What influences one company to invest in real impact and another to pay lip service to purpose? “As much as leadership might want to do something, if the capital doesn’t want it to happen, it’s probably not going to,” Sunny Vanderbeck, Co-Founder and Managing Partner of Satori Capital tells We First.
While forces like COVID-19 and Black Lives Matter push social issues into cultural discourse, “not a lot has changed,” Vanderbeck says. “You’re just seeing acceleration on the things that were already in play.”
The proposition of any business is to bring value to people’s lives. We’ve become enamored by the power of the media to manipulate people and have lost touch with what matters, adding true value to all lives. Now’s the time to peel back these layers of disingenuous behavior.
Typically, capital investments are measured in 18 months to 5 year cycles. And our lives are replete with self-driving cars, artificial intelligence and cryptocurrencies, yet the environment is suffering and hundreds of millions of people live in poverty. Why is that?
Long term time horizons:
“It’s difficult to build a real purpose in the normal five-year cycle. It just takes longer than that,” Vanderbeck says. “If my time horizon is 20 years, all of these things that are easy to not care about with a short time horizon become exceedingly important in the long term.” Essentially, we need to increase our payback periods to weave purpose into business and capital markets.
“Investors are at the root of the time issue, more than company leadership,” Vanderbeck explains. When capital investors don’t support purpose, leadership is discouraged, or laid off, for implementing initiatives that don’t align with owner priorities.
“Part of the premise for Satori is that, over time, ownership always wins.” The firm funds private equity and alternative investments with a long-term approach through the lens of conscious capitalism. The premise is that companies that care for the continuing wellbeing of their communities and the environment, financially outperform those that don’t.
Before co-founding Satori Capital, Vanderbeck built, sold and rebought Data Return, a multibillion dollar Nasdaq-traded technology company. While he had achieved financial success, Vanderbeck wasn’t satisfied. “The majority of the investment community didn’t actually understand the day-to-day realities of creating something from nothing, growing it into something of significance and doing it in a way that had a long term mindset,” he says.
Vanderbeck and his partner, Randy Eisenman, wanted to change that. “We can see a version of the future that we want to live in and it’s up to us to make it.” The two entrepreneurs launched the company amidst the great recession. “People were buying gold and ammunition and we focused on long-term investments.” At first, it was difficult for them to raise capital. “It would have been too hard without purpose,” the co-founder explains.
The eighth wonder of the world:
Around five years ago, the media conversation started to change but there’s still a long way to go, Sunny says. “We would like to see more changes in time horizons from investors. The good news is we’re seeing some other funds change their time horizons, too.”
While companies are extending their time horizons, natural phenomena like climate change are going at their own pace. The truth is that, “it will take as long as it takes,” Vanderbeck says. “Have a sense of urgency. Make relentless progress. Be dissatisfied with the reality you live in because you’re an entrepreneur and realize that things sometimes take longer to change than we want. And that’s okay.”
“You hear about compound interest being the eighth wonder of the world,” Vanderbeck says. “It’s not just true for money. We get compound interest on learning, knowledge and results.”
Leading by example:
Although purpose-driven business leaders are moving resources towards impact, there are deeply vested interests set on maintaining the status quo. How do we influence those actors to invest in social good?
“I don’t spend a lot of time trying to get other people to do things they’re not ready to do,” Satori’s co-founder says. “I spend time trying to get better at what I do and helping our team and portfolio companies do the same. The idea is to be an example.”
“One of our portfolio companies went from $60 million of revenue to $225 million of revenue in four years, organically, in an industry that grew 6% every year.” When a company starts making that kind of progress, competitors take notice. “One of the ways we can have impact is to actually go do the work ourselves. Be such a good example for others, that they decide to do the same thing.”
A data point Satori uses to measure success is the number of institutional investors that take interest in purposeful ventures. One example Vanderbeck points to Unilever. “They acquired a company that only used fair trade tea. Then they realized they could have all of their tea be fair trade sourced. I’m watching for the early warning signals in the top 100 financial institutions in the world. Are we seeing the beginnings of desire for change?”
Selecting portfolio companies:
Satori’s process for choosing portfolio companies is different from other private equity firms. Vanderbeck and his team seek companies with purpose, “But the big lie of purpose is that it’s ever over. It’s an unachievable outcome,” he says.
The conscious investors look for two factors. One is “openness to learning and growth.” The other is “who they care about,” Vanderbeck says. “We think caring about other people, over the long term, creates better businesses.”
Balancing purpose and profit:
In theory, every company would like to exponentially scale social impact and profits. When push comes to shove, business leaders are often faced with difficult choices. Do you pay more for sustainability or cut costs and turn a blind eye on your environmental footprint?
“One of the fundamental premises of conscious capitalism is don’t make trade offs,” Vanderbeck says. “For example, when the CPG companies went to redesign packaging to ship less water around in detergent, who lost? No one.” Essentially, If consumers, investors or the environment have to give, keep looking for solutions.
Drivers of change:
Behavior change, whether on an individual or institutional level, is a challenge. Here are key lessons from Satori Capital on how to move to catalyze purposeful change.
- Go to the money: While corporate leadership may be opposed to change, when the funding partners push for it, leadership listens. “The original source of capital behind most investment firms is a family, a foundation, an endowment, a pension or a similar entity,” Vanderbeck says. “When those groups change their priorities, the investment firms will reflect those priorities.” The takeaway here is that by influencing the primary investors, you can catalyze social good.
- Support policy change: Laws and regulations can be slow and to update but have a substantial influence on business operations. A recent change in the latest tax bill was the “one year holding period you needed to get capital gains as a sponsor or a fund manager was changed to three years,” Vanderbeck explains. “That’s incentive to pick companies you’re going to stick with and to want to see them succeed over the long term.”
- Stay true to purpose: Regardless of the situation, your purpose is a compass to guide you through business decisions, from investments to marketing. As Vanderbeck says, “My quick check is, ‘is this consistent with our purpose to create, fund and inspire businesses that elevate humanity?’ If it isn’t, we don’t do it.”
Throughout its investment portfolio, Satori Capital engrains purpose into business and investment strategy. They’re an exemplar for the fact that by extending your time horizons and leveraging your financial capital for social good, you can build a stronger business and a better world.