Bad Blood

Bad Blood is a fantastic book and an amazing journalistic feat. The drama is still playing out as I write this with the main characters facing criminal charges and likely to stand trial this year. Like Enron: the Smartest Guys in the Room it’s a brilliant set of lessons about how a company can be rotten but the system of investors and regulators forget to trust their sense of smell. And like the Enron book (in that case Bethany McLean who wrote an article in Fortune magazine posing a simple question — how, exactly, does Enron make its money?), John Carreyrou helped uncover the scandal — he’s part of the story, which makes it an even better tale.

It’s particularly interesting to me because in one version of the story Theranos could have been an amazing tech for good impact investment. It made me wonder how we would have reacted at BGV — would we have spotted the fake?

Theranos was founded in 2003 by 19-year-old college dropout Elizabeth Holmes. Her dream was to revolutionise medical diagnostics by creating a simple, cost effective way for people to get their blood tested from a tiny sample. If she had achieved that, it would indeed have had a huge positive impact on the world. The trouble is that it’s a very hard thing to do.

Holmes was joined at the helm of the company by Sunny Balwani, who made some money in the first dot-com boom and was also her boyfriend. Bad Blood is littered with examples of them making terrible mistakes and hiding information from people (including that they were a couple). Their paranoia was extraordinary — to the extent of fitting bullet proof glass in Holmes’ office and having people trailed when they left the company. What they were covering up for was that the technology they promised didn’t work.

In the business it’s known as ‘fake it til you make it’ and all tech startups do it to a degree. You often have to convince investors that what you’re going to do will be revolutionary before you’ve actually built it (after all you need their money to build the thing). One famous example is the video that the Dropbox founders created to judge whether or not it was worth building the software in the first place. But raising peoples’ hopes of better document synching is one thing — raising the hope of quick, painless diagnosis of diseases is another. Richard Waters is great on the subject in this FT piece.

All the signs were there with Theranos. But hindsight is a wonderful thing and there were many investors, customers and journalists who were duped. Holmes and Balwani got plenty of things wrong but it was the system that allowed them to gamble with peoples’ lives that was really rotten — and it still is.

It’s a strange story when Rupert Murdoch comes out of it pretty well. Despite losing the whole $120 million he’d invested he refused Holmes’ attempts to spike the story at the Wall Street Journal which he owned.

One aspect of the story makes me think we wouldn’t have fallen for it at BGV is that most of the investors seem to have made their decisions based on who else was involved. A classic case of groupthink. We’re always the first investor so don’t have the ‘luxury’ of seeing who else is investing. We also don’t invest very much to start off with so we get to work with teams (usually in very close proximity) before we decide to invest larger amounts. I’d like to think we would have worked out that the Emperor wore no clothes in this case. And finally we’re very sceptical of ventures that insist on secrecy — we think there’s an important link between true tech for good and openness and transparency.

Is tech for good reaching the mainstream?

It’s ten years since we began running Social Innovation Camps, the precursor to Bethnal Green Ventures. We created them because we wanted to help people use their technology skills to have a positive social and environmental impact. Our eventual aim was to help tech for good become mainstream.

So how far have we come? Are we any closer to making tech for good the norm? Well, yes and no.

Industry events are a pretty good way of judging the temperature of the tech sector and I’ve been to a lot recently. My impression is that interest in tech for good has definitely risen up the agenda at the big tech events like Slush, Web Summit, SXSW and VivaTech.

I remember a BGV portfolio company founder telling me about their visit to Web Summit in Dublin four years ago. It was a pretty depressing experience. They were dismissed as ‘charity’ and there was even an out-and-out argument with the founder of an ‘adult’ dating app in another exhibition booth who was firmly in the ‘business of business is business’ camp. I don’t think his business is in business these days.

Thankfully those arguments are much less common these days. Tech for good startups and positive discussions about social and environmental impact are commonplace now. I’d say we’re at the ‘promising support act’ stage, usually on panels away from the main stage. The people who come along to the talks are those already in the tech for good sector as well as those who are finding out about it for the first time. Each time I get a note afterwards from somebody saying ‘I wish they’d do more of this stuff’ or ‘how do I get involved?’.

At Web Summit this week there were whole areas given up to social impact and a day of ‘planet tech’ talks which was very good. As I mentioned yesterday, the tech for good startups I met in office hours showed great potential.

Then you can look at what the big companies are doing. It’s great to see companies like Facebook and Google starting to support the profit-with-purpose side of tech for good. Both run programmes for tech for good startups in London. The Campus Residency for Google and LDN_LAB ‘Deep Tech for Good’ for Facebook. We’re involved in both.

Investors are starting to join the movement too. I’d say it’s mainly limited to new investors starting firms rather than existing ones changing strategy. A few of the mainstream VCs have made occasional investments in impact companies. But it’s only when a big successful VC decides to become an impact investor that we’ll have won that battle.

Sometimes I get asked what percentage of startups are ‘tech for good’ and I don’t have a good answer to that I’m afraid. All I know is that there are more than there were. My definition of a tech for good venture is one where it’s the explicit intention of the founders to have a positive impact. So being ‘medtech’ or ‘edtech’ doesn’t necessarily put you in the tech for good boat. You can create a startup in those sectors that reinforces existing problems or inequality — and isn’t ‘for good’ at all.

So there are many positives but tech for good isn’t mainstream yet. I’d give us 6/10. It’s a good start.

Stop hating, start helping

Image by hipxxhearts, some rights reserved.

If there’s one thing guaranteed to make me angry, it’s investors hating on startups. I’ve been at Web Summit in Lisbon this week and I’ve heard quite a lot of it. Usually it’s investors talking to other investors, make a negative comment about a particular idea or rolling their eyes about a founder or a pitch they’ve heard before.

Usually they do it in private but it’s also become more common in public. I’ve noticed a rise in investors posting moans about founders disguised as ‘advice’ — but really they’re just being disrespectful to the people who make the tech industry anything at all.

Not all investors are alike of course. There was a dinner for VCs on Monday night in a spectacular venue in Lisbon and I got chatting with an investor from a firm that I respect. We commented on how privileged our position is. We get to see the firehose of positivity of founders as well as exposed to the future before most people and we get to play a small role in helping the best firms make it. It’s no surprise to me that everybody wants to start a fund. Investing is a huge amount of fun and even though it’s not a very reliable way to make money, it’s a unique opportunity to have an impact. And the chances are that you’ll learn a lot too.

I met with ten startups for Web Summit office hours this morning — they were all trying to do brilliant things. The founders were passionate about education, healthcare or improving the environment. I wasn’t the right person to help all of them, but I hope I was supportive and positive right back at them even if I couldn’t help directly.

We should never forget the whole tech for good sector (and tech sector more widely) is completely reliant on founders. They give up a huge amount with often very little reward. They take the biggest risks. They feel the heartache of failure most acutely. I think it’s our responsibility to be positive and supportive.

Less snark, more generosity. That’s what I’m hoping for.

Technology, networks and increasing returns

One of the people whose thinking has had the greatest impact on me is W. Brian Arthur, the complexity theorist and economist who did much of the original work on the economics of networks. Brian was very involved in the Santa Fe Institute in New Mexico which for a while held a kind of mythical place in my mind — I read as much as I possibly could that came out of there as I realised that the work they had done was exactly what I was interested in. That led me to really try and understand the maths and techniques of network theory which has been an important part of lots of things I’ve worked on.

There’s a great podcast in the A16Z series at the moment of a conversation between Brian Arthur and Sonal Chokshi and Marc Andreessen from A16Z about what those papers he wrote in the 80s and 90s can teach us about the way that technology has developed and what it means for investment. Arthur argues that investing in technology companies is different from investing in other companies because of the interaction they have with network effects and the law of increasing returns (as opposed to diminishing returns in most markets). There are all kinds of reasons why particular tech firms end up dominating markets (Arthur’s shorthand for the combination of these is ‘luck’), but he argues that the overall phenomenon is inevitable and inescapable. Markets either become effective monopolies or they become commoditised — there’s very little middle ground in the medium to long term. Coincidentally this is why I think technology is so vital to impact investing. If impact investing were only to focus on markets that become commoditised, it would struggle to have a positive impact at scale and miss all the opportunities that new technologies present.

The podcast is well worth a listen and confirms my view of Brian Arthur as one of the most pertinent thinkers for the world we live in.

The best article I’ve read about being a CEO

I really like this article by Claire Lew about leadership. It neatly summarises what I try to live up to in a clearer and simpler way than I’ve been able to articulate. Beyond her first point “Know the purpose of your role: It’s NOT to manage”, she outlines nine principles which I think are all very practical and actionable:

Create clarity
Provide context
Ensure psychological safety
Ask meaningful questions
Respond within 24 hours
Let go
Lead from the front
Be consistent
Build rapport

Being a CEO isn’t something that comes naturally to everyone and I really hate the chest thumping stereotype of how you should apparently behave. Indeed, many of the best CEOs I’ve worked with are completely the opposite of that. I’d go so far as to say that being a bit uncomfortable in the role is pretty helpful because it means you know it’s something you need to work on.

Finding all the Tech for Good Meetups in the world

The phrase ‘tech for good’ seems to be resonating with more and more people as a shorthand for using technology to purposefully address social or environmental problems. It’s not just about use of technology by existing not-for-profits (although that can be part of it and Netsquared/Techsoup have done a fantastic job of promoting that), it’s also about doing new things using technology including for-profit ventures that aim to benefit millions of people and deliver returns to impact investors.

Meetups have become a really important gathering point and place where people can find co-founders and investors and bounce ideas around. In the UK there are already Tech for Good Meetup groups in Bristol, Cambridge, London, Manchester and Sheffield and I know people are thinking of setting them up in other parts of Europe too. At BGV we’re really interested in helping the movement grow, so if you know of groups you think we should know about please add them here or if you’re interested in starting one, also let me know and we’ll see if we can help.

Update: You can add Meetups to this spreadsheet!

What if we all lived at the same urban density as Hong Kong?

There’s an interesting little stat in the FT today. If the whole world population lived at the same density as Hong Kong we’d all fit into an area the size of Egypt.

Now of course that might bring it’s own problems but if you look at the trends, it might not be crazily unrealistic. The world’s urban population was 54% of the total in 2015 and the global rate of urbanisation is currently estimated at 2.05% per year (says the CIA). If that continues, the percentage land area occupied by humans looks set to decrease considerably over the next 30 years. We could see total depopulation of many rural areas in our lifetimes.

We’ve got a lot of work to do to create the tools that will help us live sustainably in cities. Whether it’s aquaponics, lab meat or vertical farming it looks to me like we’ll need to become less dependent on rural food production. We’ll also need new solutions to housing, transport and democracy that are able to cope with higher levels of density.

When I think about it, it’s one of those mega-trends that creeps up on you over decades but is driving so much of the way that things are changing.

Can we help turn your tech for good idea into reality?

There are many great things about working at BGV. There’s watching our later stage teams reach millions of users, watching the founders grow as leaders and people, celebrating as teams raise money along the way, bringing new impact investment into their businesses. There’s working with teams during the accelerator programme as the figure things out and test their assumptions. There’s the moment when we say ‘yes’, helping people realise that there might just be something in that idea they had and that we believe in it just as much as they do.

But my particular favourite part is when we open up applications and say to the world — how can we help you turn your idea into reality? It’s a bit like turning on a firehose of positivity — we love all the people getting in touch and coming along to our Q&A events or drop-ins. It’s a huge amount of fun because we get to meet people who are totally passionate about social or environmental problems and talk through their ideas. We can’t invest in them all but we try to be as helpful as we can even if there isn’t a fit between what we’re looking for and what people are working on.

So what are we looking for? Well, generally we’re best suited to helping idea or prototype stage companies run by a small team of people who really understand a particular social or environmental problem. The idea will have the potential to benefit millions of people and generate real financial value by addressing a problem in health, education, sustainability or democracy. We’re interested in ideas that nobody has done before and we’ll be thinking about how the idea could be protectable as well. Is there a moat that could make this venture the one that wins when other people realise it’s a good idea and try to copy it?

We like teams (ie more than just one person) who are able to show us that they really work well together and bring the best out in each other. We’re looking for people who are super ambitious but have a willingness to listen to feedback and recognise when their assumptions are wrong They are always ready to get out of the office and talk to people to find out what they really want. They’re absolutely committed to addressing the problem they’ve set out to solve and are driven by that strong urge of ‘this needs to change’ no matter what obstacles people put in your way.

Starting a tech for good venture is hard. We know that and we’re complete fans of the people who set out to do it. We spend all our time with them and can’t help but have a sense of awe about their drive and energy in the face of almost constant knock-backs. But when it goes right, there’s nothing more rewarding than seeing something that you built positively benefiting other people.

What I love about our call for ideas is meeting people who are at that ‘just an idea’ stage and helping them work out whether it could be something that really does positively change the world and improve peoples’ lives.

So if you’ve got an idea to solve a social or environmental problem using technology, don’t hesitate to get in touch. We’ll help in whatever way we can.

We’re hiring at BGV

The tech for good world is growing fast and we’ve decided it’s time for the BGV team to grow too. Many of the ventures that we’ve invested in already are doing very well and each time we open applications for our accelerator programme we hear from more and more founders interested in starting a social venture that puts their skills to work on important social or environmental problems. We’ve also found there are more investors interested in putting their money to work to have a positive impact.

All this means that the opportunities for us to develop BGV get better and better and we need to grow our team to keep up with demand. Our aim is to become the best impact investor we possibly can and with that in mind we’re hiring for three new roles at BGV to help us get better at finding, investing in and supporting the best social ventures possible.

A Chief Investment Officer to lead our investment strategy and take overall responsibility for maximising positive social impact and investment returns
A Venture Adviser to join the team offering advice and support to the teams and ventures we invest in
A Team Organiser to keep everything running smoothly and handle the admin that comes with a growing organisation

If you click through to each role, you’ll find a more detailed description of what we’re looking for.

We’ve put all the applications on Applied, a startup currently sharing our offices at Ministry of Startups. Applied automatically disguises information that can be subject to subconscious biases so that reviewers can concentrate on what really matters: candidates’ strengths. This means every applicant is given the best chance of success, regardless of their background. We used it for our recent internship applications and were pretty impressed.

If you have questions, do drop me a line at paul@bethnalgreenventures.com and I’ll try to help.

Where Tech for Good Ideas Come From

A couple of weeks ago, I hosted a panel of BGV founders at the South London Tech Meetup and asked them — “where did the idea for your social venture come from?”.

It turned out that each founder had a story that matched one of the three sources of inspiration I’ve heard other people talk about so, as it’s also BGV applications season, I thought I’d write a little bit about them.

The first type of inspiration is frustration. Mark from Konnektis explained how when his grandfather was ill and needed care he was amazed to see how inefficiently the various people involved in domiciliary care communicated with one another. This frustration with the status quo and a completely obvious (to Mark at least) technology-based solution made him want to start the business.

Secondly, there’s the combination of two seemingly unconnected ideas. For Natalie from Walacea this was the realisation that two things she was super interested in — scientific research and crowdfunding — hadn’t yet been brought together. When she realised that there could be value in the combination, Walacea was a obvious innovation that needed to exist.

Finally there’s chemistry when inspiration for a venture comes from two or more people coming together in conversation. For Dan from Firesouls that happened by meeting a co-founder with a very different background to him who listened to the problem he described and then played it back based on his way of thinking. The resulting idea could never have come about without both of their perspectives — neither person had the whole story.

Most of the tech for good founder stories I know fit into these three categories or are combinations of them. If I’ve missed something please do let me know. But if you’re looking to start a venture, there is something else you can do — be open to talking with others about it.

The title of this post is a blatant rip-off of Steven Johnson’s excellent book ‘Where Good Ideas Come From’ in which he looks at the origins of thousands of inventions and ideas that have changed our society. He dispels the myth that inventions come from secretive labs or lone geniuses — instead he argues that “chance favours the connected mind”, most great ideas come from connecting existing ones and that the network age gives us more opportunities than ever before to build on ideas and create new ones.

Speaking of which, if you have a great idea for a tech for good venture, applications for BGV Autumn 2016 are now open!