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This article was contributed by Lindsay Siegel, Managing Director of the City Fellowship and Head of Impact, Company Ventures.
The COVID-19 pandemic has shown how interconnected our environment is. Health care, employment, supply chain, and global financial markets — as a society, we now understand far more deeply how the strain felt in one arena can percolate into others.
The same goes for large-scale urban challenges, from climate resiliency to future workforce training. Extreme weather can have devastating effects on local economies and global supply chains; lack of quality childcare means a lost generation in the workplace and labor shortages and communities systematically left out of a technology-driven economy will struggle to create generational wealth.
And yet, over the last decade, the VC market has exploded. While many thought there would be a slowdown during the pandemic, the opposite actually happened. According to Crunchbase, $454 billion total capital was raised globally through Q3 2021, versus just over $300 billion in 2020.
The VC community has a duty to increase equity and access and improve services and solutions for impact in local economies. This VC community has the capital, the resources, and the know-how to help startups innovate for net positive impact, and that model could be a blueprint for success. Here’s how.
Venture capital allocation
$5 trillion in new wealth was created during the COVID-19 pandemic, and millennials are projected to inherit as much as $68 trillion over the next 25 years. With the coming generational wealth transfer, we are at an inflection point where we can utilize the enormous power of investment for the long-term betterment of society. In a recent survey conducted by Allianz Life, 99% of millennials considered social responsibility when making investment decisions, and Bloomberg predicts that ESG assets may hit $53 trillion by 2025. With the strategic assessment and investment of capital, the VC community can help to foster rapid innovation and quickly scale solutions for the betterment of society, with an eye towards centering the needs and ideas of those most vulnerable and/or at the margins of our economic system.
Investment is about much more than money. VCs are experts at helping high-potential companies (and founders) grow at scale and dominate in their respective markets. 366 startups reached unicorn status (companies with a $1 billion valuation) in 2021. While this was driven in part by the amount of cash invested in those companies, this was also due in part to the guidance and acumen provided to these companies by people with the know-how to build and scale. Seeking methods to provide impact for entrepreneurs, including nonprofit leaders, small business entrepreneurs, and cooperative organizers, with the same playbook will drive exponentially greater returns not only for those of us making capital investments in their companies, but the benefit of society as well.
Traditionally, public-private partnerships (PPPs) have focused on large-scale infrastructure initiatives like utilities and transportation. Increasingly, the model has been successfully deployed at the local level. Last year we saw the immense benefit of this partnership in the rapid development and distribution of the COVID-19 vaccine. Through deep alignment with public sector goals, the VC community is able to leverage the private sector’s capital and capabilities to advance public priorities ranging from community development to climate resiliency to technology infrastructure.
Crises often lead to periods of supercharged creativity and innovation. The Renaissance followed the Dark Ages; great fires in urban centers led to better urban planning and innovations; Airbnb, Uber, Disney, General Electric, and Apple were all founded during recessions. According to McKinsey, 90% of executives said they expect the fallout from COVID-19 to fundamentally change the way they do business over the next five years.
The after-effects of the pandemic have shown us that not only do we need to rebuild our society, but that we can reimagine a better, more equitable future. At this moment, we must embrace the urgency to experiment and push ingenuity to build a more resilient chain. The VC community has the cash, the experience, and fundamental know-how to deliver long-term impact, and now, more than ever, we have the obligation to do so.
Lindsay Siegel is Managing Director of the City Fellowship and Head of Impact, Company Ventures.