Opportunities to invest for good and make decent returns for investors are continually growing, according to Simon King, partner and manager of the Octopus Future Generation VCT.
The number of companies launching with a focus on having a positive impact on the world has been increasing, he adds. This is primarily down to one factor, people, within which there are two elements, founders and employees.
“When we are speaking to founders about building new companies, invariably they are interested in building something that is big and valuable and has a positive impact on the world.
This is especially true among the younger generation of entrepreneurs but also it is increasingly true for second and third time founders, people who have grown their companies and have their earn outs and in looking at where their next venture lies, are wanting to move from niche areas to having a bigger impact on people’s lives.
“So what we’re seeing is a range of different founders that we have backed in the past having a positive intent to build these companies and a huge underlying trend of companies being built in spaces where they are going to make a positive impact.”
The VCT invests into three themes – sustainable planet, revitalising healthcare and empowering people – areas of big societal changes in which Octopus has a track record. Back-dated testing against companies Octopus has been investing in since 2008, the percentage of companies that sit in one of the three themes is growing year on year, King says, “and I think that trend will continue”.
With the second element, King says, “employees and especially Gen Z, are thinking about their 80,000 hours of working life and are looking to join companies that can be seen to be a force for good in the world.
“The combination of those two things means we are seeing a real build in terms of the number of companies being created and the quality of people and talent they are able to attract to them.”
There is a realisation also, King says, that anyone looking to make a massive impact on the world can rarely do it through philanthropy and relying on the charity of other people. “If you want to make a really big impact, you have to do it in a sustainable manner and that means you have a commercially viable business model that people will want to invest in and you can build and scale, and in return put some of the profits back into having that bigger impact.”
Accordingly, the investment strategy of the VCT looks first at whether the business is one to invest in from a commercial perspective, and then whether it fits within one of the three themes into which the Future Generation VCT will invest.
In a year the VCT will see around 3,000 business and end up investing in 30 to 35 of them, King says.
Examples of companies in which they have invested include Food Steps, a company set up to help businesses understand the carbon impact of food, which has seen chefs in restaurants change their menus; Overture Life, a company helping to automate IVF processes; and Oto, a company which has developed a cognitive behavioural app, which helps people to live with the effects of tinnitus.
[Main image: alicia-petresc-c3KZP4azG6g-unsplash]
