What impact investors can learn from journalists

Image by C.A.D.Schjelderup from Wikimedia Commons. Some rights reserved.

It’s struck me for a while that there are similarities between really good investors and great investigative journalists. The most obvious similarity is that they both ask good questions but I think there’s more to it than that.

As a journalist you have to uncover a story that nobody else has told. You have to zig when others zag, not just to be contrarian but because you believe in the importance of the story even though nobody else might at the time. I’ve lost count of the number of movies where journalists have to convince their editors that the story they’re working on is worth pursuing (why is it that editors always come in for stick?). Journalism is often a fairly lonely business in the early days of a story. You might get a big team working on a story once it has grown but when you’re finding out about it for the first time, it’s one or two people.

There’s also their role in uncovering information. Both professions rely on hard facts and those facts might not seem hard when you first come across them. In the case of journalism, it might be that somebody is trying to hide facts from you. In startup investing, it’s often that even the founders are struggling to spot the hard facts themselves. It takes pattern recognition to notice when things are really important and when things are inconsequential.

Then there’s the importance of telling the story in both professions. For journalists that’s obvious — if you can’t tell the story well you’re not going to get very far. But as an investor, the process you go through is one of helping founders to tell their own story to customers, other investors and the outside world. I think this is even more important for impact investments where the story of the positive social or environmental effect that the company’s product or service has should be an integral part of its value.

There’s a similarity in the temperament of great journalists and great investors that I’ve noticed as well. Both are hooverers of information — they read huge amounts and are constantly are looking for the next story/venture. They know that many of their investigations will come to nothing but all of them are good lessons.

Tech for Good LPs

It makes me really angry to see bad behaviour in the tech industry. Over the past year, there’s been seemingly unending stream of sexism, sexual harassment, bullying, and alleged fraud. Each time a new story comes out I want to scream — tech has so much potential but it will go to waste if people like this are allowed to shape the future of the industry.

One of the only good things to come out of the last couple of months is that a few investors in venture capital funds (normally known as Limited Partners or LPs) have spoken out in a way that I haven’t seen before. I was really heartened to see Mitch Kapor and Freada Kapor Klein take a stand — they did so with Uber (a direct investment) and then they did the same with 500 Startups (where they were LPs). It was the first time I think I’ve seen such a public, progressive, activist move from an LP — I think that’s a great sign and I wish more investors would do it. In general LPs don’t say anything about their investments, even to the extent of not really admitting where their money is invested, but venture capital is where the seeds of culture and behaviour are sown and LPs could have a huge influence.

We’re very lucky at Bethnal Green Ventures that all our LPs (Big Society Capital, Nesta and Nominet Trust) have invested in us because they want to see technology used for a positive social purpose and done so to the highest ethical standards. We’ve written it into our governing documents and they take a keen interest in all the decisions we make. We love having LPs who are there to keep us on our toes in terms of our mission and who will let us know very quickly if they feel we’re not living up to their expectations. Of course they’re ambitious for us financially as well.

I think this kind of tech for good LP should be the norm not the exception. Only that way will we change the tech industry down the line and break the biases and bad behaviour we’ve seen in the tech industry of late.

Google Ventures comes to Europe

I think this might be some of the best news for the European tech scene in a long while. Sure the new Google Ventures Europe fund isn’t the biggest, but having seen how they work in the US, I think it’s going to really change how investment works over here. There will be no thick carpets in Mayfair. No investing in stuff that doesn’t have the potential to change the world. No trying to screw founders over with funny terms.

Even better GV is truly about ‘more than money’ which I think is sorely needed in Europe and will hopefully mean that other investors up their game and start hiring more diversely. As the release says, “Startups need more than just capital to succeed: they also benefit from engineering support, design expertise, and guidance with recruiting, marketing and product management.” Amen to that.

So huge congratulations to Eze, Tom, Avid and Peter. Please do things differently. Don’t accept that startup investment has to be done the way it is now. Then we’ll really start motoring.

Does ‘tech that matters’ matter?

Yesterday Marc Andreessen kicked off one of his now familiar tweetstorms about whether Silicon Valley is working on stuff that matters and whether that, erm, matters.

“make trivial apps” vs “do things that matter” are not actually in conflict-there’s plenty of room and plenty of money to do both.

If you’re A16Z then there is plenty of room to do both and to be fair A16Z do invest in tech that matters. Look through their portfolio and you’ll find Koru and NationBuilder but you’ll also find Zynga and apps for helping you choose shoes. Unfortunately I don’t think there’s yet ‘plenty of room’ in the London tech scene — tech that matters is still squeezed out by tech that just sells more stuff.

I also agree they’re not automatically in conflict and that toys sometimes go on to become amazing things. It’s not triviality that I’m against — it’s starting a startup without wanting to create value beyond just money. I’ve tended to find that positive social outcomes don’t really come from people who don’t intend to create them. If you try intentionally to use technology to solve problems that matter, you’re much more likely to do it.

Investors have one of the most powerful positions in the prioritisation of effort and capital in this debate. Do they want to invest capital into businesses where there’s just going to be a return (even that is unlikely) or do they want to put capital to work in a way that can get a return and help solve one of the most pressing problems facing the planet? I know which I’d prefer to do.