Venture Firms Do a World of Good
Feb 17, 2009

The Wall Street Journal

The venture capital industry loves to tout itself as the engine behind job growth and innovation in the U.S. economy. Indeed, venture firms have backed companies that have accounted for millions of jobs over the years and produced household names such as Apple Inc., FedEx Corp., Google Inc., Intel Corp. and Microsoft Corp.

One could state, however, with perhaps equal weight that the venture capital industry has also supported a fair share of rickety business models and frivolous technology, with hundreds of millions of dollars from pension funds and endowments whose money would have been better served elsewhere.

Underneath it all is the so-called socially responsible investment, that rare moment when venture capitalists put money in companies that have the potential to transcend the "Don't Be Evil" mantra made famous by Google. These are companies that exist not only to make a buck or to solve a problem, but to simply do good. The trick - as Paul Graham, one of the founders of seed fund Y Combinator, describes in a poingant essay on the subject - is whether a for-profit business can succeed behaving like a nonprofit to people who don't have money.

A number of smaller investment firms, such as TBL Capital and Funk Ventures, whose limited partners are individuals rather than more demanding institutions, have centered their investment thesis on backing companies that make a social impact. Rarely, however, do we see big-name venture firms going this route because they don't want to seem to their investors like they put social good ahead of strong performance.

Perhaps Draper Fisher Jurvetson, one of Silicon Valley's most well-known venture capital firms and a major backer of clean technology, believes there's a way to do both successfully. Last year, D.Light Design, whose charitable mission is to replace toxic kerosene lighting for developing world villagers with solar-powered LEDs, raised $6 million in funding from several venture investors including DFJ.

Today, VentureWire details another do-good start-up backed by DFJ that opens up a marketplace connecting artisans in developing countries with shoppers in America. World of Good Inc., which has raised a total of $5 million in financing since its founding in 2004 from DFJ and Omidyar Network, including a recent follow-on round, creates customer product lines from homemade goods from more than 30 countries and sells them to retailers like Whole Foods Market Inc. With the help of eBay Inc., in September it launched an online marketplace where a much larger number of small producers can sell their products directly to consumers.

While making a profit and helping distant producers may not always be seen as similar goals, Priya Haji, a co-founder of World of Good, said it's possible if that's what consumers want. "These things are highly aligned…as long as you clearly understand your consumers and build in a practical, implementable way," Haji tells VentureWire. Read the story here.