A Time for Urgent Action
As we all know, news about the climate is dire. The 2021 report from the United Nations Intergovernmental Panel on Climate Change (IPCC), comprised of leading scientists from 120 countries, warned that humanity is now in a ‘Code Red’ situation and confirmed that global warming of 1.5–2 degrees Celsius was now virtually inevitable, setting in motion a wide array of planetary consequences. There are record-setting temperatures, fires raging, increasing hurricane activity, and more. We have blown past several critical planetary boundaries, putting the stable state of our planet — the only state we’ve known — at serious risk. Mother Earth and her abundant resources have allowed humankind to flourish, but our demands have now tipped our home from friend to potential foe.
The time for prioritizing “sustainability” is now long gone. We are past the point of listening to our corporations making public pledges and proclamations to become “net zero” by 2050. We are past the point of being satisfied with releasing annual impact reports and feeling like we are doing our part.
We must be bolder, think bigger, and demand more action. Now. We need to define and develop entirely new business models, investment structures, industrial approaches, and economic markets. Quite simply, we must rapidly transition human activities from extractive and exploitive to restorative and regenerative.
While these IPCC reports have been sobering, they have also raised our collective awareness. More consumers are voting with their dollars for meaningful change. Seizing on this consumer demand, entrepreneurs are taking advantage of the opportunity with innovative products, services, technologies, and business models. And subsequently, investors are seeing these new enterprises' potential for both profitable returns and to create meaningful positive impacts. This is what we call the “transformative flywheel” — a virtuous cycle — catalyzed by a shift in consumer preferences that are drawing in talented and mission-driven entrepreneurs who are thereby supported by investors seeking to make impact alongside their returns. This momentum is building upon itself.
A Decade of Impact Investing
We know we can do this, because we’ve done it before.
In 2011, under our predecessor venture fund, we set out to validate the thematic approach to investing in improving the food system, using an impact-oriented lens.
When we started, we were told that the food and agriculture sectors were dinosaur industries that lacked any compelling growth opportunity, with thin profit margins, high barriers to entry, and capital-intensive business models. We heard that venture capital as an asset class for investment was literally un-allocatable — this was of course prior to the Silicon Valley heyday that would soon come.
But we were undaunted by this — and we welcomed the challenge ahead to prove out our thesis that the future of food could be both profitable and impactful. We used a rigorous approach to identify and evaluate specific companies while also being intentional about where within the food system a potential investment would be located and how that intervention could possibly mitigate certain negative impacts or even unlock new opportunities to capitalize additional scalable solutions.
As our investments, and those of other startups in the food and ag innovation space began to gain traction, more and more investors joined in — first from other family offices and small thematic-focused funds, then corporate venture funds, and finally many mainstream VCs and investment funds. The excitement of one of our portfolio company’s – Beyond Meat – record-breaking IPO in May of 2019 showed that an “impact-oriented” company could capture the imagination of the public markets.
With this IPO we had achieved the initial goal we set out for — proving that you can invest in companies that are seeking to make social and environmental impact, while also generating outsized financial returns for our investors.
Over the past decade, we invested in pioneering companies that have catalyzed entire markets, from biological fertilizers to fermentation technology and plant-based proteins — all in the name of reducing pressure on our critical natural resources-our soil, land, water, and biodiversity. These sectors are now attracting billions of dollars in investor capital.
But as we reflected on the success we had, we realized that venture capital investing had become all about the home run, the unicorn or billion-dollar company, seeking to be rapid scale–ups, put on a pedestal for all to behold. And while these successes like Beyond Meat have provided an important validating effect for the entire impact VC industry, the capital rushing into spaces such as plant-based proteins now no longer present the same breakthrough, field-forming opportunity, or likely the same outsized financial opportunity it had presented several years ago.
Now, what we need, more than ever, are investors willing to see the whole board, to be able to look around corners, to have the fortitude to enter markets that may not exist today or that simply lack a compelling “TAM” — total addressable market (that we can project). We need investors willing to step up to the hard and uncertain work of sparking and supporting the innovations that meet the critical needs of our planet while also delivering a sustainable business and strong investor returns.
From Food Systems to Earth Systems Investing
With great challenges come great opportunities. Today, we see opportunities across several nascent, but emerging spaces in many interconnected markets and systems — all of which can deliver transformational change in support of earth’s critical natural systems and also drive strong investment returns for our investors through the development of tomorrow’s most valuable and impactful businesses.
Here's what we see
- Consumer awareness is driving new demand.
- Social entrepreneurs are developing solutions to this shifting consumer demand.
- Technology and innovation are advancing and poised to be harnessed as a backbone for solutions.
- Capital formation into Earth Tech is fragmented but growing quickly.
- Regulatory tailwinds are increasing, reducing barriers to entry, and unlocking new planet-friendly industries.
Announcing Third Nature Investments
Everyone wants to invest for impact, but it’s not enough, anymore, to stay the course. Incumbent economic and financial systems continue to practice extractive and exploitive methods of doing business that reverberate through supply chains and leave their destructive mark on communities and fragile ecosystems.
When we invest to make an impact in an isolated, company-level location, we might make incremental progress, but the effort lacks context within complex and interconnected systems. Also, building a product, service, or technology with a positive but isolated impact, only to “flip it” to a larger incumbent company, may be considered an investment success, but it doesn’t look much like the transformative change we had envisioned, and our world so urgently needs. What do we need to do?
So, today we are excited to announce the launch of Third Nature Investments, an integrated impact capital platform that broadens our reach and deepens our impact, one that doesn’t just consider the deal in front of us, but starts with the most systemic and pervasive challenges we face and explores the best ways to back true solutions to these intractable challenges.
Third Nature Investments is structured as a family of funds investing in the most purposeful and promising companies and funds that are singularly focused on driving transformational change that positively impact our critical earth systems. We call this earth systems investing — because we know that simply decarbonizing our economy won’t restore planetary health.
Our first initiative is Third Nature Ventures (TNV), our early-stage venture capital vehicle. We will invest in the most promising innovations and technologies seeking to address the most urgent and massive challenges we face within our most critical earth systems.
What Makes Us Different
While society loves a hero, we’ve learned through our experience that there are no silver bullets — no perfect technologies, and no simple solutions. From our journey working at the leading edge of the development of food and ag tech and impact investing, we have a clear sense of what is working, and what needs refinement. And we’re excited to put this experience and learnings to work in our next decade of work.
A Focus on Grand Challenges
Earth systems investing is a new approach to acting based on an understanding of the root causes of the world’s most pervasive, interconnected, and complex challenges.
While climate systems is an integral part of our investment focus, earth systems is broader and more integrated. We are focused on how we can help develop a set of transformative new enterprises for a new, more sustainable economy.
We are intensely focused on the planetary boundaries and critical earth systems that must be restored for safe and stable inhabitance by humanity. We have an ambitious vision for Third Nature to be a multi-stage, multi-faceted platform to support impact-driven entrepreneurs and emerging investment managers along their journey to address the most substantial challenges to our critical earth systems.
Seeking Insight Partners
Arriving at the right answer starts with asking the right questions — for us, to truly identify solutions, we must deeply understand the problems. We start with deep consideration of the root causes of challenges we face, and then leverage the expert insight from our ecosystem of thematic experts and advisors we are privileged to have relationships with.
While we see venture stage direct investing that support the most innovative companies as the core of our focus, we also have been a systems-based investor for long enough to know that what we need are critical insights that look deeper to root problems that we seek to solve through entrepreneurial action, as essential to be successful.
Not only will we provide an integrate impact capital platform to build durable businesses making purposeful impact, but we will create and nurture a space that brings together a wide diversity of innovators, designers, scientists, technologists, philanthropists, and policy and regulatory experts that provide our community with the critical insights we need to steer resources efficiently to the most impactful solutions we seek to address.
An Open Collaboration
So we ask you to get involved. We’ll be sharing resources to get into a new mindset of earth systems and earth systems investing. For now, please subscribe for occasional updates or get in touch for more information.