San Francisco-based venture firm Obvious Ventures has recently published a comprehensive report detailing how each company within its investment portfolio is contributing positively to the world.

The report highlights companies like Good Eggs, a grocery delivery service where approximately 70% of products are sourced from within 250 miles of their Oakland, California distribution center. This localized approach ensures consumers receive fresher, more nutritious food. Additionally, the electric bus manufacturer Proterra is beginning to generate substantial cost savings for cities by reducing reliance on diesel fuel, while simultaneously decreasing carbon dioxide emissions by thousands of tons.

This type of impact investing is gaining traction, according to James Joaquin, co-founder and managing director of Obvious. He and fellow co-founder, serial entrepreneur Ev Williams, recently discussed their firm’s outlook for 2021 and current areas of interest. (Notably, research into hallucinogens is now underway.)

TC: How many companies does Obvious evaluate each week?

JJ: We assess around 2,000 potential investment opportunities annually. While the distribution isn’t perfectly consistent, this represents the volume of incoming opportunities we track. A significant portion are quickly eliminated due to geographical limitations – we concentrate on North America, not Europe or Asia – or because they don’t align with our core investment themes. However, a select group progresses to meetings with our team, ultimately resulting in between 10 and 12 investments each year.

TC: Unlike some firms with generalist investors, Obvious partners appear to have specialized areas of focus, such as your work with plant-based companies. Is this accurate?

JJ: That’s certainly an area of my concentration. We have five investing partners, each with specific expertise. Within the food sector, I lead our investments in plant-based protein and plant-forward consumer products. Thanks to early work by Ev and Biz Stone [Twitter co-founder], we were early investors in Beyond Meat. We also spearheaded the initial investment in Miyoko’s Creamery, a plant-based butter and cheese company that is currently one of our fastest-growing portfolio companies.

TC: What is the deal approval process?

JJ: Typically, when a deal reaches the due diligence phase, we assemble two-person teams. A lead partner or managing director champions the deal, supported by another member of the investment team. Ultimately, the CEO or management team presents to the full investment committee before a term sheet is issued.

While the process isn’t strictly unanimous, each managing director possesses veto power. If someone has strong reservations about an investment, they can prevent it, though this is infrequent.

TC: Which newer firms are you observing that share your investment philosophies?

JJ: Several newer firms, roughly our age, are also investing in similar areas. Lux Capital has frequently co-invested with us in computational biology. Data Collective is a partner in our full-stack healthcare initiatives. S2G Ventures is a strong plant-based protein food investor with whom we’ve collaborated. These are some of the emerging investors driving this generation of world-positive investment focused on solving significant problems with innovative technology.

TC: Is Obvious exploring investments related to hallucinogens?

JJ: We are actively researching this area, specifically for medical applications. We believe that substances previously classified as Schedule 1 drugs – including ketamine, MDMA [ecstasy], and psilocybin – hold considerable potential for addressing the growing global mental health crisis. Early trials for treatment-resistant depression, PTSD, and suicidal ideation demonstrate promising results with these molecules.

We envision creating a comprehensive healthcare company, similar to our work with Virta Health for [type 2] diabetes, or DevotedHealth’s approach to senior care in Medicare. We anticipate the emergence of new mental health companies built around drug-assisted therapies enabled by these substances.

TC: Ev, you invested in Sanity, a content management platform, last month. How do you differentiate between a personal investment and an Obvious Ventures investment?

EW: That was a rare instance of a personal investment. I previously engaged in angel investing before founding Obvious, and now I direct all potential deals to James and the team. However, as James mentioned, Obvious has specific criteria regarding deal size and focus. Sanity is an enterprise product, and I found it compelling due to its potential impact on the future of content distribution, particularly for Medium. I was impressed with their work, but it didn’t fully align with Obvious’s investment priorities, hence my individual involvement. These situations are uncommon.

TC: What proportion of your investments originate from inbound versus outbound sourcing?

JJ: We ensure we have the capacity for both approaches, which we term “hunting” and “farming.” “Farming” involves managing the influx of introductions from our network. Approximately 60% to 70% of our portfolio companies originated from these inbound leads, while 30% to 40% resulted from “hunting” – identifying a promising theme, mapping the entrepreneurial landscape, and connecting with relevant angel investors and pre-seed funds.

TC: What is your perspective on Bitcoin?

JJ: We have conducted thorough research to determine if there are world-positive applications for blockchain technology, and specifically for Bitcoin as a cryptocurrency. While we haven’t yet made any investments in this space, we remain open to the possibility and continue to monitor its development.

TC: With the addition of Tina Hoang-To, formerly of Technology Crossover Ventures, will Obvious be making more growth-stage investments?

JJ: We are primarily known for our early-stage investments, but from the outset, we adopted a “barbell strategy.” Recognizing that our thematic focus would lead us to exceptional companies in areas like plant protein and electric transportation, we anticipated encountering some already at the growth stage. Consequently, our funds are structured with approximately 75% allocated to early-stage and 25% to emerging growth. Tina’s addition strengthens our capabilities in this area, providing us with expertise in growth-stage companies.

TC: Is Obvious considering the formation of a special purpose acquisition company (SPAC)?

JJ: Ev, we’ve received inquiries about SPACs. Our current strategy at Obvious does not include creating a SPAC. We prefer to focus on our core strengths. However, several of our growth-stage companies, with annual revenues between $50 million and $100 million, are being approached by SPAC sponsors. The decision ultimately rests with our founders, though we offer guidance as board members and evaluate potential SPAC opportunities.

EW: I haven’t thoroughly investigated SPACs yet. I believe liquidity can be beneficial, and hopefully many of these SPACs will succeed, but I’m adopting a cautious, wait-and-see approach like many others.