BayBrazil team noticed that in the past 12-18 months new companies founded by Brazilians launched operations in the San Francisco Bay Area region.
So, we are currently updating our survey with founders and will publicize it soon. Meanwhile, we caught up with one of these firms: early stage VC firm Positive Ventures, founded in Sao Paulo in 2016, started its operations in Silicon Valley to grow its bold mission of investing in businesses that solve some of the world’s social and environmental challenges with technology.
Here is our conversation with Co-founder, CMO and Chief Impact Officer Bruna Constantino and Managing Partner and Chief Investment Officer Murilo Johas Menezes.
BayBrazil: Positive Ventures is a venture firm co-founded by Brazilian investors that self-describes its mission to “invest in startups where every dollar of revenue is also delivering environmental or social impact”. What is the story behind the mission? What is your investment thesis and how does it work in practice?
Murilo: Positive Ventures was founded back in late 2016 and it was operating “under the radar”, testing the investment thesis through Club-Deal Investments, such as in OccamzRazor in California, or Eu Reciclo, in Brazil.
What did they have in common? Both have deeply committed and purpose-driven founders, willing to tackle huge societal challenges, such as accelerating the cure for complex diseases or tackling the lack of incentive to recycle, respectively, by leveraging technologies that may provide scalable solutions.
The team grew and in November of last year, Positive Ventures launched its first investment vehicle, while it is still fundraising, it has already secured three highly impactful and potentially profitable investments in the Healthcare and EdTech sectors. We developed an internal process which is called Decisive Investments Framework to evaluate companies that enter our Investment Funnel.
Once we deep dive and decide to invest we have another structured Value Add Framework to support our portfolio companies in two fronts: Growth Engine and Impact Engine. It has been a journey, with a lot to learn on the go, but are already seeing the results of having organized processes and proprietary frameworks and ways of engagement with our companies and stakeholders.
BayBrazil: In January 2020 you set up an office in Palo Alto, California. How is the Silicon Valley-Brazil connection related to your growth strategy?
Murilo: Many topics in the “Sustainability World” don’t have borders. The US, in particular, has huge problems, such as its carbon footprint or increasing societal disparities (i.e, one in every 5 children struggle with hunger). However, we know that most of the pressing societal challenges of our times are disproportionately affecting the South Hemisphere.
This is why most of our investments will be either in companies based in Brazil / LatAm, or in the US when the companies are about to internationalize and planning to land in Brazil / LatAm with their impactful solutions. Being aware that there is a lot of innovation in a country like the US (or more specifically the Silicon Valley and some other regions, such as Boston & Cambridge, NYC), it makes a lot of sense to establish this bridge between the countries.
BayBrazil: According to Larry Flink’s letter to CEOs in 2019 “Sustainability-integrated portfolios can provide better risk-adjusted returns to investors. Sustainability will drive the way we manage risk, construct portfolios, design products, and engage with companies.” When the largest investment management fund, Blackrock, signs this fundamental reshape of finance, it should bring some consequences to the industry. What is going on in Brazil and in the United States related to the sustainable investment agenda? Should lower returns be expected in the benefit of social and environmental goodwill?
Murilo: Both Brazil and the US are lagging behind European Countries in several aspects regarding the Sustainability agenda, in general. The very consumerism-driven economies in the Americas impose a challenge in itself to the agenda.
And it is not the case that Europe doesn’t have a high standard of living, but while the world is applauding “ESG-driven” companies (Environmental, social and governance), such as those that make individualized electric cars that required batteries and energy from a not-so-clear grid, Europe has a public transportation system in place for decades. Just as an example, the Carbon footprint for travelers could be up to 57x (!) lower if they were able to take trains in Brazil or the US instead of an economy-class flight ticket.
On the bright side, one can say that Brazil and the US are now catching up in several ways, the responsible investing agenda is one that is finally igniting. We’ve been seeing, for example, especially after COVID-19, a surge in the topic of ESG investing in Brazil, as we are seeing in the US many commitments from the investments field regarding the racial divide – long overdue.
With regards to impact and return, at Positive Ventures, every time we are asked about trade-offs between impact and return regarding Impact-Oriented investments – ESG + Impact Investing – our usual answer is: are the ‘mainstream’ profitable investments’ negative externalities they are having on people and planet being taken into account by its investors? Each investment, let it be in different sectors, industries, stages of a company, or even asset classes, has a different risk-return-impact profile.
We choose to be on the side where we can achieve high risk-adjusted returns and meaningful societal impacts, there is no trade-off there. In fact, the most renowned universities in the world, in addition to countless players in the investment sector, are showing enough evidence that impact-oriented investments have consistently outperformed those that don’t take into account the triple bottom line approach.
BayBrazil- “Quality and equity in education remain a crucial challenge in Brazil” UNESCO, 2019. How does Letrus, one of the companies of your portfolio, tackle that problem, and make it profitable?
Bruna: We have many problems when it comes to education in Brazil, and Illiteracy is a big one. In Brazil, it is estimated that 89% of young people over 15 years cannot fully understand an adult book or prepare a dissertation following the basic precepts of the Portuguese language. This scenario motivated the investment in Letrus, an EdTech that developed a platform that uses AI and gamification strategies to improve student writing and reading. As a consequence, these young people will be able to go to a better university, where they will have the tools to finish their studies and have proper jobs, diminishing the social inequality gaps that we have. To measure the impact, they’ve partnered with J-Pal from MIT, and recently were elected by UNESCO as the world’s best AI technology in the education space. This problem has a huge scale, and Letrus has a scalable solution with the potential to be in every school, public and private, generating both financial and social value.
Another example is our last investment, Slang, with Headquarters in Boston. It is a fast-growing EdTech startup that is tackling the illiteracy in field-specific English across Latin America! Less than 1% of Brazilians are fluent in professional English, which has an impact on employability and income for millions of people. We invested in Slang to solve this challenge.
BayBrazil- OccamzRazor uses machine learning to find and develop curative treatments for Parkinson’s and other complex diseases. How is it for a Brazilian VC to invest in a company which expects to solve a global problem with global partners? What are the financials in it? And how do you split grants from seed money in the same organization?
Bruna: OccamzRazor is on a mission to find cures for “incurable” diseases, powered by its revolutionary machine learning technology. It is clustering and labeling the world’s scientific information to discover much faster and effective paths to tackle complex diseases. To tackle our most pressing societal challenges, we must assemble capital, technology, and work hard beyond idiosyncrasies and borders. OccamzRazor is another example of a great company, with a great mission, impact and it represents a massive profitable opportunity. Healthcare and Biotech are multi-billion dollar markets with constant tail-wind and unlimited capital, including grants. OccamzRazor received donations from stakeholders like Michael J Fox Foundation and Sergey Brin. Venture philanthropy investments can also come with incredible partnerships. The Michael J Fox Foundation not only provided capital but allowed OccamzRazor to train its algorithms by processing the Foundation proprietary Parkinson’s research database – by far the largest in the world – a huge leapfrog and what motivated OccamzRazor’s team and us to choose Parkinson as our initial target.
BayBrazil: Working with a purpose-driven business and focusing not only on the financials are things not usual for many people. What did make each one of you choose this career path?
Murilo: Growing up in a home where both parents are artists and teachers has definitely influenced my career. I developed a great sensitivity towards other people, with a sense of altruism that defines my professional passion, just as I understood how the fact that I was lucky enough to study opened so many doors for me. Despite agreeing with and understanding the urgency of the climate agenda, my dream would be to live in a more socially just world, and this goal is what makes me work hard and with passion in my daily life.
Bruna: Since very early I was connected with social and environmental causes, but I was taught, like most people, that those causes and your work have to be placed in different boxes. Being vegan and engaged with environmental and civil rights movements were mostly a part of my lifestyle, so for years I would go to work and kept those values mostly to my personal life. That didn’t seem quite right to me and in 2015 I became aware of the “impact investing” concept, which in a simple way present itself as a concept where you can establish a clear connection between social and environmental values and work. Since then I’ve been dedicating my time to align all fronts of my life, and I’m confident that by doing so we can contribute to this future where it will be mandatory for a business to serve the people and the planet.