Europe’s pool of impact investors is small — but growing fast. And today, it has one more VC fund to add to its number: Revent. With teams in Berlin and London, it has raised €20m to back ‘for profit, for purpose’ startups and is targeting a final fund size of €50m.
Here’s the pitch: “We’re entering into the era of the purpose economy — it’s no longer about what can be built, but what should we build and what change should we make to the planet and society,” says Lauren Lentz, founding partner at Revent, who has a background in impact measurement.
Purpose-driven companies will be the most successful companies of tomorrow.
“Purpose-driven companies will be the most successful companies of tomorrow,” she says. They’ll be able to attract the best talent, they’ll be in tune with changing consumer sentiment and they’ll be able to make more money as a result, she adds.
It’s a compelling thesis. But the catch-22 for all impact VCs out raising funds at the moment is that there’s little proof that it will play out — yet.
Of the various sources to tap for cash, family offices seem to be the most interested in backing impact investors, says Lentz. “For the younger generation, this really resonates.”
Revent’s anchor investor is Benjamin Otto, part of the family behind the German ecommerce giant Otto Group. His father, Michael Otto, has also backed the fund, as have various other Ottos.
Several successful Berlin-based entrepreneurs and investors have also invested in the fund, including Contentful cofounder Sascha Konietzke, N26 cofounder Max Tayenthal, e.ventures partner Luis Hanemann, Urban Sports Club cofounder Benjamin Roth and Project A Ventures partner Florian Heinemann.
Getting institutional investors on board is the next challenge for Revent, although the team says they've had plenty of promising conversations. “We’ve spoken to LPs who still believe in the assumption that we’re trying to change — that one can do one or the other [make money, or have impact],” says Lentz.
On top of that, even LPs bought into this mentality aren’t sure whether now is the time to back an impact fund. “We’re at the start of the wave,” says Lentz — and some investors are wondering whether that means it’s too early, if there are enough great startups to invest in.
“That’s a fair challenge," says Lentz — but she thinks there are plenty of opportunities already. (And clearly, given the number of new sustainability-focused funds launching, others do too.) "Our reply is that we’re building this brand, this lighthouse fund, and we’re getting out there ahead of time, so founders come to us first when the market is even more mature.”
Revent has four partners: Lentz is joined by Otto Birnbaum and Henrik Grosse Hokamp, formerly investors at VC firm Partech, as well as Emily Brooke, founder of micromobility company Beryl.
They plan to make around 20 investments out of the first fund, writing cheques of around €500k-€1.5m and targeting 10% ownership. They’ll also save around 60% of its capital to follow on pro rata and to double down on winners; and may also invest in a handful of later-stage deals, says Lentz, “to show founders what is possible in this space”.
The team is focusing on three main areas: economic empowerment; health and wellbeing; and climate.
So far, Revent has made four investments. Hamburg-based Tomorrow Bank is a sustainable challenger bank, and Copenhagen-based Tomorrow (there’s a theme here) is an app that helps consumers and organisations reduce their carbon footprint. London-based Net Purpose helps asset managers understand the impact of their portfolio via data streams, while Sylvera monitors carbon-offsetting projects using AI.
To select companies to back, Revent has come up with a fairly thorough assessment process covering founder motivations and impact potential.
The first stage is to figure out what really drives the founders. “We have a number of conversations with them,” says Lentz. “We find a number of ways to ask the same question: why? What does success look like and how are they thinking about success?”
“It’s surprisingly easy to spot founders who are trying to spin an impact story versus those where this is the reason they’re doing it,” says Lentz.
Plus, adds Brooke, most founders who don’t really care about impact wouldn’t get in touch with Revent. “It’s self-selecting; our positioning and thought process resonates with founders who are intrinsically motivated to do this.”
The next stage is to work out what impact a company could have. “We also forecast impact,” says Lentz. “Forecasts are always wrong, however they do force you to be structured around your assumptions. What difference will this make for people and the planet, based on the science, based on the literature? What do we think the impact achieved in 8 to 10 years would look like? What do we think the scale and depth of the impact will be? And does it have unicorn potential, could it make €100m ARR [annual recurring revenue]?”
Of course, a company might change direction over time and end up on a less impactful path. Take TransferWise: the money transfer business began espousing ‘economic empowerment’, including helping foreign workers send cash back home, but it has since moved away from that core mission.
By investing at the early stage we’re able to implement good practices and have more impact on the team DNA early on.
“By investing at the early stage, you don’t necessarily have any guarantees of what that company will do in 10 years’ time,” says Lentz. But still, “by investing at the early stage we’re able to implement good practices and have more impact on the team DNA early on.”
Once companies are in the portfolio, Revent works with them to set impact KPIs and goals. As the portfolio grows and matures, the team also plans to help companies do “impact deep dives”.
Revent is also measuring its own impact as a fund. Its goal is to positively affect the lives of 1m people and abate 5m tons of CO2 — and it will track this over time. The team will also tie its carry — the upside the partners get from successful investments — to impact performance. The finer details aren’t yet finalised, but it will likely mean that if the team don’t hit a certain percentage of their impact target (say, 80%), they’ll lose a corresponding percentage of their carry (say, 20%).
Standardising practices like this would help the impact sector, says Lentz. Once upon a time, she points out, there was no standard measure for accounting — and it was a pain in the ass. “That’s the era we’re in with impact.”
One of the key challenges is that a lot of LPs are interested in the space, but they find the lack of standardisation a key obstacle to investing.
“One of the key challenges is that a lot of LPs are interested in the space, but they find the lack of standardisation a key obstacle to investing. They’ll hold off until there’s one way that impact is measured, so they can compare apples with apples.”