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“Patience is a virtue.” With Penny Bauder & Sarah Cone

The most important thing in business is working with solid, ethical people. Anything else will always come back to haunt you. In some of my earlier deals, I’ve learned a lesson: in the pressure cooker of startups, it will only get worse, so being steely focused on working with people with the right ethical bent […]

The most important thing in business is working with solid, ethical people. Anything else will always come back to haunt you. In some of my earlier deals, I’ve learned a lesson: in the pressure cooker of startups, it will only get worse, so being steely focused on working with people with the right ethical bent pays massive long-term dividends.


I had the pleasure of interviewing Sarah Cone the founder and Managing Partner of Social Impact Capital.

Earlier in her career, Sarah was an Associate at Illuminate Ventures, a Silicon Valley-based venture capital fund with top decile performance investing in B2B SaaS. She got her start in venture capital working for the “emerging technologies” venture capital group at Omidyar Network. Sarah has also worked in the legal department of Google, at the technology law firm Fenwick & West, Amazon.com, and at the technology policy non-profit Public Knowledge.

Sarah has a BA in interdisciplinary studies from the Evergreen State College and a JD from UC Berkeley. During law school she was a part of a Technology Policy Working Group with human rights NGOs, Google, Yahoo and other tech companies trying to find solutions for protecting human rights in China. She also volunteered for the C.A.R.C. Asylum Law Clinic helping represent people seeking asylum in the United States. At UC Berkeley, Sarah won the Advocacy Award for persuasive writing, the Jurisprudence Award for academic excellence, and her thesis “Reforming Federal Tax Policy to Support Social Entrepreneurs” received honors.

Social Impact Capital is one of just a few female-led VC firms and Sarah is a risk-taker who has proven herself even among skeptics who don’t think impact investing can bring money and returns.

Sarah, who jokes that her Inbox is “one of the most inspirational places ever,” moved to NYC from Silicon Valley recently and describes SIC as VC investing, but with a disruptive slant. She’s looking for seed-stage companies that create a world-changing positive effect on the world and produce a strong internal rate of return.

The purpose of Sarah’s fund is to help inspire a sense of optimism — and to generate measurable social/environmental impact alongside a financial return. Game-changing ideas and works of art have been created in times like these…think: da Vinci’s vision for a cleaner and more efficient city, or Shakespeare’s King Lear. She’s here to help innovators bring ideas to life that help make a difference in the world and creatively solve real-world problems.

A sampling of SIC’s portfolio companies include Milk RunPrometheusEndless WestTrilogy SciencesWild EarthOpenInvest.


Thank you so much for joining us Sarah. You are currently leading a social impact organization that is making a difference for our planet. Can you tell us a bit about what you and your organization are trying to change in our world today?

Social Impact Capital is a venture capital fund that invests in start-ups at the earliest moments of their creation. We try to invest in the “best ideas in impact”, and call our strategy “impact arbitrage.” Our strategy stems from the observation that there are deep biases in the investment management industry that you can’t produce good venture capital returns from startups making the world a better place so sadly, though good for us, social impact companies are being overlooked at the earliest stages.

We invest in these companies at the seed stage, and we specialize in helping our founders secure financing from top-tier VCs to lead their subsequent rounds. 89% of our portfolio companies have received follow-ons from top tier Silicon Valley venture capitalists. In a world where only 20% of seed companies manage to find follow-on financing at all, we’re quite proud of that stat.

Our idea here is to transform venture capital, by putting more companies doing the things that matter into the industry.

That’s super interesting. Okay, before we dig in, our readers would like to get to know you a bit. Can you tell us a bit how you grew up?

When I was 8, I wanted a Barbie Dream House, and my mother told me, “I’m not buying it for you. You can buy that when you make your own money.” So, fine, I thought, I’ll do that. I started a lemonade stand and spent all summer on it. By the end of the summer, though, I wasn’t interested in Barbies, and had made my first $200. My grandfather told me I should invest it, and taught me about the stock market. I spent most of my childhood in various jobs and entrepreneurial activities: paper route, babysitting, selling fruit, chores, entering every contest that had a cash prize, flea market stands … and then I invested the profits.

Investing has been my primary interest ever since, but I didn’t think it’d be my career: I wanted my career to be in the service of social good. So, I spent my early professional years at a non-profit, and then at some point I had the realization that I could probably accomplish as much social good — if not more — by engaging in my primary love: investing.

What led you to start Social Impact Capital?

I started my career in the non-profit sector because I thought I could make the world a better place there. After a handful of years of toiling, talking to my peers and sharing our experiences, we were all dissatisfied with the amount of positive change we’d been able to make. I realized that there could be another way: what if I moved into funding new companies that targeted social impacts?

Many of us have ideas, dreams, and passions, but never manifest it. They don’t get up and just do it. But you did. Was there an “Aha Moment” that made you decide that you were actually going to step up and do it? What was that final trigger?

There wasn’t a venture capital firm that I could work at and do the types of deals I wanted to do, so I had to create my own venture capital firm.

Many people don’t know the steps to take to start a new organization. But you did. What are some of the things or steps you took to get your project started?

We love seeing entrepreneurs bring companies to us after they’ve de-risked it as much as they could in a resource-efficient way — what some people call “scrappiness”. I did the same as I built this firm. The first fund, “Fund 0,” was all small amounts of my own money that I used to prove not that these companies existed, that I could also get into to deals, and that I could produce performance in the top decile of all VC firms. Off the back of this track record, which is still great after four years, we were able to launch our most recent fund.

Can you share the most interesting story that happened to you since you began leading your company or organization?

We have two different LPs in our fund who have strongly publicly stated that they think impact investing doesn’t work. So, why are they investing? For performance. That’s the most interesting thing about our fund: our performance has inspired the confidence of a broad range of investors, even those who maybe otherwise would not have considered our strategy viable. In a way, we have become “the impact fund for people that hate impact investing.” Performance eclipses ideology.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson or take away you learned from that?

I was eight months pregnant with my daughter when I pitched my first LP on the fund. My plan was to practice my pitch on someone that would have good feedback, push back on me with arguments against social impact investing — perhaps even offer thoughts on how to improve our messaging. I wasn’t pitching them with the belief that they’d actually invest in the fund. In fact, I thought he was the most unlikely person in the world to invest. I thought: after my maternity leave, at least I’d have all the data and information I’d need to begin officially raising.

To my surprise, at the end of the pitch, he said: “I’ll invest $10 million.”

I had to tell myself, “Don’t say that you’re not ready!” That experience taught me that you have to start before you feel ready; you can’t wait. You just have to work on getting the ball down the field however you can. That is advice that I always give.

None of us can be successful without some help along the way. Did you have mentors or cheerleaders who helped you to succeed? Can you tell us a story about their influence?

On the mentor side, Rob Hayes taught me VC, and the lesson I most took from him is that people are everything. When it comes to my team, I feel very lucky: I’m supported by very mission-driven, super sharp, and very funny people. And community: community is so important. We’re building this fantastic community of the world’s best experts, which is our Venture Partner and Advisor network — what we call our “extended team” — and they provide us and our founders all different kinds of support and help. It used to surprise me, because sometimes this value materializes in totally unforeseen ways, but now I know this is the point of having a strong, diverse community: not only do they have additive differences in experiences, knowledge, and skills, but they also have their own special networks of friends and collaborators, so the compounding value can be great.

We focus on diversity, and track these metrics: our full time team is 100% diverse, as is 64% of our extended team — meaning, people of color, women, LGBTQI. Differences of perspective allow us to access a wide variety of investment areas, and having some of the best and different kinds of experts allows us to pick the most attractive deals. 59% of our capital deployed so far has gone to diverse founders, who also come from varied backgrounds, in turn have access to some of the best technical and industrial experts on the planet. Many of our community members have “been there, done that,” which is what we’re looking for — these experts are perfect for our founders, who can get almost real-time support on any of their challenges or objectives.

Diversity is a win-win for several reasons, so we try to compensate our network in a way that’s not only a great incentive for whomever you are, but also in a way that helps us to scale on things like diligence or portfolio support.

Are there three things the community, society, or politicians can do to help you address the root of the problems you are trying to solve?

There are always going to be ideological divides in the world, so we focus on the social impact solutions that are just better business. You want the people that disagree with you ideologically to still buy your product because it’s a better product, or less expensive. I think complex systems challenges require multi-pronged solutions; there’s no silver bullet. Social impact challenges are so entrenched that you can essentially grab any string in the morass to begin to solve them.

From community to politics, I think an important first-principle question to ask: Do we frame the challenges in the right way? Are we narrating the “problem” in a way that inspires entrepreneurs to fix it?

Three tangible things that would help are:

  1. More money. The social impact investment sector is still too small to have an outsized impact. Social impact investing is still a rounding error. Most years, our society gives 4x more money to non-profits than we invest in social impact, and the amount that the government spends on these problems is in the realm of +100x. Tax regulations could better address this.
  2. Scaled regulations. I believe that governments should enact strident regulations where it matters. But the rule of thumb is that most regulations benefit incumbents, as it increases the cost for new entrants. Regulations need to scale, and should apply more heavily to large corporations than small ones.
  3. Tax externalities. We don’t actually have a capitalist society: we have a society where the gains are privatized and the losses are subsidized. We have no political party at the moment that is focused on free and fair markets. I’d like either party to make policy reforms in that direction.

It’s a great question, and I think there needs to be more conversations about how we can all work together to build a better future through social capitalism.

How would you articulate how a business can become more profitable by being more sustainable and more environmentally conscious? Can you share a story or example?

I sometimes say that “sustainability” is just another word for “business efficiency.” It’s just a fancy word for reducing waste, which leads to more efficient supply chains.

For example, our portfolio company MilkRun delivers groceries from local farms. This is fantastically more sustainable and better for the environment of course, but also by cutting out layers of middlemen they’re able to make sure that the farmers are far better compensated than any other sales channels, and their margins are still the best in grocery. Interestingly, stats have shown that small to medium local farms have been under threat due to big farming and big supermarkets, so MilkRun also literally saves farmers’ livelihoods. But profitably!

What are your “3 things I wish someone told me when I first started” and why. Please share a story or example for each.

  1. Patience is a virtue. It takes a long time to get returns in venture capital, and no one takes you seriously until you’ve returned cash to investors. Be prepared for a career that seems achingly slow.
  2. Make impact core. When you’re investing in social impact, you should invest in companies where the core of the business is a social or environmental good. It has to be inextricably linked with the business model. We developed a heuristic to test this: we ask ourselves, “What if the most evil company in the world acquired this company? Would they be able to change the impact mission of the company without the business going to zero? If so, then it’s a clue that impact is not core to the business. We’re also working on new ways to institutionalize impact, since there’s really no gold standard in our asset class, and we’re starting to think about the whole investment lifecycle.
  3. Value-scrupulousness in ethics. The most important thing in business is working with solid, ethical people. Anything else will always come back to haunt you. In some of my earlier deals, I’ve learned a lesson: in the pressure cooker of startups, it will only get worse, so being steely focused on working with people with the right ethical bent pays massive long-term dividends.

If you could tell other young people one thing about why they should consider making a positive impact on our environment or society, like you, what would you tell them?

Imagine waking up every morning and looking in the mirror knowing that all the work you do is in the service of a greater good and purpose. That what you do matters. Now, imagine that you’re also well-remunerated for that work: you don’t have to sacrifice your personal goals or ambitions. In fact, quite the opposite. You get paid to transform the world in a positive way, in a manner that’s actually sustainable. This type of work is available in the world, and it makes life worth living to do it.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

My daughter went through a phase at about eight months where she loved to wave at strangers with a huge smile. Sometimes these strangers would just glare at her, and sort of growl back at this waving baby, and it would really upset her. To cheer her up, my Partner Peter Bruce-Clark would tell her, “Not everyone waves back, Ada.”

When we were fundraising, we used the same advice to get us through. As a firm, we wave at everyone out of principle. We think making lasting change involves working with people from all walks of life, and sometimes with people who are very different from yourself or your beliefs. But, if people don’t wave back, that’s fine too, and the important thing to remember is that it means nothing about you or the value of what you’re working on.

We love working with the people who wave back!

Is there a person in the world, or in the US with whom you would like to have a private breakfast or lunch with, and why? He or she might just see this, especially if we tag them. 🙂

Oprah Winfrey has been this incredible mix of both compassion and business smarts, and I’d love to learn from her how she so effectively balances the two.

How can our readers follow you online?

On Twitter, you can follow me at @sarah_cone, or the firm at @socialimpactvc. If you want to get in contact, message us on our website here.

This was very meaningful, thank you so much. We wish you only continued success on your great work!

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