Alex Kremer joined US-based clothing company Patagonia’s Tin Shed Ventures almost two years ago after pursuing an MBA at the Tuck School of Business at Dartmouth College.
He said: “Being part of Patagonia’s small corporate venturing team, I am able to lead all aspects of the investment process from identifying new opportunities to the final investment decision to supporting companies in our portfolio.
“Patagonia’s mission statement is to build the best product, cause no unnecessary environmental harm and use business to inspire and implement solutions to the environmental crisis.
“The role of Tin Shed Ventures is to fulfil that mission, and more specifically, by using business and investment to inspire. We aim to generate financial returns that are in line with traditional venture funds. One of our main goals is to demonstrate that investors do not need to sacrifice financial returns when investing to also make a positive environmental and social impact.
“I was drawn to CVC at Patagonia [in 2016, after a summer associate position at DBL Partners,] because it allows me to leverage the ability to leverage Patagonia’s commitment to environmentalism that it has demonstrated over its 40-plus year history and have it guide investment decisions.”
These deals include speciality flour mill Watershed Mills, California Safe Soil, which is creating organic fertiliser from unsold produce, NuMat Technologies, a materials technology company developing a nanoporous material that can change how gases are stored, transported and separated, Wild Idea Buffalo, a provider of grass-fed, naturally-raised buffalo in the US, Yerdle, a “stuff-sharing” app, Beyond Surface Technologies, a Switzerland-based chemicals company developing natural textile treatments, CO2 Nexus, which cleans and coats textiles with liquid carbon dioxide, and Bureo Skateboards, which recycles defunct fishing gear to produce skateboards and help keep oceans free from dangerous plastics.
By having an evergreen fund structure, Patagonia has no set hold period for portfolio companies, and, as a B Corp – a company certified to be pursuing a mission involving standards of social and environmental performance, accountability and transparency – it encourages entrepreneurs to use the corporate structure as a way of combining financial and environmental goals in their mandate.
From the original investment date though to the end of 2016, Tin Shed Ventures portfolio companies have averted about 27.7 million pounds of carbon dioxide emissions, 5 million pounds of waste, 2 million pounds of chemicals, and saved more than 100,000 gallons of water, according to Kremer’s boss, Phil Graves, a winner of the GCV Powerlist last year.
Kremer said: “Given that the fund is still in its infancy, we are still awaiting our first exits, but, to date, I am very pleased by our portfolio’s performance. I am especially excited about the success we have had inspiring major, international corporations, which have reached out to Tin Shed Ventures to understand how best they can invest their corporate dollars, while keeping the environment in mind.
“After taking advantage of the solar investment tax credit and launching our second residential rooftop solar fund alongside a coalition of B-Corps, Fortune 500 corporate development and investment teams (much larger than that of Tin Shed Ventures) contacted us to learn about how they could imitate the investment structure we used.
“Since then, just a year later, one of those Fortune 500 companies has launched their own solar fund. Inspiring other businesses motivates me and exemplifies how Tin Shed Ventures embraces the final tenant of our mission statement to ‘inspire solutions to the environmental crisis’.”
However, Tin Shed’s focus on full transparency into all aspects of a startup’s operation, means it can pass on an opportunity for even the smallest red flag, he added. Kremer said: “As Patagonia’s founder, Yvon Chouinard, is quoted as saying: ‘Leading an examined life is a pain in the ass. It adds an element of complexity to business that most businessmen do not want to hear about.’ I try to keep that in mind when evaluating an opportunity that has a lot of potential, but may need to focus on some of the less exciting details of the business, in order to ensure that the existence and growth of that business will benefit our planet.
“Two things I am most proud of at Tin Shed Ventures is our unique, long-term investment approach and our decision to share the innovations in which we invest with other businesses, including our competitors. Because we are the investment arm of a private, family-owned business, we have the ability to be patient with our investments and not be tied to a predetermined timeline.
“Second, while Patagonia wants to help develop an innovation and pull it through our supply chain into a final consumer product, whether it be a Patagonia Jacket or a food product as part of Patagonia Provisions, we realize that we are doing our portfolio company (and our investment) a disservice if we are the only customer. Therefore, once an innovation is commercialised, we actively approach others in the industry, even our competitors, and give them a roadmap for adoption.
“With increased adoption beyond Patagonia, not only are we benefitting as an investor, but because we focus on investments that generate an environmental and social return, this benefits the planet as well.
“Oftentimes, entrepreneurs are hesitant to work with CVCs or standalone VC funds because of the exclusivity required (for CVCs) and the focus on a fixed investment timeline (standalone VCs). Many of our partners note these two features as critical to why they wanted to work with Tin Shed Ventures versus other venture capital funds (both CVC and stand-alone funds).
“Therefore, when thinking about how CVC could improve, I encourage CVCs to consider alternative investment models and make sure to leverage the myriad of corporate and industry resources in order to encourage top entrepreneurs to seek out CVCs for funding.”
If ice hockey great Wayne Gretzky – Kremer played the sport throughout high school and college and still does two to three times a week near Santa Barbara – is right and life is about skating towards where the puck will be then other investors might well find Kremer already there.