things about working with BGV is a lot of that thinking has been done and the team are able to demonstrate many years of consistently following the metrics through from the first programme-stage investment all the way through to Series A. This is really important for an investment committee, because you need faith in the consistency of the information being presented by the investment team.Another aspect is remembering that while discussing impact is important, you also really need to be assessing a company’s potential enterprise success. The reality is tech for good companies are going to be competing for funding and customers with businesses without that impact, therefore they have to measure up in terms of return on investments.To get that blend right in debates as an investment committee you have to be as good at judging management teams and analysing the financials as you are at appreciating the impact.
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