Spotlight on the Future of Impact Investing

[Music] good morning everyone I mean it's it's interesting this is the fourth day of the ABAB Finance weekend we still have almost the full house so it looks great um so today our topic is all about impact investing and before I joined this panel while I was driving from home to hear from Dubai I was thinking about how the world is changing and if we if we take like a bird's eye view on what's happening on a global scale just look at the uh immigration happening everywhere now look at the climate crisis and uh look at the political shifts in so many countries in Asia in Europe in the Middle East and we feel that there is something going wrong probably capitalism have served us well over the past uh two centuries but then we think there's something wrong happening and this is where your role coming in to fill a gap where uh probably uh public is not being able to do enough so before we dig into the conversation please M and Sonia can you introduce yourselves why you're here what do you do all right I'll start hi everyone uh great to see so many familiar uh faces and and allies in the audience my name is Sonia we mu I'm co-founder and general partner Adventure Suk uh we're a thematic Venture Capital firm we've been around since 2013 which is a long time for this region um and specifically we focus on fintech and climate I specifically lead our our climate investment practice that's on the investment side we also do a lot of Education work uh we run a fellowship with New York University Abu Dhabi called the conscious investor Fellowship which is about how do you nurture the next generation of investor to make sure that we ensure that there's Capital flowing towards things that actually matter such as climate and financial inclusion thank you Sonia thank you so much my name is medano shantini I'm senior partner at Global Ventures uh VC firm three funds almost 400 million asset under management we are sector agnostic and we are the typical commercial VC but if you look at our portfolio you will see a lot of healthare a lot of Education a lot of financial inclusion and so for forth uh we have been around since 2018 it's been an incredible journey so far I'm also the founder of C3 companies creating change which is an accelerator platform now part of global Ventures and with C3 I started in 2012 um the crowd was probably just the first couple of roow here and so I'm super glad to be on a stage in the abudhabi fch week on this topic in in this amazing a in front of this amazing audience awesome uh M let us start with I mean impact could be considered something in new it just started becoming mainstream over the past uh few years before that VC 20 30 years ago there was no term impact uh and then most of the VCS that I've I've been uh looking at and and and now it started showing more and more how can we Define today impact when it comes to Investments and that's uh the billion dollar question it's very difficult because there are so many shades right uh from philanthropy to traditional commercial there are so many ways to invest there are uh investors that are looking at impact adjust as risk management and so they embed ESG in their criteria for selection and uh they helped their portfolio um coming up with ways to avoid the wors avoid uh uh having negative impact right and that's one way to look at it then there are the ones that are responsible they use a lens um a little bit deeper and so they put some thresholds on this company not only has Financial returns but it's also intentional about impact and then there are uh the more philanthropic investors where impact comes first and then Financial returns needs to be there but eventually they have more flexibility on those so there is a lot of different ways to invest in this specific asset class and so um that's why the confusion sometimes I believe okay and to make things more uh confusing as well Sonia um we have the uh ESG term that have been uh for the past 20 years as well uh on the rise and and um we saw so many invest Investments going to whatever is labeled ESG whether it's ESG or not but is it similar is it where where does the difference comes how can investors know like what impact they're doing what is ESG yeah we can get into that but before we do that can we just get a sense of who's in the room who are founders in the room can you raise your hand just so we get a sense awesome who are the investors in the room I see some of you here all right more investors and Founders that's great you guys should try and find them um and then ecosystem stakeholders more generally raise your hand yeah okay so it's kind of similar to the investor size um so yeah the only reason I ask is because I think uh there's level of Education that's required across kind of the value chain whether it be the founder ecosystem the investment ecosystem Etc so yes there's a lot of conflation especially in this region between impact and ESG uh we've seen that a lot it's used interchangeably we run a climate fund the number of times I'm referred to is like oh yeah Sonia that girl that runs the impact fund like it's not an impact fund it's a climate fund or Sonia who runs the ESG fund not an ESG fund it's a climate fund so um you know I think there is a lot of conflation and words do matter so Meda just did a great job explaining what impact is ESG is more about how do you operate kind of internally right so for example I'll give you a concrete example part of our diligence process when we look at companies and in know Global desert as well is that we do have kind of an ESG scorecard if you will which is part of the due diligence process for the founders in the room when you start dealing with more sophisticated investors who do care about impact and ESG they will start asking you these questions as well and it's really not there with the expectations that you have figured it all out but it's more there for you to start thinking about do you have diversity on your board for example do you have specific do you have an employee handbook like how do you professionalize your company as it grows from C to series a to series B to make sure that you're creating a sound working environment for your employees and for your stakeholders overall and so when we go in we don't expect you to have figured everything out but we do as an investor as an investor who cares about ESG or impact we will ask you hey we know that you haven't figured all this out but we do expect that by you know the next year and the year after that that you have actually hit certain kpis within this ESG handbook if you will that we're providing you with where we think you're strong and weak in and for us when we kind of embarked on this journey four years ago of of kind of how do we look at ESG how do we implement it Etc we wanted to walk the talk first so we actually created an ESG committee at Venture Suk uh to make sure that we as investors were actually walking the talk before we actually impose this on the founders that we invest into and so that committee ESG committee is made up of Partners from each fund product that we have uh principles because for us it's very important that we also include the next generation of investors uh and give them a voice so we have principles and Senior Associates that are part of that committee as well and we have one independent um um as well and so it's about holding ourselves accountable according to these ESG metrics as well um as well as holding our portfolio companies accountable as well so it's really about how do you implement these internally as you operationalize your business that's amazing wants to add something and if I want um if I can just add to it uh it's incredible how our portfolio companies adopt this kind of concept with uh with a lot of enthusiasm because it makes a lot of business sense if I have a diagnostic uh company we have a couple of of them in our portfolio Vivo or ilara uh and I don't make sure that my medical ways to go and get processed in the right way that's a that's a pretty dangerous thing or um let me say Last Mile uh type of fot Tech if they don't have processes to make sure that minors are not the delivery uh drivers then again it could be a big reputational risk so it makes a lot of business sense to introduce this kind of stuff in the portfolio so you will be surprised how much excitement despite my skepticism initially when we started this work with the portfolio uh you will find in in young uh talented Founders that's great uh M and and and you know what when I also think about impact from an Investor's point point of view some of them they would say okay but if we need to have uh this this framework in our investment then we might need to give up some of the profits as well but then I think about one person uh Elon Musk whether you love him whether you hate him whether you think he's a nice person or narcistic I mean he's changing the world uh with his products and uh he he is now the world's richest person as well so today today when we think about uh investing in in companies and when where where profit is one of the most important thing uh does having this impact impacting our uh bottom lines or sometimes it it helps it more how do you look at it from this perspective I am so biased so please take it as a personal perspective first of all uh at C3 we start started in 2012 um we have supported with accelerators more than 300 we are close to 350 now companies 95% they're all Impact driven intentional about impact uh and a lot of them are adding additionality for for the people that know what this means in the room um to their intentions and so 95% survival rate I hear typical Silicon Valley conversation 10% Max and so either at C3 we do an incredible job in selecting them or in helping them or um on top of it I would say there is also a lot of resilience more than usual um there is a lot of discipline because again combining impact and and business it's not an easy thing so when they start with that idea from the Geto they do things in a better way in the past couple of years this crowd has fundraised uh uh $500 million just here and uh I can continue forever but it's really stats that I don't see in the typical commercial accelerators out there now I have not analyzed all these data properly to tell you if it's just correlations or or there are some causality there uh but I'm definitely excited about uh doing that sooner or later so we can prove that impact mindset help business as well again an IPO the company out of our accelerators is Desert control you might have heard of them uh it sounds like magic basically they use nanoc clay and water all natural materials they spray it on the desert and they create an arable uh layer uh to to be able to grow crop in the desert I'm just saying it's good business can I just add to that I also think in general like I think we need to that we're feeding that narrative that you just said of it has to be like profit versus purpose right like we need to move away from that I think specifically like want to talk about the Venture space like just because you have a mission-driven founder or a Founder who actually cares about what they're doing and the long-term outcome of that the business has right from a product perspective or has you know it's taking a gender lens approach where they're actually being inclusive and making sure that the product is designed in such a way that appeals to women for example like why does that why is that a bad thing like you know and so I think like we need to stop kind of having that conversation and maybe we need to stop asking asking that question I'm not pointing to you by the way I ask the question when I moderate as well but um but I do think like you know part of the problem is also us kind of differentiating that creating that kind of two- pocket thinking kind of mindset and so we need to actually say no it actually is possible I think between Global Ventures and and and Venture soup we have tons of portfolio companies so does Mark Khan who's sitting in the front row at omnivore act Tech uh Guru in in India uh and and Bo who also was in Southeast Asia running an impact fund like we have great case studies of mission dri driven Founders who of course care about the profit and the commercial side of the business but also are very much driven for personal reasons by what they're doing and that is key to be honest like when I look at Founders that actually especially because we invest early stage like when people ask us what do you look for in Founders Etc we look for that we want to spend as much time as we can with the founder to understand what is his or her motivation for building what they're doing if it's if it's just to become like a unicorn and you know kalas okay move on like I'm not interested in that like I wanted much deeper motivation because entrepreneurship is hard you know and back to the resilience Point like you need to really be motivated and believe in what you're building and the reason why you're building it in order to stick to it otherwise you're just going to say ciao you know and and move on to the next you know kind of billion dollar opportunity so I think it's really important for that now just to add a bit more Nuance to that as well um there are social Enterprises and I'm sure we had social entrepreneurs who are in the audience as well right these are not the types of businesses that Venture Capital will invest in because we invest in technology enabled businesses right and that's worthy of another part that we're all part of the same value chain Meda alluded to it right there's the philanthropist Etc we need all these nuts and bolts we're all part of the same value chain there's some stuff that is even too risky for us even though we're high risk High reward and the philanthropist will come in initially and actually give that initial grant money to get the company going in order for them to get to the point where they can actually present to Meda or myself right um but if you're a social Enterprise where um you're not looking for that kind of you know hockey curve um or Dr curve in order to to kind of you know really scale very fast because of the technology that you're using then maybe we're not the right investors for you either right and maybe there's another set of investors um it's not easy to find either by the way but there are other sets of investors who actually are okay with low return profiles basically or even kind of you know zero return profiles great Sonia also a question on um a green washing I mean over the past year there were so many news so many offices have been raided so many big institutions have been raided for green washing today how do you differentiate between genuine climate change and climate change solutions from uh uh green washing during this uh Investments process I think if you look at green washing pink washing all the Washings um it's all about the intentionality ultimately that that M also referred to and so like when we look at a business an impact more broadly not just climate but impact the impact needs to be embedded in the commercial model of the company so as the commercial kpi scale so does the impact that the company has that's kind of the Crux of what we're looking for when we look for uh whether Financial inclusion company or a climate company Etc is basically the is what they're doing the impact that they're having actually embedded in the commercial model of the company are we making sure that there not going to be any Mission drifting at any point between the impact and and that the founder will not have have to make a decision between profit versus purpose basically cuz that is a concern right like cuz the medas and sonas can come in early and be very like hunky dory and say yes like we love this impact like but another investor might come in at a later round and they're not very impact oriented and they might not care and they might push the founder towards uh and we all have stories kind of you know nightmare stories like this so how do you make sure that the founder can stick to his or her own guns basically and continue on that impactful Journey um is important yeah M I cannot agree more and we have had this discussion for the past 12 13 years uh me and Sonia so it needs to be this the magic formula The Virtuous cycle needs to be found from the Geto now sometimes it takes the get-go means a couple of years maybe even more but there needs to be an alignment between Mission and business otherwise sooner or later um that uh that let me say stretch will happen and the founder will have to choose one or the two uh but it's not that difficult uh I want to share a personal story that I often don't don't share because sometimes I ask myself why I'm so passionate um I'm actually fairly cynical business person so um I grew up in a small town in the north of Italy it's called IA and uh beautiful landscape you should go uh not a lot of business anymore but for the past Century more than a century a company called olivetti at quarter there and olivetti was a producer of type variety machine and despite all what we see today in the in the media it was the inventor of the first personal computer P 101 check it out and the Apple sorry the olivetti store in the 50s in New York looks like a modern Apple store again and I leave it there olivetti was providing for the full community starting from their employees blue colar white colar whatever you want to uh use as terms they were providing Health Care they were providing accommodation they were providing activities for kids uh of the families and there is a moment in the 70s 80s when I was a kid and a teenager where they provided the full set to the full community so my parents were not working at oliv but I could access all those cultural sports summer camps you you name them and I don't think I will be here uh considering my parents were hippies I don't think I would be here if it wasn't for olivetti so any company can really find a way to give back to the community and if you look at the history throughout the two World Wars olivetti was supported by their employees in and out so many times um and I leave it there just to say some times we forget that a lot of those big Brands we have now out there Ford another example started to solve an incredible daunting social or or environmental challenge so I sometimes I just feel like we should remember that more often can I also just add to well it's not going to add to that but add to the your question actually um just also I think it's important to talk about kind of the next generation of consumers because I think yes greenwashing is there for sure I think with regards to the space that we work in I think midday and I can kind of cut through uh the smokes and mirrors sometimes of the way things are presented to us like often times it's like oh like I'm presenting to M or Sonia let me insert that you know impact or ESG slide you know just to make her happy or or make her happy right like we can cut through that now but I think with with kind of publicly listed companies for example when you think about green washing or pink washing um the importance of consumers and I see it even at the firm level with our Juniors right like I've been told not to moderate certain speakers because the reputation that that speaker has for example on the climate side um and I've listened to that feedback by the way and not and said no actually so I think like the the the accountability that comes with the consumers the next generation of consumers is key because they can cut through the pardon my French BS as well when it comes to the greenw washing as well and so they will hold the brand accountable they will hold like you know they will know that no and they will speak with their with their with their purses basically and they will not buy that brand because they can cut through it it so I think that's also important to to mention is that yes greenwashing is around unfortunately but I think in this obviously era of social media Etc it's very easy to be pointed at for greenwashing Sonia you know what I have met so many Founders and where VCS invested in and at one point they they tell me hin listen these VCS are pushing us so hard that we need to Swerve from our main purpose so what what do you do about this I mean do you need to be self-regulated do you think that you need to be uh also regulated from the uh government Si from a business standpoint you mean like in I mean that's a very multi-layered question I mean I think first of all I think you need to think hard as a Founder what kind of VCS you want to have on your cap table uh and I think we often say that is that you know just like we diligence you you should diligence us like do you want a Sonia and and Meda on your cap table because they're aligned with your values like talal was on stage before or Rick Fox was before like like you know they were very targeted in the types of profiles that they wanted for the investors on their cap table right because this is a long this is a marriage I mean you know this is like a 5 to 10 year relationship this is not like a oneoff and then cherio goodbye like thank you for your money so you know are you sure you want that investor in your cap table um and are you sure that that person or that entity is actually aligned based on their previous actions with you and other Founders that's number one um and then um and then number two is I think the founder also just needs to kind of be mindful of what he or she wants because ultimately yes we're here as advisers we're here as allies for you and we're all incentivized to see you succeed because we have skin in the game and we've put money in you but ultimately you're the founder you should be making the decisions right and so are you able to listen take constructive feedback and then make that decision are you strong enough to push back to the investors that are maybe bullying you uh into making certain decisions that don't align with your values why are you smirking and chuckling you said the bullying I'm like okay I I still don't feel we're bullying anybody no no no we don't I'm saying but I mean I think in the world they are bullying and type investors and they they investors who bully other investors too by the way also yeah it's it's a tough it's a tough Journey for the founders in the room not all the business models or the type of businesses make sense for VC and vice versa right VCS have 10 years to in theory triplicate Queen duplicate uh de duplicate I'm I'm not going getting further because my level of English doesn't allow for it so we have an obligation to our LPS uh a duty to our LPS to make that level of returns then if we're successful we do it if we're not successful we don't do it and so when you marry uh for uh for a while VZ you have to expect that if your business model doesn't scale at that because of the nature of what you're doing doesn't scale with that pace then there are other asset classes you can consider and it's very important to think that from the get-go or at least every two to five years so that you don't get you don't put yourself in that trap of oh wow and now I need to scale so fast that's unfortunately or fortunately what what we want to see when we invest VC money it's just the type of asset class that that has that nature and so it's not for everybody some of the business model makes much more sense uh by bootstrapping you know they go to profitability earlier they they kind of create foundations that then can be scaled later on and so make sure you have a fundraising strategy that make sense for your business model um and then nobody needs to get bullied I mean I guess for the investors in the room because we have international investors we're very friendly over here so you know I hope so uh M you are um you have Investments globally so let's shift to uh geographically I mean Abu Dhabi UAE in general have been doing magic over the past several decades how do you see uh startups uh evolving here uh when you compare it to different geographies and what does it make difference being here compared to to other places I am uh I've been here for 17 years and I've been mesmerized by what happened in the past decade when it comes to Ventures when it comes to entrepreneurial ecosystem I would have never imagined 10 years ago when we started those conversations then in 10 years from now from then we will see so much talent so many incredible Founders Capital flowing and again in the impact space it always comes a little bit later and it's always a portion of it but still everything is growing at an incredible Pace the UAE specifically and now Saudi follow suit following suit created a Launchpad for Alp of the world from here in five hours you reach basically all Africa southeast Asia uh the Mediterranean it's it's just logistically very strategic but also they they created we created all of us together a Launchpad for talent and so there is a catalyzing effect of incredible ideas ideas come come from everywhere uh our portfolio is stretching between subsaharan Africa in particular Nigeria but also a bit of Tanzania Kya Rwanda Egypt uh we have a lot of startups in Egypt couple in Pakistan a couple in Singapore uh and the rest I would say it's pretty much UAE and Saudi um I don't make any big distinctions when it comes to early stage startups because they are really same level of talent incredible energy and and when in certain countries there are not even infrastructure they kind of Leap Frog they come up with things that are just mindblowing uh mind stretching the difference is when there is no infrastructure the founders needs to be very flexible and they need to figure out how strategically they can avoid that trap um and more often than not they end up creating infrastructures themselves so it's like whoa despite covid despite um uh the latest let me say bubble uh that we have experienced in the past couple of years in the region not much has changed despite the currency tanking in Egypt and Nigeria we have just made an exit in Nigeria with uh um I'm not sure if I'm allowed to say the name but with a fintech let me double check which was 20 29x first first acent from our fun number two and if it wasn't for the currency tanking they will be much Beyond a unicorn and so I'm just super impressed by by the qualities of these Founders they are not pampered at all and you are not pampered the founders in the room uh it's really tough uh capital is minimal we're scratching the surface the full region that I'm talking about Middle Eastern Africa had what 6 billion last year overall for two billion people uh that's one deal in Silicon Valley so we're scratching the surface and when we look at impact investing I was checking the latest stats this morning while while coming here um it's nothing it's like it's 2% of what they call impact investing globally it's here in Middle easn Africa and this is only uh basically overall globally including all asset classes one to 2% of the overall AUM globally so we're starting I hope um I'll see this becoming mainstream before it's too late great Sonia let me give you the final word for all the startups over here here for all the innovators with impact what would you tell them in Abu Dhabi um find your allies they exist you have two of them on the stage um but there's more of us um and you know even if we don't invest in your business for whatever reason maybe like the sector doesn't fit Etc we will be helpful um and so that would be my my kind of advice to the founders in the room is create that board of allies around you and they don't all have to be from the region necessarily but you do have some some here um and then leverage them um leverage our networks because we can introduce you to other investors who are in the room um who you know you might be a better fit for ETC so that would be like don't be afraid to actually approach us I say this a lot to Founders because they feel quite like oh I don't know I didn't want to come up after your you're the End come up we're friendly we're not going to eat you up like you know and we will take the time and at least won't have a long conversation with you but we'll take at least five minutes to to put a name to the face and then we can follow up with a longer conversation or refer you to someone on our team who can have a longer conversation with you and redirect you um because I think we need more of you ultimately and we need more Founders who think the way you do and who want to basically create meaningful change I know it sounds cheesy but I really mean it from the bottom of my heart um we need more of that energy into our world our Venture Capital world as well okay given that they extended our time a little bit so wow it must be doing well we we very lucky because I want to add on this as well um many startups uh and Founders when they approach VCS they don't know how to start with this approach so it'll be by email LinkedIn ad uh phone call coming to this conference and try to to uh meet you and and and catch you so uh what is the best way to approach one and what homework shall I do before coming to you what what homework homework oh yeah yeah yeah definitely do homework don't approach me if you're building a company that's not in a sector that I focus on which is climate that would be advice number one because it shows that you haven't done your research right if you're trying to pitch me your health Tech business I'll be like well I'm the wrong person for you so go to Meda H yeah go talk TOA exactly yeah kadia on stage before is part of our portfolio yeah yeah so there you go um LinkedIn now that's a good one because we get a lot of I think I have over a thousand uh requests on my LinkedIn I'm not a huge fan of LinkedIn I'll be perfectly honest there's a lot of noise especially post chat GPT a lot of self-promotion Etc um I will if you come up to me though say hey connect with me on LinkedIn because I've met you now like I've seen you I can you know I can put a name if you tell me hey we met after your your intervention at uh not intervention your session at atfw um that I will use but if you're cold messaging me randomly and in some instances I was saying this at this Forbes event yesterday where you actually have clearly copy pasted the message because it's actually addressed to someone else like hey dear Sally and I'm like okay clearly you didn't not take time to write this message um I will most likely not respond to you um I I do try my best to actually refer entrepreneurs to people on my team if it's relevant like if you're a fintech Founder I will refer you to my fintech team if you're a climate founder I will refer you to my my climate team right um my advice though my key point that no one really thinks about is stop always targeting the partner level because we are not The Gatekeepers of the pipeline our juniors are actually those are the people you should be sucking up to to be perfectly honest because no but it's true because we only see the filtered deal flow that our senior Associates and principles come up with basically and so get to know and network with the Juniors at the VCS rather than the partners because the partners have limited bandwidth so they might I might not respond to you because just not because they don't want to just don't have time whereas the Juniors part of their job is actually cultivate our Pipeline and so they have to spend time with you so build those relationships with the Juniors at the f at the firms in order to get to us that is the most effective and then of course if you know Meda and she refers a deal to me or vice versa that always helps as well right great advice thank you Sonia and and and be nice with the Junior because for example we have one our value is humility uh if you're like I want to talk to you uh give me your partner number then it's already a no go um so watch out for that uh something else on the homework um it's about consider every conversation with us with us no matter if you are already Al there or not no matter um what your idea stage is maybe you're too early for for our fun now or whatever but consider that a pitch I know it sounds heavy but but it is what it is be as energetic as you will be when you're pitching something officially right um um show your passion just behave as it was always a pitch and not only when you meet investor but when you meet anybody pitch everywhere I know it sounds a bit daunting but first of all you get a lot of feedback even just by the body language of the person that you're talking to and ask a question get the hardest feedback the earliest um so that you kind of you know get the voice of the market early on just to add a Nuance to that also but be mindful of where you're you're you're doing that because like I've been approached at restaurants on weekends Etc like that's not cool uh you know like if I'm with my family like don't just come up to me and just pitch me your idea in the middle of a weekend like you know so show show some you know some EQ as well like you know there are times to be in work mode and there are times to be in in family mode like you need to lead a balanced life for yourself as well by the way so just so talk about families when you are with family yeah and on that one last thing uh take care of your mental Fitness and your body fitness um the older I get and the more I see this being one of the biggest impairment for Founders when things get tough It's so emotionally draining it's beyond the beliefs because you're putting your face you're putting your family under the line um so take care of yourself and of your body great advice great conversations thank you very much Sonia I really enjoyed it a big round of applause to the ladies thank you oh [Music]