First Principles

Imagine you are an entrepreneur trying to do a new and hard thing in the world. You encounter an investor who is gifted in their craft, unusually patient with you, and transparent about shared goals. They back you because of your mission and challenge you to build a venture that will bring the change you envision, yet clearly value you as a person through persistent care. 

Every entrepreneur who seeks capital longs for investors with conviction about the kind of world they seek to advance through their funding; who are rigorous enough to expect excellence from themselves, their investing partners, and the entrepreneur; who coax founders toward redemptive imagination and possibility; who are objective enough to spot fatal business flaws or risks of exploitation; who are bold enough to call founders to the outer limits of their vision through prophetic encouragement; who are creative enough to find unseen opportunities for both returns and impact through their investments; who are able to bring countercultural virtues such as mercy, patience, and sacrifice into a normally transactional realm; and who are sensitive enough not to impose harshness, impatience, or anxiety that afflicts the founder and trickles down to the entire organization.

This sort of investor—a redemptive investor—has the power to bring abundant and life-giving innovation into the world.

Investing creative capital in entrepreneurial endeavors—the focus of this playbook—has been part of our world for centuries. With every great opportunity for exploration and transformation, a group of entrepreneurs races to bring about the change, and a group of backers vies to finance it. This kind of investing is fundamentally an act of shared risk, as investors partner with builders to bring something new to life. In contrast with the data-driven world of investing in public equities, investing private capital is a much more relational enterprise, occurring within ecosystems of entrepreneurs, individual and institutional co-investors, and other mediating groups such as alumni associations and accelerators. 

Two systems have most shaped this field in our generation: venture capital (VC) and impact investing.

Over the last four decades, Jobs, Bezos, Musk, Brin and Page, Zuckerberg, and thousands more would-be entrepreneurial icons have sought backing from a network of angel investors and a handful of offices on Sand Hill Road in Silicon Valley. Nearly every major move in venture investing takes its cue from this iconic hub, even as the sources of capital have gone global, from Tel Aviv to Nairobi to Singapore to London. 

And just as entrepreneurship has gone mainstream in the 21st century, so has investing. One thousand or so VC firms, thousands of family offices, and an estimated 300,000 angel investors base their time horizons, expected returns, fund structures, and term sheet negotiation—at least in part—on the practices of the pace-setters in Silicon Valley. The norms of the VC industry have shaped the language, expectations, and practices of venture building and investing well beyond actual VC firms funding high-tech investments. 

Venture capital, as a particular asset class, has proven to be uniquely and ideally suited to its original purpose: addressing high-risk problems and opportunities, particularly those with winner-take-all dynamics and a premium on speed to market. Over the decades it has unlocked abundance and delivered blessings to billions, through everything from medical breakthroughs to large-scale mobile payment platforms. It has produced a field of best practices and shaped a thousand entrepreneurship programs. And it will continue to be the right vehicle for investors and entrepreneurs pursuing these types of high-scale opportunities. 

Meanwhile, in 1980, as Silicon Valley was emerging as a VC hub, a lawyer named Bill Drayton founded Ashoka, an organization dedicated to the idea of “social entrepreneurship.” As this new model and language spread, it birthed its own ecosystem of ventures, founders, funds, awards, networks, gatekeepers, and publications. Over time a new field of impact investing emerged, often placing social impact above financial returns as a top goal. This field too has matured into a sophisticated discipline, with an ever-widening array of metrics and categories to help investors target the impacts they seek and weigh how much financial return they should concede for those impacts. Over decades, the result has been a significant shift for the entire investing field, such that the disciplines for considering and pursuing impact in investments have moved all the way into public equities and other large-scale investments—often styled as ESG investing, which systematically considers environmental, social, and governance factors.

At their best, both fields—venture capital and impact investing—demonstrate the active role of investors in shaping the world through ecosystems of funding and venture-building with a particular ethos. Instead of merely coming along for the ride by providing access to neutral capital, the top investors seek to move the horizons of cultural possibility by driving what gets backed, by setting norms for the funding ecosystem, and by shaping the lives of some of society’s highest-agency leaders. These investors’ beliefs about the world drive who and what gets funded and scaled. For example, as VC Marc Andreessen famously put it, “software is eating the world.” This has happened at a stunning pace and scale, in large part because investors have amplified the energy of inventors and founders through a network of firms, funds, institutions, and media, behind a grand shared narrative about the power of technology to advance human progress. 

Seen this way, effective venture capitalists are impact investors, recognizing and capitalizing on the obvious: because all companies exist to reshape the world (in ways large and small), all investments in them have multiple layers of impact. Certain possibilities and patterns of life will advance because a venture exists; others will retreat. So the strongest investors across the risk/return spectrum boldly deploy capital in pursuit of favored outcomes—literally seeking to build the future in line with a particular view of humanity, truth, progress, and the good life. And every venture investor, while constrained by the norms and the cross-pressures of the flawed system they work in, has the opportunity to do the same on their own scale. 

The creative placement of entrepreneurial capital, as advanced by these two disciplines, has undoubtedly led to immense innovation, considerable social impact, and economic flourishing for many. Yet redemptive venture investors can reap and spread these benefits while working resolutely against the errors, excesses, and idols that persist downstream of these movements. The core error, we believe, is an impact/returns reversal that distorts the proper relationships among impact, returns, and the trade-offs and risks we take in pursuit of them. 

The purpose of money is to accomplish something (impact), not to make more money (returns). And our sustained ability to accomplish anything lasting through business and investing, at least in human terms, depends on our ability to generate returns. These twin realities affirm that impact and returns are inextricably linked—and that they have a rightful ordering.

But this naturally ordered relationship between purpose and returns gets reversed, as money always finds a way of improperly anchoring itself to the primary place in our imagination, hearts, and self-assessment of success. So for nearly all investors—even for self-proclaimed impact investors—the reigning question is “What impact can we get for the returns we’re seeking?” Instead, the governing question for redemptive investors should be closer to “What returns can we get for the impact we’re seeking?” 

For the Christian investor, these distinctions are especially stark, given that we are not capital owners pursuing our purposes but stewards pursuing God’s purposes; that we know a great deal about those purposes, even while he gives us freedom to improvise how to pursue them; that what is required of us is not success but faithful obedience; that we are commanded to fight against the pervasive and seductive power of Mammon in our hearts and practices; and that we are called to love God and neighbor in and through the strategic and tactical realities of investing. 

While nearly every investor would prefer to have a pipeline and portfolio of only the highest-impact, highest-return deals, virtually all opportunities involve meaningful trade-offs along a spectrum of return, impact, and risk profiles. In making these inevitable trade-offs, intelligent and ethical investors are prone to three common traps, all of which are forms of the impact/returns reversal.

TRAPS OF THE IMPACT/RETURNS REVERSAL: CONCESSIONARY SLOPE, MAXIMIZATION RACE, IMPACT CAP.

The Concessionary Slope

Venture investors and entrepreneurs often use the term “concessionary” to frame investing trade-offs that are heavily weighted in favor of impacts over returns. At one level, this simply names an obvious reality: businesses based on some models, customer segments, regions, and economic conditions can only yield slow and modest returns, if any; so higher or earlier returns are being conceded to pursue other non-financial outcomes. To the extent that investors make a principled choice to pursue this trade-off, the term may be apt. 

Yet the concessionary framing can mask or even enable an unhelpful investment mindset, and in some ways can even become a self-fulfilling prophecy. When a deal is labeled as concessionary, we’re not simply comparing its anticipated risk-adjusted returns to alternative uses for our capital; we’re usually doing at least two other things. First, we’re anchoring an investment’s returns to an arbitrary and vague standard such as “market rate”—which varies widely across venture type, risk profile, geography, time horizons, and more—further anchoring us to the impact/returns reversal. 

Second, we also may imply that the investment is in a company or project that will not be ambitiously built and run for profitable growth. In effect, we implicitly concede not only some level of returns—but often our expectations for founder capability and venture excellence as well. At the top of the slope, we concede returns for impact; as we move down, we concede quality and get less of both. This soft stigma is unattractive to serious investors and entrepreneurs alike, who want to take on meaningful risk to build sound, profitable, high-impact businesses together. Our primary caution is to avoid this slope; and in fact it may be helpful for investors to use other terms, such as “patient capital,” to describe their approach to these kinds of investments.

The Maximization Race

Several decades of growth in venture capital as an asset class have created a growing spirit of maximization in expectations of startup growth, returns, speed, and hype. The uneven power-law dynamics of VC fund structures—where a small number of outsized winners cover for the failure of many other hopefuls—create a distorting effect on the formation, aims, and methods of founders and funders alike, especially when the businesses in question have very different fundamentals.

The results have been troubling, in the form of startup team burnout, value squandered in the race toward unsustainable growth, products and business models built to exploit addictive tendencies, high failure rates, and misrepresentation of outcomes. 

While a small percentage of startups have successfully scaled through rightful partnership with venture capital, thousands of worthy ventures should exist today but don’t. They pursued funding and growth strategies that were improperly framed with VC-style assumptions, robbing them of their chance of healthy development. As a result their prospects to deliver jobs, impact, and returns at sustainable scale were lost.

This maximization race also damages individuals by casting startup founders as messianic figures and venture capitalists as masters of the universe, capsizing their identity formation, rendering them anxious, and isolating them from accountability in community. 

The Impact Cap

This common danger for high-integrity founders and funders consists of downplaying the impacts of the ventures we back, treating them as mostly neutral. In one form, investors rely too heavily on negative screening for investments—ruling out vice-based product categories and unethical financial models. Negative screening is a critical baseline strategy to guide investment, but as a sole strategy it is too passive, suggesting that the only impacts guiding our portfolio choices are the obviously exploitative ones we avoid. 

Another form of the impact cap is to maximize profits and returns (in part) to give more away toward causes. Of course directing a generous portion of proceeds to missional philanthropy is a redemptive practice. But taken to its extreme as a dominant impact strategy it can be a trap. It invites us to excuse exploitative practices in the business by focusing on “the good we can do with the money”—deluding ourselves that God cares about ends more than means, and that he is dependent on us to achieve the right ends. What’s more, this approach underweights its bet on the positive impact the business itself can bring about—believing (wrongly) that true impact only comes through ministries or other nonprofits rather than businesses. In both forms of the impact cap, the culprit is usually the lack of a stated mission for the investor’s capital.

DEEP PATTERNS OF REDEMPTIVE INVESTING: PRIORITIZING PEOPLE, PURSUING RISK, RESPONSIBILITY FOR OUTCOMES.

Venture investing is hard. Investors face constant pressures within the constraints of fiduciary responsibilities, modest or indirect authority in venture decision-making, limited access to quality deal flow, and the need to deliver financial returns in order to raise the next fund. In this light, it is no small achievement for any venture investor to deliver consistent excellence, ethical conduct, and lasting value—let alone to navigate among the traps described above.

Thankfully, we witness this achievement regularly, both in and beyond the Praxis community, from leaders pursuing the redemptive edge of venture investing. 

These investors delight in the ethical methods of venture investing for their own sake: seeking quality and innovation at the founder and venture level, engaging in fair and vigorous competition for the best deal flow, cultivating an appetite for meaningful risk, and pursuing financial returns that fuel venture impact and generate further investment. Yet at their best, they mount a radical resistance movement against the dangers of the impact/returns reversal. 

We observe three deep patterns among these redemptive venture investors.

Patiently Prioritizing People

Most capital deployed today has a time horizon: as soon as it is placed, everyone senses that its clock has begun ticking. This tight connection of money to time—embodied in the paramount measure of profit, the internal rate of return (IRR)—gives form and shape to almost all investing. In contrast to this normative impatience of money, the redemptive investor has the opportunity to be inexplicably patient: “not controlling events, not anxious or in a hurry, and never using force to achieve their ends” (The Patient Ferment of the Early Church, Alan Kreider).

Indeed, we can operate from an utterly different perspective: that ventures and capital are temporal and instrumental (they are means to an end), while people—both those inside and outside the business—are eternal and primary (they are ends in themselves). While transactions are our fundamental activity, redemptive investors seek to make people and relationships our fundamental priority. We cannot control the outcomes of our decisions, but we have a great deal of influence over the health of the relationships we form in the course of our transactions, and those persons and relationships are of far more importance not only eternally but also over the course of our own lifetimes. 

Investors who choose to prioritize people, irrespective of the levels of expected returns, consider all those who touch our work—limited partners, founders, co-investors, investment staff, venture teams, customers, and even competitors and those who may be “disrupted” by the investment’s outcome—as inherently valuable actors worthy of our attention. In a small or large way, we are active participants in their life’s journey, not just equity holders on a cap table. So we build practices and systems that allow us to patiently attend to these people with an eye toward an eternal time horizon. 

Prioritizing people in the investing sector requires an uncompromising commitment to truth and love. Redemptive investing is in no way about mere “niceness” or tolerance of mediocrity at the personal or organizational level; in fact these are failures of ethical stewardship. Rather, it includes reckoning with the truth of how the investing system operates and what it rewards, and refusing to downplay the expectations or commitments of deal participants to one another, so as to avoid or defer misunderstanding or conflict. It means lovingly confronting entrepreneurs and investing partners who we believe are acting out of greed, arrogance, neediness, or tunnel vision; and telling the truth to founders when we believe they are unlikely to succeed under the circumstances. It even means walking away, and sometimes counseling investors and entrepreneurs away, from deals that look promising to all parties in the short term but will only benefit certain parties in the long term. It means investing the time, carrying the discomfort, and absorbing the external pressure necessary to preserve relationships through these encounters. And it certainly means offering care and grace to founders in moments of deep difficulty and even failure. Indeed, this needs to be a core competency of the venture investor, given that most ventures don’t survive and entrepreneurs so often have their identity wrapped up in their work.

Pursuing Meaningful Risk

Stewardship should be the primary lens through which people of faith understand their relationship to money. No matter how hard we (or others) may have worked to acquire our financial resources, God owns it all and we are stewards on his behalf. Capital is not ours to use as we see fit; it is ultimately God’s to use (through our stewardship) as he sees fit. We acknowledge the truth of Jesus’ words about wealth: no one can serve two masters. Either financial outcomes or human outcomes will come first in our decisions. For Christians, this radical truth is foundational to any proper use of money—personal or professional, spending or saving, investing or philanthropy. 

Yet this essential principle is often practiced in the investing vocation in ways that distort its biblical intent. Consider that in Jesus’ Parable of the Talents, the faithful stewards deliver a 100% return on the original capital. One way to misapply this lesson is to believe that according to Jesus, maximizing financial returns is the primary purpose of investing. But this view violates the “no two masters” principle (and not only because in Matthew, the owner explicitly says the unfaithful servant could have simply deposited the money with bankers and received nominal interest in return). When the relative good of IRR becomes an ultimate pursuit, it becomes an idol with an uncompromising hold over us.

The subtler way to misappropriate the biblical idea of stewardship is to take a preservationist approach to capital that avoids meaningful risk. By contrast, the Christian investor should be as bold as anyone in the world. We know that we cannot store up treasures on earth. We know that there is brokenness that needs repairing. We know that Christ may come at any time, that our calling is to obedience over success, and that our true reward for that faithfulness is in heaven. So to the fullest extent that our constraints allow, we should be running toward harder problems, bigger challenges, bolder solutions, and more prophetic endeavors that aim to not merely accelerate cultural trajectories but to bend them toward renewal. 

While we are to be wary of reckless financial risk, redemptive investors consider reward not solely in financial terms, but equally in the form of the restoration of culture, systems, relationships, and souls. In particular, many investments that are early or even “first” in a given space will likely deliver lower returns but play a critical role in activating new ways of thinking and working that will lead to more profitable scale. As redemptive investors, we should re-orient our capital to create pathways for innovations toward the common good. We should be known as investors with “redemptive moonshots” in our portfolio, betting on great entrepreneurs seeking to build enduring companies with quality returns—and letting those returns fall where they may. 

Taking Responsibility for Outcomes

Investors are not owner-operators—we live at some distance from the ventures in which we have a beneficial interest. This distance is essential to the proper functioning of the investing ecosystem. But neither can any investor afford to be entirely absent and disengaged from their portfolio. So all investors live in a tension between proximity and distance. It can be tempting to take advantage of this distance, in effect “looking the other way” on how a company is making money, building a culture, or entering into partnerships—especially if things seem to be going well. Yet investor failure to confront exploitative practices and unfit or burned-out founders features over and over in the stories of promising ventures that have crashed to earth. 

A common fallacy behind this practice is that impacts are unpredictable and uncontrollable by planning and human intervention, while returns can reasonably be planned and engineered. In fact, we assert that both impacts and returns are highly contingent on uncontrollable factors—and yet they both respond well over time to thoughtful planning and design.

Redemptive investors are willing to implicate ourselves in the changes we stand to profit from. So we learn about the worlds of the ventures we back, building a thesis-driven approach that heeds Dallas Willard’s maxim, “Understanding is the basis of care, whether for a petunia or a nation.” Together with other investors and entrepreneurs, we set out to discover impact/portfolio fit in the form of profitable and scalable businesses that create good jobs and seek to solve meaningful problems instead of creating more of them. We invest time, creativity, and prayer in developing and articulating our own theses about where the world is going and what that means economically and socially. 

We may well have to limit the number of deals we are involved in, or forgo “hot” deals that would be prestigious and rewarding, but which we aren’t positioned to steward well. And we may have to bow out of future capitalization rounds if we discern that the venture’s growth trajectory is taking it off its intended ethical course—even when the money looks compelling.

The alternative to this kind of discipline is a distracted distance, in which too many investments, boards, and cap tables make it impossible for us to pay attention beyond the numbers—sales, team size, ARR, locations, installs—that abstract us away from the organization’s health and its true impact on the world. To be sure, successful investing requires a healthy trust of entrepreneurs, but trust and neglect are altogether different.

A venture investor committed to these patterns—patiently prioritizing people, taking meaningful risk, and taking responsibility for outcomes—is a force for renewal and blessing in and through the ventures they fund. As we apply these ideas to the practices of redemptive investing, let’s explore the definition of the term “redemptive” through a tool called the Redemptive Frame.

Defining Redemptive

The Christian account is that God created humanity in his image—so even though we are more frail and proud than we are willing to admit, we are more loved and worthy than we can imagine.

Our shared cultural work—to bear God’s image in the world by creating and cultivating with the resources he gave us—is distorted by our selfishness, and cannot be put fully right through human efforts alone.

Yet putting the world right—bringing about personal, spiritual, social, cultural, and environmental healing and restoration—is part of God’s loving and glorious purpose in the world he created. As people loved through grace, we are called to love God and neighbor by joining him in that work.

Redemption is an economic term that means to buy back something (or someone) to restore it to its rightful place. It is also used to describe Jesus’ act of sacrificing his life so that we can be ultimately restored to a right relationship with God and his creation. 

Wherever there is loss, brokenness, unfairness, waste, or harm—and someone willingly enters into the situation by bearing a cost or taking a risk, to help the person, resource, or system to be restored—that’s redemptive action. And redemptive action at any scale usually requires creation or innovation, such as a new product, expression, model, or norm.

We respond to the redemptive, in stories and especially in real life, because we know that the world is broken; because we long to participate in its healing, even in the smallest ways; and because we sense that sacrificial love is the world’s most powerful force.

So this core pattern—creative restoration through sacrifice—not only describes Jesus’ ultimate redemptive work to save the world but also our daily redemptive work to serve the world. It gives shape to our mission as those who have been written into the greater story of his purposes through no merit of our own.

We believe we are to follow the redemptive pattern of creative restoration through sacrifice in our life and work.

A Redemptive Imagination for Venture Investing

Redemptive venture investing at its best is a vocation of deep flourishing, marrying great authority (capacity for meaningful action) with the best kind of vulnerability (exposure to meaningful risk). It is a journey of imagination and resolve (building a track record of rigor, integrity, and creativity in meeting expectations for both returns and impact); of avoidance and resistance (discerning which exploitative practices, partnerships, and deals the investor cannot wisely participate in, however attractive from a financial perspective); and of sacrifice and surrender (shedding our idols around wealth and influence, and embodying love and truth in all our dealings).

With redemptive investors activating capital through talented and principled entrepreneurs across return profiles, geographies, and sectors—from tech to real estate to energy to media and entertainment—we are very likely to see two outcomes over the next decades. First, we can expect to shepherd into the world more products, services, brands, and team cultures that enable rather than diminish human flourishing. Second, across that “redemptive portfolio,” we anticipate more than adequate aggregate financial returns to prove that this work is sustainable, profitable, and generative. 

All the principles and mindsets described above take concrete shape in the actual daily practices of investors: working on deals, raising funds, meeting with partners, building teams, spending time with entrepreneurs. We offer practical suggestions for redemptive investing practices in the six areas that follow. Through these practices, we believe that the redemptive investor can not only bring glory to God and blessing to the world through their work, but can also be themselves transformed in the journey.