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Dr Finian Tan is a venture capitalist who invests in a better future
The founder and Chairman of Vickers Venture Partners on impact investing’s role in funding a better world.
By Dr Finian Tan /
When we invest, we expect outsized returns. This is the fundamental paradigm in which we, as venture capitalists, operate in the investment market. It may seem simple, but we can’t expect to continue profiting when our resources from humankind and nature are depleting.
For this reason, rethinking the ways in which we invest is essential. While we invest in portfolios that generate profitable returns, we also need to be intentional and conscious about including investments in sustainable and inclusive growth areas that create paths towards a healthier planet and society.
With a mission to fund a better world, I am often asked what is the ROI?
Data from the Global Impact Investing Network showed that a majority of the estimated US$1.164 trillion (S$1.57 trillion) worldwide impact investment market produced market rate returns in 2022. On average, impact funds have lower volatility compared to non-impact funds.
Related: Venture capitalist Jeremy Tan never forgets his Toa Payoh roots while building a better world
We have seen this in our portfolio performance. Since we started focusing on breakthrough technologies with social impact, our failure rate has dropped and our home runs have increased, resulting in much better and stable ROIs.
There are a few reasons for this. Firstly, there are hardly any market risks in such breakthrough investments. The demand for a cure for cancer or sustainable baseload geothermal energy is large, known and ready. Compare this to a new social app that is supposed to enthrall users in a new way — a next-generation TikTok, for instance. A crystal ball is needed to predict the success of the latter.
Secondly, since the key risk is whether the technology works, it is possible to mitigate this through good analyses of the discovery. So, our focus has been to ascertain whether the tech will work. When it does, the returns could be ten or even hundredfold as it would be the only solution to a huge problem with an unmet need.
The world’s most pressing problems are great opportunities. In our view, the financial winners of tomorrow will be those ventures that provide solutions to today’s problems.