Polar vortex notwithstanding, tomorrow morning in Punxatawney PA and other communities around the US and Canada, people will gather to witness a groundhog being hoisted into the winter chill in hope that it will cast no shadow, thereby presaging an early spring. This event will command media coverage not only in the United States but around the world.
Beyond its charm as a cultural artifact from the Pennsylvania Dutch community (whence I also derive), the popular holiday serves up some perfectly timely insights for investors.
No, really.
Let’s start with the basics. First, “groundhog” is a misnomer. Second, overcast skies on 02 February have no correlation to spring warming in recent history. Third, and perhaps most comically, the tradition is a direct transplant from German-speaking communities in Europe which tracked the behavior of badgers, a completely unrelated species.
Okay, so you’ve ruined that for me. What does this have to do with investing?
Everything, actually. Particularly for direct investors and LPs.
First, women and people of color are often characterized as minorities, which is factually inaccurate. Moreover, while people of color and women actually found a significant fraction of businesses in the United States, women of color over-index as entrepreneurs.
Second, people of color and women are frequently characterized as higher risk than their white male peers. However, the evidence shows that when equipped with the capital necessary to succeed, they often outperform their white male peers. And furthermore, companies with diverse management, board, and employee ranks outperform more homogeneous companies.
Third, when conventional investors place capital in companies led by people of color and women, they often treat those investments as goodwill gestures or philanthropic contributions to the field. Conversely, LPs seeking different and better outcomes from their portfolios often struggle with their longstanding investment criteria and processes which are (unintentionally) optimized to selecting more of the same. Both are proving to be force-fit approaches from prior practice that fail to map to the available opportunity.
Let me guess: there’s a moral to this story.
Like Bill Murray’s character in the deservedly beloved film Groundhog Day, we can get stuck in a set of cognitive loops and behavioral habits that seem to have worked before but now don’t. So long as we remain trapped in these patterns we in essence prevent our own escape.
But when we actually start paying real attention to the people and context around us, we begin to discover that the universe of “investable teams” is richer than we ever imagined.
Wake up!
It’s time. Wake up! Shake off the old, engage with the facts, and start seeing the opportunity all around you. Use an actual alarm clock if you need to. If you need some suggestions, we’re happy to help. And don’t worry: whatever the groundhog sees tomorrow, sooner or later spring is coming.
For our part, Reinventure Capital is working from the impact investing playbook Ed originally pioneered in the 1980s and 1990s, investing in overlooked, undervalued founders to grow profitable, value-creating enterprises.
Specifically, we are focused on deploying equity and debt capital in expansion stage (breakeven or so) companies led by people of color and women, across the US. The Reinventure approach is proven effective at both creating real, measurable social impact and also generating nonconcessionary returns to investors.*
Have you already started to break out of your old investing patterns? Please share! Or better yet, take the conversation to your network!
*While there’s no such thing as a guarantee in investing and no one can reliably predict the future, Ed’s prior track record provides direct evidence that it is indeed possible to consistently invest for both financial returns and social value creation. If you are an accredited investor and would like to learn more about investments that can advance social, racial, and gender equity by supporting high-value companies led by women and/or people of color, please contact us to start that conversation.
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