In this interview, we step into the realm of impact investing through the lens of Johannes Weber, Founder and Managing Director of Ananda Impact Ventures. Johannes delves into the firm’s strategic approach, addressing pressing global challenges across climate change, healthcare, education, and equity.
Ananda Impact Ventures stands as a prominent impact venture capital firm, operating across Europe and managing approximately €200 million through its four core impact funds. Based in Munich, Ananda is dedicated to supporting technology businesses committed to having a positive impact that answers the most pressing social and ecological. Among its portfolio companies are Open Bionics, a pioneer in crafting bionic prostheses, IESO Digital Health, a provider of online psychotherapy, and Ororatech, which harnesses satellite technology to combat forest fires.
Join us, as we explore Johannes’s insights on the future of impact investing and the role Ananda Ventures plays in shaping it, we gain valuable perspectives on how impactful investments can catalyze lasting change in a rapidly evolving world.
Can you provide us with an overview of your background and journey, and what inspired you to create an impact-focused VC firm
Up until my early twenties, I had always measured success against my ability to make money. The idea was to start a company and make enough of it to provide for myself and my family. By 26 I had already founded and sold my own business. I had achieved my goals and I was financially secure. Mission accomplished, right? Wrong. I felt strangely unfulfilled and, in fact, I was miserable.
Not long after this realisation, my wife gave me a book about entrepreneurs who were attempting — and succeeding — to tackle the world’s most pressing social and environmental challenges. As I read on, I was struck by the realisation that all my entrepreneurial skills could be redeployed to do the same thing. My way in? Impact investing: putting money and resources into early-stage businesses that aimed to resolve the social and environmental challenges set out in the book. However, the first obstacle to realising this ambition was timing. It was 2007, we were in the midst of the financial crisis and impact founders and investors alike were being cautious.
I didn’t let that deter me. In 2010, I managed to convince my future business partner and a couple of early proponents of this vision and we went out to raise our first Social Impact Fund, which just recently completed its full cycle, successfully delivering double the money-on-invested-capital for our LPs. We now have 34 impact businesses, all changing the world in their own unique way, within our portfolio. Our first investment was in Auticon, an IT consulting company only employing people with Aspergers. The company is now expected to make €50M in revenue this year, and its recent merger with Unicus marked the completion of Ananda’s first fund. We have now become the first VC firm to demonstrate that impact investing can be meaningful and profitable.
What sets Ananda Ventures apart from other venture capital funds? How does it approach impact investing differently?
Ananda pioneered the creation of the ‘Impact Carry Model’ alongside the European Investment Fund (EIF), which is now used by over 80 VC firms globally. Legally-binding clauses are inserted into every contract we sign with our portfolio companies to ensure that Ananda’s GPs and management do not receive their ‘carry’ (the term for venture capital financial bonuses based on portfolio company financial success) unless their portfolio companies also adhere to specific impact-related KPIs and targets. Mission alignment becomes more than just a slogan as the financial incentives of VCs directly align with impact-related priorities. The model has the potential to change how VC compensation works in the future, bringing higher levels of scrutiny and responsibility to deals.
Our portfolio addresses four core areas: reducing the negative effects of climate change and globalisation, improving healthcare systems, providing access to quality education, and fostering a more equitable humanity. These investments also address the United Nations’ 17 Sustainable Development Goals and the 7 Planetary Boundaries. Seeing these challenges as inextricably-linked, we promote synergies among our portfolio companies to encourage them to cross-fertilise and drive each other to excel. Our impact investments are often examples of patient capital: they have long-term goals in mind and produce social, environmental and financial returns over many years. We build companies that address real needs instead of ‘wants’.
What are the usual ticket sizes of your investments and what is the usual business stage you are investing in (Seed, Series A, etc.)?
Ananda typically invests in companies at an early stage, with initial commitments ranging from €500k to €3 million, which can grow to over €10 million across several follow-on rounds and stages of maturity. We operate with a pan-European investment remit and have over €200 million assets under management (AUM) across four core impact funds, including our latest €108 million fund, backed by the EIF among many others.
Our active portfolio includes NatureMetrics (biodiversity monitoring and assessment which raised €14 million in 2022), Closed Loop Medicine (personalised medicine with precision dosing), OroraTech (space-based wildfire detection and monitoring) and IESO Digital Health (online psychotherapy which raised over €48 million Series B in 2021), and others.
How can entrepreneurs who are seeking funding from Ananda Impact Ventures best position themselves for consideration? What are the key points you are looking for? Any advice you would give them?
Founders should be dreaming big — they should expect their vision to transform entire industries for the better with zero prospect of failure. So, what are the attributes of an ‘impact founder’, and why do we call them that? This is not just a term used in VC, it is applied in other sectors too, including the climate space. It is difficult to define ‘do-good founders’ but this is precisely who we are looking for: outstanding people who are committed to solving the world’s most pressing problems, relentlessly fighting for their goals until they are achieved.
Creating outstanding businesses for impact is not easy. Over the past decade, we’ve learned that what makes or breaks a company is the dynamic between the founders and their team. It has always been Ananda’s highest priority to work with people that are fully aligned with their impactful vision. We encourage founders to show us this alignment with their teams when we meet them.
We also love parity with our founders: we want them to see us both as partners and investors. Once founders are done ‘pitching’ we start seeing more traction and successes by letting us jump aboard their ship and work with them like co-entrepreneurs.
On the other hand, what are some red flags or deal-breakers that would make a company unsuitable for investment from Ananda Ventures?
The major red flag for us is when founders seem uncommitted or have doubts about their vision. This can manifest itself in a number of different ways: it can be a lack of ambition or the longevity to see projects through; it can also be the pursuit of a business model where there is a trade-off between impact and financial performance. Sometimes it’s also reflected in the way they think about their next financing round. If the company’s value proposition is a good one, there should be no trade-off at all. Overall, we want to see real conviction, confidence and commitment to completing business journeys.
In the context of impact investing, scalability and sustainability are important factors. How does Ananda Ventures ensure that the businesses it invests in are not only impactful but also have the potential for long-term success?
It all starts with a business model where the impact is embedded into the company’s DNA so that impact and financial performance scale in lockstep. If there are no trade-offs between the two, there are no differences between scaling an impact business and a non-impact business.
Enshrining impact (and the parameters for measuring it) into our businesses from the beginning is non-negotiable for Ananda as we set them up for long-term success. As international regulatory frameworks are established and grow in complexity and scope — as they should — VCs and startups are going to have to adhere to higher standards of accountability. Measuring their impact is going to be an essential part of this and our portfolio is ready-made to do so. Founders usually quickly realise that measuring their impact is not just an additional exercise but it can be an advantage to help them manage their companies better, motivate their teams and communicate better with their stakeholders.
What role does Ananda Ventures play in supporting the growth and development of the portfolio companies, beyond providing financial investment?
The mental and, at times, physical strain experienced by VC-backed founders has always been glaringly apparent. Four years ago, we made a decision to take action on this front, and as it turns out we were already late. There’s a lot of research out there about the prevalence of mental health issues among startup founders, with a recent survey suggesting 44% of founders have high-stress levels.
Unfortunately, the wider VC industry struggles to address this issue openly. In the US, it took the recent SVB turmoil to prompt an initiative called “Founder Health Pledge” to raise broader awareness on the topic. At Ananda, it also took us many years before we came to the realisation that we needed to do something ourselves, which is why we launched our own founder mental health initiative.
Founders encounter so many obstacles during the journey of starting a business and making it impactful and profitable. By actively focusing on founder alignment, we encourage our portfolio companies to stick to their impact visions and avoid mission drift and burnout. To that end, we provide holistic support for its portfolio founders through leadership coaching, HR assessments and resilience training.
The Ananda team is also uniquely composed of former entrepreneurs. We know how difficult fundraising can be and how much attention it can take away from a founder. That’s why we’re the perfect sparring partners for founders to help flesh out their ideas and business strategies. We’ve lived the startup life and want our founders to live it even better.
Being certified as a Level 2 firm under the Diversity VC Standard, how does Ananda Ventures promote diversity and inclusion within its organisation and portfolio companies?
Diversity is the most important factor in the natural world which creates stable ecosystems. At Ananda, we believe this is true for companies as well. We have seen this many times in practice. Therefore, we have always had strong diversity credentials across both our internal team of 19 people and our portfolio of companies. Within the portfolio, 45% of the founders are diverse along gender, ethnicity, and disability lines, while we have high diversity levels across our internal team too. This is a hugely important aspect of our approach to VC because today’s most pressing challenges affect everyone, regardless of background. Solutions from a diverse range of people at the C-suite level and beyond are needed, and we similarly recognise the direct link between DEI among investors and diversity among founders.
What are some of the challenges or opportunities you see in the impact investing landscape today, particularly in Europe? How is Ananda Ventures adapting to these dynamics?
There has never been a greater opportunity for integrated solutions in the impact space because so many sectors are affected by the same problems. Climate is connected to biodiversity, biodiversity is connected to health, health is connected to education and equality, and all are connected to technology. We should be making these kinds of integrated solutions our priority. Bold, impact-driven ideas are necessary, and we can’t afford to waste money on ventures with short-term visions, that solve ‘wants’ not ‘needs’, or are solely profit-motivated.
What do you envision for the future of impact investing, and how do you see Ananda Ventures playing a role in shaping that future?
With the range of our portfolio companies, we are primed to scale up significant and meaningful startups that benefit everyone. The impact investment market is only growing — it surpassed €1 trillion in 2022 — and Ananda has been front and centre since the beginning. It’s a really exciting time for the sector, especially in Europe. More and more businesses and institutional investors have realised what we have to offer and I promise you this — we will see impact companies changing entire industries over the next two decades. Many of our portfolio companies are also leveraging AI, which is increasingly playing an integral role for them. We recently ran a deep dive into this with our founders and we expect AI will be a real booster for impact companies.
As the Founder and Managing Director of Ananda Ventures, what has been the most rewarding aspect of your work in driving positive change through impact investing?
What I find most rewarding is that I can see the impact we’re making across so many sectors – it feels really tangible. Ananda’s portfolio companies have helped 19 million patients receive better healthcare, created over 4k jobs, improved over half a million school pupils’ learning outcomes, saved over 7k tonnes of CO2 emissions and protected 130 million hectares of global forest area with optimised wildfire detection. Over a decade ago, I had a eureka moment that changed the course of my life. Impact investing at Ananda has fired me up ever since and we’re attracting so much new and brilliant talent. We have also witnessed so many other funds moving towards our direction and we ourselves have helped to give birth to a few of them. We all share the same mission: to catalyse positive change and confront today’s most urgent ecological and social challenges. Nothing could be more motivating for me.
Read the orginal article: https://www.eu-startups.com/2023/08/an-interview-with-ananda-impact-ventures-founder-and-managing-director-johannes-weber/
