Venture Capital Firm Bets Big on Sustainability
Most venture capital investors don't have a focus. Kleiner Perkins says it is "in search of the next big idea." Draper Fisher Jurvetson "backs extraordinary entrepreneurs everywhere who set out to change the world." Mohr Davidow values "entrepreneurs who identify impressive market opportunities and are not afraid to go after them."
Physic Ventures is different. Its mission is "investing in keeping people healthy." Specifically, the San Francisco-based venture firm, which has backing from corporate giants Unilever, PepsiCo and Humana, invests in "technology-enabled, consumer-facing companies that help people and the environment stay healthy," according to Will Rosenzweig, its managing director.
Physic is betting that it can discover and invest in startups that can make "personal and planetary health" a big business, just as richer and better-established Silicon Valley VCs made fortunes by backing information technology startups like Apple, Google and Amazon.
I had lunch recently with Will Rosenzweig in Washington to talk about Physic and some of its portfolio companies. Will is an engaging and interesting guy, best known for starting a company called The Republic of Tea in the early 1990s. (He and his co-founders, Mel and Patricia Ziegler, who also co-founded Banana Republic, wrote an acclaimed book about the experience that's also called "The Republic of Tea.") Will, who is 51, was also an early organizer of the TED conferences, the head of marketing for Odwalla and a teacher at the Haas business school at Berkeley.
Will and Dion Madsen, who had run a venture fund inside Unilever, the $57 billion consumer products giant, co-founded Physic Ventures about five years ago. It's an independent fund whose corporate backers who offer strategic advice and research insights. Its financial investors include CalPERS and CalSTRS, the California state and teachers' pension funds.
Will has written about the fund-raising efforts and strategy in an article called "7 Reasons Why Great LPs Invested in Our First-Time Venture Fund." (PDF) He and his partners raised about $159 million by 2008 -- an impressive amount for a fund in a new sector, with no track record of successful exits.
It's much too early to judge the success of the fund or its investment thesis, but there's no doubt that Physic has invested in some intriguing startups. The best known is probably Good Guide, which helps shoppers "find healthy, green, ethical products according to scientific research and ratings." Another, called Novomer, is developing "green" plastics and packaging made in part from carbon dioxide. I'm planning to write about Good Guide and Novomer before long so I won't say more now. Other companies we talked about include:
EnergyHub: A smart grid play based in Brooklyn, N.Y., Energy Hub was started by an engineer named Seth Frader-Thompson who worked on robots for NASA and the U.S. Department of Defense. The firm is building home energy monitors that make it easy for people to manage their energy usage and save energy. Partners include Honeywell and ConEdison. "This is technology that is coming to the consumer market to enable more sustainable living," says Will.
Own: Based on San Francisco, Own calls itself a science-based, natural skin care products company. "You have a lot of young women out there who don't want to put chemicals on their skin, let along on their babies' skin," Will says. Own says its products are "based on 'bio-activating' skincare: natural ingredients that deliver clinically-proven results by working in concert with your own body, not against it." Alastair Dorward, the former CEO of Method, is founding CEO.
Pharmaca Integrative Pharmacy: A small retail chain of drug stores located in such LOHAS (Lifestyles of Health and Sustainability) strongholds as Boulder, Berkeley, Santa Fe, Seattle, Portland and San Francisco, Pharmaca aims to become the Whole Foods of pharmacy. Its stores offer traditional pharmacy services alongside holistic, alternative and natural remedies, with a special focus on prevention. "It's very high touch," Will says. "They do a lot of education. It's driven by the demand for personalization."
Physic, by the way, means "the science of healing" in Latin. The firm is also named for the Chelsea Physic Garden, one of the world's oldest repositories of medicinal botanical specimens. While there's no rhetoric about the double or triple bottom line on the Physic website, the firm clearly aims to do more than generate wealth; it's seeking to back companies that promote personal and environmental sustainability. This approach to investing is clearly worth watching.