Making impact investing mainstream

09/12/2022

At Howard Group, we are united behind a strong yet simple purpose “To improve and enrich lives through responsible investing in people, places and ideas”. 

This clear sense of who we are means that we actively seek out like-minded partners, investments and projects who share our intentions and principles. Aligning values to investments affords a better fit, achieves more over the longer-term, and increases the societal, environmental and financial impact of the investment.

One of the companies we have invested in for these very reasons is Eka Ventures. Eka is a £68M fund investing in founders creating positive system change.

It is a seed stage investor, helping to build category-defining consumer technology companies that positively shape the world, making it more sustainable, healthy and inclusive.

Eka’s thematic focus on health equality and sustainability is very much aligned with our own responsible investment strategy, which is driven by the desire to make a positive long-term impact on the people, environment and communities in which we invest.

Jon Coker, Founding Partner at Eka Ventures, shares his view on the importance of shared values, why there’s no compromise on profit with responsible investment, and how to make impact investment mainstream.

The early days

I’ve been in venture capital since 2007. I was co-managing partner of a generalist tech focused venture fund and I left there to start an impact VC alongside Camilla Dolan, and Eka was born.

We were a start-up ourselves when we first engaged with Howard Group. We first met in 2019 and began our partnership in 2020. I was introduced to the company through Silicon Valley Bank who have a programme of connecting investors with VCs.

When I first started raising the fund for Eka, the reception from a lot of people I knew in the venture industry was ‘I don’t understand why you’re focussing on impact and why not just raise a generalist fund’. So, the first investors that were prepared to come into the fund were those who really believed in what we were trying to achieve.

Howard Group was one of those early supporters believing, like we do, that investing responsibly doesn’t mean sacrificing profits or taking on additional risk. Bringing people around to that way of thinking, if they’re not already there, is a hard thing to do because they feel they’re taking a risk on you. So, Howard Group’s early commitment to join the first stage, the crucial first fund, was pivotal in helping us to get going and clearly demonstrated their support for our mission. There was a real catalytic element to that.

The mission

The mission of Eka, which is very much aligned with that of Howard Group, is about making impact mainstream. We have a conviction in the core belief that there is no compromise between profit and sustainability and between profit and health.

The driving force, or thesis, behind Eka is that we only back impactful technology companies where we believe the product or service can have a real impact.

The companies we back are at a very early stage, a year or two old, usually have just launched a product, but may also still be in the product development stage. We invest £1M-£2M and help them grow to the next stage. We are specifically focussed on two themes: health equality and sustainability.

Within health equality we consider two different things. The first is shifting the healthcare system to be more preventative and proactive; instead of treating people when they’re sick, helping people to stay healthy and making that affordable and accessible (not just products and services that people who are wealthy can access).

The second is inclusivity. One of the most important drivers of health equality is socio-economic status so we also back products and services that we need in our lives – non discretionary products and services and making them more affordable and accessible.

On the sustainability side, we back companies that are using technology to make our consumer supply chains circular, resource efficient and de-carbonised. We invest in both new consumer brands and technologies that empower the incumbent brands.

Our core driver is to show that there’s no compromise on return by investing in those themes, in fact the opposite.

The differentiators

What we’re doing at Eka is important in driving real change.

Look at the practical nature of what we are doing – the direct impact of building a portfolio of 25 companies (we’ve made 11 investments so far). It is a high-risk high-reward portfolio where we expect the returns to be consolidated in a small number of companies that go on to really scale. Our focus is on companies we believe can have a major positive impact in a big part of our economy if they achieve that scale.

For example, we have an investment in a company called Hived. It is an early stage company which is building a zero-emissions logistics, last mile parcel delivery service. If they can change that industry through their work, that will make a huge difference in air pollution, carbon emissions, customer service, and how the workers in the logistics industry are treated.

It’s not just that Hived could build a big zero-emissions logistics company that drives less miles and treats their employees and drivers better; it’s also about setting new standards for what’s possible. If they achieve that then the big logistics companies will have to react because they can no longer say to their customers that this way of doing business is not possible. In the same way that Tesla has shown that it is possible to build a high-performance electric car at a cost that has parity with high-end vehicles. What happened as a result of that is that the likes of BMW, Mercedes and others have had to react.

That’s what it is about – backing companies that show the rest of the world what’s possible and helping them become big enough to nudge the rest of the industry towards positive change.

What we’re trying to do as a fund is to change the mindset of those who think you have to choose between profit and long-term good.

If we can be a top performing venture fund, this will help take the argument we occasionally get that ‘it is not a good way to make money’ off the table. If we remove that argument, it should dramatically increase the amount of capital there is available for the companies we’re backing, which in turn increases their success and we catalyse the wider venture capital industry. If this happens then in some ways we lose some of our differentiated positioning, but if we do that I guess we’ve been successful!

The importance of alignment

The type of companies we back care deeply about the type of investors we have in the fund, because ultimately those investors are effectively shareholders in their company and where that capital comes from matters.

Having true alignment to what investors care about matters a lot to us and we found that alignment with Howard Group. Their Centenary Vision is so in tune with what we do.

It was really clear from the outset that their three strands of purpose - people, planet and performance – and their view that you don’t need to compromise on any, guides the way they approach all business decisions. It was exciting bringing them on board. They demonstrate their values in the way they communicate with us, which is incredibly engaging and supportive, and in how they embody their long-term view.

Howard Group being a long-term partner is really important. Because we have so many parallels, there’ll be plenty of opportunities for us to work together for real societal change and to build a better economy.