Patience; the virtue investors were born without but can choose to learn
These insights have been compiled and written by Aimée Bryan, Commercial Partnership Lead at the Venture Studio from Crisis.
The first time I heard the term ‘patient capital’ I lived one of those cartoon moments when a lightbulb pops on above your head. As a social impact founder myself, how was it that I hadn’t come across the term before? ‘Patient’ was by far the last adjective I’d have used to describe the investment environment I’d dipped into. But for social impact founders, balancing mission and money, profit and purpose, patience is exactly what we’ve been looking for; investors who understand that our long-term goal is as much socially as it is financially ambitious and that getting that balance right can take a little more time to nurture.
Building the Venture Studio from Crisis, meeting like-minded ‘patient capitalists’ felt like we’d found our tribe; the community to support us, and our ventures to drive our intended social change.
With the pandemic shining a spotlight on the true enormity of global homelessness and contributing to more people at risk of or experiencing homelessness every day, the Studio has been set up to look at this societal problem through a different lens; one of entrepreneurship.
Our ambition is to accelerate the end of homelessness; building, investing in and supporting ventures that can either end homelessness faster for those experiencing it or prevent it altogether by improving access to housing, finance, health, or wellbeing services or creating new pathways to employment.
As a team of venture builders, we understand the opportunity that entrepreneurship offers Crisis and are pioneering venturing in the truest sense.
Embedding patient capital into the Venture Studio from Crisis
However, we also have first-hand knowledge of the mental and financial risks that founders experience and we’re adamant that Crisis’ role in venturing is as a responsible, inclusive, and patient partner.
As humans, we’re taught to walk before we can run. Yet as founders, investors encourage us to sprint whilst we’re barely walking. Under pressure, it’s inevitable that most fall over. The downside to pushing for 10x growth in 3–5yrs can be a financial and emotional strain, from which some never recover.
Although there is little documented or researched on entrepreneurial burnout, investors are starting to call out the issue as this recent video from Spill highlights. As the Venture Studio from Crisis, we need to take a much more responsible view of venturing, venturing that ends homelessness rather than puts more individuals at risk of it.
And for us, patient capital equates to responsible venturing. And responsible venturing at Crisis equates to:
Pre-seed business support; a safety net of advice and expertise. Founder first mentality; an inclusive and nurturing community. Purposeful growth; sustainable income to promote financial and emotional wellbeing. Impact driven; balancing the financial with the social, the mission with the money. .
For us, patient capital means investing in founders and ventures to ensure they’re firstly able to sustain themselves before secondly taking on wider responsibility for the communities or economies around them, and thirdly growing their business at a greater financial and social scale.
Demystifying patient capital
If like me you’d not heard of patient capital before, it’s fundamentally accessing funds from investors who don’t expect immediate returns on their investment. For you this may mean accessing funds through your friends and family, angel investors or grants; individuals or foundations who have a vested interest in your business succeeding long term rather than delivering against short term financial commitments; such as the goals set out by traditional venture capitalist funds. Think 10yr terms instead of 3–5yrs.
As Acumen describes it:
“Patient capital investing bridges the gap between the efficiency and scale of market-based approaches and the social impact of pure philanthropy. Patient capital has a high tolerance for risk, has long time horizons, is flexible to meet the needs of entrepreneurs, and is unwilling to sacrifice the needs of end customers for the sake of shareholders. At the same time, patient capital ultimately demands accountability in the form of a return of capital: proof that the underlying enterprise can grow sustainably in the long run.”
Ultimately the Venture Studio from Crisis is not your funding fairy godmother. We need our investments to work for us; to deliver a financial and social return.
But for our portfolio, our grant recipients, and the businesses we develop, we’re offering a long-term partnership built on shared values, shared goals, and a patient capital model that delivers from a position of sustainable growth.
Responsible and inclusive venturing:
The Venture Studio from Crisis is dedicated to accelerating the end of homelessness. However, we recognise that not everyone with the expertise to help us, has the luxury of choice; the choice to risk it all and go build a business.
Cornerstone Partners commissioned a report on founder journeys and the barriers to inclusive investment in May 2020. The report found that in the UK:
- 75% of founders come from advantaged socio-economic backgrounds
- 84% of VC-funded founders were in a comfortable financial position when they started their company
- 72% of VC-funded founders went to a top university (ie. Russell Group, Oxbridge, or an international equivalent)
The findings suggest that the ecosystem is missing out on a whole lot of talented founders who didn’t go to university or who didn’t grow up with the kind of social networks that make it easier to raise VC funding.
Within the Studio, our mission is to help open the ecosystem up to solutions that can end homelessness, and don’t often get the spotlight as well as to founders currently excluded from the opportunity. We do this by investing in and championing;
- Founders with the lived experience and insight to drive positive social change
- Ventures built by those most in need of a self-sustaining income
- Solutions that are revenue first, creating a sustainable financial platform within the business
- Growth that enables founders to sustain their own and their team’s livelihoods and health
We hope our investment thesis will open the world of entrepreneurship up to those with the knowledge, experience and expertise to make a positive economic and social difference within the ecosystem but who are currently without the financial or emotional support to take the risk.
We will provide capital to founders in a way that enables a focus on sustainable long-term impact and reduces the pressure on high growth for a quick exit. We see this as fundamental to building financially self-sustaining companies that can have a lasting impact on ending homelessness.
Patience and partnership are in our DNA:
- Our Changing Lives grant programme helps those experiencing homelessness set up their own businesses offering them a means to a self-sustaining income
- Our Venture building programme develops our internal ventures into sustainable businesses and supports the healthy scaling of our investment portfolio
- Our partner network offers our community additional financial and emotional guidance through their business building journeys
By championing responsible venturing and embracing patience in the Venture Studio we want to develop entrepreneurial role models and to pioneer a sustainable and more accessible entrepreneurial ecosystem for everyone.
