Barclays delighted with sustainable incubator programme
Barclays is on the verge of signing up for four more years of its partnership with the Unreasonable Group, a company that supports high-achieving entrepreneurs leading businesses that solve social or environmental problems.
The partnership, Unreasonable Impact, is almost at the end of the second year of its original three year term, but Barclays is set to approve a four year extension. It is part of Barclays’ 2016-18 citizenship programme, the Shared Growth Plan.
Unreasonable Group, led by Daniel Epstein, has a small private equity fund of $11.8m, focused on start-ups in emerging markets and the developing world. But its main activity is using some of the skills of a PE firm without investing, through an advisory and partnership model.
“We are community first,” said Epstein. “We wanted to be an organisation that would in any way it could support entrepreneurs on the front line. The obvious way would be to launch our own $1bn fund, but if we can create a network of all the private equity funds, sovereign wealth funds and family offices, we can move a lot more capital more quickly.”
Unreasonable’s name is taken from a George Bernard Shaw quotation: “The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man [and woman].”
Unreasonable works with small companies that it believes are going to be innovative, fast-growing winners, while at the same time helping to solve social or environmental problems.
Its main activity is to partner with organisations that want to do good by fostering such companies. The partners provide money and their own experts; Unreasonable brings its ability to source suitable companies and its network of mentors and investors.
Past collaborations have included the Girl Effect Accelerator, which Unreasonable started with the Nike Foundation in 2014. It was based on the idea that poor teenage girls are the single most important community to help if one wants to achieve a development improvement.
Ten companies were chosen that benefited teenage girls in some way and their CEOs received a two week training programme and mentoring after that. The mentors tend to be high profile people from the world of tech entrepreneurship. Unreasonable also provided a $500,000 short term debt fund for them.
In 2016, Unreasonable started working with Pearson, the UK educational publisher, on Project Literacy Lab, a “new initiative to wrap resources around the fastest growing ventures worldwide that are already solving key challenges tied to literacy”. The effort tied in with Pearson’s existing Project Literacy campaign to end illiteracy by 2030. An estimated 750m people are illiterate.
Project Literacy Lab has now helped two groups of companies, 16 in 2016 and 13 in 2017, with training, networking and mentoring.
The Barclays programme is the biggest Unreasonable has done yet. It began in 2016-17 with selecting three cohorts of 12 to 15 companies, in each of the Americas, Asia Pacific and Europe.
The second generation of companies has just been going through the programme — this week in London Barclays is holding a global forum for them all.
Barclays declined to say how much money it was spending on the partnership, but its global head of citizenship, Deborah Goldfarb, said the bank had "made a significant multi-year commitment of resource, expertise and time".
Seventy-one companies are now involved, which employ over 18,000 people, of which 6,710 have been hired since the companies joined the programme. The aim is that each of the companies will be able to grow so as to create 500 jobs in five years, which would mean a total of 35,500 new jobs. Since entering the programme they have raised a total of $1.3bn of capital, or an average of $18m each.
“We do two things,” said Epstein. “To be master-conveners of the most impactful growth equity entrepreneurs on the planet, and the funders they need to scale; and the second part is to create the conditions in which they can collide in productive ways. Most of the world thinks we run two week programmes for impactful CEOs. The reality is there are another 50 weeks in the year and the real work is happening behind the scenes. Every month we source a specific key need for each enterpreneur, whether they want to raise funding from a sovereign wealth fund or are looking for a new board director, or are struggling to balance life and work and want to talk to an executive coach.”
Neither Barclays nor Unreasonable are investing in the companies as a matter of course, although that could happen later. The main idea is to give them access to top quality mentors, as well as to let them learn from each other’s experiences, and connect them with funders or other services as needed.
“The genesis was to create as much positive societal impact as possible through job creation and sustainable enterprise,” said Epstein. “It’s also long term remarkably savvy, but that’s just the icing on the cake.”
The “icing” for Barclays is obvious: it gets to spend quality time with the CEOs of a group of preselected, promising companies, some of which might need loans and other services, and later IPOs. “Barclays is not getting any rights or guarantees, but when they step out into the market, looking to raise capital, they are going to go to the one they trust, the one who helped them without asking for anything in return,” said Epstein.
The interaction also gives bankers useful insights into new technologies and trends.
“Three weeks ago we were at the Barclays offices in New York with Joe McGrath, the global head of banking, and the board of the international bank, and ran a session with some of the entrepreneurs,” Epstein said. “They were having this international board of directors diving into the core challenges of the company, and saying ‘I can open up my Rolodex for you’. It’s amazing how much these individuals are investing into these entrepreneurs.”
Goldfarb said more than 1,000 Barclays employees had been involved in the programme, not just during the formal two week programmes, but "well beyond" that.
Barclays staff are spending time with these companies not as part of their ordinary, money-making work, but as an extra. However, Goldfarb said "we don't limit subsequent interactions to specific volunteer days".
For many, it is a welcome chance to interact with companies in a way they would not normally do, either because they are too junior or because their jobs are more internally focused, such as legal, HR or communications. “It was one of the best weeks I’ve had at the firm,” said a member of staff who had been involved.
The minimum size of company that can join the programme is one that has made $10m either in revenue or financing, though Unreasonable will break that rule occasionally for an exceptional company. On average, they have raised $18m of financing and generated $12m of revenue.
“You can’t apply,” said Epstein. “What we’ve learned is that the best CEOs in the world, they don’t apply for anything, because the reason they are so effective is they are focused. We do primary research through our network to identify a cohort – we typically look at 300 to 400 companies and vet them down.”
Unreasonable has about 250 mentors on its books and 130 fellows – CEOs of companies it has worked with. It chooses several social or environmental problems, such as providing clean water, and asks experts in that field, including its network, which companies they think are best at solving this particular problem. This produces better ideas than just asking people to name impressive sustainable companies.
“Then we jump on the phone with the CEO and get a feel for what are their aspirations,” said Epstein. “Do they exercise humility? If they don’t they are going to hate the programme. There are a lot of personal characteristics we are looking for.”
The companies are then whittled down through research and background checks to about 35 for each cohort at the semi-final stage, where a selection committee including Barclays staff decides. Once the final three regional cohorts have been chosen, Barclays employees can vote to choose one of the losing semi-finalists to be included as a wild card.
Companies in the present cohort include Sure Chill, a Welsh company founded in 2008 which has developed a technology, invented by Ian Tansley, that enables a fridge to work without a constant power supply. It uses the unique property of water that ice floats, keeping the slightly warmer, but denser, water below at a constant 4C. This is a suitable temperature for keeping food cool. Sure Chill’s fridge can stay cool for 12 days without power in even 43C heat. The company won a $1.5m prize from the Bill and Melinda Gates Foundation in 2014 and now has devices being used to cool vaccines in 49 countries.
Another, Airlabs, based in London and Copenhagen, has a technology to clean pollutants from air, which has been developed for use in cars, is deployed in Stella McCartney’s London store, and has even been used to create an outdoor clean air zone in highly polluted New Delhi.