March 23, 2021

Introducing an 8th T to Our Updated Investment Framework

Since day one, we have made efforts to take responsibility beyond what’s expected of a VC. We are now making these efforts more explicit by gearing up to launch a holistically impact-aware strategy. Here's how we are taking the next step to building the VC fund of Tomorrow.

Sara Rywe
Introducing an 8th T to Our Updated Investment Framework

byFounders is evolving. Since day one, we have made efforts to take responsibility beyond what’s expected of a VC. We are now making these efforts more explicit by gearing up to launch a holistically impact-aware strategy. As part of that, we are adding a criterion to our current investment evaluation framework: The 7 Ts.

On the occasion of our anniversary late last year, we took a moment to reflect on whether, and how, we’d lived up to what we initially set out to do.

The ambition to set up a fund for founders, by founders, was spurred in part by what used to be an uneven playing field in the Nordic investor landscape, in part by a shortage of local “smart money” for globally ambitious Nordic founders.

The situation has since changed for the better — and is still improving.

Fortunately, both the availability of capital and the quality of funding sources have increased since we started investing. Much of this transition can be attributed to the influx of capital to venture and our local ecosystems.

We’re very encouraged by observing this change.

Becoming Explicitly Impact-aware

But other, more far-reaching challenges prevail. We are far from solving many of the tremendous issues facing us at this point and into the future, on both social and environmental parameters.

We see top talent seeking our purpose-driven employers and organizations like never before. Consumers demand sustainable products and services from companies they can trust. And with new and forthcoming legislation on ESG risk by the EU and others, all economic actors will have to adapt.

On all of these points, we believe younger companies have an advantage over industry incumbents. Getting it right from the start is that much easier than reorienting a tanker.

As a fund, we want to reap the opportunities this shift presents by investing in startups with a positive impact and supporting them in securing their success.

Though, we’re not starting from scratch.

About 50% of our current portfolio companies already do have an intentional, positive impact associated with one or more of the Sustainable Development Goals:

"Until now, we’ve had an implicit disposition towards founders and companies with positive impact. In our second fund, we’re ready to make this focus explicit." - Eric Lagier, Managing Partner, byFounders

Letting Our Values Guide Us

By elucidating our focus on impact, we make sure that it informs everything we do at byFounders. However, we are not becoming an impact VC.

We don’t expect impact startups to make up 100% of our portfolio, as we still want to keep our doors open for startups that drastically transform industries for the better while not directly addressing one of the SDGs.

What’s important, however, is that we invest in responsible founders who care about topics such as diversity and inclusion, employee wellbeing, and carbon footprint.

We believe superior financial returns will come from investing in companies contributing to a better Tomorrow.

Either through their product or service or by how they run their business.

Ideally both.

We are adopting an impact-aware approach throughout all of our actions as a fund and firm.

This approach will complement our existing core values and principles from when we first started the fund.

Here’s one of the changes we will make to walk our talk.

Let Us Introduce You to Our 8th T: Tomorrow

Thanks to our connections to, and visibility in, the Nordic and Baltic ecosystems, we see approximately 100 deals per month. Investing only in about ten new companies per year, we naturally have a rigorous screening process.

From the start, we’ve centered our screening process around the “7 Ts”. We are now adding an “8th T”: Tomorrow.

You can read more about our thinking behind each T here.

Under the eighth criterion, we ask: in what way is your company contributing to a better tomorrow?

Staying true to our roots and competencies, we take a liberal approach here.

What’s important to us is that you are conscious of the impact you have.

That your product or service does not have a negative impact, and that you continuously strive to improve it.

Your impact comes from both what you sell and how you run your business. A “traditional” B2B SaaS company with founders who care about how they run their business in the most sustainable way still fits under our umbrella. While it might not be classified as an impact startup, we expect it to be a responsible one.

If you can succinctly answer this eighth question, along with how you meet the other seven — well, then your company is right up our alley 👋.

But we won’t stop there.

Once we have invested in your company, we will help you reach your ambitious goals — as always. What’s new is that we’ll actively help you improve your impact as well. Namely, we will support you in implementing sustainable operations and measure your social impact. Some activities will be mandatory, others we’ll encourage you to take advantage of. The outcomes will be tangible, measurable metrics that we will report on regularly. Keep your eyes open for more on this soon.

We can’t wait to embark on this journey together! 🚀

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Sara Rywe

Sara is a Partner at byFounders.

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