GCV Powerlist 2016: Phil Graves, Patagonia

Phil Graves, director of corporate development at US-based clothing company Patagonia, oversees its $20m & Change fund. He admits it is a misleading name, but for a good reason – $20m was too small an amount to set back in 2013, when it won GCV’s Launch of the Year award.

Patagonia prides itself on its ethics and social and environmental responsibility, and demonstrates this commitment in its investments. It has already made 14 worth an aggregate $40m in 12 companies in the three years since Graves joined from accountancy firm Deloitte.

These deals include California Safe Soil, which is creating organic fertiliser from unsold produce, NuMat Technologies, a materials technology company developing a nanoporous material that can change how gases are stored, transported and separated, Wild Idea Buffalo, a provider of grass-fed, naturally-raised buffalo in the US, Yerdle, a “stuff-sharing” app, Beyond Surface Technologies, a Switzerland-based chemicals company developing natural textile treatments, CO2 Nexus, which cleans and coats textiles with liquid carbon dioxide, and Bureo Skateboards, which recycles defunct fishing gear to produce skateboards and help keep oceans free from dangerous plastics.

Graves said Bureo, in particular, was the kind of deal Patagonia hoped to do more of. The company collects abondoned plastic fishing nets, which comprise about 10% of seaborne waste, on the Chilean coast, and hires locals to clean them ready for recycling as skateboards and sunglasses. Graves said Bureo was also in talks with Patagonia to use the plastic in its clothes as fasteners.

He added: “It is a goal for Patagonia to have portfolio companies as part of our supply chain and reduce our environmental impact. We are probably unique as a corporate venturer in having environmental covenants in our legal documents, which gives us a right to exit if they no longer have a social or environmental mission.

“We invest for long-term profits, but $20m & Change is an unconventional VC in not looking for near-term growth and profits. We take the time to interview potential deals to see if they have a green mission for the right reasons, not just to look for a green exit.”

As a result, Graves said he did not invest if private equity firms owned a majority, as they were not necessarily aligned with Patagonia’s ethos. Instead he looked for a “clean” capital structure with founders as majority owners.

By having an evergreen fund structure, Patagonia has no set hold period for portfolio companies, and, as a B Corp – a company certified to be pursuing a mission involving standards of social and environmental performance, accountability and transparency – it encourages entrepreneurs to use the corporate structure as a way of combining financial and environmental goals in their mandate.

Beyond $20m & Change – which is reviewing its name, according to Graves – Patagonia has a fund to help install solar panels on 1,500 residential homes in eight US states. Patagonia is working with Kina’ole Capital Partners, a solar finance company,

Graves said the fund was already having an impact. “I knew I did not want to be made a partner at Deloitte, and as I am a keen backpacker and surfer, I thought if there was any company I would want to work for it would be Patagonia. So when I read it had set up a fund I sent my resume to Rose [Marcario, now CEO] and she gave me the job of running the fund.”