In the world of high-tech and innovative startups, venture capitalists have long been considered the guardians, or judicious meritocrats, directing funding to shape the industries of the future. WeWork, Uber and Theranos are just a few of the ‘visionary’ companies that promised to transform everything, from the way we work, to urban mobility, and even the future of healthcare. But the reality of such enterprises proved very different, and the venture capitalists of today are facing pushback over substantial investments in unprofitable businesses, leaving them to double down in future down-rounds in order to protect their investments.
A high-profile example is SoftBank’s investment into WeWork, which earlier this month finally reached a settlement after years of issues with the WeWork founder and a problematic initial public offering that left the business on the verge of bankruptcy. A company that was once valued at around $47 billion has now drastically fallen, landing at somewhere between $8 - $10 billion; a nose-dive investment that SoftBank founder Masayoshi Son has admitted was a mistake.
“We paid too much valuation for WeWork, and we did too much believe in the entrepreneur,” Son told Forbes in 2020.
The knock-on effects of this type of cut and run capitalism, where the only people to make money are the ones who get in early and leave before the business shows itself to be unviable, wreak havoc on society.
Luckily, a new breed of venture capitalists is emerging. Leaders who value sustainability over a quick buck and who are turning towards a more human form of venture capitalism. Niall Carroll, the chairman of CG Tech falls into this class. Paving a new path with his investment holding company, the South African entrepreneur chooses opportunities that have substance, as well as long-term value. In other words, investors like Carroll are showing their appreciation for the “long buck.”
Niall Carroll isn’t alone in his pursuit of sustainable capitalism. The 2150 fund, based across London, Berlin and Copenhagen is also backing technology companies that seek to reshape the urban environment in a viable way. With a mix of institutional capital and family offices, and counting the former chief sustainability officer of the Obama administration, the fund promises to only invest where sustainability impact can actually be measured.
Within the venture capital realm, there is also a push to diversify. According to the VC Human Capital Survey (2020), 41 per cent of firms stated that their limited partners requested to see diversity, equity and inclusion information in the previous 12 months – an increase from 36 per cent in 2018. Leadout Capital is one fund whose mission is backing “non-obvious” and resilient founders with a focus on markets that have generally gone unnoticed in the past. Harlem Capital is also working towards a similar goal, promising to invest in 1,000 diverse founders within the next 20 years.
This new way of doing business definitely appeals to Niall Carroll and the rest of the CG Tech team. Since starting the investment holding company in 2014 with his business partner Andrew Jackson, Carroll has made a habit of taking a more hands-on approach to investing, linking up companies in the portfolio to ensure maximum impact and benefit for everyone involved. Their unique brand of venture capitalism isn’t bound by a particular industry or technology, in fact where the team most thrives is when there’s an opportunity to infiltrate a traditional sector and create disruption at a sustainable speed.
“I don’t agree with the old Silicon Valley adage, ‘move fast and break things.’ What about building something lasting? What about taking care of people?” explains Carroll.
Where many venture capitalists look at the short-term capital gain, CG Tech is more interested in the long-term ramifications of their decisions. It’s a view their leader has skillfully mastered over a successful career that spans decades. Whether it was during his time in investment banking or building a successful portfolio for the Royal Bafokeng Nation, Niall Carroll has learned to follow a specific path where long term views make it easier to balance profit impulses with enlightened innovation.
“A lot of venture capital is focused on three-five-seven year time cycles which is not necessarily in the best interest of the company,” says Carroll, adding, “This affects decision making and the impact you can actually have on a company. By shifting our perspective to longer-term horizons, we can ensure that we don’t do stupid things in the short term.”
It’s a formula that is clearly working for CG Tech and its wide-ranging portfolio. From Prommac, a traditional gas and oil company that has successfully scaled to become a global player, to The Virtulab, a forward-thinking company that’s transforming remote work and events through the use of virtual reality and drone technology, CG Tech continues to work diligently towards their long-term goals. Their latest venture, Serious International, is a sound stage company that is set to transform the way TV and films are produced and is already garnering the attention of the industry’s biggest players including Marvel, Paramount, Disney and Warner Brothers.
As CG Tech continues to gain steam across multiple industries, the group’s lofty ambition of building a US$1 billion portfolio by 2030 doesn’t seem so out of reach.
“For us, the importance of working with partners that share our values throughout the portfolio has always been paramount to achieving success. The idea of having multiple businesses that add real value and are sustainable in the future is more important to us than finding the next unicorn,” says Carroll.
If there’s anything to be learned from the stories of WeWork, Uber and others like them, it’s that no amount of money can rescue a bad business model. Being propped up initially with cheap cash from the likes of Draper Fisher Jurvetson and SoftBank only serves as a distraction before the cash runs out and startups are left fending for themselves without the basics in order.
“Most VC-funded startups fail at fundamental stuff like actually making money,” explains Carroll. “This leads to a lot of issues once the money from investors runs out.”
For sustainable capitalists like Niall Carroll, the importance of building relationships with business founders and owners is vital to ensuring growth for everyone involved. The blueprint of 49 failures and one success doesn’t appeal to Carroll and other venture capitalists like him who subscribe to a more holistic approach to investing.
In an industry that continues to become more concentrated among the rarefied few, companies like CG Tech and leaders like Niall Carroll will become more vital than ever before, with the hope of a new paradigm of sustainable venture funds that create sustainable value, leading to a more sustainable future.