Category: Medium

Five years ago, when we first started talking about investing in and building a truly global edtech ecosystem, a lot of people thought we were crazy. Though I had brought General Assembly from New York to Asia, we had made several cross-border edtech investments from our first fund at Fresco Capital, and we helped those investments make their first international footprints, many potential investors insisted that education was an inherently localized problem. Edtech lacks scale, liquidity, and cross-border appeal, they insisted.

At the time, there was no argument the edtech ecosystem was in its early stages. But having spent time on the ground as operators, founders, and investors, we could see where it was going. So, we started evangelizing. We collected data points, distilled them into trends, published articles, outlined the key ingredients for a global edtech ecosystem, and spoke to hundreds of startup founders and corporate LPs about the value of an international strategy in edtech. We talked to anyone that would listen, and in the process, we launched two funds comprised of some of the most forward thinking corporate LPs interested in edtech and the future of work. Then, we built a portfolio of 60 companies from all around the world, and now have 7 successful exits from that portfolio.

In 2017, I outlined two major predictions for the following year, which were a pick up in cross-border M&A, and edtech going mainstream. Indeed, with three major exits announced these past few weeks — NetDragon buying Edmodo for US$137.5 million, Adecco buying General Assembly for $413 million, and finally Pluralsight filing for their IPO — this marks an exciting milestone for the evolution of an ecosystem we’ve so passionately played a role in building. So, I figured this would be a good time to pause, summarize what we’ve learned so far, and speculate on where we might be going next.

Here are 3 key lessons we’ve learned so far:

1. Investing early makes a big difference

I’ve talked to a lot of corporates and investors who believe that edtech is risky, so instead of investing in a portfolio of early stage companies, they’d rather make direct investments in later stage startups that have “proven” their business model. However, what recent exits have made clear is that the stage and the terms at which you invest make a big difference for your returns.

To quote one of the greatest hockey players of all time, Wayne Gretzky, “Skate to where the puck is going to be, not where it has been.”

Especially when it comes to edtech, the market is rapidly growing and also rapidly evolving. That means investing in the right team at the early stage pays off.

For example, General Assembly’s Series A post-money valuation was US$20 million. For us early stakeholders, a US$413 million exit is a huge win. However, later stage investors are facing much less impressive returns. Yes, investing early is risky and the total capital deployed is smaller, but the return profile is significantly better.

2. A cross-border strategy pays off

All three of these companies had international strategies that directly contributed to their growth as well as their exit profiles.

Pluralsight expanded aggressively internationally, beating competitors to the punch by localizing their offerings and selling courses in places like India. This helped diversify their revenue base, solidify a larger overall market size, and create a stickier brand. Surely this led to their options for liquidity and contributed to their recent S-1 filing.

Similarly, General Assembly expanded early on into London, Hong Kong, Singapore, and Sydney. Not only did this contribute to a strong, global brand that differentiated versus competitors, but also led to the development of strategic, international corporate relationships with customers and partners like Switzerland-based Adecco.

Edmodo had boots on the ground in Asia from very early on, and welcomed investors from Singapore and Japan into their later rounds of funding. NetDragon, based in China, ultimately acquired them, so there is little doubt that their presence in Asia had an impact on their ultimate exit.

3. Cross-sector partnerships are the most fruitful

Many edtech founders believe that their ideal partners are traditional education companies. Similarly, many traditional education companies are only looking to invest in and partner with startups in edtech. We have always been of the view that creativity is a key ingredient for scale, and the isolation of the edtech sector will only hinder its growth.

Indeed, through our experience as entrepreneurs, operators, and VCs, it is clear that the most productive partnerships are cross-industry. If you work with a partner not in the traditional education business, you are creating new possibilities for both of you. This means you are not competing for the same customer base, but instead opening up new customer segments for both parties. Consequently you are more like to have an open, collaborative partnership. It also means the multiples on your acquisition are likely going to be higher, as they represent completely new revenue streams and business lines for your new partner.

NetDragon is a China-based gaming company, and though Edmodo’s ultimate acquisition price may seem low compared to their later rounds of funding, the multiple on their revenue base is remarkable. Similarly for General Assembly, Adecco is a Switzerland-based HR/staffing firm, and not a traditional education business. At first glance, these aren’t the most logical partnerships, but they certainly have proven to be rewarding.

So, now that edtech is going cross-border, and cross-sector, you might be asking yourself… what’s next? Here’s what I think.

Here’s why education is eating the world

In 2011, Marc Andreessen made a splash by declaring that “software is eating the world.” In 2018, as a direct result of that assertion, education is eating the world. Back in the early days of the internet, and even when Marc first published his post, technology companies were considered to be a separate sector. This was largely due to the fact that barriers to integrating technology into your core business were high. However, as technology became cheaper and more advanced, billions of people came online via their mobile phones, demand for online services exploded, and software made its way into every business model. Today, no matter what your core product is — healthcare, financial, utilities, energy — there is a technology component. Every company, in some form, is a technology company.

Similar to the evolution of the technology sector, there will be a day in the near future when education is no longer a separate sector, but instead a layer that sits on top of every type of business. You see, every company is a technology company, and therefore every business is becoming a technology business. As a direct result, every job is a technology job. Technology is evolving at an exponential rate. Jobs and businesses have not only been transformed, but they are continuing to change at a rate faster than ever before. This requires companies to create a process for constant adaptation in order to remain competitive, productive, and profitable. (And this is precisely why Adecco, an HR/staffing firm, sees value in acquiring a business like General Assembly.) Every company must, in some form, become an education company.

At an individual level, since jobs are evolving so quickly, regular retraining is necessary. As a result, education can no longer remain a distinct portion of our early years. Instead, it must be integrated across all aspects of our lives and over the course of an entire lifetime. Day in and day out, we must constantly be learning if we are to remain competitive and productive members of society. Hell, given the recent scandals with cybersecurity and data privacy, we have to constantly be learning if we want to simply avoid being manipulated or hacked.

Given our education system has been largely unchanged for hundreds of years, the decentralization and globalization of education is a significant cultural shift that will take time to play out. I still meet people who assume “education” means K-12. However, there are early signs that this perception is changing. We’re already seeing cracks in the demand for tertiary degrees, increasing acceptance of vocational training programs, and a more informed, globally mobile student base. Instead of continuing to question whether or not edtech is a sizable opportunity, let’s seek to understand how technology is transforming businesses, jobs, and individuals’ lives worldwide, and what that means for how we will all need to adapt to that reality.

That’s what edtech is really about, and that’s why at Fresco, we’re putting our money toward investing in technology not just for education, but also the future of work, and healthcare. If we embrace a constant state of learning, then we will not only be able to keep up with how technology is inevitably disrupting every aspect of our lives, but we can also empower the next generation of innovative solutions to the world’s biggest problems.

Education is eating the world was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

Last weekend I traveled about 250 miles south of the Arctic Circle in Siberia to the city of to Yakutsk. Yakutsk is a city of about 250,000 people and is pretty remote; it is about a 7 hour flight from Moscow, mostly over thousands of miles of snow and ice. Typically it gets to -40C and is usually in the news for being the coldest place on Earth (or Mars). Not the place you would expect to find a thriving startup ecosystem.

Fresco came to Siberia to visit the local startup and tech ecosystem. The local Venture Company and government invited Fresco Capital to host a hackathon, startup pitch event, and an ecosystem lecture series. We spent a lot of time in the local ecosystem and learned a lot of amazing things.

Ministry of Investment and Enterprise

Our first stop was a meeting with Anton Safronov, Minister of Investment and Enterprise for the Republic of Sakha (Yakutia) where Yakutsk is the capital city. Anton was an impressive guy, in his mid 30s, international (undergrad at Harvard, masters at MIT), and motivated to bring the digital economy to Siberia. The province is the size of India, has only 1 million people, but has tremendous natural resources like diamonds, gold, natural gas, and oil. They don’t need any help in those industries and if you want a mining or construction job, Yakutia is your place.

The challenge is to diversify and build the tech ecosystem. Anton is the right person for that job as he is the one who got the original ecosystem players to attend the MIT REAP program where they all met me last year. Anton also came to the opening of the hackathon.

The Hackathon

The hackathon was themed “Think Global” and had over 100 people participate. We had great diversity with 25% of the participants being women (and two all-female teams) with some people flying in from all over the region to participate.

The results were amazing. A total of 13 teams presented for the judges (going for the $1000 prize) and most played to the strengths of the Yakutia region while looking for a global appeal. The winner was a blockchain based distributed messenger service as Telegram has been in a dispute with the Russian government. Most projects were ambitious and some standouts were social media tools to manage comments on large sites, social media projects around engagement, travel, VR, and EdTech. As the largest tech employer in town is a very successful gaming company, there were a few impressive game teams as well.

Local Startups

Speaking of games, the largest and most successful tech company in town is MyTona, a mobile gaming company. MyTona was founded in 2012 by twin brothers Alexey and Afanasey Ushnisky. MyTona’s top games The Secret Society and Seekers Notes have more than 50 million downloads and are consistently in the top 20 grossing iOS games worldwide. We visited their office and they have over 300 employees building the games right in the middle of Siberia! MyTona could not find enough game developers in Siberia, so they train them after hiring them. A supporter of the local ecosystem, it also tells you that you can build a high performing startup anywhere.

We also visited the offices InDriver, a peer to peer ride sharing app also based in Yakutsk. Different than Uber insofar as most drivers are everyday drivers looking to pick up someone to carpool and make a little extra money. They compete head on with the big players in Russia and Central Asia and serve over 10 million rides a day. They too have about 300 employees in Yakutsk and recently closed a Series A.

We also had a startup pitch event where we met 10 local startups as well as visited Technopark, the IT park, co-work space, and incubator all rolled into one. All of the successful local startups we saw were ones that played to the strengths of Yakutsk but were focused globally. A lot of bio-tech (many unique plants and animals are nearby), export (tea and legal Mammoth bones), and cool things like vertical farming and fishing, as well as cooking flour made from fish bone. The startups are all early stage, but most have a clear path to try to get to the level of success of MyTona and InDriver.

We rounded out our time by visiting several ecosystem partners including a local bank (doing some innovative stuff), the Arctic Innovation Center, and the Higher School of Innovation Management (a corporate training center and host of several of our events.)

Fun

Of course we couldn’t go to Siberia and not have a little fun in the ice and snow. The organizers took us out to the Lena Pillars Nature Park, or the place the Game of Thrones producers got inspiration for “The Wall.” To get there we had to drive for about 3 hours on a winter ice road on a frozen river. After we arrived we hiked up about an hour to the top and took in the scenery. Of course it was about -25C/-13F and snowing. But it was worth it.

Our trip to Siberia was full of surprises. There is a lot going on in ecosystems around the world and Siberia is no different. The tech ecosystem in Yakutsk is proof that you can build great global startups anywhere.

Look What I Found in Siberia was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

Last fall I did a keynote at MIT at their conference bringing together ecosystem partners from around the world to discuss ecosystem development. I spoke about how Fresco Capital builds global ecosystems and described some of our recent experiments in India, Singapore, and Vatican City. I finished my talk by saying that we like to do a lot of experiments to learn and that we are open to trying anything.

At the break, a group from Siberia approached me and asked if Fresco was really “open to anything”. Vasilii Efimov, representing Venture Company Yakutia, a Siberian VC, asked if Fresco would come and visit Siberia.

The team from Siberia was at MIT to discuss how to stimulate economic development in the remote region of Yakutia by building an ecosystem with multiple partners. The team is a partnership between the local VC fund, the Ministry of Investment Development and Entrepreneurship, a local bank (doing some innovative things around IT and exporting), a regional university, and an IT park.

I was impressed with the region’s commitment to ecosystem development and the large group of diverse stakeholders assembled to make it happen; I committed to learning more and to visit Yakutia in 2018. The team at Fresco wanted to see how this model was working in a such a remote region and if we can learn from their efforts and help replicate it in other environments.

We talked about organizing a local Hackathon, similar to the Hackathon we helped organize in Pune, India. The goal of the Hackathon in Yakutia is to learn about the developer and tech ecosystem in Siberia and see how the Hackathon model brings ecosystem people together in remote regions. The Hackathon will be held later this month at the Higher School of Innovative Management which is a large professional development center.

In addition to the Hackathon, we decided to organize a local startup mentor office hours and pitch event to give the local startups an opportunity to work with and pitch to an international group (besides me coming from Silicon Valley, I’m bringing partners from Hong Kong and Canada.) It will be a great learning opportunity for the local startups who don’t get a lot of international exposure. They will get some dedicated mentor time as well as have a group pitch event to gain feedback on their pitch as well as their business model. We at Fresco will learn more about Yakutia’s model of building ecosystems.

The team in Yakutia also organized an entire “IT Weekend” that consists of the Hackathon, the startup event, a few mini-conference sessions, local ecosystem tours, and visits to government, Techopark (IT park), university, and corporate partners.

The Yakutia team likes to brag about how cold it is there, apparently, the coldest inhabited place on Earth. Not sure what I’m getting myself into. However, I’m looking forward to spending time learning, exchanging ideas, and helping build global ecosystems.

Why I’m Going to Siberia was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

Digital society has already arrived for billions of people, but the implementation of digital health is just beginning.

We’re now starting to understand which digital solutions can help solve healthcare issues, like tracking digital biomarkers for example. We’re also realizing that our digital society can create new healthcare problems. Brain hacking?

If we ignore the critical gap between digital society and digital health, it will only grow over time. The ideas below put an emphasis on being proactive.

1. Prevent upstream digital health problems.

It took time, but we’re making progress in dealing with upstream problems such tobacco, environmental toxins, and food safety. There are also far-reaching challenges upstream when it comes to digital society.

This includes health issues related to social networks, digital devices, and artificial intelligence. When the business models of these industries conflict with healthcare outcomes of society, the business models will win.

While there are still not enough research studies, the ones that have been completed are coming up with some disturbing results.

“All screen activities are linked to less happiness, and all nonscreen activities are linked to more happiness. Eighth-graders who spend 10 or more hours a week on social media are 56 percent more likely to say they’re unhappy than those who devote less time to social media.” — Jean M. Twenge

The above analysis is related to The Monitoring the Future survey, designed to be nationally representative in the US, with more than 1,000 questions for 12th-graders every year since 1975 and eighth graders since 1991.

One of the additional challenges with the digital world is that we should expect legal rules to be consistently behind the curve. Regulators are currently not equipped with the right skills, incentives, and resources to keep up with changes in digital technology.

Thus it is up to the private sector, both consumers and businesses, to be proactive. Tech employees are starting non-profits focused on identifying potential harm of digital platforms. Business leaders are taking a stand about digital advertising. Investors are communicating that social purpose must be tied to profits. We need more of all of the above — being passive is not a solution.

2. Avoid private sector monopolies for public goods.

Healthcare companies save millions of lives every year. That shouldn’t stop us from identifying clear evidence of business model misalignment which can lead to adverse health outcomes, even death. This challenge already exists in healthcare, and it is absolutely relevant for digital health.

The history of patent law describes a very complicated balance between stakeholders. Most people want innovation. There is disagreement on the right mix of incentives.

As part of this debate, it’s always important to check on the final results. The story of rising insulin prices in the US is one example. A quick glance at the chart below makes it clear that the current mix of incentives is not leading to desired outcomes. The system is being gamed.

It’s easy to blame the companies, and they are absolutely part of the problem. They are also responding to the incentives of the system.

With digital health, this challenge becomes even more relevant because digital health products and services should be highly deflationary over time. If we see rising prices for digital health services in the future, that would be a massive failure of incentives.

A single private company owning a patent on a multi-billion dollar revenue life-saving treatment is a private sector monopoly resulting in less competition. When the state uses its powers of coercion to enforce this patent, it makes a value judgement that society is better off in having a private sector monopoly instead of competition. Given the long history of abuse by private sector monopolies across a wide variety of businesses, we typically expect a high level of price regulation to accompany monopoly power, and healthcare should not be exempt.

Many life-saving drugs were initially supported through government funded research. The pricing of these drugs has a massive impact on the healthcare outcomes. And we know that a monopoly will naturally lead to overpricing precisely because of a lack of competition. So at the very least, the burden of proof should be on the company to maintain a monopoly, not society. Also, it would be incompetent for society to outsource the pricing of drugs to monopoly holders of patents.

This logic applies to the owners of digital health patents, except with even more potential for misalignment. The burden of proof for digital health patents should be extremely high, not low.

Moreover, once a digital health patent is granted, that monopoly pricing power needs to be regulated. In the digital world, it’s not enough to expect modest price inflation. We know that competition in the digital world results in severe price deflation and this should be the benchmark for any price regulation of digital health monopolies.

3. Ensure user friendly data portability.

Forgetting about distribution channels is easy. In the digital world, however, these channels have direct relationships with customers, and importantly also customer data. Digital super-aggregators enjoy some of the most influential market power ever witnessed in the history of business.

There are already problems in healthcare with the market power enjoyed by distribution channels. The potential for abuse of power in digital health distribution is even more significant. It’s mostly a good thing that companies like Amazon are entering healthcare aggressively. But let’s not assume that the company and others will be immune from increasing market power.

Specifically, we need to have more clarity about healthcare data portability. It’s tempting to use the word healthcare data ownership, but the topic is not that simple. There is a difference between ownership, control, and privacy. While the infrastructure and nuances of those issues will need time to sort out, the most obvious starting point is data portability.

Patients should have the right to access and transfer the data being gathered about their health. This will become even more important in the future as the amount of passively collected digital healthcare data will increase exponentially. If an algorithm is analyzing your health from a video camera recording, does the algorithm need your permission? Would you want the right to access that data output if you choose?

Regulators will be way behind the curve on this issue. In addition, most users of healthcare are likely to choose convenience over control. At the very least, we need to ensure that there is an option for user-friendly digital data portability if someone decides to switch health providers.

Moving forward

When it comes to digital healthcare, we can’t wave a magic wand and say “let the government deal with it, it’s not my problem.”

It would also be irresponsible to take the view that large companies will solve these challenges on their own.

All stakeholders have to work together for meaningful progress in digital healthcare. It’s part of Capitalism 2.0 where we all have a role as patients, healthcare specialists, caregivers, employees, public servants, non-profit leaders, business executives, startup founders, social impact innovators, and investors.

3 Rules for Digital Health in a Digital Society was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

Over the past year, we at Fresco Capital have had a lot of questions from our portfolio companies on Initial Coin Offerings (ICOs). Most of them were asking, “Should we consider doing an ICO?” Given the unforgiving volatility of cryptocurrencies, and the potential legal ramifications of an ICO (e.g. the US Securities and Exchange Commission (SEC) issued warnings on ICOs), we thought it would be a good idea to provide some guidance on the topic.

In addition to helping our existing portfolio companies navigate the choice to do an ICO or not, we have also been evaluating an influx of crypto-related dealflow (we passed on many, and have invested in one). Throughout that process, we learned firsthand that finding the right information to make a decision on an ICO is just as, if not more difficult, than actually doing one!

So, we decided to formalize our guidance in a document and distribute it to our entire portfolio, saving the portfolio companies weeks of research of their own. We have reached deep into our global network over the past year to get the best advice for our founders. The entire team at Fresco was involved in putting together a document, everyone from a super engaged intern in Hong Kong, to our Venture Partners, to all three of us General Partners. A few of our own investors or Limited Partners (LPs), have a lot of experience with ICOs, so they helped out as well.

The first version was sent to our portfolio companies, advisors, and some investors a few months ago. We’ve been told that most of our founders didn’t realize:

· ICOs take longer (4–6 months) and are more costly ($500k-$1m) than expected

· The classification of your token as either security or utility has massive legal, tax, regulatory, and economic consequences.

· The jurisdiction for your issuance is critical.

Since it was first published, some of our founders and investors have contributed back to the document, as well as asked if they can share it with their friends at other startups. Given it is such a quickly evolving market, we thought the best strategy would be to open source the document so that it can be a living, breathing, and evolving resource for the entire startup ecosystem.

You can access and contribute to the guide here:

FrescoICOPlaybook

Fresco Capital’s ICO Playbook for Entrepreneurs was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

At CES earlier this month there was a lot on display including a jetpack, a holographic wall, a 65'’ TV that rolled up when you are not using it, and full sized drones that folded up and fit in your (cargo) pocket. What stood out for me was the robotics section. These robots really stood out because they were powered by artificial intelligence, or AI.

Robots are defined by first being able to sense, then compute the inputs of those sensors, and lastly actuate based on the results of those computations. Sounds fancy, but the elevator at the Aria Hotel at CES is considered a robot as it has sensors to see how full the elevator is, computes the weight limits, and acts by skipping floors if the elevator is “full” all while sending a new elevator car to the floors it skipped. No AI involved, just a robot using data to respond to a set of pre-defined instructions.

AI typically doesn't have any physical presence other than the supercomputer that it runs on. Twenty years ago, IBM’s Deep Blue defeated reigning chess champion Garry Kasparov, however, it was a computer telling a human what moves to make on its behalf (no different than you interacting with Siri or Alexa on your phone.)

Not much changed when 20 years later, Google/DeepMind’s AlphaGo defeated Lee Sedol in the Chinese game of Go (significant as the amount of moves compared to chess are astronomical.) Again, you had a supercomputer AI being controlled by a human.

What makes the robots at CES so compelling is that they combine robotics and AI. While in the movies for decades, this is a relatively new concept. Most robots just react to a set of pre-determined instructions based on data collected by their sensors (including self-driving cars, they just have a really, really sophisticated set of instructions and sensors).

The first robot that caught my eye was Omron’s AI powered robot playing ping pong against attendees of CES. While this is a cute example, the AI would read your facial expressions, body language, and other surroundings as well as use sensors to track the ball and react to the shot . If you are a level 1 player, the robot will play you at a level 1 skillset, if you are level 100 player, the robot will play you at the level 100 skillset. No human standing in for Omron.

Sure, robots playing ping pong are cute, but why is this important? Omron has no intention to enter their robot in the Olympics, however, their pick and place machine could very well take over every factory in the world, doing QA better than humans on the assembly line using a robotic AI.

Another pick and place AI robot, built buy Soft Robotics, can be controlled remotely by in a web browser or mobile app, allowing the factory managers to be replaced remotely as well as line workers.

The robots were not limited to the factory floor or the ping pong table, but also in the ocean where Qysea’s Fifish will make decisions that send back digital video.

One Step Closer to Skynet?

Yes.

But while the movies make us fear the Terminator and Skynet, the implications of these robots at CES are far more immediate and real. Millions of jobs will be displaced in the next decade due to AI. While I’m bullish on the long term employment opportunities, the short term will be chaotic at best.

All the systems that power the world are not equipped to handle the future that is being ushered in by technology. Be it the SEC responding to cryptocurrency, cable news responding to Donald Trump, the FDA responding to digital health startups, or Universities trying to prepare our youth, we need to take a hard look what powers society and take action. Else Skynet will take over…

AI Powered Robots are now a Thing was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

Fresco’s Evolution: A New Look, The Same Mission

When Fresco Capital first started investing in early 2012, one of the least impressive things about us was our website. To be blunt, it sucked. We know, because Tytus hand coded it himself in HTML. We also know because people told us.

However, as our entrepreneurial roots suggest, Fresco is not just a VC fund. We are a startup, too. And just like the companies we invest in, we are constantly evolving.

In 2017, we launched our third fund, we welcomed our 50th founder team to our portfolio, and we added our fifth Venture Partner to our growing network of local teams. We soon realized we had outgrown previous skin and it was time to embrace our own evolution; a time to refresh our brand, our website, and our messaging. So, we worked with one of our close partners, Rival Schools, to do just that. Given the team has world class expertise on localizing user experience, branding, and messaging to suit a global audience, we knew we were in safe hands.

We wanted a design that reflected our global team, our partnership based approach, as well as our belief that our team is greater as a whole than as a sum of its parts. We were aiming to visually represent the simplicity of our mission, but the complexity of our approach. Here is how we look now:

Our mission: Building global ecosystems

Although our shape may have a changed a little on the outside, Fresco remains the same on the inside. In fact, our growth has only strengthened our commitment and our excitement about our core mission:

You’ll notice our mission isn’t just about being the best at investing in technology companies. Just like our logo, the idea of “building global ecosystems” may seem simple, but it is an approach that embraces the complex.

An ecosystem can be defined as a complex network or interconnected system. Whether we’re working with founders, our LPs, or our partners, we believe the most effective investment strategy is to look beyond just us, and instead focus on empowering others. That is the only way to truly enable exponential change. One person, one product, one platform, one investor, one country, can only do so much. If we are able to build ecosystems filled with individuals, startups, and investors that are passionate about solving big problems, then the impact will be unimaginable in scale. And, if that’s not what we’re striving for, then why even be here?

Our approach: Thinking global, acting local

Our portfolio companies are leveraging technology to solve the world’s biggest problems in the future of work, education, and healthcare. These problems are global in scale, but implementing any solution requires a deep understanding and appreciation for local challenges.

It would be impossible for any one person to understand or appreciate the nuances of doing business in every local market, so we have focused on building a diverse team of specialists. Each with their own unique network, set of experiences, point of view, and passion. In our new website, we put a bigger spotlight on some of our favourite local partners, with whom we have worked with closely over the years and trust to be the absolute best at what they do.

Our motivation: Why we’re global

Though we are strongly motivated by our mission, we must also admit we’re not simply building global ecosystems out of the goodness of our hearts. There is a clear and direct connection between helping our portfolio companies scale globally and higher returns for our fund investors.

Global companies are worth more money — they have more revenue, less concentrated risk, and higher valuations. They can extend runway by optimizing their operations, increasing access to later stage capital, and diversifying their relationships with potential acquirers. We’ve seen this play out across our existing portfolio, which now spans 54 companies, 12 countries, 7 exits, and a total market value of US$1.6 billion.

We talk to and work with founders all day, every day, about how to build a company that scales and endures over time. Indeed, successful business models have mission, values, and financial incentives aligned by design. So it’s natural for us to apply the same approach in building our own business.

Our bottom line: We can’t do it alone

Given all of the chaos endured in the past year, we believe that now is the time to double down our mission. The world is faced with an unprecedented level of uncertainty, inequality, and risk, and it is our responsibility to work together globally to source, build, and scale the world’s most promising technology solutions to our most critical challenges in the future of work, education, and healthcare.

We look forward to hearing from you and working together toward as we grow and evolve as a firm, and as an ecosystem in and of ourselves.

Why We’ve Doubled Down on our Mission was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

At the recent Yidan Prize Summit, I had a chance to hear from Professor Carol S. Dweck and Vicky Colbert who were chosen as the first ever Laureates of this award. It’s about time that the top education practitioners are treated as superstars, though they were both extremely humble despite all the attention.

Vicky Colbert is the founder and director of Fundación Escuela Nueva. With roots in rural Colombia from 1975, her practical approach has been changing lives ever since. As one person commented during the awards video of classrooms using the philosophy: “the kids look so happy!”

The most well known work of Professor Carol S. Dweck of Stanford is about psychological mindset, especially the difference between a growth and a fixed mindset. As the awards event made clear, her overall contribution and influence in terms of both ideas and implementation across education is both broad and deep.

Importantly, their speeches and discussion contained lessons for us all — here are some of my key takeaways from their talks over the two day event.

1. Education of children transforms society today, not just in the future

It’s obvious that our children will one day be the leaders of society and so by definition education is key to transforming the future. But the message from the two Laureates is that children can be agents of change for society today — right now. Under this approach, children are proactive participants in social reform. Vicky gave an example of how children were important participants for improving healthcare awareness and treatment in rural parts of Colombia.

2. Expanding the status quo is not the goal

Governments love to talk about how they are spending more money on education. The unfortunate problem is that simple expansion of the current system is not the answer. The global education system has badly lagged changes in the rest of society. More of the public and private sector investment should be focused on better, not simply bigger.

3. The right to learn is global — across culture, religion, race

A clear message from the Yidan Prize event was the universal importance of education across all traditional boundaries of culture, religion, and race. Of course there are always local nuances when it comes to implementation but the core desire to learn and right to learn transcend barriers.

4. Problem solving focus

When asked about what the goal of learning and education should be, the answers from Carol and Vicky emphasized solving practical problems in today’s world. That has absolutely been our philosophy at Fresco Capital and I hope we have more students, educators, and parents who embrace this goal.

5. Co-operative learning and teamwork

If we aspire to have leaders of society who understand the benefits of co-operation, wouldn’t it make sense to start that habit at a young age? Both Laureates highlighted the power of team based learning in contrast to the traditional emphasis on individual performance. They also led by example by exploring collaboration opportunities across their respective areas of focus during the conference.

6. Teacher and student roles should change

The role of teachers needs to change. To be clear, the message is not about replacing teachers with technology. Instead, students should be more active learners. This then allows teachers to support and listen to children as they learn.

7. Test theories in real life

There are many elegant theories about learning and education. Both of these educators are consistent in their rigorous approach to use real life for testing theories. They are not content with ideas alone — the focus is tangible outcomes and results.

8. Opportunity to think big

The most inspiring lesson was to see these very successful leaders accept their awards, and then very quickly focus on thinking bigger for an even larger impact on society. Far from being content and satisfied, their curiosity and determination remains unwavering.

The first Yidan Prize Laureates set a high bar for everyone else involved in learning and education (which technically includes all of us). If we each reach just a fraction of their impact, we have the potential to create an exponential positive compound effect for generations into the future.

2 Inspiring Educators with Lessons About Learning for Everyone was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

How a New Era of Business Reponds to Changes in Markets, Demographics, and Technolgy with Profits and a Mission

By: Stephen Forte and Gretta Whalen

Note: this is an abridged version, download the full white paper here.

Introduction

The monumental advances of the last century — the automobile, the airplane, the personal computer and mobile phone, and the Internet — can almost certainly be attributed to a regulation of supply and demand by Adam Smith’s “Invisible Hand.” The father of capitalism proposed the theory in 1776, positing that “enlightened self-interest” naturally produces the best outcomes for all. The notion of choice under scarcity (supply and demand) went unquestioned until recently, as the market has been experiencing a slow but cataclysmic shift. More products are digital and experiential; they’re comprised of bits and bytes and stored in the cloud, not assembled in factories and sold in stores. The march of progress has rendered our concept of supply and demand obsolete.

Even more recently, British economist Ronald Coase posited that it’s in a company’s best interest to expand and become a “firm” — a vast entity owned collectively by shareholders — in order to lower their costs and increase efficiency. Nearly four decades later, Michael Jensen and Dean William Meckling’s 1976 paper “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure” led, indirectly, to a period of corporate growth in which shareholders shaped the effects of capitalism and customers were often overlooked and underserved.

Consequently, capitalism — a system intended to meet demands and dispense opportunities — served the greater good with less and less efficacy. Management focused on increasing shareholder wealth (as well as their own) and societies eased into an era of abundance. Desperate to increase shareholder benefits and secure their positions, executives acted against their broader self-interests and ended up harming their customers, their employees, the world’s most vulnerable populations, and themselves.

Meanwhile, a massive decline in regulation (beginning in the 1970s and continuing in the 1990s) pshed society toward economic instability through a series of smaller scale booms and recessions. The steady evolution of technology protected society largely from a great depression, but since that same technology is rendering the theories of Smith and Coase obsolete, we’re approaching a tipping point. The decline of the spirit of capitalism is reverberating slowly, but surely, around the world, drawing the ire of its usual critics, and prompting the strong commentary of more unexpected voices, too.

Laudato Si’: On Care for Our Common Home

In 2015, Pope Francis wrote a groundbreaking encyclical entitled, “Laudato Si’: On Care for our Common Home.” It’s a detailed censure of humanity’s collective failure to care for the environment while pursuing capitalistic interests, the effects of which have only hastened a global, and potentially catastrophic, climate crisis.

His Holiness’s letter is somber, but not without optimism. He begins and ends with a plea to begin a new conversation about the future of the planet, one that includes everyone, because it affects everyone. It’s a clarion call, an appeal to the entire human family — and young people in particular — to cooperate in an effort to “redress the damage caused by human abuse” and offer solutions to the “sufferings of the excluded.”

“The urgent challenge to protect our common home includes a concern to bring the whole human family together to seek a sustainable and integral development,” he said. “For we know that things can change.”

Pope Francis wasn’t the first of his faith to plead with humanity to be more mindful of the planet and the human family that inhabits it. In the 1970s, Pope Benedict asked believers to “recognize that the natural environment has been gravely damaged by our irresponsible behaviour. The social environment has also suffered damage. Both are ultimately due to the same evil: the notion that there are no indisputable truths to guide our lives, and hence human freedom is limitless.” Bartholomew pointed to the ethical and spiritual implications of environmental problems, advising that we replace “consumption with sacrifice, greed with generosity, wastefulness with a spirit of sharing.”

The Laudato Si’ coincided with a watershed moment: capitalism is at a crossroads. Previously focused only on shareholders and profit margins, not consumers, faltering businesses have required governments to intervene on behalf of children, workers, the environment, and businesses deemed “too big to fail.” With the new capitalism — Capitalism 2.0 — entrepreneurs are choosing to be driven by both mission and profit. The culture of the firm has been disrupted. The new Gig Economy, driven largely by freelancers, means the firm has a lower survival rate, which leaves more opportunities for startup companies to transform the corporate space.

The principles of Capitalism 2.0 are currently unfolding thanks to The Laudato Si’ Challenge (named by His Eminence Cardinal Turkson and inspired by the November 2016 Right Now! Conference), which is assisting startups as they expand their solutions to the world’s boldest challenges. The challenge includes a call-to-action for businesses to lead the way in care for our common home by protecting the ecological diversity of the Earth and humankind. The Laudato Si’ Challenge is one of a number of strategies to stimulate mission-driven efforts that are addressing threats to humanity like climate change, but is one of the only initiatives that prioritizes social enterprise efforts that are driven to achieve a mission and turn a profit.

The Past

Pope Francis’s encyclical touches on a number of problems resulting from the pursuit of progress that is unfortunately often accompanied by a general disregard for the planet. His holiness mentions the following scourges specifically: pollution, throwaway culture, climate, water, loss of biodiversity, decline in human life, breakdown in society, global inequality, and weak responses to the difficulties at hand. While we’ve made advances in technology, that progress has come at the expense of people living in developing countries. We deplete their natural resources and exports while making no effort to replace them. Meanwhile, the jobs we’ve relied on for generations are getting outsourced or dying out forcing many former workers below the poverty line. Experts such as Roger Martin, author of Fixing the Game, believe this gradual decline started when executives centered their attention on shareholders instead of consumers.

A pervasive emphasis on the expectations market has reduced shareholder value, created misplaced and ill-advised incentives, generated inauthenticity in our executives, and introduced parasitic market players. The moral authority of business diminishes with each passing year, as customers, employees, and average citizens grow increasingly appalled by the behavior of business and the seeming greed of its leaders. At the same time, the period between market meltdowns is shrinking, Capital markets — and the whole of the American capitalist system — hang in the balance.

Thus, the corporate world is plagued by continuing scandals. Executive compensation has increased while corporate performance has declined, and many executives have lost sight of the psychologically and economically rewarding business of creating value.

But that’s all starting to change.

The Present

In its relatively short lifespan, Capitalism 2.0 has emerged with two promising strains: the cross-subsidy model (or 1:1 model), in which consumers can effectively donate a product for every purchase they make, and the mission-driven model.

The 1:1 enterprise model, espoused by TOMS, Warby Parker, Bombas, WeWood, and so many more, has endured its share of criticism for giving humanitarian aid at the expense of economic advancement in the developing world. Still, this model launched a broader interest among business owners in social entrepreneurship, even carving out space for businesses that are not just socially conscious, but propelled entirely by a belief that sustainable solutions for problems like hunger, waste, water, and climate change can be as lucrative as foot-, eye-, and wrist-wear — perhaps even moreso. Enter the mission-driven enterprise, typified by companies like Tesla and the nine startups who are participating in The Laudato Si’ Challenge. These are the representatives of Capitalism 2.0 who embrace double sustainability and are pioneering models that enable solvency for businesses and for humanity as a whole.

Auxiliary virtues of Capitalism 2.0 include transparency and accountability. Johnson & Johnson demonstrated these values during the Tylenol crisis of 1982. Within a week of the first death that came as a result of tampering in the Chicago area, Johnson & Johnson ordered a recall of every single bottle of Tylenol in existence. They put an immediate stop to all production, all advertising. Undoubtedly, the moves came at a tremendous profit loss, but the company credo explicitly names the “first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality.” Putting customers first allowed Johnson & Johnson to survive a devastating tragedy and continue to serve the people who rely on them to manufacture impeccable products.

Similarly, Proctor & Gamble has long abided by a customer-first credo:

We will provide branded products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come. As a result, consumers will reward us with leadership sales, profit and value creation, allowing our people, our shareholders and the communities in which we live and work to prosper.

The customer-first philosophy, long considered optional by executives desperate to meet shareholders expectations, is becoming the rule rather than the exception because it’s better for people, and it’s better for pocketbooks.

The Future

Each technological revolution introduces a class of professionals that were unimaginable just a generation before. Workers in the Industrial Revolution couldn’t fathom a world that required automotive technicians, airline pilots, and telephone operators, and members of the Greatest Generation are mystified by professional titles like “Growth Marketer” and “Data Scientist.” Our grandparents came of age in a society that still factored farming into the GDP. Today, there aren’t enough people doing farm work to factor it into unemployment statistics.

Just as farmers from the 1850s couldn’t predict the factories of late 19th century, and how turn of the 20th century manufacturers could foresee changes that would result from auto and aviation industries would, we similarly can’t imagine the jobs that will exist in 25 or 50 years. The Information Age will usher in more jobs than ever before; the nature of those jobs remains to be seen.

As it has for centuries, this turnover will likely produce a painful cycle wherein jobs are lost, replaced, and lost again. The magnitude of the economic turmoil will depend on how disruptive the new technologies are. Artificial intelligence, robotics, and machine learning are profoundly disruptive, which means our communities are experiencing, and will continue to experience, financial discomfort, political unrest, socioeconomic uncertainty. A laid-off coal miner West Virginia can’t fill a software engineering position in Silicon Valley, for instance. These are the people who will need our financial, educational, and emotional support as they gain the skills they need to compete in a new economy.

Nevertheless, history will show that the Information Age was much more constructive than not — and actually became one of the biggest job creators of all time. Moreover, if we place our focus on what consumers need, we can ensure that our entrepreneurial endeavors will be relevant and profitable, and that laborers will find meaning and fulfillment in solving problems for a living, whether on a small or grand scale.

This is the vision of The Laudato Si’ Challenge. Nine startup companies, selected from a set of more than 300 applicants, traveled to the Vatican to refine and accelerate their mission-driven enterprises. Each one endeavors to combat one (or more) of the devastating threats to the world today, at an affordable price.

• Mandulis Energy — Renewable energy that turns agricultural waste into electricity and clean cooking fuel.
• Nokero — Efficient solar powered lights to decrease indoor air pollution from kerosene.
• Smart Yields — An app that allows farmers to have insights into how to grow crops and improve efficiencies of current crops.
• Rise Products — Upcycles waste from breweries into high protein, low carb, cholesterol free, artisan flour.
• Aqus — First income-generating water filter that is designed to be affordable to people in developing worlds.
• Innov8tia — Patented microwave technology that changes toxic sludge into clean water and energy.
• ProTrash — Pays people for recyclables with cash cards that can only be used for food, medicine, or other necessities.
• Scooterino — The only ride-share service using scooters in Europe.
• papr — Creates paperless workflows for enterprises using “File > Print.”

Conclusion

Capitalism 2.0 is just that: capitalism. But instead of prioritizing shareholder value at the cost of efficiency, transparency, and accountability, the new generation of entrepreneurs will prioritize the customer experience first and their broader mission (a close) second. This is not just the most moral way to run a company, it’s also the most profitable.

The ushering in of Capitalism 2.0 will not be without turbulence. There will be disruption, as there always is when society moves from one technological phase to the next. Some jobs will disappear. Some workers will be displaced. But as the New Era of Business supersedes the shareholder driven status quo, it will find novel ways to serve its customers, and better ways to educate, train, and utilize its workers.

Meanwhile, The Laudato Si’ Challenge will provide funding and mentoring for the young entrepreneurs who are answering the Pope’s clarion call to care better for our common home, Earth, and its most vulnerable people. Today, this approach to business is still novel. In ten years, it will be standard practice. And hopefully, the next generation will never imagine that Capitalism was done any other way.

Capitalism 2.0 was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

While it’s inspiring to think about becoming an interplanetary species, there’s plenty of opportunity in bringing space back to Earth.

Why bring space to Earth?

The dream of space has always been about leaving Earth. So it seems counterintuitive to focus on the opposite. It’s almost too practical.

And yet it’s already happening. Private sector innovation is leading to improvements in both launchers and satellites which monitor our planet from space — creating exponential growth in data back on Earth. Cost, variety, and most importantly, speed of iteration, have been transformed.

As an example, our portfolio company Spire went from no satellites in 2012 when we first invested to 40 by 2017, with applications in areas including shipping and weather.

The infrastructure is now at critical mass to start opening up to partners for building external applications. Instead of building and launching your own network of satellites, you can get access to the data directly.

There are also many under appreciated applications on Earth which will be critical to successfully becoming an interplanetary species. Take digital healthcare as an example: portable diagnostic devices, telemedicine, and augmented reality are just three of the obvious areas of overlap.

Can space eat the world?

The space ecosystem up until recently has been primarily focused on space infrastructure. The massive opportunity going forward is to connect this amazing group of innovators to other sectors of the economy and society.

20 years ago, the Internet was viewed as a separate industry by most people. Very quickly in the past few years, the consensus has come around to the idea that “software is eating the world”.

The space industry has a similar potential for impact across society. But whether that potential will be realized is still unclear. Whether that impact will be positive or negative is also unclear. It’s up to all of us to figure it out — together.

Start with talent

Our team at Fresco Capital recently held an event in Singapore about expanding the ecosystem, which included a panel about talent.

One of the panel participants was Lynette Tan, Executive Director at Singapore Space and Technology Association. After this panel she wrote an overview about some of the opportunities in the sector. Here is a key takeaway related to building the talent part of the ecosystem:

“The integration of space technology into our daily lives also means new modern disciplines are now required. With the avalanche of data from and flowing through space systems, programmers, computer scientists and big data experts are all likely to find increasing demand for jobs seeking to monetise these assets.”

The talent needs described above are clearly cross-disciplinary.

But that’s not all. If we’re going to build successful applications, there will be a need for design, user experience, and sales, to name a few obvious categories that are not traditionally associated with the space industry.

That’s great news in the current environment of concerns about technology replacing humans in jobs. Space applications are a potential growth driver of new jobs across the entire economy.

Of course, there’s the challenge of aligning our education system with these job opportunities, but that’s worthy of an entirely separate discussion on its own.

Practical public / private

At the International Astronautical Congress (IAC) just held in Adelaide, there were representatives of both the public and private sector from all over the world.

On one of the industry panels, a private sector member was the living embodiment of the entitled capitalist, saying something to the effect of “the only role of government is to get out of the way.” This view has the benefit of clarity, but it has the much larger drawback of being completely impractical.

At this same conference, I had a chance to share a panel with members of both the European Space Agency (ESA) and NASA, as well as give a presentation to an audience of country representatives from all over the world. Overall, I found these public sector members to be very self-aware of their organizational constraints and refreshingly open minded about finding creative solutions.

Here’s the reality: government to government space agreements and negotiations move at a snail’s pace. The private sector can move faster in theory.

Unfortunately, there are several roadblocks. Export restrictions. Import restrictions. Talent restrictions. Mostly because space is considered to be a strategic industry, which is understandable.

This creates an opportunity for private sector companies operating in applications because the regulatory environment is completely different from the traditional space industry. Obviously, there are still regulations and restrictions when it comes to data and applications. But the level of freedom for the private sector is significantly greater when operating in this application layer as compared to space infrastructure.

It’s important to recognize that governments will continue to play a key role in developing the space industry. At the same, the private sector has a unique opportunity to innovate around applications.

Connecting space to applications

It’s no accident that some of the most exciting private sector entrepreneurs in the space sector have an Internet background. But this cross-over shouldn’t be limited to billionaires who have the capital to start investing in space infrastructure.

One of the lessons from the development of the Internet is that eventually infrastructure and applications do get connected.

Sometimes this is through open standards and co-operation. HTTP is everywhere and yet invisible to almost every user.

Conversely, even a single company can dominate a key connection layer with regulators struggling to catch up.

We could all sit back passively and hope that things “just work” in the evolution of connecting space to applications. That when a billionaire decides to set up either a for profit or even a non-profit, they will be mindful of other stakeholders.

Alternatively, we could be proactive and intentional in building these connections with a mix of co-operation and competition. And in the process, just like the Internet, we may discover that the number of applications related to space are infinitely larger than we ever imagined, right here on Earth.

Bringing Space Back to Earth was originally published in Fusion by Fresco Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.