The story of Renewal Partners and urban food delivery. How two wealthy American-born, Vancouver-based heirs hope to change the face of venture capitalism by changing the world.
The headquarters of Small Potatoes Urban Delivery (SPUD), off an alley near Hastings and Commercial in Vancouver, is a 13,000-square-foot warehouse that smells faintly of celery and green onions. Milk crates, a compost barrel full of carrot tops and several newly arrived pallets of natural orange-mango soda crowd the receiving bay; at first the warehouse looks like the backroom of an organic grocery store. But instead of a glossy retail floor, the dimly lit interior is a maze of assembly-line tracks, where employees in jeans and T-shirts fill customer bins with grocery items – 1,300 in all, including recycled paper towels, frozen organic burritos, glass bottles of milk, free-range ground buffalo and the eponymous small potatoes (this week, white nuggets from Fraserland Farms). After pickup the bins will be delivered to customer doorsteps from White Rock to Pemberton via the company’s trademark purple vans.
The grey hairs of 10 years of entrepreneurial stress notwithstanding, SPUD’s founder David Van Seters is fresh-faced and laid-back. Before we enter the produce cooler, he points toward the ceiling. “We eliminated 60 per cent of the lights, then we switched out the last 40 per cent to energy-efficient bulbs,” he says. “We’re very tuned in to keeping energy use down. This is not like a supermarket, where you’ve got open freezers just pouring energy out.” Web-based grocery delivery is a tough haul for an entrepreneur: it’s a high-volume, high-overhead business with perishable product, fussy technology and low margins. Van Seters’s appreciation for conservation is typical of so-called “blended values” or triple bottom line entrepreneurs – who place equal value on people, planet and profits – but even in that elect company he has more respect for efficiency than most. Unlike web-based grocers Webvan, HomeGrocer and Streamline, SPUD survived the dot-com bust of the late ’90s and has since maintained a 20 per cent annual growth rate. New warehouses modelled on its Vancouver operation have sprouted in Calgary and Victoria, as well as in Seattle, Portland, San Francisco and Los Angeles.
Between December 2007 and April 2008, the company doubled in size, thanks to recent expansions into the latter three American cities; over 16,000 customers now order from its selection of natural, mostly organic groceries, while annual revenues exceed $24 million. Though well-oiled and impressive, SPUD’s is not the kind of operation usually associated with paradigm shifts and global economic transformation. But for Carol Newell and Joel Solomon of Renewal, the company is a star case study in their “portfolio of stories,” proof of a theory of social change hatched in the early ’90s – and just possibly proof that social venture capitalism can save the global economy from itself. In the mainstream venture capital world, an entrepreneur focused on anything but fat profits is a leper. Venture capitalists tend to prowl for high-tech bets they can flip in three to seven years, hopeful of a three-to-one payout for their trouble. They don’t look kindly on ethics or social mission DNA that might temper quick growth. “When you’re in the realm of having to achieve a billion dollars valuation in three to five years, you have to be absolutely single-minded and sacrifice whatever needs to be sacrificed to get there,” agrees Solomon, Renewal’s president and CEO. This has left countless idealistic entrepreneurs such as Van Seters grinding in low gear, stuck in the friends-family-credit-card round of financing. But in the social venture capitalism (SVC) model pioneered by Renewal and a handful of other funds across North America, investors screen for social purpose, taking their time to turn lepers into wealthy apostles. “We’re a long-term investor with an eight-to-12-year frame, which gives social mission DNA time to take root and become profitable,” he says. “Some call it patient capital, but it’s an investment strategy.”
Since 1993 Solomon has acted as the public face and central strategist for Renewal. Bankrolled entirely by Carol Newell’s inheritance, Renewal’s mandate is to “fund change,” using business and philanthropy to promote conservation and social justice. Renewal houses several independent entities in three categories: grant making, collaboration and SVC. On the grant-making side is the Endswell Foundation, which since 1991 has funded a long list of non-profits, including Rivers Without Borders, Forest Ethics Canada and the Pivot Legal Society. Collaboration projects run by Renewal include the Social Venture Institute (networking retreats for triple bottom line entrepreneurs such as David Van Seters) and invitational “Play BIG” events that teach wealthy progressives how to get the greatest social bang for their philanthropic buck. The investment arm, meanwhile, comprises Renewal Partners – a seed- to expansion-stage SVC firm that, in addition to SPUD, helped kick-start juice company Happy Planet Foods Inc., Salt Spring Island Coffee Co., Horizon Distributors and socially responsible investments (SRI) screener Jantzi Research Inc. It will also soon include Renewal2, a $30-million to $50-million fund that, for the first time, brings in outside capital for early-stage investments. This is a lot of social leverage for one foundation. On the SVC side, Renewal’s partners kept quiet about their investments for 15 years, waiting to see if the startups they’d nurtured would achieve profitability.
They have, or many have, and, now that the mystery investor has stepped out of the shadows, it appears that the story of SVC in B.C. – if not Canada – is largely the story of Renewal. The Renewal story, in turn, is a tale of two heirs: Carol Newell and Joel Solomon. Newell, 52, is bright-eyed and high cheekboned, with a few streaks of grey in her brown hair. Sans makeup, she has a healthy, no-additives glow. While Solomon was the public face of Renewal for over a decade, Newell spent nearly the same period living in anonymity on Cortes Island, keeping quiet about her patronage and performing occasionally with a local African drumming troupe. Like Solomon, Newell grew up in the U.S. in a wealthy business family. Her father was head of the Newell Company, a housewares manufacturer in Upstate New York that got its start making curtain rods. He died when she was nine, and her mother took his seat on the board of directors, shifting from homemaker to businesswoman at age 46, just when the family company was about to go public. By the time she was 16, Newell had gotten an oblique education in business from her mother and learned how to track the imposing number of family investments. “She had this huge ledger; assets above purchase price were in black, below they were in red. . . . She would invite me to meetings with the portfolio managers and ask me to help her make decisions.” At age 21, Newell came into her first inheritance of US$4 million. It made her head spin – but, thanks to her mother’s training, not out of control. “It doesn’t seem like much now, but back in 1977 it was a huge amount of money,” she says. “There I was in my early 20s, thinking of all the possibilities connected with that amount of capital.” Travelling in Egypt on a university archaeology course, she had an epiphany while watching locals grinding grain. “They were using cattle harnessed to a wheel, and I thought, ‘My God, they’ve been doing this for thousands of years. That’s sustainable culture. How long can we actually keep doing what we’re doing back in the States?’ ”
Newell’s mother had taken a traditional philanthropy approach by supporting the arts, hospitals and universities, but in the era of Love Canal and Three Mile Island this sort of charity no longer seemed radical enough. “They didn’t really have a focus on creating systemic change in society, and I could see that we were going down a road that was, well, doomed, with an end point. The disposable society, where the GDP booms but leaves destruction behind it and doesn’t account for externalities, that didn’t make sense to me.”