(upbeat music) - Welcome to Swimming with Alligators. - The VC podcast from the LP perspective. - With your hosts, Alexa Bins. - And Ernest. You ready? Let's dive in. Today, we are thrilled to have Margot Kane, Chief Investment Officer at Springpoint Partners. Join us. Springpoint focuses on deploying investment as a tool for social impact. Margot is a sought after impact investor in both social change and sustainability, currently on the investment advisory board of the EPA and certificate at capital. We're thrilled to have Margot on to share her lessons learned in her long impact investing career from capital impact partners to Calvert Impact Capital to closed loop partners and now Springpoint. Thank you, Margot. - Thanks for having me. - Well, many of our listeners are not impact investors. And given your extensive experience in the field, could you share a bit of an overview of how impact investing has changed? - It has grown immensely. I mean, when I started in this industry, it wasn't a phrase. You could do community banking. You could do socially responsible investing, which was really in public equities. And so there were these niche, established bodies of work based on decades of folks efforts that really started to coalesce in terms of a multi-asset class, more holistic vision for assessing the fact that all investments have an impact. And so if you're not intentional about the kind of impacts your investments are having, likely you're supporting negative impacts and negative externalities. And I think that's probably the biggest shift that's happened in the last decade, which has really grown the possibilities. I think that it has also highlighted the need for multi-disciplinary skill sets and areas of expertise to do this well, to develop that intentionality that blends both investment expertise in a given strategy or asset class or geography with a deep understanding of the levers of impacts that are either human impacts or planetary impacts or both. I think people have a hard time sometimes facing some of the intrinsic trade offs, inherent to becoming more intentional about the kind of impact you're having in the world. And that's, for me, that's one of the most interesting things that is facing the kind of whole concept of impact investing. Can you have your cake and eat it too? If you're trying to build a more humane and better for the planet form of capitalism, can you still welcome with your eye-baker bonus at the end of the day? Probably not. And so we'll see where that goes. But it is maturing and growing rapidly as a kind of theory and practice. Thankfully, I think most people now understand it's not an asset class in itself. And yeah, I'm excited to see what kind of the next generation brings. Are there any misconceptions about impact investing today? Lots, I think. I think both internal to the kind of community and external, one I think I hope is now put to rest is that it is an asset class, like some kind of weird philanthropic asset class. Not that. I think the biggest one that comes up a lot when we interface, as I do in my work, I co-invest with a lot of folks that are not impact investors, self-identifies that, that we don't care about financial returns or profitable business models, we lack rigor. When in fact, not only do we care about those very much, we're adding another layer of analysis into our diligence. So it's often more complex, not less. That's on one hand, I think on the other hand, there's also, and I think this kind of lives at institutional financial services level, there's a misconception that you can basically like slap a green leaf on a product and call it impacts. I think that's starting to, they're starting to learn their way out of that. The SEC certainly is taking issue with it and clients aren't dumb and vote with their feet, right? But I think we've got some ways to go on that front and the concept of impact washing, getting past that at the institutional level. - For retail investors, do you have any suggestions if they do want to be voting with their dollar savings accounts? (laughs) Yeah. I think everyone has different times of their lives where they have different capacity and bandwidth for this conversation, honestly. But the plus is that there's always an entry point. I mean, consider where you're banking, right? Is the bank where you're depositing your savings, they lend that money out. They're doing stuff with that money, it's not just sitting in your account. Figure out what they're doing with it or look for local credit unions, local community banks where you can place deposits because they are mandated to circulate that capital within your community. You know, certainly there's a lot of kind of thematic pooled funds around 401Ks and various retirements accounts that have either passive or active strategies around intentionality in terms of climate impacts, social impacts, governance, et cetera. When you're opting into those, you know, check it out. Even the robo-advisors have them now. You don't have to pay more for these options. So I would just like work it into your everyday because I think it's a big ask to ask folks to kind of go out of their way to do this if it's not part of their everyday practice. It just becomes another chore. But the options are out there on the retail throughout the products, at least in the public markets and on the kind of banking side are out there. So just, you know, yeah, consider it and always ask your financial advisor. It's always a good test to see like, are they really doing this work to meet your needs and values or are they trying to kind of make their own lives easier? And there's a very interesting, you know, set of regulations right now being debated. That's gonna really affect the financial advisory community around their fiduciary duty to their clients. And so, you know, they'll be upheaval there anyway. And I think it's always worth asking. - It's 2024. So as much as a lot of us are maybe ignoring it or waiting to the end, where do you think impact investing fits within just kind of our political climate and where will it kind of end up in 2025, 2026? - That's a big question, Ernest, in an election year. There's a lot of anti-ESG and, you know, other forms. There's a campaign being waged against taking into account social environmental externalities and investment strategies, broadly speaking. This is not unique only to impact investing. And a part of me views that this coordinated campaign as a little bit of a, oh, you know, we're making a difference. We're now finally wielding some influence and investment practice. But these lawsuits are, they are gonna have at least a temporary effect, certainly. And they have a chilling effect, particularly the ones that are, you know, claiming reverse racism and affirmative action like activities and diversity, equity and inclusion activities. So I think without a similarly coordinated defense strategy, we could see some setbacks depending on how these cases wind their way through the courts, depending on certainly, you know, political parties and power at state and federal levels. But we're still on the right side of history, right? You can ignore climate all you want, Florida, but Miami's still gonna be underwater. So like the lived experience of the citizens will show. And if our investment practices don't catch up to the real world, people are living in, you know, we're in for a world of trouble. - Yeah. - Across multiple fronts. So I think there's some short term pain and long term. I think the arc is impact investing is not impact investing. It's just investing. - Yeah. That makes me think talking about living in the real world. One of my friends said his mother always told him you can either learn or feel. And so if we don't do the certain things, we're gonna feel it no matter if we learn it or not. - Yeah, that's a learner feel. I like, and you can learn through feeling too, right? Lived experience, that's what we're talking about. Like you can react or you can learn and adapt and we're all gonna have to adapt. I mean, even what we're doing now is insufficient. - So with that, that kind of like, that cheerful landscape, the question I brought up. Could you tell us more about spring point partners and the mission? - Yeah. - We're a mission driven organization. We deploy capital in a variety of ways, through multiple tools, including both grants and investments. And we're deploying capital to support our partners to achieve transformative and systemic impact in our aligned impact strategies. Our directors include the members of the fifth generation of the Burwind family based in Philadelphia. Their values and their vision have really shaped our strategic direction and our work since we were founded in 2016. And they were very deliberate about setting us up as a very flexible organization. We're a little hard to define, but we are impact driven. And a lot of our investment practice focuses on our impact strategy around economic justice. So we're really looking at wealth building strategies for underrepresented families, entrepreneurs, communities. And that takes a variety of forms. - And where does venture capital fit into this diverse nebulous strategy? You have a hard job, Margot. - Yeah, it's hard to be concise about it in conversation. - Yeah. - So venture plays a pretty important role. When we think about where you get the overlapping kind of Venn diagrams of the opportunity to create intergenerational wealth and socioeconomic mobility, with access to new markets for folks who have historically been locked out of those kinds of wealth generation activities, with the kind of resources an operation like Springpoint can bring to the table. That's kind of where you land into supporting emerging and underrepresented managers in venture who themselves have investment theses and strategies around supporting underrepresented founders. So it's a bit of a ripple effect. And so we are consistently deploying to venture kind of outside of a classical allocation strategy because of the wealth generation opportunity. We see, we know that venture is a tiny percentage of the broader markets of the broader activity in terms of who's going to be successful founding team and generate that kind of wealth. But it is still an essential component. We do other kind of small business style work in Philadelphia. We look at other types of strategies like distributed ownership as well and kind of different asset classes, more kind of late stage businesses, but venture is near and dear to our heart for that reason. - I believe you all began, I could be wrong, but supporting emerging underrepresented fund managers in 2020. Are you still looking to add additional venture managers to the portfolio right now? Great. - Yes. We'll add probably between three to five new managers this year in addition to, you know, supporting the existing managers in our portfolio that are going back to market. - So how do you assess and vet these managers? - It probably wouldn't be that different from any other LP. Honestly, you've had on the podcast, we just probably take a slightly different slant to some of the elements. We're looking at leadership and team building approach, learning mindset, impact alignment in terms of their dedication to making sure capital is flowing to places that it's otherwise kind of scarce. Fundraising strength right now on this market, that's a pretty big area of, fortunately it's kind of binary right now in terms of whether or not you can get off the ground, execution capacity, right? Access to deal flow, portfolio construction, deal making ability. We will take proxies for track records certainly, you have to if you want to authentically support emerging managers. So there's a few different kind of ways that we'll think about that. One area where we have to get really creative is sort of mapping their understanding of fund management, right? You can be a great investor and know nothing about fund management. And there's elements of that where we're willing to take the bet on the learning curve and there's elements of fund management where we've learned, you know, folks kind of have to have this understanding before they launch or there's some painful corrections at. So yeah, those are kind of the, you know, main areas. - That sounds very consistent with what we've heard. Some, I think even some more rigor of like digging in and being very descriptive on what qualities you're looking for. But one question I had just around who's the right type of fund manager to interact with you, Marga, is, and the way I'll ask it is, how many fund managers actually label themselves as impact managers you think that are within your portfolio and how many don't? 'Cause I think within the community, there's a fear of being kind of put in a box, even though you're balancing and having conviction. So. - I think maybe half or less in the venture box and we're fine with that. Just because we're an impact investor doesn't mean you have to be, it's on us to determine whether your strategy, your, the culture you're creating in your firm, the kind of work that you're leading, you know, is showing the positive externalities we're hoping to generate. We care a lot about values alignment. We spend a lot of time assessing our relationship with those managers. That's, that's for us far more telling versus whether or not you have impact KPIs in your deck, right? That the, the impact's gonna come from that, that relationship and our alignment in terms of strategy and the work you're doing day to day. And I fully empathize with those that, even if they think they're doing this with, with an impact lens, they don't wanna brand themselves like that. That's a, because of some of the misconceptions we've talked about, that's an extra burden to carry for folks that are already carrying multiple barriers in terms of accessing the kind of capital they need to be successful. - I am intrigued to hear that fundraising strength is something that you look at in the same way that frankly we, we look at founders on, are they going to be able to raise that next round? And I was just looking up some of the most recent data and we've only recently had over 100 black female founders raise over a million dollars. - Yeah. - This is recent history and, and YC has 500 companies a year and they're two cohorts. So you put, you put that in context that fundraising capability is a really sticky topic. When, I think those stats alone tell you, it's not on those women. There's some, there's something happening apart from their fundraising strength that we only have 100 women, black women who have over, ever raised over a million dollars. - Yes. - Yes. - So, you know, I remember when that article came out and I was, my first article, and I was, my first read of that, I was selfishly very pleased because I felt really validated. I could see so many of our partners in that list who backed these women or who wore these women. And I was like, oh my gosh, it's working. There's this ripple. But obviously the bigger story is this is a very low bar. This is not okay. And you're right, like fundraising strength is not limited only to the capacity of the individual. And I've been doing a lot of thinking about the concept of network wealth. And I think this is, this is some of what the challenges is a lack of networked wealth in black communities and in brown, Hispanic, indigenous communities within, you know, differently-gendered communities. So, you know, a couple of things on that article. I mean, one takeaway is we need more black women investing in black women, which means the black women need resources to do that in bigger checks. The network of wealth needs to be supported to grow because I think that leads to so many other things. Not only, you know, your first few checks, whether you're starting a fund or a business, but also access to talent, access to expertise, access to deal flow. I think one of the biggest things is who gets to take risk, right? And so you may have, you definitely have superlative black female investors at top tier firms who, if they were from a networked wealth, white male background, would have spun out their own firm three years ago, but they didn't. How can you change that dynamic so that they do in the future? And they're making different investment decisions going forward and building generational firms that are making different investment decisions and supporting different kinds of founders going forward. I think that's something we've been thinking a lot about. And some of it has to do with personal risk, a lot of it has to do with personal wealth, but also like, do they feel supported to do that? And I think we can say pretty, you know, honestly, in our current society, no, they're not supported to do that. - Yeah. - So how do we change that dynamic? How do we get those firms to support them to spin out? - Agree with all those things. You know, when we're looking at the factors of despite, I think a lot of times people look at just educational backgrounds and assume things, right? And I can't remember what group said, this was some foundation I was reading, but it said people should actually look at which zip codes people have traveled from, right? So if we aligned all zip codes and based on socioeconomic standing and where you started as a kid to like where you are now, that would have more implications on your desire to take more personal risk, 'cause it'll probably be around trends of like, okay, you might be, and this is me and Alex is a like, you're in middle management age, right? If not just your career, but your personal life, you're managing future generations and sometimes taking care of older generations. And so all those things are factors. The other piece I have is like, and I won't do this 'cause it's not the point of the podcast, but like, I think people would be surprised on how many statured Silicon Valley firms, San Hill Road firms have never had a black GP, but that's the whole other thing, people can do that research on their own. - Oh, I'm not surprised. - They can do that on their own. - The numbers are very clear. That's why they're fighting disgusting diversity data in California. - Yeah, some have just pushed people to spin out, but that's a whole another thing. If anybody wants to respond to that, they can't, but I was gonna move on. - Yeah, but that's such an interesting, like the rise from within versus the encourage to spin out dynamic, that's a very sticky one too. Because a lot like, yeah, culture can be very sticky in those firms as well. - Yeah, and if we haven't had, tell this friend always, we haven't had an Obama moment, right? Where somebody is a managing partner of an established firm, right? And then how that can change a lot of things, like it's changing a political system. Both good and bad, right? But we start to see more participation from a lot of different groups. So when you're investing in these transformational leaders and solutions that think about really, really big problems, what are some of the challenges you face, your fund managers have faced, and how do you overcome them? - I think when you get down to like very specific strategies in let's just say, let's pick a sector like an education or early childhood education, let's say ECE. One of the biggest challenges we wrestle with is, is this the right solution? Is this right lever to pull? Like you see a broken inefficient marketplace, which means opportunity, but it might not be investment opportunity. It might need policy first to create a functional marketplace for investment to then flourish. And so are we supporting the right leader and solution for the problem at hand? And that's where the kind of systems thinking has to come into play. A lot of folks just use the tool they've got. And I've been around venture long enough to know it's really not a solution for a whole host of social challenges. They can actually exacerbate a lot of things if deployed incorrectly or without guardrails. Hello, AI. So I think that's one of the biggest challenges, honestly. Are you kind of like working with the right lever, supporting the right solution? And you never have a clear answer of that, right? So it's a very internal kind of conviction conversation, but it's a good practice to do because you can get otherwise very enamored with charismatic leaders and persuasive solutions and strategies. And that's always, I think, a good check on that tendency. All of us investors tend to have. The other one is, are we a good partner for you? So I mentioned earlier, we spent a lot of time on alignment and that I think you've had previous guests on talking about how investment relationships are not transactions, they're relationships, especially in kind of the GPLP world. And so, early diligence through post closing, that's the start of a relationship. And we are constantly kind of evaluating the qualities of that relationship. And are we on the same page? Are we driving in terms of communication style, transparency, what we expect from each other? Are our values aligned? I think relationship quality for us is essential because, once you're in business with someone, in order to generate transformative changes, which is what we're going for, you have to be willing to take a lot of risks. You have to be willing to really bet on a leader. And so if you don't have kind of a foundational relationship there based on mutual trust, understanding, you're not going to want to take that risk. And so that kind of alignment doesn't mean that they're not the right leader or leading the right strategy in kind of like another context, but we're maybe not the best investor for them. And those conversations can be hard because I can see like, you're going to be great. You're going to be amazing at what you're going to be doing. I believe in what you're building, but the way you're going about it is just not like the way that we go about it. And so our styles don't really align. And it's going to just generate friction in the long run. - Do I have this correctly that part of your style or your sort of theory of change is shared ownership? Could you enlighten us on what participatory investment models are? - Yeah, so we really like to see, and we're really hoping to see folks that are thinking deeply about ownership. And this applies to venture as well as other classes and thinking about the effects of dilution, not just from a sheer financial return standpoint, but from control and agency, governance standpoints and taking into account the history for especially BIPOC business founders and where in the past there's been very intentional wealth and ownership stripping from these founders, but also because of the lack of inherited wealth, had to start businesses with less equity to begin with. So we see, we know that we're values aligned when we're meeting a fund manager that has kind of built in redemptive equity, has thought about revenue-based financing, has also thought about how they open up their fund to small dollar investors in order to diversify that wealth generation opportunity. So that's a very kind of introductory component to this kind of shared ownership thing, which can go all the way to participatory, which is a flavor of it. And you'll see participatory investing models where governance rights are widely distributed amongst stakeholders. A lot of them tend to be place-based or company-based. So cooperative models, for example, are kind of company-based. You've got a Boston Impact Initiative is more of a place-based participatory model. And in between these two examples, right, you've got a lot of different models that basically they're spectrum in terms of whether it's what extent they are distributing governance and economic rights to a broader base of stakeholders. So you can have a perpetual purpose trust where the fund that Common Trust is standing up, where a business not only is now perpetually responsible for their employee's financial wellbeing has employee governance and cemented economic rights, but they may also say they are responsible for community investment and wellbeing. You have ESOPS, which Axios just had a great article about how successful ESOPS are at wealth building for blue-collar workforces. And we back APIS and Heritage, which is a firm that really focuses on transforming companies with a majority-minority workforce into ESOPS with strong kind of cooperative governance models. So there's a wide range. I think we kind of need all of them. We're not trying to pick one because different types of approaches will work for different kinds of sectors and companies. But we really think there's more opportunity to be more equitable in our wealth distribution. And that extends all the way the history of the public equity markets, right? Like the reason companies went public, A, to raise money, but B, to generate wealth building and opportunities for the broader American public. And wealth has been highly concentrated there as well, and it's one of the drivers of inequality in the country. So I think this is, you know, it can seem as like a very niche crunchy thing to focus on, but really it underpins the entirety of our capital markets. And we should all be thinking a little bit more rigorously and broadly about ownership and governance rights. - Dows did not invent this. - Nope. (laughing) - The stock market is option one, right? And when we defanged proxy voting, you know, and all of these things to consistently concentrate power in management and in a few Black Rock and State Street institutional shareholders, right? We start to see real governance challenges, which link back to our earlier conversation about impact and who's making decisions, you know, for whom? And what are the externalities and things that are occurring in our society because of that? - Now we're gonna take a quick break to speak with our sponsor. - Next up, we have our industry expert and sponsor, Dave Dorton, co-founder, CEO, and chief investment officer of Vested. Vested provides funding to exercise your stock options. Thank you so much, Dave, for joining us. - Yes, happy to be here. Thank you, Prabam. What is the origin story behind Vested? - Vested is an interesting business. So originally, Vested began as a company intended to help startup employees understand their stock options. Almost everybody that works at Vested either has directly screwed up some decision related to startup equity or nose friends who have. And so the first incarnation of Vested was a website with free content and free tools to help you just understand and not screw up your startup equity. Then we had a very, very interesting set of independent opportunities start to come in about a year, year and a half into the business, which was a lot of our initial users who were coming to Vested for the education started asking us for money. And we did not at the time have plans to be a capital provider of any sort. However, some of us have financial services backgrounds and we are antenna went up at the opportunity to be a capital provider. And when we took a look at what the nature of the capital requested from our own users was, we found that it was almost entirely this one unserved issue that lives that is like endemic to the world of startups. So I shouldn't say we thought we'd see five or six different use cases. We thought some people would wanna sell some of their shares in their private company for the purposes of putting a down payment on a home and other people would wanna buy a car and some people have unexpected medical bills and whatever. And all those use cases did present themselves at various points, but the by far dominant request to us was, oh man, I just left my startup and I figured out for the first time that I had 90 days within which I messed them up with the money to exercise my Vested Stock Options or else they go away. - The clock is ticking. - Yeah, 90 day clock, which is just all over the place. It starts in the employee stock option plan which is a boilerplate set of documents which most startup founders don't think about when they're putting everything together the first time and it self propagates all the way through. And so this problem that we ran into is kind of just following the structural flows of a labor market of startup land. Like anytime anybody leaves for any reason, they are likely gonna be in a spot where they have 90 days to not lose their stock options. So we took a look at the market that we assumed must exist around this problem since it's not a particularly new problem. And when we canvassed the market a few years ago, we saw that there were four or five stock option funding providers that were out there depending on how you wanna count four or five. And they almost all some intentionally and some practically served the senior employees that were leaving the latest stage startups. And so after having done our market research and then looking back at our user base that was coming in then us, what we realized was that our user base represented kind of the rank and file startup employees, not the senior people, not necessarily people with like a $10 million option exercise need, but the folks who needed 50 grand at a time. And in the scheme of startup equity which can have very high value, that doesn't seem like a really big dollar amount, but at the same time, the brutal startup comp cycle is you're under cash comp working at a startup. Like they make it up to you in the equity that you get granted. And as a result, you don't have 50 grand line around for this unexpected rainy day. So I mean, that's the origin story of Vesta, which is what you asked. We looked for interesting ways to become a capital provider to what we saw was a very fragmented and distributed but completely almost completely unserved market which was the rank and file startup employees that needed 50 grand to not lose their options. - Now, what a great example of listening to your customer or your user. And what is the core product now? - So from an employee perspective, the core product is funding for your expiring stock option exercise. What we do fundamentally is we buy a subset of the shares that you're exercising your way into as the machinery for getting you all of the money you need to do your full exercise. And so it ends up being some split between us where the math depends on the strike price and the current share market value and all these other things. But the bottom line is we're just buying a portion of your shares so that you can allot the rest. And then on the flip side where our capital comes from is we raise investor capital from LPs who are interested in accessing the venture asset class. And what we promised them is a diversified, unconcentrated pool of fairly high quality venture backed companies, which is the exposure that we get when we buy the employee shares to help them exercise. - No, and there's some interesting signal there that the people who are in the inside think it's worth besting their stock option. - Yeah, actually there's signal always. So first there's the motivation to make sure that they retain their equity, which is a very positive signal. Then there is the fact that they're selling only the minimum number of shares to us necessary to unlock the remainder of their equity which is a positive starting posture. And then there's the possibility that they want to sell all of their equity and just take a bunch of cash and run which is a very negative signal. So there's a spectrum of signal based on the behavior of the users that come to us. But actually for whatever it's worth, most people want to hold on to their equity. - That's an interesting observation that most people want to hold on to their equity. Do you think has that changed in the post frenzy where VC has cooled a little bit? - Yeah, I don't think it's changed, but the types of deals that we're able to get done has changed because of the crash in the private markets in the last year and a half or two years. There is a concept for the common stock that employees have usually the right to buy through their stock options, which is called the fair market value of common stock. It's a capitalized term. There's an independent valuation firm that comes in, the board approves whatever they do. That becomes the fair market value common stock. And the fair market value of common stock gets kind of redone on an independent basis at least once a year. And although investment rounds don't happen all that often and maybe a company last raised during the go-go times of 2021, and that price hasn't changed, usually the fair market value of common stock has changed since then and now reflects the current market environment. And so we're only able to support stock option funding deals where the stock options are actually in the money, meaning that the fair market value of the underlying shares is higher than your strike price. And so there are marginally fewer deals that we can get done because a lot of companies have taken an FMV write down which moves some employees from in the money options to out of the money options. - Thank you so much, Dave. To start working with Vested, you can please email investors@vested.co and mention this podcast and now back to our LP interview. - One kind of vertical that has a lot of impact and we mentioned it already was climate and there has been a lot of money, especially kind of during 2021, 2022, poured into climate. You have a lot of experience there. What are the biggest opportunities in this category you think for returns and impact? - There's a lot. There's a lot of opportunity when you look at kind of the history of longitudinal history of American capital markets is the kind of expansive periods for a given sector, let's say energy. Always come after significant collective public investment. We built the railroads coal followed, right? Massive fortunes built on the infrastructure that the public tax players have under in. And this is no different. The IRA is pumping billions, tens of billions of dollars into building the infrastructure to enable much more robust investment marketplace across multiple types of assets. And I mean that in terms of asset class as well as natural resources. So there's significant kind of incentive being put in place today. And that's on top of having made the ITC permanent so that you have kind of this tailwind as well behind the solar and wind markets. So I think the opportunity is massive. I think though, so, you know, if I could wave magic wand and encourage money to flow in a particular way, I think the most durable opportunities are where the planetary wellbeing intersects with the human wellbeing. A lot of the early climate strategies were born out of conservation, which really viewed humans as the problem. And this is, you know, essential. We are the problem, right? My son once said, like, aren't humans an invasive species? I was like, yeah, that's not on, actually, Yuri. But I think it's a short-term strategy. Humans can only like be part of the solution to the crisis that we are gonna, we have created it and we'll continue to create if we're not part of the solution. So you have to solve for human livelihoods. You have to solve for their cultural and historical connections to their ecosystems and the natural resources. You have to solve for their health and financial inclusion in the climate solutions and in solving for adaptation and mitigation. And I think that's actually where the most durable marketplace market opportunities live versus kind of like ring fencing, you know, natural resources and telling humans to stay out, which, you know, frankly, has been some of the history in there. Certainly, I think there's some really exciting kind of just pure tech plays and battery storage, et cetera. But I think that the intersections with human behavior are the ones I find most interesting and have the most transformative opportunity. Could you give us an example of something like that so we know it when we see it? So I think some of the examples in renewables and solar and community solar, where they are building the assets, they're building the infrastructure tied to long-term revenue streams. So tied to PPA is with utilities in a way that ensures the community has ownership or an economic right in those underlying assets. I think those opportunities are really interesting so that it's not an industrial solar field off the side of the highway where the only people, you know, probably North with private equity fact funds, right? And people can see, like they can kind of understand the impact on their lives. Like there's free energy being, you know, distributed within that community because those assets have been placed on the rooftop of your local school and hospital, right? And so, you know, people are being trained to maintain that infrastructure and there's job creation as a component as well. I think those types of opportunities that really view the community as an asset to be built up alongside the renewable infrastructure is those are really exciting. - Is that the kind of thing you're reviewing with the EPA? - So I'm on the Environmental Financial Advisory Board with the EPA and we were asked by the EPA to provide some recommendations around the deployment as the greenhouse gas reduction fund. And you can see the public meetings meeting minutes from that last winter. And those funds are also under the Justice for the Initiative under the Biden administration, which directs the funding to go into communities that have historically been under-invested or kind of locked out of this type of funding and prioritizing, you know, majority of minority communities, indigenous communities, et cetera. And I think, you know, one of the really interesting things here and goes back to that human intersection is that the most vulnerable communities from a climate perspective are also the most under-resourced communities historically from a financial and infrastructure perspective. So a lot of the recommendations that the E-FAB worked on was trying to figure out ways to help encourage that money to flow down to the less resourced communities and not kind of get stopped up at, you know, levels, municipal state levels where, you know, you had, I mean, there will be money spent at those levels for sure, a lot of it. But those entities have shovel-ready projects. They have the capacity to apply for and report on, you know, federal funds and the like. And I think the Biden administration, you know, as well as the leadership at the EPA, we're very aware that there needed to be a different approach to make sure that these funds reached vulnerable, rural and urban and islands communities that otherwise don't have access to this kind of funding historically. - Just curious of kind of like the entire landscape, Margot, what industries or investment trends are you steering clear from right now? - Well, so many, so just personally speaking. - Yeah. - I mean, obviously other than like the usual fossil fuels arms, tobacco, alcohol, et cetera. We have, and this is potentially controversial in the impact of us in space, seared away from student debt. So this is one of those like, is this the right lever thing? Slightly better student debt and a fundamentally extractive predatory and unsustainable marketplace is not a net good, in our, in my opinion. So yes, there are better ways to do it, but also we just shouldn't be levering up our young people with unsustainable levels of debt to get educated. So that's one area we stay away from and the markets have kind of validated that in recent history, unfortunately for everyone. It also kind of fuels an asset bubble that sustains some of the worst players in higher ed in particular. Cyber security, it's when you mix cyber security with for-profit incentives, it's very hard to know or control whether or not you're empowering states that are committing human rights violations upon their own citizens or others in mass scale too. So I think that's an area where we're definitely not trying to deploy any capital that's very popular. And you know, I was saying this also three years ago when this was not a popular point of view, but cryptocurrency. Because I think until you have a transnational regulatory infrastructure, it's either a scam or a fantasy or both. Sam Bankman Free just got 25 years in prison for all of the above. But I think that's more of a mark of an industry attracting scam artists because it is not like a real exchange of value and productivity yet. And then I was also in this position three years. And now everyone would agree with this, but three years ago, no one agreed with me, SPACs as a vehicle, I think are absurd and shouldn't exist, frankly. And would always avoid those as sort of a untenable kind of like fee capture for no risk amongst the sponsors. And I think you have like this amazing combination like the two worst things possible when you see truth, social, launch under a SPAC, right? So that's like the epitome of what we would, I would never put a single dollar towards. And to kind of round that one out, much trickier position to do consistently is not back any business that is really organized around collecting and profiting off user data, particularly that of miners. So that would kind of be all of big tech right now. And that's a tough one. It's the majority of our kind of economic growth engine or the last decade, but I think we're reaping the negative rewards now in the mental health crisis. Just to pick an example amongst youth and they're crusading against blocking access to social media accounts. - I think it speaks to, it's very helpful to hear the tangible examples of what you sort of opened with saying every investment is somewhere on this spectrum of positive or negative impact. - Or combination, right? And we all have to kind of determine like what trade offs are we willing to accept? - Oh yeah, oh yeah. Any final thoughts to share with this audience? We've got allocators, GPs. - I think for both audiences, I was a history major in college and then quickly realized I was not cut out to pursue a history PhD. Probably to the relief of my family, but to the disappointment of my mentors. But I love kind of applying the frameworks of history to the practice of investing. And I find venture especially entertaining in this regard. Everything is cyclical and the venture industry is very true to form in that it gets far more hysterical than most other asset classes in terms of its response to the cyclicality of reality. So their cycles cause more whiplash. We're seeing a correction cycle now. There was a boom cycle previously, et cetera. I lived through several of these now. And I think what I would try to tell folks is like don't buy into the hype or the bust. Just try to stick to your path and your beliefs and the people that you're working with just people you're working to support. And it's kind of gonna even out over time. If you stick to that and you don't jump into the volatility/hysteria in one direction or another. It's tough right now. I think the other thing I think about a lot is how lonely it must be for especially solo GPs. And I think it's really interesting that investors think that we should make sure we create a founder community and we have to connect our founders to other founders so they can learn from their peers and feel like that support. But they don't do that for themselves. And you guys are all out there building businesses. Also your GPs are founders. And you need friends and peers. And you need to spend time on cultivating that community as well for your own mental health and the long-term kind of sustainability of what you're trying to build. So I would encourage people to spend some time with their friends and peers and consider that community as a resource, especially right now. - That's cool. - You wouldn't know this, Margot. But that's actually how earnest and I know one another is. - Really? - We formed a group of basically junior partner sort of comrades to all be able to talk about what's going on in our careers. Yeah. - I love it. And look what came out of it. - I know, birth to podcast. Margot, thank you so much, especially for those last two points. You can apply those not only to this asset class, but just to life. And so thanks so much for being on swimming with allocators. - Thank you so much for having me. It's been a pleasure. See you later, allocator. - After portfolio tile, investing with a smile. (upbeat music)
