Wealth Monaco proposes you the article of Diandra von Lenzburg, Founding Partner at Bucephalus Capital Ventures who stresses out the relevance of the positive impacting in the Venture Capital universe.
How to rationally unlock value at the frontier of innovation?
Traditionally risk-averse investors have increasingly shifted allocations to a radically evolving Venture Capital ecosystem. This requires an agile methodology for stress-testing the investment thesis and accompanying strategy which enables partners to maximize their success – in other words, underwrite differently.
Of course, this is a recursive problem for most successful investors. Long-horizon perspectives are usually shaped by value investing principles. In 2020, market fragility concept demonstrated that even the most traditional
investors needed to revise their approach to risk management.
How to probabilistically-weight risk when operating when no former models for what you’re doing?
The problem is self-reifying: it is impossible to be risk-averse in innovation when dynamically acting on the frontier of what is possible. Any idea which is new inherently lacks prior models from which to stress-test and mimic via herd mentality. We need actuarial models not analytical reproductions of outdated approaches.
Risk-Mitigating Deals at the Frontier
How do we do this as we enter 2021’s new frontier? We need to reward entrepreneurialism in its purest manifestations: the risk-takers with skin in the game.
Change (if we wish to translate it into forecastable returns) starts with the prime mover: for our purposes here, the investors. In order to develop a highly contrarian outlook, argument, and approach, we require cognitive diversity throughout the pipeline.
More simply: we cannot expect to unlock unmined capital in underserved founders (for example, fund the best inventors; not the founders who best conform to a view of what gender category or cultural facts are thought to reflect assembly-line style plug-and-chug decisions).
‘Impact’ Investing That Actually Pays Off
Let’s use the oft-discussed gender-equalising play. It is merely a play for most, rather than an actionable strategy driven by beliefs about forging an equitable society in which the best people are chosen for the best jobs.
Most who claim to specialise in funding, say, the elusive female founder use such claims as PR branding, but cannot really optimize outcomes with the returns they promise without, in fact, including female executive leadership within the Venture Funds themselves.
Similarly, political fragmentation is impossible to finesse into meaningful cross-border fluency without multicultural perspectives working together as decision makers from the ground up. While narratives which redefine
the rhetoric on “who decides” within the Venture ecosystem do positively impact effecting change, we cannot create an idea meritocracy without aligning all elements shaping outcomes for the deal flow on the table in any real way without diversity of minds collaborating.
Cognitive Diversity: Reframing Human-to-AI Frameworks
Cognitive diversity – across binary constructs of geographies, gender, culture, and “branding” should matter to any Impact – let alone returns-driven – investor. Reframing how we approach who sits at the table opens the door to a whole new world to unlock -and harvest – the most obvious sources of capital, without actually changing any part of how to demonstrate the purpose driving our actions beyond making it as tight and rigorous as possible. As investors, we should be asking how to search
differently, and underwrite differently to help our partners to maximise the amount of success given what they are doing?
The first step is to choose what problems to solve, starting with the central
question: how do you grow when operating at the frontier without a guide of what to do?
Article: Diandra von Lenzburg, Founding Partner at Bucephalus Capital Ventures
* Taleb, Nassim Nicholas. Skin in the Game: Hidden Asymmetries in Daily Life . Random House, 2020.