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hi i'm kathryn klein i'm happy to be here and to be interviewing Derek Handley Derek is an entrepreneur social
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entrepreneur philanthropist venture capitalist and author and we have a tremendous amount to talk about so
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welcome thanks for having me great to have you here so you were just a quick summary of some of the highlights you a
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co-founded hyper factory you were the founding CEO of the B team you are today and this week the Nazarian Wharton
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social innovator in residence so here at Wharton thank you and you are the founder of the newly launched vc fund
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arrow VC great so we have a lot that I'd love to talk to you about and the three
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subjects that are highly they're all been we could spend a lot of time I think our purpose impact invents
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investing venture capital and leadership okay so we'll see where we but we can
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get through this cycle so when it comes to purpose I mean you I have have thought a lot about purpose and you
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found your purpose and that's been meaningful for you how did you find your purpose as a business person interesting
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question i think the common pattern for me has been whenever something really terrible has happened from a business or
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a life perspective asking bigger questions around what i might be best put here to do and so in kind of moments
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of crisis a sense of perspective has often opened up new ideas about where i could be spending my time and how i
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could be using it so that's one kind of common element from the past you know
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ten fifteen years the other is just experimenting and exploring different places understanding that you know that
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is a journey and you kind of wave in and out of things that you resonate with and
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lastly the things that i resonate with really trusting that mmm that intuition and that instinct to follow that
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whatever that particular calling or idea is and giving it the space and time to really grow great with in my life so
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that's kind of some of the ways in which it's manifested itself and and as i
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understand this there was when you were launching hyper factory this purpose in this larger vision for
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your contribution to the world was less front and center yeah and that shifted right i mean i was mostly focused then
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on how do you build a start-up you know from where i was in the bottom of the world in new zealand and just straight
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out of university and i had this idea that i wanted to build a company that went global and as a really young person
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to show that it could be done so in a sense the purpose that I was trying to prove was can we build companies as
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young kids from New Zealand and make it in the best night yeah I foot it with the best so I was around innovation the
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thrill the chase how do you build a company and but when I came in kind of stepped back and looked at well what is
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the purpose and what's the what's the impact that the company is trying to
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have that's when I looked at much I guess a much broader perspective of what
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is possible if you're building a company what might you try to have it tackle as
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an issue and and has finding that larger purpose been inspiring daunting tiring you know energizing how would you
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describe what finally see you like you're really connecting with something that you feel you're here to do yeah
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it's it's really energizing and inspiring and to me one of the tests I have around this stuff is if it's
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frightening in some way then it's probably the right place yeah it's a little bit like it's going to be
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difficult and it's your putting you in an uncomfortable position then I feel
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like it's probably where I should be going if it looks too comfortable and something that you think you could do
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then to me it's as personal you know instance it's probably not the right
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thing for me yeah and is your purpose succinct enough distinct enough that you can articulate it to us not I don't
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think in a sense that I've you know kind of created a slogan out of it but at the
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macro level everything that I'm doing now is somehow trying to contribute in
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some way to a social or environmental issue that I that is that is out there in the world or some sort of sort of
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injustice that I think this generation should be trying to transform whether that's the way we treat global drug
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policy or the way we think about what should entrepreneurs be building in terms of the companies that people are
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starting so that's kind of the macro I guess thesis on an individual basis it's
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about helping and trying to empower and build confidence in every single person to pursue that the truth that's inside
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of them as to what they should really be doing with their life I've met too many
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people who take comp make make a lot of compromises and don't pursue the things
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they knew or no are actually where their dreams lie for an enormous number of reasons that they have created that make
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it very difficult for them whether it's about the courage or the confidence or
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practical reasons like you know I couldn't possibly do that or it's not really my thing to make these changes
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and part of the mission we're on as helping all sorts of people realize the things that they really want to do in
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the world and that you know investing in entrepreneurs we're trying to create
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significant change is one expression of that so before we get dig into investing
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in entrepreneurs and who want to make a difference in the world any any advice to people who may be listening and
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watching and thinking yeah I want to find my purpose what the heck is my purpose or I don't have time to find my
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purpose well the the biggest advice I have in this whole space is taking a significant amount of time to reflect
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and think about these kinds of questions in the course of your ordinary week or months I think we're in a world where
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people operate in a whirlwind battling with an inbox for their whole day it seems like it's starting n to the blur
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and then you go home and you kind of just want to you know get some relief but for me the thing that's always
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worked its carving out several hours a week to think about the longer term the bigger picture and always questioning is
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this where I feel like I'm making the biggest difference is this where I feel
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like are my strengths of being brought to bear and if the answers are not positive for you know enough enough days
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in a row then you have to make changes and so creating that space is what I think a lot of people strong
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with because they think they've got way too much to do right but actually if
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you're doing all the stuff and three or five or seven years later and you look
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back it and it doesn't mean anything to you that actually it's far worse than
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taking time out now to recalibrate and constantly kind of challenge yourself as to whether you're being courageous
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enough to really do the things that you know in your heart are the things you should be doing yeah so you've channeled
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your business expertise and your love of entrepreneurship and your sense of purpose into a new venture capital fund
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launching today arrow VC so what is arrow vc so era is is a new initiative that we've been building over the last
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15 months it is spun out of a charitable foundation of mine in New Zealand called
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the era foundation error being you know the word describes our era the things that we should be challenged and
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tackling in ocean spelled that it's a ra is the Latin root and I looked at the
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early stage venture space around the world and saw that there was definitely a need for more early-stage capital and
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support for companies and founders who are trying to address a particular social or environmental issue that they
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felt really strongly about and they had chosen to build a venture-backed company
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to do that so we're looking at companies from all around the world and in the
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last year of backed them from you know New Zealand Australia Hong Kong New York and trying to create a community of
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those those founders but also a community of families from around the world than one who invest in those
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companies so it's the twofold community building that we're kind of embarking on
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right right so you've talked a little bit about VC and the need for VC in this
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space can you describe more about the companies that pass you know pass through your screen that that get all
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the way to this could be an interesting and important investment well the first thing is this core mission has to be
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something to address a social or environmental challenge of the founder has stumbled across or has been living
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in for a long time that's the first you know kind of test we have developed for
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error a concept called the error terms which is like a social term sheet which has basically three elements one the
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commitment from the found at build into their DNA as an organization their purpose is being around this
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particular social issue the second being that they are willing to try as hard as
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they can to create at least one metric to measure what the progress is they're
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making against the issue and the third is that they are building in some way to should they succeed and exit and develop
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a successful company that there are some ring-fenced equity that they will pay forward to a non-profit or an impact
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investing unit or something like that so that's kind of how we first look at the
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social mission then we look at things in the same way that you look in an early stage company so what's the product
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what's unique about it what's the market what's disruptive about what they're
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trying to do and essentially the most important thing is always what's the founder and the team look like and are
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they going to be able to deliver you know on the only on the vision that they have so I'm intrigued by this concept of
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the error terms right that it's been important to you that these terms be explicit and you mentioned right this
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kind of deep purpose that's part of the DNA metrics to measure and measure it
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and then paying it forward upon exit why is it important to make those as explicit as a term sheet for us it's a
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way of it's almost like a litmus test if people are buy into that then we're on
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the same page we're on the same adventure together you know that's what we believe the entrepreneur and era
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believe the same thing that this is why you should build companies and that there is some robustness in the level of
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rigor around will you're trying to change something in society well how are you going to measure it because if
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you're trying to build a business you measure your traditional metrics revenue
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margin whatever it might be cash burn well if you're trying to solve a problem
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in education or health you need to put your mind also to how you might measure it and some time that's very difficult
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but at least if you put your mind to it I think it helps the founders get some clarity is to at least coming up with
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some possible way of figuring out whether they're making a dent in the problem they're trying to address so
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that's kind of just a way for us to structure some rigor around making sure a few boxes are checked
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before we then go into and have a look at how transformative or what kind of potential the company might have and
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earlier when we were talking about these companies earlier today you use the term
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hybrid capital so I think hybrid organization may be a more familiar term meaning an organization a company that
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may have a for-profit mission and a social mission and that's kind of a hybrid is more familiar to focus on and
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scholars of management for sure this hybrid capital what is hybrid capital and why is you why have you found that
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important well the way I think of it is a you know a hybrid being the capital coming from both for-profit sources and
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also from philanthropic sources it's not a prerequisite we look at a company but
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we think there's this interesting time at the moment where nonprofits and foundations are willing to invest or
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grant to for-profit companies if they believe that that organization is doing an amazing job at addressing the issue
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that they care about and they don't worry that it's not a non-profit so this
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is happening more and more so if we look at a company and they're getting for
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non-profit foundation grants to us an indicates they're doing a very good job
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on trying to tackle this mission right because some third party has endorsed it in a way that an investor wouldn't be
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looking at it the ideal for us is that a venture capitalist who doesn't really
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care about the social issue also thinks they will consider investing because from their lens the things that they're
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trying to check off are being checked off and if those two things can happen which is rare but a couple of the
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companies we have have that then it means you're satisfying these kind of two ends of the spectrum and by blending
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that capital you're essentially creating you know a stack of different ways in
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which the company can grow and scale and to us that's really exciting to find
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those investors investments because the grant capital is non-dilutive so as an investor it becomes and you get leverage
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out of it and the more companies we find like that in the early stages the more we can get leverage from our early stage
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investment right right it's very interesting because right you have you have well philanthropists and investors
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to use the traditional terms applying different criteria exactly right and seeing in this company something that
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both value exactly yeah that right I get that that's what cos of the sweet spot
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yeah exactly so the the last thing I wanted to discuss with you is leadership you've had you know you've been a leader
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you've worked for it as part of the the B team at first CEO of the B team and we
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can you can talk a little bit about the B team you've seen a lot of extraordinary leaders and now of course
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you're investing in leaders so let's let's give folks I let you describe what
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the the B team is and who's involved and then let's talk about what you've
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learned about leadership okay yeah so the B team was an idea that Richard Branson and the Virgin Unite foundation
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had a few years ago which is essentially in the beginning of this kind of movement of corporate CEOs wanting to
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figure out how they can create more sustainable or socially oriented businesses Richard wanted to build a
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collection of leaders like that from around the world to help each other work with each other advocate for issues and
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also pilot different ideas and their own organizations so I had volunteered year
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of my time to help but should build this idea and essentially Scout the globe to
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find iconic leaders from around the world like you know Ratan Tata in India or GME Leal from nature in Brazil and
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produce a team that a lot of them haven't met before but bringing them together on the same page to help
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catalyze a movement that's you know picking up pace which is how does business move from being myopically
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focused on profit to being focused on people planet and profit and that movement is I think what we're
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increasingly wanting to see happen and the B team is trying to be kind of an icebreaker Ennis and a you know at the
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spearhead of it so being exposed to that experience and all the various types of
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people that were involved and had a heady group yeah I mean all sorts of people from Muhammad Yunus for who the
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microfinance been at pioneer to Arianna Huffington who's now obviously pioneering around well-being and sleep
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and issues that are becoming more what better understood in the zeitgeist of how do we take care of ourselves so that
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we are personally sustainable so these are these kind of shifts that are happening in the world that
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organizations like the B team are trying to help tip into more of a mainstream movement so as you
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think about you know you reflect and you're obviously someone who does reflect a lot as you reflect on your own
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leadership experiences as a leader as a follower interacting with these leaders now investing in these leaders what are
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the let's start with you what are the the characteristics the practices that
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you aspire to enact as a leader yourself well something that I care about I guess
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you know it's a particular thing for me is what does the future look like so i
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invest a lot of time and energy and thinking about where are we going what's
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the possible vision of things in society that need to change and systemically should be a you know evolved this
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century so the b team is a representation of that you know where does capitals a move to involve given
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that what we've learned and what we've seen with regards to the planet and also
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social issues that still are struggling that applies to other areas like as i mentioned drug policy where we're seeing
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that after 30 40 years of a war on drugs it isn't working there is a lot of challenges with it and we need to
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rethink our view on it so for me that's one of the things i like to make sure
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that i'm always thinking about what's behind the next next corner and where do
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we need to start you know thinking about the other pieces i guess goes back to the idea of like reflection and making
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sure that in my world that i'm doing the things that i think if I died tomorrow I
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wouldn't have any regrets and how I'm spending my energy my time any resources
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I might have or how I might you know deploy them and that goes for also for people i meet or work with you know so
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younger people or anyone that I know or see your friends to me being a leader in
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a community or in a family or with your friends my particular angle on that is helping other people make sure that
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they're really being bold about how they live their own lives and are making
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courageous decisions because you know it is very short in a sense life but if you
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are bold and courageous about what you're doing I think as the Roman philosopher Seneca can set said is life
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as long you know if you know how to use it the problem I think is that too often
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we're encouraged to be on a while a mouse wheel and not look back and forward enough to make
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sure that we're on the right you know the ladders up against the right wall because you can climb up it for 20 30
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years and realize it's totally wrong war mm-hm and it's a pretty sad thing to do
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that you know I think the longer you you go on I'm interested in your you know in
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your description of vision why is that important I mean I think it's some level
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we could say oh right vision leaders are supposed to have vision but why again this is just from my point of view right
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I'm not some kind of leadership expert but unless someone can inspire a broader
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mission for me to be a part of a movement or a mountain to climb or something like that it's hard to get me
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motivated and excited about it so I think about how do you motivate and excite people to push themselves to be
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who they are and all that they can be well for me a large part of that is inspiration and direction and at a point
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where you don't feel like there's a challenge or something inspiring to follow or you know a moon shot of some
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sort I think you can get home home and people can kind of get into a cycle but if there is a moon shot if there is an
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audacious challenge or if there is a direction that you believe in and that you can buy into think that's what
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motivates organizations and people and teams and whether they're a sports team
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you know we're a company and that that whole thing to me if you can't articulate and paint a picture of vision
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I think that there is a strong element of leadership that is kind of being left you know an addressed and there are lots
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of leaders who are do not do a lot of that you know I think leaders of cities and countries sometimes don't do a very
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good job of that and they become more managerial and administrative than visionary it's just my my personal bias
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as towards leaders who can project we're going there and these the reasons why
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we're going and you should come along yeah yeah so earlier today when we were
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talking about leaders you mentioned another quality and I'm wondering how that fits in because you've talked about
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vision and you've talked about boldness and earlier when we were talking today you
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talked about coachability and i have to say when i think about leaders who are bold and visionary i would think there's
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a real risk that they're not that coachable so to talk to us about a coach ability well it's kind of this this
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double edged the type of thing right i think the vision and the boldness and the conviction of what you're trying to
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do in the idea i think that's where you you want that persistence and that that
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that unrelenting kind of commitment but how you get there and how you go about getting there is where I think you need
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to be able to be flexible and coachable on where you might not see blind spots or you might not be strong enough
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certain areas and so when you look at our entrepreneur you might agree entirely with where they want to go but
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if it seems like in the first 9 12-15 months it seems like some of the things they're doing aren't working you want
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the entrepreneur to be able to recognize that acknowledge a set of external possible advisors and inputs and then
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make and synthesize their own decision as to how they're going to modify their
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behavior or their approach if you can't if you can't embody that kind of
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behavior then it becomes very difficult for anyone to help you out of a situation so I've invested in certain
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companies where the founder would not change their view on the world even though it was showing that nothing was
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working right and those companies they and that particular company for example died because they wouldn't change their
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mindset they were fully committed to exactly how they were executing when it was clear to everyone outside them that
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it wasn't you know working so that's just a kind of an element that I think
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even I think everyone should have that you know that ability to make sure that you know when you're 60 70 80 90 you
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should always be able to have as we were speaking about earlier beginners mine because then you can never be accused of
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being stuck in your old ways and you can never be find yourself in a situation where you're isolating your perspective
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on something and that the whole world has totally shifted and you you know because people say oh I'm talk too old
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to learn new things or I'm too old to change my ways and to me that's the
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antithesis of what life is about it's a constant organic evolution and the moment you think
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you've gotten to a point where you're too old or you know too much I think
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that's when a lot of the beauty of life is kind of lost and to me the biggest
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challenge I guess of living would be to constantly have or try to have you know beginner's mind yeah great thank you so
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much for being with us Derek Emily thank you you