Socially-conscious business is booming
By ALEXANDRA BISSONNETTE Special to the Daily Press
THIRD STREET PROMENADE Venture capital firms do not usually evoke images of socially-conscious young people paving the way for innovative and obscure companies, but what else would you expect from a Santa Monica-based firm.
Funk Ventures, founded by Andy Funk in 2000, is a venture capital firm that prides itself on its socially-responsible investments.
“It is possible to do well financially and make an impact,” Funk said. “That is the underlying basis of this company.”
Funk, the youngest founding member of a venture capital firm in the United States, built Funk Ventures from the ground up when he was just 24 years old.
At age 18, it was assumed that he would take over Funk Gruppe — one of the largest insurance companies in Europe — which had been run by his family for six generations. Instead, Funk bought a one-way ticket to America to create his own entrepreneurial successes.
“I wasn’t interested in running something that was already perfect,” Funk said. “It was the best decision I ever made.”
After traveling across the country, Funk ended up on Ocean Avenue in Santa Monica and decided to set up camp. He lived off of credit, managing to get himself into a quarter million dollars debt by the time he was 20-years-old.
Eventually, his first three business became big hits, and Funk was on his way to pioneering his own venture capital firm.
Funk was a philanthropist from the beginning. One of the first companies he founded was helping.org — also known as Network for Good — which allows people to give money to any number of charities online via one convenient Web site that keeps track of donation records.
The success of the Web site was realized following Sept. 11, 2001, when helping.org became the greatest contributor to relief funds, second only to the Red Cross.
Funk was drawn to venture capital early on, calling it the “back-bone of the American financial market,” but also noting that “the VC community is a niche community.”
“It’s still a very small group,” said Ludwig Chincarini, assistant professor of economics at Pomona College, of the socially conscious venture capital firms. “But they have noticed a trend in society toward environmental friendliness and they are looking at it from the profit side.”
Funk, realizing this trend and being a philanthropist himself, seized the opportunity to start his firm.
“I felt that a for-profit company could really make a significant impact,” Funk said, citing the challenges associated with non-profit organizations. “The problem is that half of the money that a non-profit raises has to go to raising more money. Often in the end only 10-15 percent goes where it needs to go.”
Thus, Funk created Funk Ventures as a for-profit company with non-profit ideals, allowing investors, the company, and the people to do well.
It was not always an easy road for Funk Ventures.
“People used to laugh at us,” Funk said. “They thought we were just a bunch of tree-huggers, but now we’re considered pioneers.”
When choosing business plans or ideas to invest in, Funk Ventures looks into three categories: clean technology, medical technology, and health and wellness.
Since the company was founded, it has successfully invested in 18 businesses, all of which have a socially-responsible cause.
Among the innovative companies in Funk Venture’s portfolio, one can find Virgin Charter, a company founded by CEO Scott Duffy that allows people to book the empty legs of privately chartered aircrafts, thus reducing the number of empty flights and unnecessary pollution.
When billionaire Richard Branson heard of the start-up, he decided to invest as well.
Funk Ventures was also involved in Prolacta Bioscience which provides fortified breast milk to babies born prematurely, and Lucky Earth a company that has recently been gathering steam for its waterless car wash solution.
“We didn’t have enough capital or operational knowledge to continue to grow,” said Lisa Peri, founder and CEO of Lucky Earth. “We are relieved to have Funk hold our hand.”
The latest in Funk Venture’s investments is Cyber-Rain, a unique sprinkler controller system that downloads weather information from the Internet and waters lawns accordingly.
“Millions of gallons of water are wasted on lawns,”Funk said.“But these units always know what is happening. They can save people 20-30 percent on their water bills.”
Given that California is currently in a drought, Cyber-Rain is a particularly noteworthy product. Additionally, many cities — including San Diego and Orange County — and the Metropolitan Water District give rebates for household use of Cyber-Rain, making it virtually free for consumers.
The partnership has worked well for both the investors and the Cyber-Rain company.
“We really wanted investors with the common goal of environmentalism,” said Reza Pourzia, founder and CTO of Cyber- Rain. “They [Funk Ventures] could really relate to our product.”
When asked how he chooses which companies to invest in, Funk replied, “I always know, it’s kind of scary. If the founder doesn’t believe in social progress, the company becomes all about the money and the purpose goes away.”
This is why Funk places as much importance on who he is working with as he does on the product itself.
While Funk Ventures could certainly expand beyond their current firm of seven people, Funk doesn’t see it growing above 20. “We want to stay small,” Funk said. “A billion dollar investment firm can’t do what we are doing because when you give a company $10 million off the bat, it becomes prohibitive.”
By getting these socially-responsible business off the ground, this Santa Monica-based VC firm is making it easier for many to access the tools they need to become socially-responsible citizens.
“People want to do the right thing,” Pourzia said. “You just have to make it easy for them.”
Originally published in the Santa Monica Daily Press print edition on July 18, 2008. Read the original PDF.