‘It is all about growing companies that offer solutions to the problem’ Meet the Future Business Partnership, Vish Srivastava and Tracey Huggett – private equity, but far from business as usual.
Vish says, ‘Tracey and I both have a background in building consumer brands by investing in them, equipping them with capital but also expertise from our network. ‘We are using what we know to be part of the solution to a sustainable future by building a specialist impact fund. It’s no accident that I stepped out of my last job the year my son was born, and that Tracey has a 13 year-old, eco-warrior daughter. We want our kids to see us a part of the solution, not part of the problem. We both had very successful careers as investors in consumer brands and we want to use our core skills to make a difference.’ With track records that between them include Bluegem Capital, Terra Firma, DB Partners, MidOcean and Neo, the pair have invested £650m between them in their previous roles.
Vish explains the investing focus for FBP, ‘Household consumption is responsible for more than 60% of greenhouse gas emissions globally and a huge amount of resource degradation. But what is all that resource being used for? If you think about fast fashion, food and waste, packaging, deliveries, beauty products, cleaning products – the answer is right there.’
‘We know that environmentally-focused consumer businesses can provide solutions to this, that they can change their sectors. There have always been consumer brands who were fantastic champions for environmental and social change; Patagonia is still the best known example.
‘Although the most deserving of capital and expertise, in terms of growth we noticed that this type of company didn’t engage with private equity. Why? Because bluntly, our sector does not have a great reputation. In his autobiography, the Patagonia founder Yvon Chouinard wrote that he would never let a PE firm get its hands on Patagonia. He argued that the obsession with short term profit generation at the expense of the environment and people would ruin it. His motivations were different. He was building an enduring company that would create a positive impact through its operations. This was the inspiration for us. We thought, ‘What if we build a different type of PE firm, with a different type of investing and legal structure?
‘We set ourselves the challenge to build a PE firm that is a real engine for growth in purpose driven, environmental champion brands; driving change in the consumer sector with products that make it easier for consumers to make sustainable choices without sacrificing price, quality or convenience. We wanted to work with founders ready to scale, companies that we could help make a bigger impact with investments between €5 – €30million.
‘But what right did we have to access that sector? Why would those companies want to work with us if they don’t want to work with anyone else? Then we came across B Corp and it fit like a glove. We understood the idea of building a company for the benefit of all stakeholders, not just shareholders, but it was important to reflect that in our legal structure up front. Then we did something unusual for our sector, pushing further than anyone else in linking our fees to the impact of the companies we invest in.
‘We decided to link 100% of our ‘carried interest’ [PE speak for our success fees] to the achievement of social and environmental progress within our portfolio companies. We needed to be able to measure this by reference to an external, independent methodology that means we can benchmark, and it also had to be robust in incorporating all aspects of ESG, not just the products, but the companies and supply chains behind them too. When we looked to see what was out there, the B Corp certification was the best methodology.
‘B Corp isn’t just a yes/no certification, it is a set of questions that generates a score that can go up or down like a profit and loss account. It offers a plug and play solution that enabled us to say – let’s have a different financial structure, let’s link our incentive to the achievement of measurable environmental and social goals. If mission-focused entrepreneurs fear that our industry is only incentivised by short term profits at the expense of everything else and that’s what prevents us being the right investor for their businesses, then let’s change that.’
And change it they have. FBP is building an impressive pipeline of opportunities, closing two investments to date; Big Green Smile, and Naïf, a rapidly growing European e-tailer and curator of eco-friendly and socially responsible home and personal care products and a Netherlands-based baby care retailer focused on environmentally friendly products. Vish, Tracey and their expanding team make no secret that FBP likes companies already in the B Corp movement as the certification acts as an extra layer of due diligence, but it’s not essential. Their mission after all is to deliver demonstrable impact, so helping companies certify and improve their score is all part of the process. And they maintain there is always scope to work with even the highest scoring B Corp companies to help them develop even more sustainable and socially responsible supply chains, particularly as they internationalise and grow.
We predict that being an FBP portfolio company is going to be a much sought after label in its own right as this disruptive private equity firm builds its reputation for picking winners and proving that being good is also good business.
