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When I reflect on impact investing and its prospects of growth to a size somewhere between the $100 billion of microfinance and the $3 trillion invested in private equity and venture capital worldwide, I often think back to the origins of venture capital – the starting point of my professional life.
Venture capital was a response to the needs of tech entrepreneurs, just as impact investing is a response to the needs of a new generation of social entrepreneurs who seek to make a meaningful difference in improving people's lives.
No one had thought of creating ten-year, illiquid funds, investing in small companies with very limited track records of performance, led by young people with no business experience. The response came because people sat around a table and said, “We see the future, and we have to provide the tools for it.” When I set up what became Apax Partners in 1972, few in Europe knew what an entrepreneur was, and fewer still believed that entrepreneurs would achieve much of consequence for our daily lives. Forty years later, they have completely transformed our world.
The microchip, the PC, the mobile phone, and the Internet, with its search engines and instant access to information and people, have revolutionized the way we live. They have brought a transformation as momentous as that which followed the creation of the alphabet and the invention of printing. Entrepreneur-led companies have overtaken those that led their fields for nearly a century. IBM was overshadowed in the space of a couple of decades by a start-up named Apple, which is now the largest company in the world by market cap; Microsoft, Amazon, Google, and Oracle made it from start-up to being among the world's top thirty companies in just three decades.
The tech entrepreneurial revolution was driven by innovation and risk taking. It transformed the mind-set of governments about how economic growth should be achieved. In the United States, in the space of twenty-five years, it has been estimated that fifty million jobs were lost by smokestack industries, while sixty million jobs were created by new companies.
