I think the time has come for a serious conversation about the role we (the VC community) play in company building–and our need to think more deeply and with greater intentionality about what we’re making, who it serves and how it’s built.
I recently returned from Helsinki where I was a keynote speaker at Slush. I was there to talk about responsible innovation–the theme of my new book with Kevin Maney: Intended Consequences: How to Build Market Leading Companies with Responsible Innovation (McGraw Hill, January 25, 2022)
The term ‘responsible innovation’ may be new–but it’s not a new thought for me. I have been thinking and writing about this topic for years. In fact, I was first at Slush with Kevin in 2017 launching our first book Unscaled…and a lot of this work has been a continuation of the thinking from there.
At its core, responsible innovation is a framework for building enduring companies that are engineered at the outset for both growth and good. It rejects the old Milton Friedman philosophy that the sole purpose of corporations is to maximize shareholder value. Instead, it embraces the belief that the very best companies are only going to be created at the intersection of financial and societal return. Responsible innovation rejects the false duality that you can either make money or do good; we believe that increasingly the only way to thrive as an enduring business will be to do both…to have a successful business will also mean having a positive impact on the lives and livelihoods of people everywhere. That’s how innovation will take hold in the future.
We in the venture capital space are sitting in a very unique position. We are founding, funding, nurturing, advising and shaping the next generation of leaders and market-leading businesses. We have a unique opportunity–and a real responsibility–to use our influence and our leverage to ensure that they are engineered to avoid unintended consequences, enable broad participation, and benefit not just a few but people everywhere. We can ensure that tomorrow’s companies are being built with intentionality and mindfulness of impact. It all starts with a mindset to ask questions like: What difference or change are you trying to make in the world? Who will benefit or get left behind? How do we think about all our stakeholders? How do we align our business models with our desired outcomes?
The stakes for what we are doing as an industry have never been higher. When I started in this business 20 years ago, all of technology investing was about driving efficiency. Software was there to make tasks more easy, more seamless, more streamlined. But today we’re reimagining whole industries through technology. If we’re successful, the companies we build today will dominate every aspect of modern life…including healthcare, education, commerce, security. We are building banks, insurance companies, healthcare services, schools…so the sense of responsibility is far greater. We are fundamentally transforming the core pillars of the economy and the fabric of modern society. So we need to learn from the recent bitter lessons about unintended consequences and do better–as an industry and as a community. The old mantra of ‘move fast and break things’ is an engineering design principle…it’s not a society design principle.
This is not something we can rely on the government or regulators to do on our behalf, because the technology has changed so materially. There was a time when the government could provide oversight by sending armies of experts to technology campuses to observe the business. But in this new AI world, there is little to observe. Do you send regulators to stare at servers in big tech companies’ data rooms? It’s not unusual for a powerful new technology to baffle our lawmakers. We don’t elect people because they’re experts in tech, we elect them because they are experts at governing.Today’s regulators lack the deep understanding of the technology and the access to the underlying information that is driving so many of these decisions. It’s up to us to think hard about the inputs that go into company building–and get it right from the beginning and at each infection point along the way.
I know there’s a lot of cynicism and skepticism in the VC space around this topic. And make no mistake–I am a hard core venture capitalist who cares deeply about driving returns for our investors. We all know that the best investments are the ones that compound over long periods of time. The only companies that are allowed to compound for a long time are the ones that are in the long term interests of society. Therefore, we need to appreciate that there is a false choice between impact and financial return going forward. I believe the next generation entrepreneurs and investors implicitly understand this. My hope is that this new tech diaspora will embrace this way of thinking as it invests in the next generation of market defining companies.
This last year and half has been an amazing time for the venture business, as every part of the economy has had to innovate. We’ve seen many of our portfolio companies like Stripe, Color, Gusto, Guild Education and Canva really thrive during this golden era for innovation. But we also need to acknowledge the uncomfortable fact that while the VC business is flourishing, society itself is in turmoil…and that is not a harmonious state. Many, many stakeholders are hurting. If we’re not building with intentionality and with this broader set of these stakeholders in mind, we will wind up creating the economic and institutional underpinnings to a society that is neither equitable nor sustainable. Something is going to break, and none of us want that to be our legacy. In truth, this is my biggest fear for the future.
Earlier this week we announced the launch of the Responsible Innovation Labs (General Catalyst is a founding partner andI am a co-founder and chair of the advisory board). The Labs’ mission is to create standards of innovation to meet the needs of a global society, and build enduring companies that re-center technology as a force for good. Its initial areas of focus will include economic opportunity and inclusion; environment and sustainability; diversity and workforce transformation; data privacy, safety and security, and intentionality and impact. At General Catalyst, we will be adopting the principles of responsible innovation (with our portfolio companies and for ourselves) and will be sharing our own journey over time. We will also be donating all book proceeds to the Labs. This is just the first of many steps we’re committing to take.
Now is the opportunity for us all to set down the right path and to build the companies that are on the right side of history, with fewer unintended consequences and positive outcomes for people everywhere. My hope is that others will be inspired to join us in this responsible innovation movement. The choices we make now will determine the future society we all live in.