Q#1: You claim that Gaia Labs is taking a new approach to venture capital investing. Can you describe what that new approach is?
A#1: We believe Einstein’s statement to be a profound truth. The Gaia Labs mission is to solve the Grand Challenges facing mankind and the planet.
The different angle we take in part, is based on the fact that the consciousness that created our problems also believes in a concept of solutions. The first thing we need to do is to consciously explore a new interactive dynamic between our perception, thinking and use of language. Even though we use the label Grand Challenges, we are not seeking solutions to them per se.
We are placing an evolutionary context around the problem and we are guiding the problem towards its evolutionary transformation. Much like a caterpillar weaving its cocoon, we seek a metamorphosis.
Venture capital has a role to play in finding, structuring, investing in and implementing metamorphic change. That role, however, cannot be to repeat the status quo venture capital business model.
In light of the Grand Challenges, it is clear that the traditional VC model must make adjustments. This new VC approach must reflect a change in consciousness, and as a result, a change in investment strategy.
For instance, VCs have traditionally focused on three tech innovation investment sectors: digital, life sciences and greentech. Gaia Labs is adding a fourth investment sector: social innovation.
Q#2: OK. But from the practical standpoint of investing what does that mean? What is Gaia Labs planning to do differently? Isn’t this just another triple bottom line approach to investing?
A#2: Most VC funds are stand alone blind pools of money, where the LP investors passively hand over their capital to a trusted third party GP with a track record of success, who then in turn opportunistically invests. Gaia Labs is strategically moving beyond that tradition.
First, we are bringing vetted deal flow. Investors in Gaia Labs will not invest in a blind pool. Our process of deep due diligence and our global network has allowed us to identify compelling deal flow, and also take a strategic approach to stocking our deal flow pipeline. Where there is a need, where there is pain, we are strategically structuring a VC approach and venture building team around it.
Second, we expect our investors to contribute more than money. Ultimately, we want them to become part of an active global community of change agents. In order to address the Grand Challenges, it is all hands on deck.
Third, what are the Grand Challenges and what is their nature?
Finding financially and economically viable alternatives to the fossil fuel development paradigm, for example, is already an intractable problem. The combination of tropical and neglected diseases, and water, sanitation and hygiene related causes, kills millions every year in the developing world. This past decade, we reached a planetary milestone – for the first time in history more than 50% of the world’s population lives in cities. What this means for our natural resources, our biodiversity, clean water, food, housing, our collective and individual physical, mental and spiritual health are core issues to be addressed. In addition to the fact that time is an enemy. Things are getting progressively worse. Climate change is a huge problem.
All of this – the state of the world today, absolutely all of it, is due to consciousness – both at an individual and a collective level. And no globally sustainable approaches, whether driven by non-tech innovation or so-called exponential technologies (or a combination of both) will be found without dealing with the question of consciousness.
In this sense, we go beyond triple bottom line investing. Weaving consciousness into the investment calculus adds a fourth alchemical element – it forces us to think differently and more comprehensively when conducting due diligence, it allows us to unearth value that has traditionally been off the radar screen, it locates deeper chemistry and psychic connection with our execution teams, it naturally broadens the definition and roles of stakeholders, and it creates hockey stick scaling and more powerful strategies of monetization, which in turn allows for a maximization of consciousness raising, financial, social and ecological impacts.
Q#3: OK. But again, what does this mean practically for venture capital investing?
A#3: In addition to bringing deal flow to our investors, we are also using a different model of value creation. That means that we are customizing each deal with a handpicked team of deal executioners and advisors.
Instead of investing in dozens of deals, we are limiting the number of deals and concentrating our efforts.
We are emphasizing quality over quantity. Our deep due diligence process also means that we are not seeking singles and doubles. We de-risk to the extent that we do, exactly because every deal is structured to be a home run. The best performing fund in the history of the venture capital asset class is a mid-1990s vintage Matrix Partners fund that garnered a 42x return. At Gaia Labs, we think that that is a worthy target.
Q#4: That sounds good, but talk is cheap. I get the business model, but honestly what does making those kinds of returns have to do with raising consciousness?
A#4: We are embedded in a global capitalist system. In order to accomplish our goals, we have to maximize returns on investment. Gaia Labs is being structured to do that.
However, to maximize the return on investment and address the Grand Challenges has no precedent. To achieve that combination of goals requires a new consciousness and approach to venture capital investing.
The Gaia Labs’ investing process is informed by three philosophies, which together create a new approach to venture capital investing.
Steve Jobs & The Importance of Design
The first philosophical principle is based on design aesthetics.
A profound lesson about the importance of design aesthetics can be learned from Steve Jobs. Beauty and functionality, when melded together, attract us. That attraction can be monetized. However, design thinking cuts more deeply than producing aesthetically and functionally pleasing products that consumers will buy. Design aesthetics moves towards the essence of sustainability.
This Jobsian notion of aesthetic design leads us to Cradle-to-Cradle (C2C) design thinking -- the second philosophical principle that feeds into our venture capital investing strategy.
The Role of Cradle-to-Cradle Design
C2C takes biomimetic approaches to the design of products and expands them to include how we live and work together, and how we treat the planet. We can and must create a new design thinking architecture for both the creation of our exterior material world and our interior consciousness, and apply it to all we do.
Integral Venture Capital
The third philosophical framework is Integral Theory, and this is arguably the most all-encompassing of the three philosophies.
Integral Theory is a philosophy that deals with the very structures of consciousness itself. It is a lens through which we can see the world and ourselves in both full depth and breadth, and because it provides tools for dealing with often conflicting and overlapping levels of consciousness, it naturally provides (digs up one might say) creative approaches to the Grand Challenges facing humanity and the planet.
In addition, Integral thinking and analysis provides insights into how we are evolving as a species, how that evolution dove-tails with our planet’s evolution, and finally, how we collectively (in the broadest sense) begin to realize that each one of us is an agent of evolution.
The evolutionary impulse passes through us. In that passing it brings not only consciousness, but responsibility, and just as importantly, true freedom and the energy that that freedom brings, to create and innovate – all the while pushing the evolutionary process forward.
These three philosophies together define what Gaia Labs means by design thinking creating a core set of investment values.
These values serve as the foundation for what we call Integral Venture Capital (IVC).
For more on Cradle-to-Cradle thinking, see:
https://en.wikipedia.org/wiki/Cradle-to-cradle_design
See also William McDonough’s TED talk:
http://www.ted.com/talks/william_mcdonough_on_cradle_to_cradle_design?language=en]
For a good introduction to Integral Theory see:
http://www.dailyevolver.com/a-primer-on-integral-theory/
Q#5: Gaia Labs wants to create evolved approaches to the Grand Challenges facing mankind and the planet. If a sizeable portion of your investment strategy is focused on startups for consumer Internet, mobile e-commerce and software & apps, basically all things digital, how does that square with finding solutions for large problems like climate change, poverty, neglected diseases, etc.?
A#5: Gaia Labs’ basic premise is that we need to think differently about these challenges. We see the global roll-out of broadband, mobile devices, cloud computing, big data and storage as significant developments, and we are assuming that digital will increasingly play an important role in addressing the Grand Challenges.
Digital, in the broadest sense, is a global real-time laboratory for collaboration, and it is already overlapping into and dramatically impacting life sciences, greentech and social innovation with new truly disruptive ideas.
Dr. Leroy Hood, of Seattle’s Institute of Systems Biology, began his pioneering efforts of combining digital with life sciences in the early 1970s. The result is our current post-genomic sequencing world. In truth, we are just getting started.
The same phenomenon is occurring with greentech, and we have social innovation in our crosshairs as well.
Because many of the Grand Challenges disproportionately impact the developing world, one of Gaia Lab`s goals is what we call technological leap-frogging opportunities.
Developing nations can and must lead many of these investment thrusts. This goes for tech-driven and non-tech driven innovation.
In this context, we can’t think of a better place to start than with startups focused on the Internet, mobile, software & apps, etc. We can build from there.
Digital is a bridge across industry verticals. It allows for the first time, a true cross-border, cross-fertilization and combinatorial approach to value creation. In addition, we believe that entrepreneurs will increasingly demand a focus on the Grand Challenges.
Q#6: You have mentioned social innovation as a VC investment sector. Digital, life sciences and greentech are all legitimate and traditional VC investment sectors. How do you explain and justify social innovation as a VC investment focus? You can't expect to generate Silicon Valley-like returns on investment in social innovation. Can you?
A#6: Great question. We define social innovation, as taking tech innovation ideas from the three traditional VC investing sectors and applying those concepts to urban challenges and toward the alleviation of poverty.
However, no one at Gaia Labs or anywhere for that matter, is naive enough to assume that technology can solve everything. Non-tech innovation is crucial.
New forms of governance, master planning of green communities and even entire cities, the mixing of ideas across related industry verticals like transportation and materials science, raises a host of new investment horizons.
So the answer to your question is yes, at Gaia Labs we believe that we can do all of this and generate excellent returns on investment.
Our strategic one-off focus at the bottom of the pyramid is really a focus on the entire global pyramid, and has to do with empowering all people -- to change and improve their lives, to realize their dreams and to participate with them in generating returns on investment.
Silicon Valley-like returns on investment for our investors and our partners at the bottom of the pyramid is more than feasible. It is imminently doable. And in the process, we will stop using the term bottom of the pyramid. The goal is to eliminate not just the concept but that reality.
Gaia Labs has a project in our pipeline in stealth mode focused on this social innovation challenge. We call it the Ubuntu Project.
Ubuntu, is a term that originated in Africa. It captures the spirit of social innovation investing. We have a quote from Bishop Tutu about Ubuntu's significance:
"Ubuntu speaks particularly about the fact that you can't exist as a human being in isolation. It speaks about our interconnectedness. You can't be human all by yourself, and when you have this quality – Ubuntu – you are known for your generosity. We think of ourselves far too frequently as just individuals, separated from one another, whereas you are connected and what you do affects the whole World. When you do well, it spreads out; it is for the whole of humanity."
Q#7: Gaia Labs is launching its first project and is targeting a first closing. How much money are you raising and how do you see that money being allocated?
A#7: Let's slow down a bit. We have projects in various stages of deep due diligence and maturation in the pipeline.
The project that is furthest along in the pipeline is in the digital space. This is not an accident. The digital investment sector (i.e., consumer Internet, social media, mobile, e-commerce, etc.) is the cheapest, fastest and easiest sector to scale to regional and global impact. It is also the easiest route to liquidity and monetization.
We believe we have found a project that has immense grassroots monetization potential, that can scale quickly to regional, national and even global impact, and that has deep positive societal impact.
The project is in the live entertainment industry vertical and it is focused on the United States and Canada.
Gaia Labs anticipates generating a virtuous cycle of returns on investment for our investors and for the subsequent deals in our pipeline.
Q#8: Your strategy involves having offices in Rio and the Silicon Valley.
A#8: Correct. Today, the top decile of VC firms, 90% of which are based in the United States, are investing globally.
Gaia Labs will be investing globally. Our company building model means we bring the financial, technical and human resources together where we deem it most appropriate for global impact.
Because we are a lean, multi-cultural and multi-lingual team, and because the United States and Canada is our target market for our first company building venture, that venue becomes the natural platform for our investment efforts, deal structuring, team building and launch.
Q#9: Given that most of the deal flow you expect to see is digital, how will you handle life science, greentech and social innovation startup ideas?
A#9: Life science, greentech and social innovation startups offer a different set of investment challenges. Generally speaking the founders involved are older and more seasoned professionals. Many of the entrepreneurs we have seen who are focused on these investment sectors have advanced technical degrees, often Ph.D.'s and post-docs with deep industry vertical experience.
Because of the level of technical and scientific sophistication in these investment sectors, the amount of investment dollars and the time needed to launch a company into the market is considerably longer than for a typical digital startup. Deep due diligence and de-risking is especially important.
Currently, we have at least one deal in the Gaia Labs' pipeline for each of the four investment sectors. In some cases the due diligence process and team identification exercise began over two years ago.
Coupled with our institutional partners across these verticals we feel confident that we can accelerate these startups to market in record time, all the while maintaining our benchmark of generating top decile Silicon Valley-like returns, that place us amongst the top-tier of VCs globally.
We expect our digital startups to maturate for up to six months, before market launch. A life science, greentech or social innovation startup could easily be expected to take twice that amount of time or longer. The amount of the seed and follow-on round investment will have to be determined on a case-by-case basis.
To reiterate an important point, we will determine with our founders in each case, which legal jurisdiction is the best to maximize the value and global impact proposition that the startup team seeks.
If it makes more sense to set up in Delaware, we'll do that. If Brazil makes more sense, then we'll go in that direction. We are venue agnostic. We simply want what is best for the team, for the idea and for scaling to regional and global impact.
Q#10: Tell us about the Gaia Labs team.
A#10: Gaia Labs will act as Master General Partner for all our projects. That means we will be building individual dedicated project teams for each deal as we move forward. These founders will be venture partners in the company building process.
To the greatest extent possible, we are removing the line in praxis between entrepreneurs and venture capitalists. By fully aligning our interests and pooling our respective resources, we maximize the chances of altering the VC business model and finding and executing on ideas that will truly have globally disruptive impact.
In most cases we will structure the deal as a limited partnership with a dedicated general partner and/or with a complementary LLC or "C" corporation. Compensation and incentive structures will be tailored for each venture.
On the human resource side of things, the top tier Silicon Valley VC firms consist of three complementary skill sets:
(1) finance professionals, usually with investment banking or McKinsey-like backgrounds,
(2) former entrepreneurs, who have grown ideas from a napkin to an IPO or other liquidity event, and done it several times, and
(3) technology-scientific professionals, women and men who have Masters degrees and PhDs and/or have done post-docs in biochemistry, physics, engineering, applied mathematics or computer science, etc. and after graduating worked for Amgen in R&D, sales & marketing, or they worked for Cisco or Intel and then after years of industry experience, migrated into venture capital.
The Gaia Labs company building strategy represents a combination of (1), (2) and (3), but we are adding to our core team, depending on the project, three other complementary skill sets: (4) design professionals, (5) social innovation expertise, and (6) institutional partnerships (both academic and from targeted industry verticals).
We believe this will make all the difference for a global impact driven customized deal by deal approach to company building.