In episode 79 the Investing in Impact podcast, I speak with Ed Marcum, the Managing Partner of the Working Capital Fund, on the innovations creating a more transparent and responsible global supply chain.

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With over 20 years of experience in human rights and venture capital investing, Ed has worked across the for-profit, nonprofit, and public policy sectors.

Previously, he spent more than a decade at Humanity United, guiding initiatives to address forced labor in corporate supply chains.

He holds a bachelor’s degree from the University of California, Berkeley, and an MBA/MA from The Wharton School and the Lauder Institute at the University of Pennsylvania.

About the Working Capital Fund

The Working Capital Fund is on a mission to improve the lives of marginalized workers, catalyzing economic justice by investing in innovative solutions that address the deep-seated challenges of global supply chains.

Global supply chains are enormous, involving millions of workers across thousands of businesses. On average, a Fortune 500 company works with over 10,000 suppliers, producing the goods that consumers rely on daily.

However, these supply chains are often associated with some of the most pressing challenges humanity faces, including forced labor, unfair wages, and environmental degradation.

Annually, over $354 billion worth of goods are at risk of being tainted by forced labor, with more than 17 million workers trapped in modern slavery conditions.

These challenges are often hidden deep within supply chains, making them difficult to detect and resolve. Moreover, supply chains are a primary contributor to greenhouse gas emissions, exacerbating the climate crisis.

Portfolio Companies

• Altana: AI-driven data analytics for global trade risk management.
• Diginex: Blockchain-based supply chain transparency.
• Honest Jobs: HonestJobs provides funding, mentorship, and a network for entrepreneurs building responsible and non-exploitative labor migration markets.
• HowGood: Ingredient sourcing data for brands.
• Kenzen: Wearable tech for industrial worker safety.
• minu: Employee wellness platform in Latin America.
• OpenSC: Blockchain for food/agriculture supply chain traceability.
• Prewave: AI for supplier risk prediction.
• Proof: ESG impact data insights.
• Provenance: B2B2C sustainability claims platform.
• Quizrr: EdTech for corporate responsibility in supply chains.
• SupplyShift (Acquired): Supply chain data analytics.
• To The Market: Supply chain management for responsible vendor compliance.
• Twinco Capital: Supply chain finance for SMEs.
• Ulula (Acquired): Worker voice tool for labor conditions.
• Versed.AI (Acquired): Supplier network risk management through AI.

Learn more about the portfolio.

How the Working Capital Fund Works to Create Impact

The Working Capital Fund focuses on investing in technologies and solutions that address the injustices inherent in global supply chains.

Through its strategic investments, it aims to create a positive impact on workers and the environment. Key areas of focus include:

1. AI-Enabled Transparency Tools

One of the biggest challenges in addressing supply chain issues is the lack of transparency. Corporations often do not have visibility into the practices of their suppliers, making it difficult to identify labor violations or environmental concerns.

By investing in AI-enabled transparency tools, the Working Capital Fund is empowering companies to map their entire supply chains and assess risks in real time.

These tools offer a clear view of potential human rights abuses or environmental risks, helping businesses make more informed decisions about their suppliers.

2. Worker-Voice Solutions

Empowering workers is a critical part of creating a fair and just supply chain. The Working Capital Fund invests in worker-voice solutions that give laborers the tools they need to hold their employers accountable.

These solutions allow workers to anonymously report unsafe working conditions, wage theft, or other violations, providing valuable feedback to companies and regulators.

With this data, stakeholders can take action to improve labor conditions and ensure that workers’ rights are respected.

3. Financial Technology for Fair Pay

Ensuring fair wages for workers is another priority for the Working Capital Fund.

By investing in financial technologies, the Fund is helping to create systems that ensure workers are paid promptly and fairly.

These technologies also help gather sustainability data on upstream suppliers, providing insights into whether they are adhering to ethical labor practices.

With this information, companies can work towards ensuring that their entire supply chain is both economically and socially responsible.

The Economic and Social Impact of the Working Capital Fund

The Working Capital Fund has made significant strides in addressing the social and economic challenges associated with global supply chains.

Its investments in cutting-edge technologies have not only empowered workers but also helped corporations mitigate risks and operate more sustainably. Some of the key impacts include:

Reducing Modern Slavery

With over 17 million people working in modern slavery conditions across the world, the need for effective interventions is more urgent than ever.

The Fund’s investments in transparency tools and worker-voice solutions have played a crucial role in identifying and addressing instances of forced labor.

By empowering workers to speak out and giving companies the tools to monitor their supply chains, the Working Capital Fund is driving real change in the fight against modern slavery.

Driving Environmental Sustainability

The supply chain is a major contributor to the climate crisis, with greenhouse gas emissions from production and transportation causing severe environmental damage.

By investing in technologies that track environmental data and help companies make more sustainable choices, the Working Capital Fund is helping reduce the carbon footprint of global supply chains.

These innovations not only benefit the planet but also make businesses more resilient in the face of growing environmental regulations.

Improving Economic Justice

At the heart of the Working Capital Fund’s mission is the drive for economic justice. Marginalized workers, often those at the bottom of the supply chain, are frequently exploited and underpaid.

By providing them with tools to report abuses and ensuring fair wages through financial technologies, the Fund is helping create a more equitable global economy. This focus on economic empowerment is central to its strategy of driving long-term, systemic change in global supply chains.

The Role of Emerging Technologies in Transforming Supply Chains

The role of technology in transforming supply chains cannot be overstated. From AI-driven risk assessment tools to blockchain-enabled traceability systems, new technologies are offering unprecedented insights into the operations of global supply chains.

The Working Capital Fund is strategically positioned to leverage these advancements to promote transparency, sustainability, and economic justice.

Blockchain for Ethical Supply Chains

Blockchain technology offers another powerful solution for ensuring transparency in supply chains. With blockchain, every transaction and movement of goods is recorded on a secure, immutable ledger.

This provides a clear record of the entire supply chain, from raw materials to finished products.

By investing in blockchain-based solutions, the Working Capital Fund is helping businesses ensure their supply chains are free from human rights abuses and environmental harm.

Episode Transcript

Well, thank you so much, Ed, for joining me today. Really excited to chat about your journey and everything you're doing now with Working Capital Fund. Really interesting landscape that you're a part of and investing in and capitalizing, you know, this sort of movement in supply chains and all kind of different aspects of that as we have the global supply chains and so many different aspects with that. Before we get started with Working Capital Fund.

Talk a little bit about your journey into impact investing, what your career been like up to this point.

Ed Marcum (01:16.335)
Yeah, well, first, thanks for having me, Grant. Great to be here. And big fan of the show and nice to be able to participate in it. So, you know, my parents are both activists. My father was an academic focused on, you know, largely post -colonial Portuguese speaking Africa. And my mother...

Grant Trahant (01:23.214)
Thank you.

Grant Trahant (01:42.03)
Hmm.

Ed Marcum (01:44.323)
was also very active in the civil rights movement, participated in Mississippi Freedom Summer, registering voters. So needless to say, kind of growing up in that environment, a mission -driven career was sort of a given. so gravitated towards mission -driven work my whole life. When I graduated college, I...

started working for a nonprofit in the Bay area. was focused on micro enterprise development and trying to help build skills into the development of, know, early stage small businesses so that you were learning the basics of how to calculate margins and understanding cost of goods sold, things like that. And it was at a time when it was, I'll date myself a little bit, but it was in the middle of the dot com boom. during that period,

the company on one hand, was sort of the best of times, the worst of times. The company was doing quite well, the nonprofit was doing quite well, but it lacked management skills. There was sort of a lot of chaos, operations were inefficient, marketing strategy, et cetera, were lacking. And so while I had always felt like I would probably go on to work in public policy and probably engage in nonprofit management or perhaps even go into academia,

it at that time became clear to me that maybe going to business school would be an option as well, where I could learn certain operational skills that could be then applied to public sector work. that took me into business school, went to business school. And when I graduated from business school, pretty shortly thereafter, I had the really great opportunity of coming across something called the Humanity First Initiative at the Omidyar Network. And so Omidyar Network,

Grant Trahant (03:15.893)
Thank

Ed Marcum (03:39.867)
sort of philanthropic and impact investing vehicle that was started by eBay founder, Pierre Omidyar and his wife, Pam. And this Humanity First initiative was a body of work that was particularly close to Pam Omidyar. She'd been involved in a number of human rights oriented work and the foundation of this initiative was working on fundamental human rights related issues. So a lot of it was

based on her involvement in Save Darfur advocacy work, a lot of it was also focused on issues of forced labor, bonded labor, labor exploitation, essentially. And so while I worked across that portfolio for a number of years, ultimately ended up focusing a lot on addressing forced labor in supply chains, forced labor, bonded labor, labor exploitation, and in supply chains of multinational companies. And so the...

Grant Trahant (04:19.224)
Sure. Yeah.

Ed Marcum (04:36.313)
The basic thesis there being that in today's world, virtually all businesses have specialized and distribute production. No one is vertically integrated anymore. And when you have outsourced production, you have now these distributed, very complex supply chains. And in that complexity, there's a lot of opacity. And in that opacity,

A lot of bad things go into component parts or raw materials of the goods that you and I buy on a regular basis. And so the question there we were asking is, what can we do to help drive change such that, you you can outsource production, but you shouldn't be outsourcing accountability and responsibility for that process. so did a lot of work, both philanthropically and with for -profit investing capital. Initially, a lot of it was to try to pressure business to do more. So.

you know, spent time trying to push public policies that would force companies to disclose what was taking place in their supply chain. Starting back many, many years ago with the California transparency supply chain act and a number of other European legislation sense that are driving towards this kind of mandatory human rights due diligence on your supplier base, invested in investigative journalism, trying to figure out if, when, where,

how you could break stories where tainted supply was slipping into the supply chain of Fortune 500 companies. So I supported a lot of the Guardian's work, Associated Press, et cetera. Did something called Know the Chain, was once companies were forced to disclose, could you try to benchmark which companies were actually doing a good job and taking this issue seriously. So did a lot of that work on the pressure tactic side of things, but then realized also that companies actually lacked

the tools to be able to do what we were hoping that they could do. Well intentioned companies still struggled. Basically, if you looked at voluntary supplier codes of conduct, social audits, multi -stakeholder dialogues, these sort of go -to tools of choice that corporations would use to try to mitigate some of the risks, they were probably necessary but insufficient to be able to really know who was in their supply chain, what was going on. And that at that same time,

Ed Marcum (06:56.079)
there was an emergence of a number of technologies that we thought could be applied to addressing some of those challenges. And as a consequence, could create a suite of tools that would enable businesses to do more in a more cost effective scalable way. so started to make a few investments in that area and started to realize that there was a bit of a there there. And so then decided that, you know, which was unusual within the Omidyar group or the Omidyar network.

at that time, that we would actually be more efficient if we syndicated it and brought in other limited partner investors into a pooled fund. so early days, we're able to get Walmart, Apple, Disney, Zalando, a number of corporations, and then along with a number of human rights -related investors like Soros Economic Development Fund, the Minduru Walk Free from Australia, LGT, a number of other investors.

to come in on a fund that would both, I think, help us understand where some of the industry pain points were. Also, if we were to invest and have companies that would be successful and grow, there would be contracting and sort of matchmaking opportunities with some of those entities. So that was really the origin of the Working Capital Fund. We felt like there was a real value for...

for -profit capital to do certain things, to be able to scale innovation into well -functioning capital markets that didn't exist on the philanthropic side. It felt like by making those investments, we could really kind of accelerate that S -curve towards the adoption of these kinds of technologies that would provide better visibility, better transparency into labor conditions deep down in extended supply chains.

Grant Trahant (08:29.955)
Yeah.

Grant Trahant (08:46.242)
When you're your time working with maybe the on the philanthropic side, what did you maybe learn from that that side of things or see from that side of things that maybe helped you, you know, transition, so to say, so to speak into

venture capital and in the financial markets. It seems like philanthropy and nonprofits is such a like, it's such like a wealth of knowledge that you can gain that can always be applied on top of like the layer of business. There's always so much knowledge that comes out of doing that work. I guess talk about your time in the philanthropic sector and how that helped pave the way.

you know, for the working capital fund.

Ed Marcum (09:36.257)
What really became clear to me is that philanthropic capital can do certain things more effectively and for -profit capital can do certain things more effectively. so when it comes to, as I was mentioning, public policy and supporting advocacy groups, supporting investigative journalism, which quite frankly now is almost a nonprofit activity, given the way the media markets have evolved. There's certain things that can only be done, I think, with that kind of capital where you're

Grant Trahant (09:41.069)
Mm

Grant Trahant (09:55.968)
Sure. Yeah.

Ed Marcum (10:05.049)
essentially going to be losing the principle no matter how you invest. And yet at the same time, there are certain things that for -profit capital can do to advance social impact that non -profit capital can't do, right? And that was really, I think, my takeaway from my time at, was then called, was the Humanity First Initiative, it ultimately became called Humanity United, it was one of the foundations within the broader Omidyar Group. And,

Grant Trahant (10:18.965)
Mm.

Ed Marcum (10:34.011)
So, you in the case of an investment, you make that investment, if you make that as a grant, typically, you know, a year later, that $100 ,000, $200 ,000 has been used up. You've got to start from scratch. There's not that ability to tap into, to take retained earnings, to tap into broader, you know, investment markets where there are actors who can help you scale that impact over time. And so I really felt like

Grant Trahant (10:46.296)
Yep. Yep.

Ed Marcum (11:03.023)
In my time there, I was able to learn a lot about which of those levers made sense. And in some ways, I think you have to have humility and understand the complementarity between those two things. think so often in all realms of life, people feel like my solution is the silver bullet solution and I'm the only one who's doing anything that's going to really make a meaningful impact on a particular issue. And I think that experience to me showed that, gosh, there's a really important role.

for philanthropic capital to drive public policy. And public policy is super important, but that's not gonna get us all the way there, for example. If we're gonna have scalable tools and technologies and solutions that we want business to adopt, we've got to invest in those to make sure that they're truly there and that they're actually making meaningful impact, that they're really giving you information about what's going on in a work setting, for example, and that that wasn't gonna happen through the philanthropic sector. that...

Grant Trahant (11:37.036)
Yeah. Yeah.

Ed Marcum (11:57.967)
that kind of complimentary, that understanding that it takes a variety of actors. takes a variety of approaches. Obviously organized labor plays an important role in this process. All of those need to be working in concert. And too often, I think you find people who disparage one approach versus another because they feel like, hey, mine's the most important. And I think they're all important. And the kind of capital you use as well, as I said, can kind of enable those different approaches.

Grant Trahant (12:25.89)
You mentioned early partners, know, such as Disney, Apple, Walmart, Foundation. What would those conversations like to get them on board? They sort of all in for the get go, are they waiting for something like this? Do they often invest in funds like this? Like what was that process like, experience?

Ed Marcum (12:43.098)
It was a

Ed Marcum (12:47.097)
Yeah, I don't think that most corporations do invest in funds like this. I think it was, we had an advantage in that this was a true pain point for companies, particularly companies, well -intentioned companies that wanted to be doing more were recognizing that it was very difficult. As I mentioned, many of the tools that they have, that they use were not sufficient at mitigating risk, mitigating brand risk, mitigating potential exposure to, you know, bad press, et cetera.

And, you know, I think that many of them struggle with very vast, highly complex supply chains with, you know, 50, sometimes hundreds of thousands of, you know, sub subcontractors or suppliers within their supply chain and getting a grasp on that and being able to truly understand in a way that wasn't prohibitively expensive, what was going on, who was in their supply chain were issues that they were struggling with. And so I think they.

They, from inception, many of them saw the need and usually our engagement was with people in responsible sourcing or, know, CSR roles within those companies, people who we'd worked with in the past. And one of the challenges I think for them was trying to figure out where they would draw capital from because they're not investors. That's not typically their day job. And so, you know, were they going to pull from R &D, from their corporate strategic venture arm, from their philanthropic foundation budget?

Grant Trahant (13:50.252)
Hmm

Grant Trahant (14:10.253)
Right.

Ed Marcum (14:12.461)
Each entity pulled capital from different places, but I think the overall orientation from them was, wow, what a great opportunity to help identify better solutions for us to be able to address some of these problems and mitigate risk. And I think we saw from inception a great way, we consistently reach out to these corporations. What are your pain points? are the, you know, what, what still is problematic? Maybe now there are more tools out there.

but they're not integrated. don't speak to each other. You know, can we, you know, find ways of kind of addressing, you know, emerging pain points and similarly as we're then investing and some of those companies are scaling and doing well, we have the opportunity to say, Hey, have you looked at, you know, this particular portfolio company? They really seem to be addressing this problem. You know, might there be opportunities to work with you so that there there's sort of a synergistic relationship. It's not a typical.

LPGP relationship where we're just giving, you know, a financial report every quarter. We have a very engaged back and forth because it's really about trying to solve a problem collectively.

Grant Trahant (15:21.868)
Yeah, I wonder if they're less interested in like the returns versus like the data and the companies being invested in and what they're actually producing that could help them because they, you know, I don't know, like they're, the revenue is so massive, right? It's like, they're almost more interested in looking at the companies and what's being built rather than like the capital being returned. It's such a...

an interesting.

Ed Marcum (15:51.075)
Absolutely. I think that's absolutely true. And, you know, in many cases we share our pipeline, so they may be even invested in companies that we don't invest in, but they're interested to learn that, someone's applying a new geospatial approach to getting better visibility in the following way, or, you know, what's going on with DNA traceability. you know, okay, so maybe it's a company that for whatever reason, you know, we didn't think the unit economics worked or what have you, or the competitive landscape was challenging, we don't invest.

Grant Trahant (15:58.667)
Right.

Grant Trahant (16:05.548)
Mm -hmm.

Ed Marcum (16:20.133)
but we're always letting them see and kind of look around the corner and see the kinds of innovations that are out there that may have some applicability to their work.

Grant Trahant (16:30.242)
Look, the global supply chain and the global workforce, it's such a vast dynamic. There's so many layers to it. What are some of the main issues sort of right now trying to be solved for within this vast ecosystem of the global supply chain, of labor? I guess what are maybe some of the top issues that face this environment right now?

Ed Marcum (16:55.996)
Yeah, unfortunately, some of the very basics are still not sufficiently covered, I think, across the vast majority of industry. So if you start with even just basic supply chain visibility and an ability to evaluate where you have risky suppliers, the numbers are surprising. I saw a Deloitte report from late 2022 that showed that only 13 % of businesses know

who's in their supply chain beyond the second tier. And the vast majority have no idea where raw materials are coming from, et cetera. And again, therein lies the opportunity. So some of the things we've invested in early days are using AI, for example, to take your first tier suppliers, because virtually every company knows who their first tier is. And then you can scrape the web, for example, and understand.

Grant Trahant (17:27.33)
Mm -hmm. Mm -hmm.

Grant Trahant (17:32.547)
Yeah.

Ed Marcum (17:49.883)
you know, are there logistical or financial connections between them and a group of suppliers and then those suppliers with other suppliers, et cetera. Now you're able to map out a supply chain of 50 ,000 suppliers in a matter of hours, as opposed to what was take, you know, six weeks to two months historically. So, you know, and then many of the companies we've invested in, once they have that map, are then able to ingest a bunch of other information, media, social media, know, foreign corrupt practice act data, beneficial ownership structure data, et cetera.

Grant Trahant (17:53.314)
Mm -hmm.

Grant Trahant (18:04.216)
Sure.

Ed Marcum (18:20.555)
to identify, within those 50 ,000, which is a little bit overwhelming, where are there pockets of suppliers where there's high risk? And if we do have limited social auditing dollars, maybe that's where we apply those. So some of those very basic, I would say prerequisites, you're never gonna be able to find out what's going on in your spletchn, if you don't know who's in it and you haven't done a little bit of diligence on them. Some of those things still need to be addressed.

Grant Trahant (18:38.359)
Mm

Ed Marcum (18:49.561)
Certainly other areas where fundamentally you're addressing a problem of opacity and in that opacity there's a lack of visibility. So how can you get better insight into what's actually going on on a factory floor or in a particular work setting? So in some ways, we've also looked at different technologies that can, for example, use cell phones to crowdsource grievance data from a work setting. A company we invested in called Ulula that does that.

Grant Trahant (19:14.498)
Mm -hmm.

Ed Marcum (19:18.783)
where you're able to get real time information, you know, are people being, is there forced over time? are there certain things that are taking place within or withheld wages, wage theft, et cetera, things being done in a particular context where you're not looking at that social audit snapshot every year or two years where people may have even been gamed in terms of how they respond. You're able to get more meaningful first mile data. You know, another investment we made similarly, that's looking at some of that first mile data as a, investment in a company we,

called comp science, which is using computer vision AI, similarly to use closed circuit televisions or security cameras that are already in manufacturing or warehouse settings, and use that to help predict where there may be risk of injury. So ergonomic related activities. If you're driving a forklift with multiple boxes and have no visibility, you can identify those behaviors. In their case, they bundle that with workers comp insurance as well.

you're getting this really rich first mile data, which continues to be, I think, at scale, a big problem in addressing labor rights related issues. So I still think that there's a lot of opportunity both to kind of create that visibility and then to be able to collect better high quality information. We talk a lot about having verifiable claims at scale. So there's a lot of, you know, I think very fluffy, unverifiable.

Grant Trahant (20:20.259)
Yeah.

Ed Marcum (20:46.179)
superficial claims that companies will make about how things are produced. But the more you can drive higher quality information where there's a way of verifying where it came from and its veracity to some extent, the more you're going to see, I think, change and real problems addressed in a meaningful way.

Grant Trahant (21:07.17)
You mentioned some of the portfolio companies. If we can, I'd like to dig a little deeper into a few more. You know, maybe some that are just, you know, doing some cool things that you like to shout out. Maybe maybe two or three of them.

Ed Marcum (21:13.552)
Yeah.

Ed Marcum (21:21.049)
Yeah. I I mentioned there was a cluster of investments we made that were using AI to create what we call knowledge graphs of suppliers based on taking first tier information. So a couple of companies there, one Altana, which recently became a unicorn. Another company called pre -wave, another one called burst AI, all three of those in different ways were helping to create that visibility.

within a supply chain and create that knowledge graph and in different ways were either ingesting risk data and or, you know, helping corporations identify, you know, where they needed to apply some of their limited resources for doing extensive diligence. That's been an area where, you know, going back, we're now in year eight within our first fund, we were making early bets well before there was a commercial market and

All three of those companies have now done very well and we're starting to see much greater interest, I think, in that supply chain mapping and in the supply chain risk assessment space. So those are three companies that I think stand out. I've already mentioned Ulula, mentioned CompScience. Perhaps another company that I think is particularly interesting is a company called Kenzen, which is a biometric

that sort of heat exhaustion monitor that IoT device that you can wear that has, I think so much applicability in a world where the planet's getting hotter, workers are at risk increasingly of heat exhaustion in a variety of work settings. And, you know, what's so particularly compelling about this particular

Grant Trahant (22:48.334)
.

Ed Marcum (23:09.093)
device and something we've had to spend a lot of time on in many of our investments is just trying to understand also the privacy concerns and how you protect workers. There's some application of technologies that can give you better visibility but is that better visibility being used in a way to help workers or is it being applied in a way to disempower them. And so in this case we make sure that there's informed consent that.

you know, the results are anonymized so that if you have people, you know, wearing this biometric device on the, you know, the, on a construction site, it doesn't name an individual who may be at risk of heat exhaustion. And so therefore everybody has to take a break. It, you know, it just lets you, it lets you know as a foreman, Hey, there's several people who are in that red zone or in the orange zone of potentially at risk. So you got to get people to break. you know, is the information kept on the edge? Is it kept on the cloud?

Grant Trahant (23:45.088)
Mm.

Ed Marcum (24:03.129)
A lot of things that we have to do, I think, as we start to engage with some of these new technologies to ensure that that greater visibility is applied in the right way and still protects workers' privacy.

Grant Trahant (24:14.818)
What about a proof?

Ed Marcum (24:17.755)
Proof is a company that is similarly going back to the point we were talking about, about verifiable claims, doing some of the really hard work of not just taking claims at face value, but going back and trying to, for example, match up digital payment receipts with claims about living wage or trying to really, I think,

we see them as an important player in advancing this whole idea of verifiable claims at scale being where, quite frankly, the work that we're doing, but more broadly, think ESG, it has to be built on a foundation of strong data. And when you don't have that foundation of strong data, no one's gonna really pay much attention to the claims you're making. And so in some small way, I see proof as playing a really critical role in that.

Grant Trahant (25:10.882)
Well, I have to mention sort of, you know, AI and you mentioned data, this sort of, maturedness, I guess, in, in the AI marketplace and just the ability and the improvements that are happening sort of month over month, year over year. How have you seen AI, I guess, play, this is sort of a perfect industry where AI can maybe play a role in data collection at scale.

but also transparency and also curating all this data into some sort of readable format, easy to read. I guess, how have you seen the last 12 months through all the portfolio companies, AI impact them perhaps in a good way or in a bad way?

Ed Marcum (25:57.467)
Yeah, mean, and certainly AI is going to impact all dimensions of our life and probably all dimensions of our portfolio companies existence as well. And, you know, I've mentioned a number of platforms that we've been invested in already where they're really driven by AI, much less generative AI and more, think just machine learning and some natural language processing. But, you know, I do think that AI enables

much greater efficiency in those in regard to, example, the identification of suppliers, creating maps, et cetera, where I'm excited about, I think, new opportunities with respect to AI. You know, one area that we're particularly interested in is thinking about ethical procurement, for example. You know, can you allow people who are on the front lines of making decisions about, you know, raw materials or component parts and align their day -to -day activities with

Grant Trahant (26:31.586)
Mm -hmm.

Ed Marcum (26:55.353)
the mission of their larger organization, which sometimes are surprisingly disconnected. So if you're looking at price, quality, speed to market, can you also then begin to incorporate better ESG related information? And can you have like agentic AI that'll just make those decisions? And part of that is, again, built on data. You need high quality data to be able to make those decisions. But there's a way to potentially

automate and take qualitative information around supplier activity, integrate that into the day -to -day decision making that's taking place within procurement roles, such that money is flowing to the good actors who can demonstrate that they're doing the right things and taking extra steps to be responsible. And that would force those who aren't doing those kinds of things to up their game and be able to signal to the marketplace that they are in fact paying a living wage, doing the right things environmentally, et cetera.

And there's a lot of data and a lot of data that is, you know, not necessarily interoperable or comparable. And I think when you take that qualitative information, generative AI offers, I think a unique way potentially to allow for the, the, those more apples to apples comparison and, or at least to be able to signal not all certifications, for example, are created equal, some are higher quality than others. so, you know, can you

you know, ensure that those are at the top of your decision, you know, making list if you're in a procurement role. So I see, I see opportunities there. I mentioned comp science. still think there are tremendous opportunities where computer vision AI wants an area again, that's risky because you have surveillance sometimes without informed consent, et cetera. But I think if done the right way, you know, AI offers opportunities to get the kind of visibility you need into what's going on and to help prevent.

Grant Trahant (28:32.227)
Yeah.

Ed Marcum (28:48.499)
so, and then I think across the board, we're seeing a lot of the, the, work that our companies do just being augmented by and made more efficient potentially through generative AI and the use of it, you know, not necessarily making themselves generative AI companies, but, know, using generative AI for specific dimensions of their work that can, make workflow, easier for the end user and more efficient.

Grant Trahant (29:13.784)
I have a couple questions on on Fund One. How big was the original fund and what was sort of the average check size?

Ed Marcum (29:24.795)
Yeah. Fund one was a $25 million fund and we're early stage. So, know, seed series a probably 500 ,000 to $2 million initial check size, depending on the opportunity. And, we are now, as I said, in, in year eight, we've had to be exceedingly patient. I think we see our role as an impact investor in part, you know, as I'd mentioned earlier, we get out in front of things we see, you know, an ability, we have an ability to think, understand where the pain points are.

in a multinational corporation supply chain, and then an ability to look at different technologies out there and kind of see where they'd be applicable to addressing that problem. And that means we have a very thesis driven approach to how we go about looking for particular opportunities. But that sometimes means we're well out in front of the marketplace. And so it's taken us a while, but this year, all of a sudden, we've had a lot more sort of traction.

from the financial attractions. have three exits this year alone, and we've had one company achieve unicorn status, but it's taken a long time for us to get there. And I think part of that is the technology and the scalability of the solutions we invested in. Another part though that is probably worth mentioning is there's been a lot of forward progress on...

Public policy. So particularly starting in Europe now, there's something called the corporate sustainability due diligence directive, which for the first time is taking what were voluntary activities and, you know, in terms of doing due diligence on your supplier base and making them mandatory. So historically, ignorance was bliss. The less you knew about what was going on in your supply chain, the less liability you would have as a corporation. And if something bad were to happen at the bottom tier, you'd be insulated from that to some extent.

Grant Trahant (30:47.811)
Thank

Grant Trahant (31:16.59)
Mmm.

Ed Marcum (31:16.763)
Whereas what this legislation is now doing is saying, if you haven't done diligence on your supplier base and you don't know who those suppliers are and something bad were to happen, then in this case, you know, it has real teeth up to 5 % of your annual turnover could be at risk. And so what that's doing is taking what was a voluntary market and now making it mandatory. So it's growing the total addressable market. Therefore the need for the kinds of tools we invest in is growing.

And so a lot of the acquisitions we've seen, for example, in our space are coming from, you know, large private equity firms, the Carlisles, the Blackstones of the world. You're starting to see a lot more commercial engagement in the space than we've historically seen. And I think that's in no small part because the incentives have changed as a result of policy.

Grant Trahant (32:04.45)
Yeah. I want to one more question on the fund. What was it like for you raising the first fund? You know, it's, you know, just like a founder has to raise money from, from you and the team. You have to go raise money from LPs. What was that experience like for you?

Ed Marcum (32:21.957)
Yeah, it was difficult. was a, it was a fun adventure to some extent. was unprecedented. I don't think anybody had done anything in the human rights space so squarely. And we were focused on this particular niche of labor exploitation and supply chains. so whether we were going to be able to raise a fund and what that would look like was uncertain. I think very much benefited from being part of the broader Omidyar group and can really stand on their shoulders and their learnings and their experience.

about where and how catalytic capital can be applied, how we might want to structure a fund, what that process would look like. I think we, although we were starting from scratch and we're a startup, we were also embedded in this entity that had so much, I think, social capital, intellectual capital, and really leaned on that to help us out of the gates, which was fantastic. And yeah, then when we started to land a few investors,

those things begin to snowball, right? And you get a little bit of momentum and always felt like there was a really clear investment thesis and always kind of shocking to me that no one was working on it and no one was doing anything about it. that, so saying in some cases, I think there was very, and there still is very low hanging fruit. Like how is it in today's world that most companies don't even know who they're, who's in the supply chain and

Obviously we're coming at that issue from a labor rights perspective, but as we saw during COVID with all the supply chain disruptions, you don't know where your suppliers are. You don't know what risk you are there is for disruption of operations. Obviously with people making net zero commitments, you know, how are you going to know what your carbon footprint is when most of it is in scope three and you don't know where those suppliers are, who those suppliers are. Right. And so there's a, there's a, I think going to be a movement over the next five, 10 years where

that lack of visibility will no longer be the norm, but it's still shockingly unaddressed. And so I think in the early days in raising the fund, was just sort of like, there's a really clear need here. And was really hopeful that we would be able to get the capital to be able to demonstrate that. And one other thing probably worth touching upon is then the first fund.

Ed Marcum (34:40.667)
It was embedded within the foundation. The foundation was the general partner. We were something called a program related investment vehicle, which basically means we could take philanthropic dollars and that would count towards, know, a foundation was called their qualified distribution. They need to give away 5 % any given year. So it would count as a grant for them, but it also then required that we would put in place side letters with each investment that we made.

And some of the language in those side letters, because the legislation that sort of drives it is pretty antiquated, created some challenges for us as we had tried to invest in more competitive deals, because it has withdrawal rights built into it. so either existing investors or entrepreneurs would see some of that language and feel like, hey, wait a minute, this looks like you've got a poison pill built into this investment.

and you're at the top of the capital stack and you can withdraw if there's a deviation away from the mission, not even necessarily from our financial performance. That became a bit of a challenge for us. And so there were some, you know, a few other things about that structure that were challenging. then as we just, you know, we looked at fund one as proof of concept. And then, you know, we're thinking, hey, there's a real opportunity here. Let's launch a second fund. We realized we wanted to do that without that being a program related investment vehicle.

Grant Trahant (35:40.632)
Hmm.

Ed Marcum (36:03.035)
So in 2020, we spun out and raised a $30 million fund too. It's no longer a PRI fund. And so I think that helps us be more nimble and potentially participate in deals that are more competitive. Also though, ironically from an impact perspective, I think it allows us to be more aspirational. So when we were using the PRI side letters,

Grant Trahant (36:24.097)
Hmm.

Ed Marcum (36:27.387)
because people were fearful that if they didn't accomplish their objectives, it might trigger a withdrawal, they were very unambitious. And now we're able to sort of say, no, let's have a conversation about the number of commodities that you can tackle or different ways that you can go about using certifications that are aspirational and not very conservative. And in doing so, I think it aligns us.

And it aligns our vision with the entrepreneurs in a better way than it did when we were a PRI vehicle.

Grant Trahant (37:00.078)
I'll kind of end a little bit on the future and you know I know things move fast especially in the supply chain arena things are things move without your control and you know on a daily monthly basis perhaps when you look at next maybe three to five years what are some of the goals and successes that you and the team would like to achieve?

Ed Marcum (37:21.667)
I mean, I think there's still tremendous opportunity in the areas that we're focusing on, as I've mentioned several times in our conversation. I also think though that in many ways, the problems are going to get more complicated. And so when I look at the next three to five years, I see those both as challenges and opportunities. As is always the case, there's sort of two sides to that coin. I think climate change is going to...

disproportionately impact marginalized workers. And so we're gonna see parts of the world where the rising temperatures are going to make livelihoods very, very challenging. The amount of arable land it's gonna lead to, so displacement of lot of workers, it's gonna lead to mass migration. And there are already a lot of issues with migration and the vulnerability that that creates for workers. There are gonna be certain supply chains

like supply chains and mining and those that are required for a green transition to lithium ion batteries, for example, that we already know are incredibly stressed and full of human rights abuses. And yet the delta between where we are now, between supply and demand is only going to grow. And so how are we going to manage some of those supply chains and work within those contexts when we know that there's going to be overwhelming demand?

So I see climate as both a potential risk and something that's going to maybe exacerbate vulnerability, but also an area where we need to be thinking about investing and coming up with new solutions. Similarly, we spend a lot of time talking about AI. AI runs the risk of displacing a lot of both white collar and blue collar jobs. And so you know,

Grant Trahant (39:09.602)
Yeah. Yeah.

Ed Marcum (39:13.867)
What are the guardrails we need to put on AI in terms of how it's used and managed? How can we use it to augment workforces and create higher quality, better jobs? Understanding that there will be certain amounts of displacement that probably occur as well. But I see some of those areas as kind of run on that cusp of both creating new problems, but also maybe allowing us to be able to drive towards new and better solutions.

Grant Trahant (39:29.912)
Yeah.

Ed Marcum (39:43.727)
Those are the things I think that are exciting for us. And as we look ahead, even in the next three to five years, we see both the core work that we've done to date, as well as then kind of the emergence of these new areas as things that we need to begin to focus on.

Grant Trahant (39:58.296)
Amazing. Thank you. Thank you so much for taking the time and your your knowledge of the space and and your ability to present it is is awesome. It helps me kind of understand that the space a bit more and hope it does everybody else because it's it's very complex. But I think the tech that and the companies that you and the team have invested in is it's pretty interesting. I love

I love looking at portfolio and I love looking at what entrepreneurs are building in all kinds of spaces. And this is such a unique space. I'm glad somebody took it over and is putting all the work in. So best of luck to you and the team for the next decade.

Ed Marcum (40:39.621)
Thank you. Thanks for having me and really great to talk to you.