Category: Investment

What the United Nations Net Zero Food Plan Means

July 15, 2024 Social Issues

Jeff Bartel

Chairman and Managing Director

The Net Zero Food Plan is designed to promote sustainable practices in the agri-food area to tackle climate change and, at the same time, reduce hunger globally. Challenges exist, including rising global emissions, regulatory impacts, the need for innovative financing options, and continual collaboration to make the plan a reality. Achieving these planned Net Zero goals will ultimately require a mix of strong leadership from governments, various industries, and advancements in technology to succeed.

Understanding the UN’s Net Zero Food Plan

The plan includes programs to limit global warming to 1.5°C by 2050 and target ten key areas: sustainable agricultural practices, better land management, water resource management, varied food production, healthier diet promotion, and environmentally friendly fishing practices.

Benefits to the World Population

The UN’s Net Zero Food Plan directly benefits people by ensuring a stable and nutritious food supply, which addresses global hunger and improves overall health. By promoting sustainable farming practices and resource management, large and small farmers can make food that is more affordable and accessible. The plan also looks at climate change, reducing the risk of severe weather that can upset food production and threaten farms and communities. It also encourages advanced technologies that increase food quality and safety and provide people with access to healthy and nutritious food.

Role of the Food Sector in Global Emissions

The changes the plan calls for and the improvements necessary to reduce greenhouse gas emissions are challenging to achieve without considering the impact it could have on the global food supply and the risks of increasing world hunger.

The food sector adds to climate-changing emissions at nearly every point, from processing and transportation to consumption. Several factors impact this, including agriculture, deforestation, land use, fossil fuel use, and the production of nitrous oxide and methane gas.

Impact on the Global Landscape

Governments, international groups, and public and private sector companies all look for ways to promote and fund agricultural improvements. All four work to support small farmers, promote climate systems and establish reliable food supply chains. Large and small organizations prioritize funding technologies and systems to lower greenhouse gasses and increase quality food production while maintaining the nutritional requirements of the global population.

Risks for Net Zero Investors

Meeting the current Net Zero goals does require partnership and agreement between governments, businesses, farmers, and consumers. Because of this, conflicts of interest can make it difficult to find common ground, leading to less favorable investment results that ultimately make overall success more difficult.

Challenges Aligning Investments with Net Zero Goals

To align investing with Net Zero goals, challenges can come from more than just collaborative interests. Investors require confidence in the methodologies used for measuring and tracking emission reductions to ensure consistency. At the same time, there is a lack of standard metrics for successfully dealing with green technology, which can lead to less reliable data for choosing investment options and understanding the differences between short- and long-term goals.

Greenhouse employees collaborate on sustainable agricultural practices, examining data on a laptop.

The Role of Innovation and Technology

To improve food production and to help make informed decisions, leadership will use data analytics, artificial intelligence, and blockchain technology when looking at ESG standards. Innovations in sustainable food systems let companies develop and apply helpful practices in their operations, including energy-efficient manufacturing processes, waste reduction strategies, and the use of renewable energy.

New technologies can also specifically help companies by:

  • Enhancing resource efficiency,
  • Reducing carbon emissions
  • Minimizing the environmental impact of food production

Specific Technology Uses

Other technologies, besides data analytics, AI, and blockchain, can increase resource efficiency and improve food production and sustainability. The specific technologies used are outlined below.

  •  Internet-connected devices monitor crops and soil quality
  • Genetic engineering creates more robust crop varieties
  • Drones and satellites help farmers manage large areas
  • Advanced materials and biodegradable packaging lower waste
  • Robotics can automate planting, maintenance, and harvesting
  • Hydroponics and aquaponics allow farming in urban areas

Key Takeaways from the UN’s Net Zero Food Plan

The Net Zero Food Plan offers a wide-ranging approach to solving the challenges of climate change and global hunger. By overcoming increased emissions, complex regulations, and financing challenges, the food sector can use resources more efficiently, minimize the environmental impact, and build a resilient global food system. It will take a combination of focused leadership, technological advancements, and the support of various governments, industries, and stakeholders, but the benefits this plan will have on the world and its population over time are worth the effort.

Charlie Munger: Latticework of Mental Models

December 15, 2023 Investment

Jeff Bartel

Chairman and Managing Director

In strategic decision-making, renowned Berkshire Hathaway investor Charlie Munger, Warren Buffett’s partner, introduced the groundbreaking concept of the Interconnected Web. Munger’s revolutionary idea of the ‘latticework of mental models’ envisions an active framework where each mental model represents a single piece of knowledge from various disciplines. While the approach to worldly wisdom has gained praise, it does face challenges and criticisms, including potential pitfalls and the subjective nature of mental models.

Charlie Munger’s Concept of The Interconnected Web

Munger introduced the idea of the Interconnected Web as a foundational principle for effective decision-making that supported a multidisciplinary approach. According to Munger, a comprehensive understanding of the world requires a wide mental model that includes knowledge from diverse disciplines like psychology, economics, biology, and history. Munger believed that a narrow focus in a single discipline could limit the ability to navigate the complex challenges of the business world and that developing a more universal perspective could promote adaptability and better position themselves to succeed in a constantly evolving business environment.

The Latticework Metaphor

The “latticework of mental models” predicts a dynamic and intricate framework where each mental model represents a single piece of knowledge from several disciplines. The latticework metaphor implies an interconnected network of insights, highlighting how each piece adds to the overall structure and understanding of complex issues. As mentioned before, this structure includes diverse disciplines like psychology, economics, physics, and biology and forms a lattice to enhance an individual’s ability to analyze and navigate the world’s complexities.

Why Charlie Munger Recommended Synthesizing Diverse Knowledge

Charlie Munger noted that synthesizing diverse knowledge could form a broad understanding of many disciplines and enable executives to navigate complexity and make more informed decisions. Munger’s emphasis on synthesizing diverse knowledge is based on the concept that a single, specialized perspective is limiting when addressing complex challenges in the business world. Executives can build a comprehensive mental toolkit by taking insights from various fields. This interdisciplinary approach allows them to synthesize information more effectively and identify patterns, connections, and potential consequences within the limits of a singular discipline.

The Holistic Approach

Charlie Munger’s recommendation to synthesize diverse knowledge stresses the importance of business leaders developing a holistic perspective that transcends traditional siloed thinking. Mixing insights from different domains lets executives break free from narrow, specialized views and develop a comprehensive understanding of issues. Leaders can better assess challenges and opportunities by incorporating elements from numerous disciplines. This holistic approach allows a more nuanced understanding of business dynamics’ interconnected factors. Traditional siloed thinking limits decision-makers to singular expertise and neglects the intricate network of influences available.

The Importance of Learning from Different Perspectives

Charlie Munger emphasizes the importance of learning from different perspectives, mainly by studying the successes and failures of individuals across several fields. Munger recognizes that a narrow focus limits the depth of understanding and hinders intellectual growth. Individuals gain a more comprehensive worldview by broadening the scope to include insights from diverse fields. Munger advocates for extracting lessons from triumphs and mistakes, believing that studying failures is as important as looking at successes in developing an understanding.

Tunnel Vision

Munger recognizes that tunnel vision, a narrow focus limited to a specific industry or discipline, can lead to single-minded decision-making. Cross-disciplinary learning provides a broad source of experiences and equips leaders with insights to avoid dangers associated with narrow-mindedness. It encourages an adaptive and robust mindset and allows executives to navigate uncertainties with a diverse understanding beyond a singular perspective limit.

Continued Learning

Executives who embrace Munger’s continuous learning approach understand that the business landscape evolves, evidenced by constant changes and uncertainties. By studying the experiences of experts from many domains, leaders accumulate diverse knowledge and develop an approach that focuses on continuous learning. This approach enables them to adapt and stay ahead of industry shifts, anticipate trends, and navigate complexities. The commitment to ongoing education ensures executives are well-versed in their field and equipped to find insights when confronted with unique situations.

Challenges and Criticism of Munger’s Worldly Wisdom Approach 

Although Charlie Munger’s approach to investment has received general praise, it does have its detractors, challenges, and criticisms. One significant challenge lies in the difficulty of applying a multidisciplinary mindset. Critics argue that not all investors possess the time or resources to explore various disciplines, potentially leading to a lighter understanding of diverse fields. Additionally, the success of Munger’s approach relies on an individual’s curiosity and capacity to learn, which everyone may not share. Critics also maintain that the interpretation of insights from different disciplines can vary among investors, possibly resulting in conflicting strategies.

Potential Pitfalls

Executives may encounter pitfalls when including insights from various disciplines in their decision-making processes. One major challenge is the risk of information overload and difficulty gathering meaningful insights from the available knowledge. Executives may be challenged to decide which elements are relevant to their industry or situation. The complexity of synthesizing insights from various disciplines requires significant time and intellectual effort, which may pose practical challenges in fast-paced business environments.

Hampton Group’s Key Takeaways from Charlie Munger

Over his long and celebrated career, Munger presented many lessons for improvement in business and life in general, including:

  • Always be Learning: To Munger, ongoing education was a cornerstone of his professional and personal life, and he continually pursued learning on various subjects, including business, history, and science.
  • Develop a Trusted Circle: Munger found talented and trustworthy individuals in his life and encouraged others to seek out teachers, collaborators, and advisors to help provide guidance and diverse viewpoints.

Charles T. Munger’s popular and well-developed philosophies and insights remind executives to explore and develop a broader, continuous learning approach that enables them to navigate uncertainties, anticipate trends, and make more informed decisions.

How the Markets Responded to the Cryptocurrency Crash

December 1, 2023 Risk Management

Jeff Bartel

Chairman and Managing Director

The recent FTX cryptocurrency crash shocked financial markets and led to a reassessment of risk management strategies and exchanges. By exploring the crash and examining its effects on the industry, it’s easy to see the challenges crypto startups face in the future. It highlights the delicate balance between risk and innovation as cryptocurrencies continue attracting funding in 2023 and beyond.

The Market’s Response to the FTX Cryptocurrency Crash

The impact of the cryptocurrency market crash continues to be felt through financial markets, leading to a need for vigilance among investors and regulatory bodies. FTX’s crash prompted a reevaluation of risk management strategies and increased scrutiny of cryptocurrency exchanges. Traders are now more tuned to the potential adverse effects of an exchange failure and shifting investment behavior. It’s a reminder of the interconnected nature of cryptocurrency with traditional financial markets, underlining the need for thorough regulations and risk mitigation measures.

Following the cryptocurrency crash, a sell-off occurred and prompted reviews of risk tolerance within the cryptocurrency space. Over time, the market strengthened again as investors re-entered, seeing an opportunity to acquire lower-value assets. Several factors maintained the revival, including enhanced transparency by cryptocurrency exchanges, regulatory interventions to restore confidence, and a broader recognition of the underlying technology. This flexibility highlights the active nature of the crypto market, where periods of decline are followed by renewed interest and growth with a focus on the need for more robust risk management practices.

How Bitcoin’s Volatility Impacted Financial Markets

Bitcoin’s volatility significantly impacted the markets, illustrating the interconnections between virtual assets and traditional financial systems. Bitcoin’s price fluctuations, known for rapid surges and declines, led to a ripple effect across various markets, influencing investor sentiment. That instability created curiosity and caution among institutional and retail investors, with Bitcoin considered a measure of current market sentiment. The impact goes beyond cryptocurrencies, influencing other markets, equity prices, and currency valuations.

Historically, sharp rises or declines in Bitcoin prices were linked with subsequent changes in stock markets. Investors and analysts saw these digital asset price movements as a general market sentiment and risk evaluation gauge. This connection’s rationale is that Bitcoin and traditional financial markets respond to similar economic factors, like geopolitical events, economic indicators, and regulatory developments.

Exploring the Market Cap Cryptocurrency Crash

The Market Cap Cryptocurrency Crash highlighted crypto startups’ challenges, revealing susceptibility to external factors, regulatory developments, and technological vulnerabilities. The cap, a key metric reflecting cryptocurrency’s total value, saw sharp declines. The aftermath stresses the importance of due diligence and risk assessment in crypto startups, as these groups play a crucial role in shaping the future of the blockchain industry.

As cryptocurrency values plummeted, many blockchain and crypto startups faced financial limitations, leading to workforce reductions and project cancellations. The uncertainty around market recovery and regulatory scrutiny caused a degree of cost-cutting within the industry. Also, the cryptocurrency exchange crash prompted a change of talent toward more robust and sustainable projects focusing on teams that could withstand market volatility. Overall, the crash emphasized the cyclical nature of the cryptocurrency job market, where industry players needed to respond quickly to the market.

The Drop in Cryptocurrency Venture Capital Deals

The decline in these deals is driven by mounting concerns surrounding market volatility and high-profile incidents like the FTX crash. Crypto, once ideal for venture capital investment, has seen traditional investors retreat due to increased risks associated with the industry’s volatility. The FTX incident has amplified concerns, forcing a reevaluation of risk and investment strategies. Venture capitalists typically seek stable opportunities and have become more cautious in unpredictable market activities and the potential of significant disruptions.

In 2023, despite the drop in cryptocurrency venture capital deals, specific sectors will continue to attract significant funding. Decentralized finance remains a focus for investment, with projects chosen to revolutionize traditional financial services through blockchain technology. Non-Fungible Tokens, or NFTs, still receive funding for art, gaming, and virtual real estate projects. Blockchain infrastructure development, including Layer 2 scaling solutions and interoperability protocols, also sees continued investment. Additionally, green and sustainable crypto projects dedicated to environmentally friendly blockchain solutions are getting attention, reflecting an industry shift toward eco-conscious practices.

Factors That Affect the Cryptocurrency Market

Many factors influence the cryptocurrency market, each playing a role in how it’s shaped, including: 

  • Market volatility: Rapid and sometimes unpredictable price fluctuations of cryptocurrencies can impact investor confidence and decision-making.
  • Security and privacy: These are major market concerns, with hacking incidents posing significant risks to the private information of both individuals and exchanges.
  • Criminality: Instances of high-profile criminal breaches have increased the perception of cryptocurrencies as unsafe financial repositories.

Addressing the negative environmental impacts of cryptocurrency has become a significant market concern. Proof of Work, a process of verifying blockchain transactions, is seen as energy-intensive and has led to increased scrutiny regarding the carbon footprint of cryptocurrency mining. Market participants struggle to reconcile blockchain technology’s potential with its environmental issues. Sustainable and eco-friendly initiatives have emerged, including Proof of Stake, a greener mining technique that offsets carbon emissions. Investors, regulators, and industry stakeholders are pushing for greater transparency and adopting environmentally friendly methods to improve the market’s long-term viability and acceptance.

Hamptons Group and The Cryptocurrency Crash

The recent FTX cryptocurrency crash left a lasting mark on financial markets, leading to a reassessment of the stability and risk management of cryptocurrency exchanges, and it’s clear that these sectors and the companies interested in them face tough challenges, emphasizing the delicate balance between risk and innovation.

In this unpredictable time, strategic financial advisors like Hamptons Group assist clients in developing risk mitigation strategies tailored to specific crypto financial goals and risk tolerance. In addition, our advisors can provide timely insights and recommendations based on comprehensive market research, helping our clients make informed decisions.

Sustainable, Responsible Impact Investing

December 15, 2022 Impact Investing

Jeff Bartel

Chairman and Managing Director

With a quick look at today’s headlines, it is unsurprising that some investors want their money going to the exact causes driving news stories on social and environmental value creation. These investors seek profits from their investments, but they also want to know that they play a role in making positive changes globally or in communities.

From climate change to social justice issues, sustainable, responsible impact investment options are plentiful and warrant a closer look at their rise and growth.

The Rise of Sustainable, Responsible Impact Investing

Sustainable, responsible impact investing supports investment in stocks, bonds, securities, and other projects from organizations that focus on social, environmental, and governance issues. Some of the most popular options involve companies expressing interest and concern on climate change, social justice, poverty eradication, end to geopolitical conflicts, and sustainable natural resources.

Funding in sustainable, responsible impact investing has increased significantly from around $3T in 2010 to $16.6T in 2020. This growth is expected to continue, with experts predicting this sector will grow to $50T by 2025.

One of the biggest trends in sustainable, responsible impact investing is that it is now attracting the attention of all investors, even those without a particular interest in these issues. Unfortunately, this has resulted in greenwashing, with increased investment options falsely claiming to invest in these issues. Therefore, it is vital for investors to thoroughly vet all sustainable, responsible impact investing opportunities before investing.

Demographics Demanding Sustainable, Responsible Impact Investing

Millennial investors have been the driving force behind sustainable, responsible impact investing for years. Today, this has all changed. Not only are younger generations also interested in investments that work towards making a difference in the world, but there has also been an increase in investments from both Gen X and baby boomer generations.

Perhaps most surprising is that Millennial and Gen Z investors are occasionally willing to absorb some loss in their returns if these investments propel worldwide changes in diversity, income equality, climate change, renewable energy, and carbon emissions reduction. For example, one study shows that investors under 41 years old are willing to lose as much as 10% of their investments to bring improvements to society and the planet.

Climate Change Is Driving Sustainable Impact Investing

Climate change is one of the top issues for sustainable, responsible impact investors. Due to this popularity and multiple climate change concerns, there is a vast diversity of investment opportunities available, such as green bonds, green real estate, alternative energy, emissions reductions, and advanced technology, such as water technology.

With the increase in climate change investment opportunities and the rise in greenwashing, today’s investors are taking the time to research and track companies before investing; these investors seek transparency and results.

Responsible Impact Investing in Agriculture

Agriculture is another popular sector for sustainable, responsible impact investing. For example, food insecurities are a growing concern for global leaders and investors interested in sustainable, responsible impact investing. In addition, as climate change continues to impact some of the poorest nations in the world, there is a strong likelihood that investments in responsible agriculture will continue to grow.

Impact investing in sustainable agriculture focuses on investments involving sustainable farming practices, land conservation, and organic farming practices free from chemicals and dangerous pesticides. Social equality issues affecting agriculture, such as gender diversity and child labor laws, are other standard options within the agriculture sector.

Reducing Global Conflict with Sustainable, Responsible Impact

The Ukraine-Russian conflict has certainly heightened investors’ interest in responsible impact investment involving geopolitical conflicts. In 2020 alone, over 80 million people were displaced worldwide due to various issues. In many countries, such as the United States, where investors have limited options to help in these conflicts making responsible impact investments is an ideal alternative.

However, these investments should not be made in haste. Instead, investors should take the time to research each fund or company they are considering investing in to precisely see what it uses the funds for, such as political activities or refugee support. This extra step ensures your investment is going towards the causes you care about most.

While sustainable, responsible impact investing was primarily in the hands of Millennials not long ago, that has all changed. Investors from all generations, walks of life, and investment goals are starting to make this type of investment a part of their overall portfolios. Sustainable, responsible impact investing provides a way to diversify your investment portfolio. First, however, it is essential to research and ensure you are investing in the right organizations.

Real Estate Finance and Funding Innovations

November 14, 2022 Real Estate

Jeff Bartel

Chairman and Managing Director

Real Estate Finance and the Rise of Fintech for Funding

As inflation concerns continue to trouble some investors and interest rates keep rising, it is not surprising that real estate investors are looking for alternative funding and real estate finance options. While fintech has played a role in the real estate industry for decades, today’s economic conditions have catapulted it to the forefront.

The reality is that fintech is changing how we handle real estate finance, track property ownership, and even purchase real property. These changes are generating new real estate opportunities, with fintech assisting investors with growing investment portfolios.

Crowdfunding Real Estate Investments

One major shift in real estate investments is the popularity of crowdfunding. This type of real estate finance strategy is often a win-win for developers and investors. It allows developers to bypass the traditional lending options that are usually time-consuming and limited in real estate funding opportunities and will enable investors to diversify their investment portfolios to include real estate without the hefty upfront down payment.

In many cases, crowdfunding real estate investments can provide a higher dividend than traditional real estate transactions. Most importantly, crowdfunding in the real estate market can help minimize your risk level because you do not have to use any personal assets for collateral.

While crowdfunding can provide an alternative way to invest in real estate, there are some downsides to using this strategy. First and most importantly, since there are multiple owners, you will not have direct control over the decisions regarding the property, and you typically cannot use the property as collateral for other loans. Additionally, some crowdfunding platforms that offer real estate investments only work with accredited investors. Finally, since this is a relatively new investment opportunity, it is sometimes difficult to determine which platform is best.

It is crucial to weigh the pros and cons of this investment option before deciding whether crowdfunding real estate investments are suitable for you.

Fintech innovation, including blockchain, changes the speed of transactions while decentralizing the investing process

Blockchain Transactions in Real Estate Finance

At first glance, it may seem like something other than blockchain and real estate should be partnered. However, the reality is that blockchain may help to revolutionize the real estate industry. There are several ways this is happening.

First, blockchain provides a safe and secure way of storing and managing real estate records and transactions. Second, it helps to eliminate the middleman by decentralizing the process, which is prone to fraud and errors. Finally, blockchain can speed up the transfer of ownership process and cut costs for buyers.

Those interested in investing in blockchain real estate transactions can do so in several ways, including:

Purchase Property With Cryptocurrency

The most direct way to invest in real estate through blockchain is by purchasing real estate using cryptocurrency. Since this is a new investment opportunity, investment options using this payment method are possibly limited. However, there are several platforms that investors can use to purchase property both nationally and internationally using cryptocurrency.

Buy Real Estate Tokens

You can also purchase specialized real estate tokens representing ownership of a specific property. In many cases, tokenized real estate opportunities are broken into fractions, which means that one token represents a portion of the property. You can also sell or trade these tokens through numerous platforms.

Invest in Real Estate Finance Related Cryptocurrencies

If you are not ready to purchase real estate with blockchain technologies, you can invest in buying cryptocurrencies that involve real estate finance. For example, you can invest in a cryptocurrency that is working towards creating a decentralized storage system for property transfers and ownership.

Cloud-Based Commercial Lending

Cloud-based technology is already helping simplify the real estate industry. For example, cloud-based loan origination software helps streamline the loan process for both the lender and the investor. It allows most of the lending process, if not the entire process, to complete online while creating safe, more secure document management capabilities.

This technology is such a big part of the lending process, especially for commercial real estate transactions, that it has gained the government’s attention. The Biden administration recently announced its plans to expand its SMB 7(a) program, making it more assessable to a diverse set of small business owners.

While no agreement regarding accomplishing this goal is set in stone, many in the cloud-based lending sector are hoping for good news for the industry. Because fintech lending opportunities tend to attract many minorities, as well as low-income, business owners could play a role in helping the government reach its goals. In addition, with or without the government’s approval for cloud-based commercial lending to participate in the SMB 7(a) program, this type of lending will likely continue to increase as technology advances.

When investing in fintech real estate, it is essential to do your research and understand what opportunities are available. Since this is a relatively new investment market, many fraudulent platforms often offer great rewards for your investment. This factor makes it critical to only work with fintech companies and platforms featuring a solid reputation for success.

The Biotech Venture Capital Market in 2023

October 28, 2022 Biotech

Jeff Bartel

Chairman and Managing Director

Venture capital investments in the biotech industry have steadily increased since 2015, with a significant spike in Q1 2021. Although these investments dropped slightly in the following quarters, investors should not be too concerned. We will discuss the causes behind this drop in VC investments and explain why biotech is still a valuable investment.

Biotech Venture Capital Trends

Over the last three years, we have seen a significant spike in venture capital investments in the biotech industry. In 2019, VC biotech investments stood at $1.5B in Q1 and continued to rise, peaking at $9.1B in Q1 2021. However, since then, there has been a slight decrease in VC funding going to the biotech sector.

Despite the recent decrease in VC funding, billions of VC dollars still impact the biotech industry. Investors seem particularly interested in the therapeutic-based biotech sector. This biotech research and development area is so popular that VC companies worldwide invested more than $52B into this field from 2019 to 2021.

Some of the most popular therapeutic-based biotech research areas for investors include:

  • Cell Therapy: $7.7B investment from 2019-2021
  • Next Generation Gene Therapy: $7.6B investment from 2019-2021
  • Precision Medicine: $4.5B investment from 2019-2021
  • Machine-Learning Drug Discovery: $4.4B investment from 2019-2021
  • New Drug Delivery Methods: $4.0B investment from 2019-2021

VC investors in biotech also trend more toward startup biotech companies. In fact, from 2019-2021, nearly two-thirds of all VC funding in biotech went to startup companies.

The Drop in Biotech Venture Capital and the Rebound Potential

While VC investments in biotech have dropped since its big spike in Q1 2021 ($9.1B), Q1 2022 ($7.6B) investment levels are still 58% higher than investments in Q4 2020 ($4.8B). This drop in VC funding is partly due to uncontrollable global events, including inflation concerns and unstable markets.

One thing is sure; VC investors are becoming more selective regarding their investment choices. While investments in biotech can provide rapid growth once the product makes it to market, investors may be looking for more movement in the development phase.

There are currently over a thousand biotech trials underway, but out of the 50 drugs approved by the FDA in 2021, only 2 of these drugs were in the biotech field. While this may seem like a small number, it is a significant advancement for the biotech industry and could signify what is to come.

Test tubes representing an biotech venture capital investment

Investment in Cell and Gene Therapies

Biotech is a booming industry with plenty of room for growth. More than 3,000 biotech firms were formed in 2021 alone. Studies show that the industry is set to grow by 30% by 2025. In addition, 21 cell therapy and 31 gene therapy launches are on track for 2024.

There has been a shift in the type of biotech investments that interest VC investors. In early 2020, many VC investors still leaned towards traditional biotech areas, such as microbial. In 2021, however, there was a significant shift in VC investors to next-generation cell and gene therapy investment opportunities. Considering recent advancements in this field and a few successful launches, venture capitalists will likely continue to invest in this emerging technology.

Funding for Machine Learning in Drug Research

Biotech advancements can be a costly endeavor. Estimates show that the research and development phase alone can cost up to $2.3B and close to another $1M to get the product to market. Fortunately, investments in machine learning and artificial intelligence by the biotech industry are helping to cut these costs, which results in higher rewards for venture capitalists choosing to invest in this biotech sector. Studies show that machine learning can help reduce preclinical costs by up to 40%.

Cost-savings are just some of the benefits machine learning offers. It also can help biotech companies speed up the research and development phase. This advanced technology can help take some guesswork out of the development phase by transforming big data into analytical results. Moreover, machine learning is so impactful that experts anticipate biotech companies investing in machine learning may bring as many as 50 novel therapies to market over ten years.

Biotech companies investing in machine learning technology are already grabbing the attention of VC investors. In combination with small molecule drug discovery, machine learning has overwhelmingly received most of the VC funding.

Despite the recent drop in VC funding, the value of the biotech sector is far from over. With machine learning and artificial intelligence helping to save costs, speed up the research and development phase and simplify the launch phase, a surge in biotech products coming to market is likely on the horizon. As a result, this could be the perfect time for VC investors to invest in biotech before the market is saturated.

High-Commitment, High-Performance Management

August 31, 2022 Corporate Responsibility

Jeff Bartel

Chairman and Managing Director

High-commitment, high-performance management organizations (HCHP) sustain performance over long periods by concentrating on three organizational pillars. These pillars are crucial to creating a long-term vision that looks at big-picture growth and longevity rather than the bottom-line needs of this year or quarter. High-commitment, high-performance organizations are characterized in part by:

  • A sustained commitment from all levels, including investors and customers, to organizational excellence and shared missions
  • Long periods of achievement that exceed expectations and can be described as excellent
  • Clear goals that are tied to big-picture organizational success and can be dropped down to support relevant team and individual goals at every layer
  • An emphasis on continuous learning and improvement throughout the organization, including skills development, process improvement, and growth

The pillars of high-commitment, high-performance management are performance alignment, psychological alignment, and learning and change.

Performance Alignment

At the most basic, performance alignment is about getting the ducks in a row within an organization so everyone can focus well on a shared winning strategy. That being said, this pillar does not look to dictate single-minded paths from the top down. Instead, leaders and those on their teams work together to create a business strategy that supports success.

That strategy becomes the beacon for all paths to support the big-picture strategy. The business goal must be communicated to stakeholders at all levels. Stakeholders must have goals that serve them individually while supporting the business’s goals. When performance is aligned across the organization, success for the business means success for everyone, and success for one means the support of business success.

Performance Alignment Leads to Employee Engagement

According to Gallup’s Q12 Engagement Survey, employees at organizations using best practices to achieve psychological alignment are 40% more likely to be engaged in 2022 versus other organizations.

High-Performance Management in the Organizational Chain

To achieve high performance as a business, every link in the organizational chain must also be high-performance. That requires alignment across overall strategy and goals, specific, well-documented roles and responsibilities, and rules for decision-making.

Some common challenges for creating a high-performance culture include:

  • Putting the right leaders in place
  • Getting (and keeping) commitment from teams and people at all levels of the organization
  • Managing the communication and collaboration required for seamless performance alignment
  • Building and supporting the processes and tools required for this intense alignment

Psychology Alignment

It is not enough to set shared goals and align performance across all levels of an organization. If performance alignment is the structure by which high-commitment, high-performance firms are built, psychological alignment is the glue that helps hold it all together.

High-Performance Management Leadership

High-performance management practices require leadership to empower employees and trust them to make decisions. Ensuring everyone is aligned to a higher purpose can help build that trust because everyone is working toward the same common goal — and that goal is greater than the company’s bottom line.

While many employees certainly will understand that driving revenue or profit margins can be suitable for everyone, the ability to make a difference often pushes teams to do more than they would if business performance were the only drivers on the table. Under this pillar of high-commitment, and high-performance management, leaders provide a sense of higher purpose and a shared cause that can rally all stakeholders to action.

Common Goals in High-Performance Management Organizations

Building a better world and pride in performance are two common goals that work well for psychological alignment.

The first involves finding a mission the business and its employees can get behind. Environmental actions, such as reducing carbon footprints, or philanthropy, such as giving back to the local community, are two examples of building a better world.

Pride in performance ties psychological alignment to the business’s brand reputation or the quality of its products. It makes people proud to call themselves an employee and creates a culture where team members strive for excellence so they can be part of that legacy.

Some common barriers leaders can face with psychological alignment include:

  • Finding the right shared values to motivate employees and stakeholders while supporting business goals
  • Balancing profits and other business needs with action on visions and values
  • Maintaining a brand reputation in keeping with the shared values used for psychological alignment, as deviation from the path could mean public relations and employer branding challenges
Trust is an essential element of high commitment, high performance management

The Importance of Learning and Change in High-Performance Management

Trust is a critical commodity in any high-performance management model, and one-way leadership can court the trust of team members is by ensuring opportunities for learning and change. In an HCHP organization, learning and growth are organic components of all processes, and everyone works to ensure access to knowledge and opportunity for growth across all levels.

In a high-performance culture, leaders have collective, public conversations with key lower-level stakeholders about what stands in the way of success — for individuals, teams, and the company. As a result, the business is transparent about clear goals and fair performance evaluations for individuals, and it is clear that importance is placed on providing growth opportunities. This emphasis on learning and change can help reduce burnout, support employee retention, and loyalty, and create growth patterns for individuals, teams, and the business.

Some common challenges businesses can face related to this pillar include:

  • Finding the time and resources to support learning and skills development
  • Creating transparent and fair practices for selecting high performers for opportunities
  • Driving the type of overall growth that makes room for team and individual growth

High-Commitment, High-Performance Management Drives Organizational Excellence

High-commitment, high-performance management is a holistic approach to organizational excellence, where commitment, alignment, and a learning culture create a synergy that propels organizations toward success. Trust within the organization and with external stakeholders is at the heart of this high-performance model, driving its continued evolution and adaptability in an ever-changing business landscape.

The Impact of Social Venture Capital on Society

August 18, 2022 Private Equity

Jeff Bartel

Chairman and Managing Director

Venture Capital as a Force for Societal Change

While traditional venture capital investment continues to provide investors with opportunities for financial reward, impact investing and social venture capital are beginning to take center stage in the investment arena. Venture capital projects with a potentially positive impact on society provide investors with an opportunity to return profits while supporting the most critical, necessary societal changes. Often supported by both the public and the public sector, there are many advantages to social venture capital.

Trends in Social Venture Capital in 2022

Venture capital grew throughout 2021 and into 2022 after exiting the disruptions of 2020. It was up $332 billion in the first three quarters of 2021 compared to the same period in 2020, and early-stage funding was up by more than 100%. Despite that growth, venture capital did not see the types of growth in ESG considerations that other investment areas did. That creates a significant opportunity for growth in social venture capital in 2022 and beyond.

Over the past year, movement in social venture capital indicates many firms and sectors are poised for that growth. Venture capital collaborations are moving to improve practices across the industry to support diversity and other critical missions, and many firms are hiring directors of sustainability and other professionals meant to steer investments and initiatives in ESG directions.

What Are the Main Advantages of Social Venture Capital?

Social venture capital offers many benefits for firms, businesses, entrepreneurs, and the community or society. Some of the benefits of social impact investing and social ventures include:

  • Better access to funding sources. Governments and other agencies offer incentives for social impact investment, making investors of all types more likely to enter the pool. In addition, channels such as crowdfunding and angel investments are typically easier to access when a mission backs the venture.
  • Increased service to the community. Services developed in social impact finance tend to be more relevant to community needs and more likely to solve known social or environmental problems.
  • Easier buy-in. ESG venture capital firms act on agreed-upon environmental, social, and governance missions. Because of that, it is easier to get buy-in from all stakeholders because the mission is clear, and most people can stand behind it.
  • Greater diversity. Consumers increasingly buy from brands they believe support important missions and social responsibility. Social venture capital tends to lead to increased diversity naturally.

Does Social Venture Capital Have Any Disadvantages?

Social venture capital is not without disadvantages. For example, social entrepreneurs relying on social venture capital may give up control to get funding. In addition, a lack of historical case studies may make it difficult for social entrepreneurs to convince potential investors. This may be challenging until social venture capital becomes a long-term trend.

The Dual Nature of Social Impact Investing

One of the challenges leading to investor hesitance for social impact investing is its dual nature. Investors and venture capitalists historically were concerned with the return on their investments. The bottom line can not be ignored, as investors that pour money into ventures that do not perform go out of business quickly. But social investors are also concerned with how the venture performs with regard to social or environmental factors, including diversity, sustainability, reduced emissions, or policies that provide for the community.

A business woman investor examines solar panels while holding her notebook with social venture capital impacts listed.

Social Impact Investing To Cool the Planet

One growing area of social impact ventures has to do with the environment. Social entrepreneurs are leveraging innovation, sustainability, and other processes to create products or provide services in a way that safeguards the planet. Climate impact investors are putting money behind those efforts, funding businesses and efforts that keep the planet central to all missions.

Venture Capital to Reduce Poverty

In the same way, for-profit and nonprofit venture capital investors seek to improve the quality of life of people across all borders. For example, many are looking at ways venture capital can reach the poor in developing countries. Funds from private and public sources are being used to educate and train people in these nations to help them develop businesses, local economies, and even entire infrastructures that might lead to longer-term profits or prosperity. Again, the efforts come up against significant challenges, including currency risk, cultural barriers, and long-term poverty that can be difficult to change.

Removing Barriers for Minority Entrepreneurs

Women, Black, LGBTQ, and other minority entrepreneurs have historically found it challenging to get funding for several reasons. First, historically, not many partners in venture capital and investment firms match these demographics. People often invest in ventures that make them feel comfortable, which can mean a trend of investors funding ventures for and about people that look and act as they do.

Cultural and societal barriers, including systemic racism, also play a role in reduced funding opportunities for minority entrepreneurs. However, as more investors seek social impact ventures and awareness about diversity needs continues to rise, those trends are changing. As a result, venture funding to minority businesses has been up in recent years, though there is still a lot of ground to cover, as it remains small compared to the entire funding pie.

How Do You Measure the Impact of Social Venture Capital?

The first step in measuring the impact of social venture capital is to define why it matters and what success looks like for all involved. The second step is finding a numeric measurement that can help indicate performance.

If someone is trying to create more diversity, a good metric of success might be how many of their venture investments are run by or related to minorities. Investors interested in climate impact investing might want to measure the emissions associated with their portfolios.

Going beyond measurement, social venture capitalists might rely on case studies to demonstrate success in a more narrative format. Case studies can raise additional awareness and funds and illustrate the impact on investors and other stakeholders.

Examples of the Effects of Social Virtual Capital on Society

Social virtual capital has plenty of positive effects on society. For example, a venture capital fund that seeds startups helps businesses get off the ground. But a social venture capital fund that specifically seeds startups with a community mission does more than that: It helps a business help others. Likewise, a social impact investor that puts money behind ideas that introduce sustainability into sectors that do not tend toward eco-friendly processes helps those businesses grow and protect the environment.

Ultimately, social venture capital can change the world. Investors must do so, however, with one eye focused on change while the other eye remains trained on the bottom line. It can be a problematic duality to walk, but it is critical to the future success of communities, nations, and even the planet.