What All Nature-Positive Founders Need to Know, According to Funders
How to build businesses that matter and raise from the right type of capital
As any founder that is building a nature-positive business would know, there is no one-size-fits-all approach to securing investment & funding in this nascent space. With traditional VCs, philanthropists, and impact-first investors all taking interest, and the diversity in business models the world needs to address the biodiversity crisis, the rules aren’t always clear.
In this post, we’ll break down what founders need to know about attracting the right type of capital, informed by sessions and insights from the knowledge partners of our Biodiversity Accelerator+.
Know what type of capital you want to attract
Before founders decide what type of capital they want to attract, the first question they must ask themselves is this: What kind of product do I want to build, and for which market? The answer to this question is the guidepost for the type of funder you should target.
As George Darrah, Partner at UK-based VC firm Systemiq Capital shared, VCs don’t have flexibility with the type of returns they need to deliver. “We have to be accountable to our own their own set of investors, too.”
Therefore, in addition to looking for companies that are efficient levers for pushing us towards tipping points for change, they evaluate deals based on whether they can return 10x their valuation at investment. “Not only do they have to be highly defensible - they also have to go for very big markets, with potential to grow,” George shared. “For our type of capital, markets under $1B are very difficult to justify.”
That is not to say that companies that don’t fit this profile aren’t doing good work - but they may want to look at other forms of funding, such as outcome-based financing or blended finance structures, as Michael Rieser of UBS Optimus Foundation (UBS OF) shared. “Businesses we invest in absolutely need to have a sound revenue model, but we can be a bit more patient than some other investors.. For organizations without sound revenue model but strong impact, it’s better to early on find the right type of capital. One alternative can be outcome-based financing.”
Make your impact tangible
To unlock the kind of capital that Michael is discussing, however, founders must be able to answer to strict impact standards and frameworks. UBS OF employs a rigorous selection process for impact (including both environmental and social), rating programmes and organizations based on three different criteria: the intentionality of impact, measurability of impact, and its additionality.
Being able to measure your outcomes this way can also be used to access other types of financial instruments, such as UBSOF’s outcome-based nature finance (OBNF), which pays for outcomes achieved by agriculture and biodiversity programs alongside carbon projects, since the carbon market does not yet widely rewards co-benefits financially.
Due diligence your investors
Taking external funding is for the most part a one-way door. After all, nothing in life is free. Cash comes with things like voting rights and terms and conditions, and giving the wrong people that kind of power in your business can be a devastating move.
“Talk with some of the portfolio founders about what the investors you’re speaking with have actually done, before you close with them,” advises Kevin Webb, Managing Director and co-founder of US VC Superorganism. “Getting VC investors is like getting on the rocket ship - it’s not for everyone, and it will always push you to a riskier and faster-growth approach.”
In addition to cash, says Kevin, you should also think carefully about what they can bring to the table. Do they have significant experience building businesses, for example? Have they made significant customer introductions, or can they help connect you to pilots (like LiLi of BASF ventures shared in a previous post)? Or perhaps as in the case of UBSOF, can they leverage their network of clients to attract even more funders to support your work?
The importance of founders
Delivering on every single expectation that we have discussed so far can seem like an impossible task for any early stage company. As George puts it, “The reality is that it is very hard to find the right team building the right product.” But that is also why “we have to start by looking for exceptional founders early in their journeys, and from there begin working with them even before we have a conversation about capital.”
Kevin seconds this idea. “One of the first questions we ask on venture profile is, “Is this the right team to build this?”
Timing is everything
Superorganism’s second question is, “Why is now the right time?” Indeed, this second question is one that we at Silverstrand feel is often underrated. If a company enters the market before the technology is mature enough, or before customers are ready to adopt it, that company risks burning through resources without gaining traction. On the flip side, waiting too long can mean that competitors have already captured the market or that the window of opportunity has closed.
Great innovations need more than just a strong product; they need alignment with market readiness, consumer demand, and technological infrastructure. Missing this alignment, even slightly, can mean the difference between being a pioneer or an expensive lesson in timing.
Manage your capital well, be clear about your what and how when it comes to key milestones, and don’t underestimate the power of revenues to fuel your growth
While it is easy to look at million dollar funding rounds and think that those companies have it made, the reality is that it is easy to burn through those funds quickly - especially given the often capital intensive characteristic of nature tech. As you enter your next round of fundraising, what will make you stand out from the hundreds of deals investors review is your ability to show strong stewardship of the financial resources you’ve already been entrusted with.
And one form of alternative financing is, as Kevin puts it, “good, old fashioned revenues.” Getting paid customers is an important tool to help you weather challenging fundraising environments, like the one we are in now. In our investments at Silverstrand, we emphasize the importance of demonstrating keen cash management skills, being clear about the key milestones you need to hit, and having a solid plan to successfully reach them.
At the end of the day, investors and funders come in many shapes and forms. The advice shared here is not just meant to tell you how to please funders - it is meant to guide how you think about building a solid business. With the foundations in place, the funders will follow.
About the organizations featured
Superorganism: A US-based VC which finds and supercharges companies that benefit biodiversity and deliver venture-scale return. Superoganism views investments across 3 themes: Tackling extinction drivers, Investing in climate tech that supports ecosystems profitably and Enabling technologies for conservationists to benefit.
UBS Optimus Foundation: The UBS Optimus Foundation is an independent philanthropic foundation connected to the global bank UBS, focusing on inspiring programs and investments that are making a measurable, long-term difference to the most serious and enduring problems. Thematically, the foundations supports programs in the area of health, education, and climate & environment.
Systemiq Capital: a UK-based climate-tech fund invests and directs capital toward solutions that can provide a sytems-level intervention to improve planetary health. Systemiq Capital goes leverages the experience and expertise of Systemiq Ltd. to find passionate founders building highly impactful companies with venture-scale returns.