‘Impact investments’ VC wave of the future, says Peres scion

In some circles capitalism is a dirty word, because, its detractors claim, it puts “profits before people.” But even among capitalists themselves, there’s a growing realization that people count – and more than ever, investors who are looking to make money are putting their money into companies that not only do well, but do good, too.

“The world used to be divided in two,” according to Chemi (Nechemia) Peres, managing general partner and co-founder of Pitango, one of Israel’s biggest venture capital funds (and son of former president Shimon Peres). “If people wanted to support a cause, they would make a donation, and if they wanted to make money, they would make an investment. Today there is a lot more willingness and desire among investors to meld the two, and that is what we call impact investing.”

To that end, Peres is working with Yair Safrai on Impact First Investments. Supported by Pitango (Peres is a member of Impact First’s advisory committee), the new firm, chaired by Safrai, raises money on both the “donation” and “investment” tracks for promising tech start-ups.

“The donations are just that, while the investments are regular venture capital investments that remain in the company until there is an exit,” said Peres. “At that point we sell the shares or distribute the income from an acquisition deal and distribute the money to investors. Meanwhile, the money invested helps to develop a tech idea that has a positive impact on society. We act like a small VC fund for socially driven tech.”

One of Impact First’s investments, for example, is a company called Catalyst AgTech, which produces a catalyst that, when added to chemicals and pesticides, accelerates a chemical reaction with molecules when they settle into the ground, destroying them. The company’s technology is designed to alleviate the damage pesticides, fertilizers, and other chemicals do to the environment.

One such catalyst, called B12, is added to a specific pesticide, and when it hits a certain set of conditions in the ground, “the catalyst accelerates the breakdown of the molecules,” according to Shalom Nachshon, CEO of Catalyst AgTech. “It’s a simple and eco-friendly method of dealing with chemicals, allowing farmers to do what they need to do in order grow as much food as possible.”

Chemi Peres (Courtesy)

Another Impact First investment is EarlySense, makers of “smart bed” technology that records data on how individuals sleeping, how often they toss, turn, wake up, and fall back asleep, breathing and heart rates, and more. Designed for use in non-emergency room or even home settings, the system uses sensors embedded into a mattress or chair cushion to monitor heartbeat, respiration rate, and movement – the theory being that the more a patient moves around in bed, the healthier they are, in general. The data is transferred to a monitoring station, either local or remote, with the system setting off alarms in the event that something appears amiss. In use in thousands of hospitals, nursing homes and home settings around the world, and according to hospital studies, over 90% of staff said that the system was useful in stemming and preventing patient deterioration.

But EarlySense’s technology has commercial appeal, too; the company has developed a sleep monitor that can be part of a “smart home” solution, integrating with other smart systems – turning on and off heaters when a user is under the covers, turning on the automatic coffee machine and brewing a cup of coffee a few minutes before the alarm goes off, or turning off the home alarm when an individual gets out of bed.

In January, Korean tech giant Samsung invested $10 million in EarlySense, providing the company with funds to develop its IoT solution, which is being presented at this week’s IFA event taking place in Berlin. “Building upon the success of our contact-free monitoring solution in the hospital setting, our core technology can make a similar impact for consumers who want key information on their overall wellness,” said Liat Tsoref, VP & GM of the Digital Health Business Unit of EarlySense. “MyEarlySense is the next logical step after wearables – which we call ‘invisibles.’ We are proud to offer an extremely accurate, contact-free device to manage personal wellness and sleep patterns. Our solution can benefit everyone in taking better care of themselves and their loved ones.”

EarlySense, Catalyst AgTech, and the other companies in Impact First’s portfolio are doing good – and have the potential to do very well for their investors. “That’s the model we follow,” said Peres. “We measure potential investments on two different tracks – the social impact of the product or service, including examining the motivation of the founders, as well as the financial viability of the business. We want the technology to be sustainable, meaning that it will be useful to a large number of people, both within and outside its target market. It doesn’t have to be a big idea like Facebook or Google, but we need to see some potential in it,” said Peres.

The firm uses the internationally respected Global Impact Investing Ratings System (GIIRS) to assess the social and environmental impact of companies and funds with a ratings and analytics approach.

In business for about six months, Impact First has made five investments so far, and has several more in the works, said Peres. “We take referrals and conduct due diligence on promising-looking firms,” said Peres. “It’s a lot like ‘regular’ investing; we’ve taken the proven tools and methods that work in the tech venture capital business and applied them to impact investing.

“There are other impact investing firms in the world, but we have a unique model in our combination of donations and venture capital-style investing. I am hoping this will be a model for others,” added Peres. “Sooner or later, I believe, all investments will be measured by two standards – financial returns and social impact, if the trends I am seeing among investors continue. We’re very proud to be developing this in Israel – we can be a technological and investment model ‘light unto the nations.’”