A few weeks ago we decided to shut down Bageera.
Although I stopped myself from sharing any thoughts in the immediate aftermath, I have used the past few days to put together a series of lessons and takeaways from our journey.
If you got here redirected through my LinkedIn profile, chances are that your already have a fair sense of what we were building, but let me just set the stage as a refresher…
Bageera’s mission was to transform nature into an investible asset class.
We did this by developing a platform to source, analyse and market natural capital investment opportunities (think of investing in a forest, sustainable agricultural lands, plains, wetlands, etc). After over a year of work, we had an unbeatable team of seven people, funding from top tier international VCs and some traction with initial customers.
The vision was clear: we have traditionally undervalued nature and not accounted for the full range of ecosystem services it provides us with (e.g. water purification, carbon capture, soil fertility, etc). And because society is increasingly starting to acknowledge this, we thought that facilitating a way for people to invest in this booming new asset class was surely destined to be one of those rare success stories where financial and environmental interests magically align.
Note: A key point to the “why we failed” learnings below is that our investment opportunities were not linked to CO2 offsets. In other words, we assumed that because nature is undervalued, there had to be a massive investment appetite for it. What we did, in fact, was focus on projects that would issue credits in the future, so that our investors benefited from the financial upside while ensuring maximum environmental impact (the bottleneck for most conservation/restoration projects in nature is to secure financing at their infancy, when credits have not yet been issued).
Now that you know what we aimed for and that we missed the target by so much that we had to shut down, I can move on to what I think have been the most relevant takeaways from this ride.
The post is divided into two parts:
- An overview of our journey: covering the steps we took and a high-level overview of why they did not work.
- Reflections and learnings: a more personal note to what I learned from this, both at a company level and as its CEO.
Although I think that anyone could benefit from reading the first part, this is mostly intended for those that are developing much-needed solutions to solve the financing gap from institutional capital to nature. Because I do not cover any of the specific concepts in much depth, I’d encourage anyone interested in the space and with any questions to reach out to me directly. You can also find a brief podcast in which I stressed out my views on natural capital markets more in depth here.
The second part is more general and probably just a weak version of what many better and more successful entrepreneurs have written in the past. In any case, although it is unlikely to enlighten many, I figured that keeping it to myself was just a way to shy away from failure and miss the actual point of this reflection.
Part I: An overview of our journey
Summary (TL;DR)
After more than a year of trying to find a solution to channel private funds into natural capital, we have failed to find a way to do so effectively and at scale.
With (i) a repeated failure to find a product-market fit, (ii) an apparently incorrect financial/corporate structure, and (iii) our inability to raise capital to extend our runway, we see no alternative but to take the final decision of liquidating our company.
For a short and simplified version of why we failed you can think of this metaphor:
Imagine trying to build a marketplace like the early Amazon (i.e. an online bookstore) at a time when very few people read books and even less wrote them. How on earth are you to position yourself as the innovative intermediary of two parties which don’t even exist?
At Bageera we found ourselves in a very similar situation.
We were trying to get people to write books (by sourcing the best natural capital projects), convince people to read more (by trying to attract interest from investors), and we were doing this through an innovative marketplace-like platform!
So the easy, straightforward takeaway might be that unless you’re operating in a market which has been around since the 15th century, rushing to build a marketplace when you don’t even have a product to sell might not be the best idea.
If you want a more in-depth view of the process, below are some of the main areas which we faced challenges in.
Product-Market Fit
Everything we did was aimed at finding a way to bridge the financing gap from private capital towards nature (i.e. we offered investment opportunities that protect or restore nature while delivering financial returns).
Our journey started by targeting retail investors, offering a very low minimum ticket.
There were three problems with this:
- Demand: Although there was some demand to invest in natural capital, retail clients did not have a need to “diversify” their portfolio and hence had very little willingness to invest in something that did good but that was so new to them.
- Regulation: To offer our securities to non-professional investors, we had to opt for a special license granted by regulatory authorities on a case-by-case basis. After countless meetings with the relevant bodies in UK and the EU we were notified that it would be very hard for them to approve a scheme which offered a totally new asset class (e.g., financing a biodiversity conservation project that relied on the revenue from credits) to retail investors.
- Economics: Due to the immense work required to source our projects and the costs of our structure, we soon realised that even if we found a way to market our securities to retail clients (exploring alternative routes like tokenisation), it made no financial sense to do so with a totally unprofitable business model.
We then pivoted to institutional investors, who seemed to have a larger appetite.
To do so we replicated the financial, legal and technological set-up of other players in the space that were offering investments in alternative assets through a platform (e.g. Moonfare with private equity, or Linus with real estate).
The problems we faced at this stage were, once again, mostly derived from the asset class we were marketing.
- Demand: targeting large players was soon ruled out due to the scale of pipeline and credentials they required from us to enter into an asset class with absolutely no track record. We then shifted our attention to small/mid asset managers (incl. FOs and HNWIs).
With this revised approach we reached out to more than 1,000 players across Europe (yes, 1,000) and secured a handful LOIs. Despite this initial traction, it also came with two big problems which we were not expecting:
- Investing in emerging economies was outside almost everyone’s scope: so we had to automatically rule out the majority of our projects in South America and SEA.
- Investing in projects which only relied on “new” business models was a deal-breaker for them: so, financing biodiversity, reforestation and conservation programs was viable only under the condition that these be complemented with other more “traditional” ones (e.g. agriculture).
- Supply: because of our new constraints (on geography and asset class) we decided to shift towards only offering sustainable agriculture projects in Europe. Which, by the way, ended up being even harder because of how tricky it proved to ensure that we were creating real environmental impact. Unless we ensured that farmers had a clear path to improve the sustainability of their operations and a way to prove it (which was extremely hard) we would not be staying true to our mission (simply fractionalising already sustainable agricultural land and calling it “impact investing” is literally greenwashing). So once again we bumped into a problem of lack of supply. If we were limited in the geographies and the asset classes we offered, it was impossible to find the recurrent pipeline that investors required.
To see if we could do one last push to try and find demand for the few projects we could offer, we decided to try and reach out to corporate investors in the food & beverage industry, selling the value proposition of improving the sustainability of their supply chains from within.
The problem with them was clear: unless we were helping them accelerate their path to net zero on paper, they were not interested. Because, as much as financing transitions to sustainable agriculture can actually have a massive impact on the environment and do so within a corporation’s value chain, regenerative agriculture takes time, and these corporates wanted results now. And because we did not offer carbon certificates — remember this is precisely what made us different from the marketplaces which are already out there — they were simply indifferent to our value proposition.
Incorrect Structure
Focusing on retails was unrealistic and unprofitable, corporates were not interested in our offer, so the only subset of clients which we had some traction with were small asset managers.
These, however, not only challenged our asset class focus and geography but, most importantly, our structure.
The single most recurring question when speaking to investors was: why are you not doing this as a fund?
The rationale behind this was clear for them and was usually stated by saying something along these lines: “If you want to channel private capital towards nature, you should either be on the frontline with project developers or become the private capital yourself”.
In hindsight, I think they were probably right…
There was a fundamental difference in what we did compared to other investment platforms.
Whereas their business model relies on democratizing access to an existing investment (e.g. real estate), we needed to develop our natural capital projects (which is a full-time job in itself) before even thinking of marketing this to the public. And when doing so there was little need for that added layer of complexity of having to do everything through a platform.
This is why even the handful of clients that seemed keen to invest all agreed that they would prefer that we dissolve the current structure and raise capital through a traditional fund structure (i.e. forgetting about the platform).
But even if they were right in their observation, our corporate set up made no sense if we were to raise money like a fund. Going down that route was an equivalent to shutting down operations and starting all over again (which is what finally happened).
Fundraising and Market Environment
After trying every possible route to launch an MVP to record some revenues and failing to do so, we realised that we needed to do a fundraising round to extend our runway.
We approached this in all ways we could think of, from angel investors to large institutional capital, grants, accelerators, pre-seed extensions, etc.
No need to expand on this other than the sincere acknowledgement that we did absolutely everything we could to find capital while continuing to look for a realistic alternative.
Then came the market downturn…
If marketing an asset class with virtually no track record in a bullish market was tough, doing so amidst a looming crisis seemed almost impossible.
We reached out again to each investor who had, at some stage, expressed interest to see if they would be willing to invest in our pilot projects.
They all refused stating that it was now not the best time and that they couldn’t bear the risk of doing so if we had not secured other players to give them trust. A few of them repeated the concern that if they were to invest in something like this they would either do so directly or find a fund that did it for them, but they were becoming more and more sceptical of this “investing platform” approach.
Conclusion
Perhaps the conclusion of all these points is that we were ahead of the times.
We wanted to find a solution that we thought the world needed but found that we had done so in a structure that no client was willing to “pay” for.
There is a chance that something like this is needed in the future, when natural capital is so established as an asset class that you can build a fintech solution to aggregate investments in a platform-like format.
For now, nevertheless, we believe that the natural capital market needs to first focus on scaling both supply (project developers) and demand (investors) separately, and that the matchmaking figure to “democratize” these will just have to wait until these are settled.
Part II: Reflections, Learnings, and Potential Improvements
Part II: Reflections, Learnings, and Potential Improvements
Our Failures as a Company
I. Taking our own assumptions on “what the market needed”
This is, by far, the biggest mistake we made.
We tried to find solutions to problems we thought the world had without going out and actually testing them.
Retails do not need to invest in natural capital.
Institutional investors do not need an investment platform; those that want to invest will do so directly in the projects that fit their needs (probably through a much-needed intermediary, but not through a platform like Bageera).
Corporates do not need (yet) to deploy capital to improve the sustainability of their supply chains if this is outside their emission reduction plan.
How to improve this: it might a cliché, but putting clients first is the only way to go. Ask what they really need.
II. Underestimating the challenges of being the first to do something
Tackling a new market is not always as easy as saying that you’ll create the new [any existing company] for [a new market] — e.g. the new Robinhood for natural capital.
Amazon is a marketplace covering supply and demand because when they started they had at least one of the two sides covered (i.e. a lot of people who already wrote books, and a lot of people who already read books — or both!).
In our case we set out to create a marketplace for something which was extremely scarce (natural capital), convincing a little minority to buy it, and build the marketplace for it!
Although I use Amazon as the easy analogy, this can also be applied to my example with Robinhood (the investment platform where everyone can buy and sell stocks in public companies); they don’t have to “develop” Netflix/Apple/Tesla stock to list on their platform (it’s already there), and there are already tons of people that want to invest in them.
How to improve this: still hard to know at this stage… I think it’s something you most likely figure out while trying it. Perhaps just be extra cautious when thinking that you just found a simple solution to a problem which is as large as the one we were tackling. Not sure about this, though…
III. Seeking perfection when we didn’t even know what that looked like
Thinking and overthinking about what could be improved in our offer prevented us from understanding what clients needed (point 1).
How to improve this: sometimes it’s better to launch, fail, and try again rather than deferring your launch to “perfect” the offer and losing the valuable client input you would get of having tried.
Note: we actually realised this in the middle of our journey and tried to apply it from then onwards. But this was especially challenging given the nature of what we were building… Buying a concession in an emerging economy and then trying to market that to promote biodiversity wasn’t just like testing a B2C app on few users. But the point still applies.
IV. Failing to keep it simple
Having a clear value proposition and being able to explain it in one sentence is probably the best way to overcome the aforementioned challenges (new market, little backed-up knowledge of clients, etc…). The trial-and-error approach suggested in the previous point would’ve only been possible if we had simplified the “what” and “how” of Bageera from early on — even if this was wrong.
We underestimated the value of simplicity trying to find a holistic solution across geographies, asset classes and clients.
How to improve this: re-think your strategy, and make sure you can convey your idea in a sentence. Less is more, and we should have opted for a simpler and quicker solution, that could have then scaled to the actual mission for the company.
My failures as a CEO
I. Failing to be specific
The single most important thing I missed out on was building precise roadmaps at a company level and then being able to create specific tasks for each team member to pursue.
This not only created inefficiencies, but also demotivated the team by adding the pressure of “not knowing what I should be doing”.
How to improve this: I think these things come only with practice and failing like I did… However, there is a method which normally worked: sharing what I thought each team member had to work on with the whole group so that (i) I was forced to set clear objectives which everyone could understand and (ii) each team member had the “insurance” that everyone else knew what they were doing and that they could not be put on the spotlight as long as they delivered on it. By the way, the key to this approach was also that whenever I set the wrong objectives for someone (many times), everyone had a chance to speak up and we could revisit them together.
II. Underestimating the importance of having (constant) communication
When starting a company and with a team as good as ours, failing to have a recurrent dialogue with the whole team meant missing out on a lot of invaluable opinions.
It was not until the end of our journey — when we started doing two-hour daily morning meetings — that I realised how much we missed by not involving the whole team more.
How to improve this: ensure that everyone in your team knows what the “management” is up to and find ways to facilitate dialogue. An extra effort must be made if people are working remote.
III. Predicating universal truths which were grounded on little evidence
Our day-to-day was dependent on being on top of every latest piece of news and report that came out related to our field, from carbon markets to regulation around biodiversity conservation (which is probably one of the top things I liked about this job).
The problem was that, because I was no expert in any of these fields, I took every new report that I came across as a universal truth, sometimes even using it to change the direction of what we were doing (e.g., if the latest UN report said that biodiversity credits are the new way to go, we need to forget about carbon altogether — incorrect!)
How to improve this: there are times to do research and thinking, but sometimes it’s better to hold your ground and stick to what you’re doing, otherwise you might end up doing nothing at all.
IV. Not being open about what I knew and what I didn’t
This follows from point 2 in that it basically means that there were many, many times when I told the team what the “correct” way to go was when, in reality, I had little clue.
It also ties nicely with point 1, because if instead of doing this I had acknowledged the limits to my knowledge, communication would have certainly improved and perhaps we could’ve found a better way forward as a team.
How to improve: Just say “I don’t know” more often (always finding a balance, since there are many times when a leader might be needed).
Bonus: A Call to Action
Instead of summarising (again) the key takeaways or telling you what I plan to do next (which is basically continuing to look for the best way to channel private capital towards nature to restore our natural ecosystems), I’ll wrap up with the single most important thing I could leave you with:
Addressing our planetary crisis (this goes beyond just climate) will be the most important work of our generation.
Our past century’s titanic efforts to continually grow and industrialise have brought countless benefits: poverty alleviation, increased life expectancy, better education, etc. But this progress has inevitably come at incredible costs to our planet. Academic debates on the precise increase in temperatures, the number of species that will go extinct, how much the sea will rise, which wars will be fought as a result of droughts that make land inhabitable or the millions of people who will be exposed to increasing extreme weather events, have all done a great job in getting this message out, but will mean little if we don’t start acting upon them.
Tackling our planetary crisis means re-thinking everything in our system: how we protect and restore our natural ecosystems, how we feed a growing population, how we build the spaces we live in, how we travel, how we power things, and so much more. It’s a unique opportunity to start doing things differently. To finally design systems that enable humans and ecosystems to thrive in a healthy planet.
So let us all go out there and start changing things. Entrepreneurs, politicians, artists… We can all find meaningful and bespoke ways to make an impact, and we cannot afford, practically or morally, to delay this any longer.