Oliver Libby On Impact Investing to Uplift Social Ventures

Oliver B. Libby is the Co-Founder and Managing Partner of Hatzimemos / Libby Holdings (H/L Ventures) and CityRock Venture Partners.

Based in NYC and founded in 2009, H/L Ventures is dedicated to building high-growth businesses that protect and promote people and the planet, with a strong preference for diverse leaders. Libby began his career in the U.S Government and later at a global managing consulting firm. He graduated Magna Cum Laude from Harvard College. Libby also chairs the board of the Resolution Project Inc., a non-profit organization based in New York City which he co-founded in 2007. Through its Social Venture Challenges, held at leading youth conferences around the world, Resolution identifies undergraduate students who wish to launch new social ventures. The resulting Resolution Fellowships provide dynamic, hands-on mentorship and grants to implement their social ventures, a full ecosystem of support that empowers the recipients to become socially-responsible leaders.

Oliver discusses how impact investing can uplift social ventures and shares the philosophies he uses to run a venture firm and non-profit organisation

Highlights from the interview (listen to the podcast for full details)

[Indio Myles] - To start off Oliver, could you please just share a bit about your background and then what led to your work in impact investment?

[Oliver Libby] - In terms of my background, I'm a little bit of a cross-sector animal. I've been in government, done a bunch in the philanthropic and non-profit space, and certainly of course, in the venture and entrepreneurship space. I have seen all the different contributions the sectors can have to move forward on major global challenges, and I think that's become an important thread that weaves throughout my life. The impetus for me being in impact comes from two communities that I was a part of earlier in my life. I was born into a family of doctors and scientists and had the chance to work in doctors' offices and laboratories when I was just a kid. I grew up around those communities. The two overarching driving factors for success in that community are mission orientated, and doctors and scientists are very driven by helping people and humanity. There was a tremendous amount of diversity. I remember my grandfather's laboratory had postdocs from the Midwest of the US, Africa, Japan, Germany; all across the world, genders, and sexual orientations. It was a very powerful experience. I myself started in the government and national security world, and once again, I was surrounded by people who were mission-driven with diverse talents. Interestingly, when I then went into the innovation world in the mid-2000’s, I found a much more homogenous place that was driven by multiples and very homogenous in terms of the founders, mostly from work like me and who went to schools like mine. It was a very easy decision from there to see if we could breathe some life into an investment thesis that was powered by impact diversity. It is kind of the same thing with resolution projects. University students are often wanting a mission and to be surrounded by a heterogeneous and fun community of difference (and to be able to see solutions that others might miss). The resolution was to create help and support that ecosystem.

As a Managing Partner of H/L Ventures, can you share with our audience this firm’s activities and values?

We are a venture capital firm in many ways, but I think we have transcended that. When I started the firm with my partner Eric, we started with a stated purpose to reinvent a venture capital firm for the future. Venture capital has lots of wisdom and mythologies that are perhaps, oftentimes, the tail wagging the dog. We challenged a lot of those things with how we structured H/L Ventures. It brings two core mentalities and approaches to the way that we do ventures. The first is that we're looking for companies at the nexus of growth, impact, and diversity. We are a firm that believes impact and diversity drive returns. We are non-concessionary. There's a long-simmering debate about whether you can invest in high growth and get great returns, while also looking for impactful companies and underrepresented founders. Our answer was to go through that and to say, “wait a minute, it's not while doing those things, it's because we're doing those things.”

We think that impactful companies today have tailwinds that push stronger returns and that underrepresented founders are demonstrably generating better returns when they have diverse founding teams.

That's the “what we're doing”. The “how we're doing it” is a very special thing. It's called daily active engagement. I don't mean daily to be completely literal, but basically, we're in almost everyday contact with every founder in the portfolio in a supportive manner. Whatever it is that they need, if its advice, strategy, structuring, fundraising, business development, marketing, branding, recruiting talent, culture, we can provide. We offer anything they could want as they set out to climb their own personal Mount Everest, we are the Sherpa there to help them along the way. Of course, we work hard to identify in the beginning of our investment process quality companies and quality founders. But the work that happens after the check clears and with our companies in our venture studio is really where the battle is fought in one. Those are the two core philosophies that power what we do at H/L.

How can socially-minded individuals, entrepreneurs and businesses actively participate in impact investment and fuelling change?

Well, there are a couple of different things. Impact investing is essentially the movement of capital to support businesses that are trying to solve challenges. We say protecting and or promoting people and or the planet. I think there's been a big movement. When we started this firm almost 15 years ago, this was a total niche corner in the investing world. It was somewhat looked down upon, as philanthropy dressed up in business clothes. It was viewed as unlikely this would ever generate strong investment returns, like the harder business-minded investing styles. I think we've progressed a long way to disproving a lot of that unhelpful mythology. The fact of the matter is there's always now light being shed on the fact we have been able to create a strong business while doing it in a way backing companies and founders. It is really important and shedding light on that. What you're doing via this podcast is incredibly important, because that story is now being told.

The more assets invested with a lens for impact and towards diverse underrepresented founder teams are going to be powerful.

What recommendations would you have for social enterprises and not-for-profits to more effectively access financial and non-financial support for their operations?

Back to your prior question also, I think everybody can play a role in the impact economy. If you have money to invest, you should be investing on those principles. If you have an idea and want to launch an impactful social venture, fantastic. If you want to work or volunteer with them, there are ways for everybody to take part in this important work. That's just one thing I wanted to throw out there. To your question about the finances:

I'm a big believer in the fact that impact coexists with good business practices. just because you're doing good in the world doesn't get you off the hook for running a tough-minded, disciplined business.

As you mentioned in my intro, I run H/L Ventures, a venture firm. We have about 50 portfolio companies, and also the Resolution Project, which is a non-profit under US law. What's funny is that (I've always joked a little bit) we run Resolution Project, which is completely not for profit. Everything that returns to Resolution Project gets reinvested in the non-profit, and we're not allowed to take profits from it, but we run it like a start-up. It's very lean, we've put in a highly leverageable system, we leverage volunteers from our own and other countries well. We've been able to generate almost $9 billion market capital across the social ventures that we've started, with grants of less than $10,000. It's an extremely leverageable, lean business model, even though it's not for profit. In the meantime, we've got H/L Ventures, which is investing dollars for a return, and I think we are doing a pretty good job of that. But, we run it with the heart of a non-profit. Our mission is to uplift social ventures and make sure underrepresented founders have access to capital while unapologetically making money and returns. It's about blending those things, but as you think about running an organisation, that organisation can take the shape of a government agency or a not-for-profit. It could be a for-profit venture or a skilled publicly traded massive corporation.

You need discipline and finances, but you need to understand what you're trying to do with that. We believe that businesses, organisations, and non-profits are dedicated to helping people on the planet have better results long term.

What key observations have you made of the business sector recently in how it’s engaging in social change and sustainability, and what’s holding back social enterprise from becoming business as usual?
This is where the battlefront is, right? First of all, it's chaos, like any battle. I think there are lots of good things that give me hope. There's the fact so many more assets and large asset managers are holding themselves to at least some sort of environmental, social, governance or ESG metrics and norms. It makes me really happy the next generation of high net worthy families are pushing to have more impact investing and make sure their allocation is part of their family strategy. It makes me happy that media organisations are holding corporations to a higher standard, and so are some government agencies. On the flip side though, is there some greenwashing and ESG [Environmental, Social, and Governance Investing] washing occurring. It is easy for companies to claim aspects glibly of what they're doing as ‘positive emissions’, while they continue to do other things like harming the environment or mistreating their employees. It's all about continuing to hone our game as a society, to make sure the gains we're making in impactful business become the norms. They will be consolidated and we will weed out the things that are too loose or too easy and we will remain truthful about that. A lot of the key elements of that include how do we get cross-cutting metrics that the broader market accepts where we can actually evaluate these things on an even playing ground? We have not made a lot of progress on that. There have been many standards that have come and gone, so we need to do better work there.

We need to have real consequences for negative externalities, things like carbon, pollution, dumping, and mistreatment of employees. there needs to be a broader acceptance of some of the types of governance that actually allow leaders to lead in certain ways.

For example, I happen to know some pretty senior people in industries that have polluted or caused damage to the environment. By and large, these are not terrible human beings who are nefarious actors. But in a lot of ways, the way that we run large companies in America and across the world are to maximise shareholder value alone. There are new corporate types like benefit corporations here in the US that permit the elevation of other stakeholders, local communities, the environment, and employees. We have massively increased the number of businesses organised on those principles, but there's still so much of a long way to go. For a long and meandering answer, we've made so much change in the last 15 years, it's night and day. Do you know how much more emphasis has been placed on dollars and attention. Regulation is flowing in the positive direction, but there is an enormous distance left to go, and so the work is there for us to do.

What inspiring projects or initiatives have you come across recently which are creating a positive social change?

The wonderful thing about what I get to do for a living is that every day is an inspiration. It doesn't mean there are not tough days and frustrating moments, don't get me wrong, but every day we get to be approached by entrepreneurs who have really exciting ideas and a lot of passion for changing the world and doing so through the lens of business. With the Resolution Project, to be frank it's almost like what is the inspiration of the day? I'll tell you just one thing that's front of mind for me. We have a lovely company in our portfolio named Loliware, which has just announced the completion of work on a seaweed-based plastic, which is capable of running through the installed base of the plastics industry today. You can essentially put a seaweed based biopolymer and bioplastic into the back of these old machines that have been around for generations, and the outcomes are a straw, fork and knife that's made out of seaweed you can throw out like a banana peel. It's just an amazing thing. One of my philosophies, and I don't mean to sound cynical here at this stage of our discussion, is that in causing systemic social change for developed countries around the world, particularly amongst citizens, people don't want to give things up. If they've become used to luxury, they're going to want to have it. They're not going to just turn off the air conditioning or stop having straws to drink their soft drinks through.

the question then for us in the innovation community is how do we work hand in hand with the other sectors? can we provide people with acceptable replacements for those experiences that don't take something away from them, but that do things more sustainably?

The good news is the tech cavalry can't save the day every time, But we are riding hard to the sound of the guns with really exciting solutions like what Loliware is doing! People can have that straw or that plastic fork, but it'll be made out of something bio-compostable. Throw it out the window and it'll be gone in 60 days, and that's a really exciting development. If you pair that with the right regulations and work for non-profits across sectors, we can really solve some of these challenges that seem so depressing and intractable.

To finish off, what books or resources would you recommend to our listeners?

There's so much being written in the impact investing space and I think a lot of it is actually being reported by broader outlets. I have a long reading list of things that come across the search terms I use. I'll tell you this. For example, there’s a real great friend and amazing human being, Howard Buffet, who published a book recently on impact evaluation. I think if we're really getting down to the nitty-gritty of the questions you were asking earlier, having shared frameworks for evaluating impact and guiding companies on how to actually measure real progress and hold themselves to standards is crucial. That issue is hiding in the reeds; that's one of the key things that are either going to make this all work or not. Social Value Investing is one book I can think of off the top of my head, but there's really so much to take in here. The key thing for your audience, and what I might ask instead of them, is when you read something exciting about a socially responsible business that's working, share it and talk about it. Bring light to those entrepreneurs and their efforts, because it's really tough to do what they're doing. They are labouring against an assumption that their businesses are somehow less than others, because they have a social mission. But let’s all band together to uplift those stories, share and disprove them.