Return on impact: How Rubio co-founders have linked 100 percent of their carry to impact

As one of the European pioneers in impact investing, Rubio was somewhat of an anomaly when it emerged on the scene in 2014.

"Ten years ago, we had to explain what impact investing was,” co-founder Willemijn Verloop tells Impact Loop. "There was a lot of skepticism about whether this wasn’t just venture philantropy."

A decade later, the Dutch VC has a clear track record of proving that financial success and positive social impact are not mutually exclusive.

With Rubio now in the process of raising a targeted €110m for its third fund, Verloop and co-founder Machtelt Groothuis sat down with Impact Loop to discuss the keys for success going forward.

Verloop and Groothuis have seen plenty of other impact funds pop up since they started out, but Rubio still stands out for its dual focus on people and climate.

"We started out ten years ago with the assumption that you can never achieve a just transition if you don't look at both sides of the spectrum. It's not just about the planet, it’s also about people," Verloop says. "It's interesting to see that there's still so few real social investors in the market in Europe. Compared to climate tech funds, it's incomparable."

It's interesting to see that there's still so few real social investors

Focus on 'people power'

Rubio does plenty of climate tech investments as well, but also focuses on what it calls "people power." That includes solutions that give more people access to job skills and education, or improve mental health and wellbeing.

"There is a lot of overlap between planet and people impact. For example, we need skilled labor to make the energy transition work, and we need to make sure clean energy solutions benefit lower income households too," Groothuis says.

"When we started raising a new fund, a lot of people found it difficult to understand why we also focused on the social side, but we feel that that is changing now. In the last four or five months, more and more LPs have realized that we can’t just solve the technical side of the green revolution. We have to take people along at the same time. So there's more and more interest in that side."

Or as Verloop puts it: "There are a lot of funds who think we can SaaS our way out of the climate crisis. But we don't believe that's the case."

Carry linked to impact

Another thing that sets Rubio apart is that 100 percent of its carried interest, or carry – the profits paid out to the fund managers – is linked to independently verified impact targets, and not just financial returns.

"If we don't hit our financial target, then there is no carry. And if we don't hit our impact target, our carry goes to a charity," Verloop says. "There are a lot of new impact funds out there, but many of them only have 25 or 50 percent of carry linked to impact, which I don’t find to be true impact funds because then finance still comes first. We believe those need to be equal."

And while the European startup sector still has a massive shortage of female founders and executives, Rubio has managed to buck that trend as well. Of the companies in the fund’s portfolio, 31 percent have female founders while 50 percent have at least one woman on its leadership team.

Finding female founders

Groothuis and Verloop say they don’t focus especially on finding female founders. But the fact that Rubio was founded by two women – another aspect that was almost unheard of 10 years ago – has probably helped.

"When a female founder comes to us, I do think we are better at seeing the potential because women just have a different language sometimes," Groothuis says. "But it's not that systematic, to be honest. Maybe it's just that we're a very diverse and majority female team ourselves and that means we have very little bias and are attractive for diverse founders."

The fact that they don’t only focus on deep tech companies also helps.

"If you look at the female founders in our portfolio, many of them are on the people side, or the circular or wellbeing side," Verloop says. "We see more great female founders in that corner."

What they're looking for next

Rubio’s first fund closed at €41m, while the second was €110m, with most investments made at the seed and Series A stage. They’re expecting a first close of the third fund later this year.

Rubio looks at around 2,000 startups every year, but narrowed that down to seven new investments in 2024.

So what types of companies are Rubio looking to invest in next?

On the people side, Groothuis says she sees "a big opportunity" for startups who are helping create a workforce that can assist the green energy transition. On a more technical side, improving the flexibility of the European energy grid is a big focus area.

"The growth of solar and wind causes huge imbalances in the electricity grid. So we’re interested in any software or hardware based solutions that can help there," she says.

Rubio also has a specialised team for food and ag tech, where biodiversity is a big theme.

Mental health companies are also in high demand.

"Mental health is just a tsunami that is coming at us right now, where we are looking for solutions," Verloop says.

One thing all portfolio companies must have in common is that they fit Rubio’s criteria for making a systemic impact – rather than just making incremental improvements within its sector.

"In every impact segment we look at, we need to believe that our investment could potentially have a systemic impact, and change an entire industry or value chain," Verloop says.

"One easy example is fashion. It's one of the most polluting industries in the world. But we know we'll only look at propositions that are at the very beginning of the of the value chain, such as how water is used and chemicals in production, or at the very end of the value chain where everything ends in the landfill and where we need new models to prevent that. Every improvement in the middle of the value chain is incremental, and that’s not where we want to be."