Giant Leap venture capital fund seeks impact businesses for investment

Giant Leap Fund has become Australia’s first venture capital firm investing in impact businesses and is investing in businesses that “blend financial returns with deep social and environmental impact.”

The $15 million fund is owned by Impact Investment Group, and is investing in businesses that are scalable, tech-enabled and match social and environmental impact with profit.

“The purpose of Giant Leap is to demonstrate that businesses that fuse profit and purpose actually outperform businesses that don’t,” says Will Richardson, Giant Leap Fund chief investment officer. “The best way to do that is to test our thesis with start-ups because they’re fresh and brand-new and they don’t have any baggage. One of the things we love about investing in start-ups is that as they scale the business, the impact scales as well, and for us, that’s really what excites us, because we’re looking for outsized social and environmental impact.”

One of those companies is Perx Health, a user-first smartphone app that motivates people to take medication as prescribed through providing rewards and games as well as instructions on adhering to medication. While the Perx app is downloaded on users’ phones, access to the platform is sold to enterprises such as health insurers and pharmaceutical companies, which then offers app access to their customers.

“Our model is B2B2C,” says Hugo Rourke, a founder of Perx Health. “We sell to large enterprise customers, and those enterprise customers have groups of customers that they particualrly care about. For a health insurance company, those are the users with a highest risk of hospitalisation because they’re not adhering to their medical routine, based on the conditions they have, behavioural impacts have shown over time. We work in public health and with pharma companies. We sell to the big enterprise systems who have an interest in the health of the end user.”

The goal is to use gamification, community support and engagement to encourage people to adhere to their medication regimes with more patience, which results in better health outcomes and reduce heath costs, Hugo notes.

“We want to change the way people feel,” Hugo says. “In our first year of live trials, people were saying this fundamentally changes the way I feel about my condition, or my medication. They say ‘I’m excited about taking my meds rather than bored or even stigmatised.’ Reviews talk to that exact point.”

Perx Health’s impact metric is the rate of adherence patience, and depending on the terms of the contracts written with their enterprise customers, the target range can be between 75% and 90%  of the end user group, Hugo says.

“We’re working with NSW Health and doing a small case study with diabetes,” Hugo says. “In diabetes, adherence to insulin injections can be as low as 40%, and oral meds can be 25-50%, which is to say that more patients are taking medication poorly than are taking them well. This is a huge opportunity to change the lives of those patients and change the costs if we can ingrain good habits.”

Perx Health is looking to scale into the overseas markets in Europe and the US, Hugo says. Perx dual health impacts and potential profit are what Giant Leap looks for, Will says.

“We’re looking for businesses that have impact embedded in the revenue model,” Will says. “As they make revenue, there’s measureable social or environmental impact from that revenue. On the commercial side, we want businesses that are scalable, usually tech-enabled, and looking for large markets where there’s a pressing problem that can be solved through business. We’re trying to identify remarkable founders who are missionaries rather than mercenaries.”

Another business the fund has invested in is GlamCorner, an online designer dress hire service that matches high fashion with an evionmental message.

“We initially set out to save a basic problem for our customers – the average Australian women who only wears one third of what’s in the wardrobe,” says Dean Jones, co-founder and CEO of GlamCorner. “We realised, there’s an opportunity here, because we saw an industry where the end customer was getting a bad deal, in that they have these silos in their wardrobe of money they’d spent and never go the full value from. We’re providing a better deal for that individual person. But what we realised is that  basically, this customer is changing the way she’s consuming fashion and apparel. As we grew, we learnt more about the fashion industry, and we found that the fashion industry is the second most polluting industry on earth, meaning that disposable fashion was a bad deal for customer, and bad for the environment. This is something we wanted to get better at, because our customers say ‘I love renting my clothing because it’s a more sustainable way to get dressed for the occasions we need to get dressed for.’ That matters to us, and it matters to our customers.”

Dean says GlamCorner processes 15-20 tonnes of apparel a month, and on average, each item of apparel is worn 20 times before it’s “no longer as good as new,” Dean says. GlamCorner hires a team of seamstresses and operates an environmentally friendly garment care facility on its site.

“If 20 women share the same item of clothing, that’s 19 other items that don’t get purchased,” Dean says. “That’s a 95% reduction in the footprint required to satisfy that same amount of demand. Our standard is as good as new every time. An item doesn’t get out unless it’s’ clinically cleaner than it went out, and checked by the seamstress team, as good new. We’re getting better at that over time – as we get bigger and our merch team are requiring more durable items that work for our clients, that average is coming up over time. We have the stats to show, Australian women have been sharing for a long time, but that can be done at an even bigger time. That network of friends can be a lot bigger, if someone in the middle like us is holding the inventory.”

Dean says that by bringing on Giant Leap as one of its investors, the fund gave them support on the dual impacts of profit and environmental aims. GlamCorner is a B Corp, a process that the fund supported them through.

“From day one, we had a natural conversation with them about where we want to take the company and why,” Dean says. “It was an ideological eye-to-eye moment about how much good can a company do in the short term and the l/t in terms of changing the supply chain in the fashion industry. In terms of a slam dunk business partner, they fit the bill. … We were looking to become a B Corp anyway, and when we found out they look to invest in B Corps, we knew they wre they type of partner we were looking for. After we finished the funding round, Giant Leap  were part of the GlamCorner investment family, they were super helpful in resources and advice, and we got our B Corp certification in 4-6 months of Giant Leap Fund investment. They helped us by making intros tot the B Lab team, so we could get what we needed done as swiftly as possible.”

Giant Leap emphasises that there is not a trade-off between profit and purpose.

“We’re not trading off financial return for social impact,” Will says. “We’re actually looking for business that can generate 10 times our investment as they scale, and generate outsized impact.”

The fund has a 10 year time horizon, and looking to the future, Giant Leap will seek to raise a second round of venture capital funds of $15 million, Will says.

“We take minority interests in the companies we invest in – we don’t control the exits,” he says. “Our strategy is more typically to see our companies acquired by a larger company, or list on a stock exchange.”

The fund measures impact produced by their invested companies, but the metrics are bespoke and the result of discussions between the fund and the company, Richardson says.

“We don’t see that there is a silver bullet to impact investment,” he says. “There isn’t an impact calculator, as much as we wish there was. We meet with founders, we try to understand their intentions behind the business, we co-design a metric with them, dependent on the industry, and then we ask them to commit to report on that metric on that basis, not just to us, but more broadly to the public because we believe that is what brings about change, a commitment for sharing the impact metrics that they have committed to.”