AN INTERVIEW WITH ANER BEN-AMI OF CANDIDE GROUP
Aner Ben-Ami is a co-founder and principal at Candide Group – a registered investment advisor that works with families, foundations, athletes and cultural influencers to direct capital away from an extractive global economy towards investments dedicated to social justice and sustainability.
Candide is an investor in Alternative Ownership Advisor’s parent company, Organically Grown Company, and they were one of the lead investors in the fundraising round that allowed OGC to transition to trust ownership.
Aner joined me from his home in Tel Aviv to discuss impact investing, the stories we tell about money, his work routine, steward ownership, his favorite cities in the world, parenting, his hopes for the future, and much more.
PMK: Can you walk me through your typical day? What do you do?
Well, I am in Israel and the rest of my team is in the US, so it's a bit upside down.
After I drop off my two girls at school, I tend to have a bit of flexible time in the mornings because that's when my team in the US is asleep. So I get to have some "me time," whether it's working out, going to a coffee shop, or meeting a friend or something.
And then I have some quiet writing time. I tend to spend that time either going through my inbox or writing investment recommendations or doing research or due diligence on investment opportunities. And then my early evening and night is a lot of Zoom time, which is with a combination of four stakeholders, which for us includes:
Companies and funds that are in our portfolio and may need some sort of support.
Our clients, the investors, who we are continuously guiding towards investments and helping them kind of get comfortable with investments.
Ecosystem partners and co-investors where we talk about a variety of things - are we looking at the right things together? What could we be sharing and what should they be sharing? We brainstorm ideas, opportunities, models, et cetera.
Our own growing team.
So that typically gets me to 1:00 AM here and then it's rinse and repeat. That's the part of being remote that is nice. If you want to write and think and research you do need to find that quiet time, which is hard to do during a day of meetings and emails and zoom calls. And so having that time during the day that is almost by design quiet for me because the team in the US is asleep is somewhat useful for that.
PMK: So your productivity hack is to move eight time zones away from your team?
<laughs> I guess so - If you're a night person!
PMK: Can you bring me back to the origin? How did Candide begin? Where did that inspiration come from and what made you start?
We started as a quasi-single-family office, with a single asset owner and a personal relationship. I was friends with a member of the family, and this family is incredibly values-driven, thoughtful, and disciplined about everything they do as citizens and consumers. They want to bank, use transit, shop, etc. in ways that are values-aligned.
Their values really guide their decisions about everything, and they also happen to be asset owners. They had an investment portfolio, and at the time it was being managed by a large bank with no regards for impact. That felt completely at odds with who they are. This was about 10 years ago when they were trying to explore investing in things that resonated and were more compatible with their values. Having those conversations with their bankers led nowhere.
I was lucky to have them turn to me during a friendly visit in New York, and ask "maybe you can help us start down this path." I was, at the time, working for the Boston Consulting Group in Chicago, so investing was new to me, but they looked to me as someone who understood their values and had enough of a general business background to help figure this out. So I got involved not really knowing what it would entail. Very quickly, through my research on early leaders in the impact investing space, the conversation shifted away from let's dabble, to let's integrate impact throughout everything we do.
This "100% approach" is informed by the idea that impact investing should be the norm. One of the themes that emerged on day one was this notion of: how do you define impact? What do you want to invest in? What are you trying to achieve? We were struggling to find terminology and language. Our approach wasn't thematic. It wasn't about picking a couple sectors, whether it's food or education or any other sector and focusing on that. It was about integrating impact into every business in every sector of the economy. What we broadly call “the how”.
We joined a number of impact investor networks, wanting to initially see a lot of companies and meet a lot of practitioners. Often, when you join one of those impact networks, you get asked to pick which sectors you care about. Agriculture, food, financial inclusion, education, and it always felt like, well, what do you mean pick? These are all important and they're all connected. The reason there are systemic issues across all these sectors is that the system itself is broken. It's not about a particular sector that's broken, it's the financial system. It's this version of capitalism. So that was the guiding framework from day one.
It was difficult in terms of figuring out how to navigate the impact space with this holistic framework because you go to the "clean energy conference" or the "food conference" or the "FinTech conference." But if you care about everything and it's all important, so long as you are seeing things through the lens of needing to make systemic change, rooted in social justice, how do you kind of navigate the impact space?
PMK: I feel like impact investing has become an empty term, because like you said it can mean different things to different people, depending on who you're talking to. You're talking about having to define that for yourselves, like, what does "impact" mean for us? How does that tangibly manifest in our philosophy? Do you have any comments about what "impact investing" means or what it ought to mean?
I don't know if it's an empty term, but it's a very broad term and it means very different things to very different people, which leads to a lot of useless arguments e.g., "does impact drive returns?" Well, it can if you're looking at a particular set of strategies where it does. Those exist for sure. Or is impact concessionary? Well, it can be. If what you care about is fixing market failures where traditional capital cannot generate best-in-class returns then you will be interested in investing in projects and companies that address those market failures, but yield a “concessionary” return.
I think we're at this point where there's an evolution going on with our terminology. Some investors aren't shying away from saying we're "impact first capital." Then there is catalytic capital, double bottom line capital, etc. Those terms haven't quite solidified, but having those terms helps avoid a lot of the circular arguments that I don't think I've been very productive because ultimately, it's just different people looking at very different parts of this space.
PMK: We could easily have a conversation about everything that's wrong with capitalism. And I have no doubt that that will come up throughout this interview, but I want to ask the opposite question. What do you think are the best parts of capitalism that we should endeavor to maintain or even expand?
I guess I shy away from this binary either/or debate like its capitalism versus something else, whatever that is. That's not helpful either. Certainly, some version of capitalism is probably the best form that we know of, in terms of driving innovation, driving entrepreneurial activity, providing those incentives for building all these great market-based solutions.
What we're essentially doing in impact investing is stepping in where either the government or public sector dollars or philanthropy have failed to address certain issues. We see an opportunity for a market-based solution to do that. That is one definition of capitalism. And of course all of our work around so-called alternative ownership models, where we are re-defining who is on the cap table (ownership) and who is at the Board room table (governance). So it’s an inclusive stakeholder-centric form of capitalism...but it’s still capitalism in my book.
PMK: Yep, I agree. How do you source deals? Where do you find opportunities for cool companies to invest in?
We've been around now for almost a decade. We've been active consistently and I probably should have these stats off the top of my head, but in the last couple of years we've probably done 20 private investments per year, so a couple a month. I think that alone sets us apart as an organization that has been doing this for a while and has been active, putting their money where their mouth is - that draws referrals. Other investors are sending stuff our way because they know we're doing the work and the founders want to talk to us. So, finding deals has never been our pain point.
The other thing is we have such a broad scope. If we were defined around a very specific strategy where we're only looking to invest in very specific models or types of ownership and building a fund around that, then you might get into deployment issues or pipeline issues. Having this very open-minded, broad funnel at the top means that we can consider funds and companies in so many different areas and sectors and can see what rises to the top. We can look for a model that feels really transformative and innovative and exciting.
Right now, we're closing over 20 investments a year. The truth is there's probably more than that that we'd love to be able to fund. We either just don't have the capacity or the bandwidth or the capital behind us to do more.
PMK: Wow - 20 a year, that's a lot for your size.
I will say that does include follow-on investments. So not all those are relationships, but it is a lot.
PMK: You have invested in multiple steward owned companies at this point, including Organically Grown Company, Firebrand Artisan Breads and Berrett Koehler Publishers. Can you tell me what attracts you to steward ownership?
I described earlier our general impact thesis and north star. It has always been somewhat sector agnostic. It's always been, as we like to say, more about the "how" than the "what."
Our thinking is that any business can be an impact business, depending on how it's organized, how it treats its stakeholders, its workers, and its communities. How they engage in designing governance and ownership. That's always been at the core.
My co-founder Morgan Simon is also the co-founder of Transform Finance, where I am also on the board. It is a nonprofit that is organized around these principles that are sector agnostic. It's more about what it means for businesses and for finance to be accountable to communities and to have a deep social justice approach. With that general sort of lens, it's not about whether you're publishing books or making bread or distributing organic produce. It's about how you're organized, who you're owned by and how you make decisions about who's at the table, who benefits when you are successful, who loses when you're not successful. These meta questions cut across any industry.
Steward ownership was a very intriguing way to approach those questions. We haven't fully hitched our wagon to this model or said, “this is the one model we're pursuing.” We view it as one option across a range of solutions from co-ops to ESOPs, etc. There are more traditional companies that may still be best in class in terms of the types of jobs they're creating and how they're sharing profits.
Our approach has also been to meet companies where they are and to try and support them in deepening their impact practices or their stakeholder practices, whether it's through becoming steward owned, or whether it's about creating a more distributed cap table and ways to incentivize workers and communities in a more thoughtful way.
PMK: What do you think needs to happen so that steward ownership can go from a niche movement to something that is considered more viable and mainstream?
I'm not sure I have a great answer, but I think that answer will look quite differently for companies at different stages. I could certainly see some of the more mature businesses that are at the succession planning or long-term planning phase, like Organically Grown Company or Berrett Koehler, moving more in mass towards some form of steward ownership as a more scalable solution. If the right vehicles existed, whether an evergreen fund or a holding company that enables other businesses to transition, I could certainly see that trend accelerating. It's a tricker question for growth stage businesses.
PMK: You think steward ownership is trickier for early or growth stage businesses because of the limitations around financing that currently exist in a steward ownership context?
Yes, primarily for growth stage businesses, just knowing that it's not the last time you're going out to capital markets. You're going to raise more capital, maybe multiple times. So a structure that limits how you can raise capital can be challenging unless you do not think you will need to go out and get more money from investors, or if you have the luxury of fundraising with a more narrow set of terms.
PMK: I am thinking about Firebrand Artisan Breads - they are not exactly a startup, but they're not exactly a super mature company - they are somewhere in the middle. That was an interesting deal, the way you structured it, where investors were getting a high percentage of the returns until they got 2X and then it flips in favor of the employees or the stakeholders after that.
That's right. Matt and the team deserve a lot of credit for designing and proposing that solution. I always say this, it's a bit of a side note, but it's amazing how important it is for founders to communicate to investors a plan. Like, saying: this is what we think we need. This is how we think this financing is going to work. And then investors, like us, step in and we'll probably have some ideas, and we may tweak it or maybe change it quite a bit. But working with companies that already have a strong idea of how financing will work for them, for us as investors is critical.
We're working on 20 deals a year. Unfortunately, we don't have the capacity to do advisory work. We can't advise a founder for months on end on how to structure their deal. We just don't have that capacity or the right knowledge necessarily. Folks like AOA can get companies to that place where they're investment ready or closer to investment ready.
A lot of credit goes to Matt and the team at Firebrand because they already had their creative ideas sketched out when they came to us. It's also a reminder of how each of these deals has been very different.
Is that ideal? Maybe not. Should we strive to standardize more? Probably. So far, our experience has been that each company has different needs and priorities. It's about what the company needs, what it could generate, what it could support in terms of its growth trajectory and profitability. It's always a little bit different.
And you're right, Firebrand was in that middle stage, it's not a startup but it was profitable at the time. It had been around for about a decade but not at a steady state like OGC or Berrett Koehler. It is a very interesting case study and I hope it can serve as a template and influence other companies at that stage. It shows you don't have to be a 40-year-old, super mature business to do a steward ownership transition. You can do this as a growth stage, somewhat profitable company. So it's really helpful, potentially, that Firebrand can serve as a model.
[Editor’s Note: For more on Firebrand, check out our interview with founder/CEO Matt Kreutz)
PMK: You constantly talk to a bunch of people who are considering investing into the impact space. Whether institutions or individuals, my question is why should investors consider other metrics besides maximizing financial returns? I know you're in this world, so it may seem obvious to you, but many people are not active investors and they're just investing in an index fund and they're an accredited investor who's making 10% a year for the last few years in the S&P 500. And then I come to them and say there's this cool company doing great things in the world, and you can probably expect a return around 5-8%, and they say, "well I'll probably lose a couple points, so why should I do that?" - so, why should they do that?
I have a couple of thoughts. I think we're lucky in our work at Candide where that's not something that we have to really do. We have investors that are already bought into this type of thinking, which is why they come to Candide and invest with us. So we don't have to do as much education or convincing.
But I think there's a business/financial argument, and there's an ethical argument. The business argument exists, I mean, you look at some of these companies, steward owned companies, companies that are well aligned with their stakeholders like Organically Grown or Berrett Koehler, and they are super resilient. They've been consistent. They've maintained growth and profitability for years and years and years. And it's not a coincidence, right? It's because they have this stakeholder orientation in their DNA. In a hypothetical future, as I mentioned earlier, where you had a dream holding company that you can invest in like an index fund that has great values-driven businesses that convert to steward ownership. I mean, imagine which businesses are likely to be in that group. They're probably going to be an amazing group of businesses that a lot of people are going to want to invest in because their businesses are consistently successful because they're so authentic. People want to work there, and people want to shop there and suppliers want to supply to them, etc. From the Traditional Medicinals to the Patagonias of the world. The leaders in capitalism 3.0, right? So, there is a business argument that ultimately these are going to be strong consistent performers.
Secondly - I think there is a strange disconnect between how individuals think about this notion of “giving up returns”. There was a session at SOCAP a few years ago about alternative financing that Luni Libes was leading. He presented this hypothetical company that does impactful work in East Africa providing chickens to small farmers and increasing their incomes. He then asked folks to design an investment, some profit share type of investment. There was a big room, a lot of people in the room, and he asked them what appropriate return would make them happy. If you put on your financial advisor hat, the appropriate return would be really high because it's a really risky early-stage business in rural Tanzania or something like that. But people's answers were all surprisingly very modest. They said that if they got their money back and made a small return, they're going to be happy. And that's true, right? If you, at an individual level, support that business and get a small return while doing it, it probably feels great. But then at the same time, you can have a more theoretical conversation and the answers change. You can say you're going to “give up upside” or “give up power” and suddenly people no longer have that relatable story. I've gotten yelled at at conferences by people saying, "why should I do this, this isn't what capitalism is about." So, there's a bit of a disconnect there.
PMK: So true. Money is a story. And part of our work is to tell different stories. People give up money all the time for a good story. They decide to buy the more expensive bottle of wine because they like the label better. It’s an interesting perspective.
Well, moving to a slightly higher level: are there any policies that you'd like to see enacted at a state or federal level (in the US)? Specifically aimed at incentivizing alternative ownership and governance?
The one that comes to mind are the tax benefits that currently exist for ESOP conversions. I’d like to see those extended to other forms of stakeholder-centric ownership
PMK: We'd love to see that too. I think it's not impossible either. It just needs to gain a little more recognition in the mainstream.
How do you think big money, like pension funds, should approach impact? How should they incorporate "impact" into their portfolio?
This is not a universe I work in directly. But these institutional asset owners ultimately are managing assets on behalf of workers. And climate and social issues are becoming an existential threat to their portfolios. It becomes part of their fiduciary duty to think about these issues.
Impact investing is a very large tent. Part of that tent increasingly includes individual asset owners who are losing interest in the debate around “market rate” of returns. They know they have more wealth than they need and they are willing to significantly reduce their return expectations in order to achieve more impact with their investments.
Ceniarth has been an influential voice in this conversation. We also have some clients who are taking more of a reparations mindset - they acknowledge that their wealth is partly a product of historical extraction from communities and the planet, and they don’t think they should be generating massive returns as they are investing to undo that harm.
That is not the case with pension funds who need to generate sufficient returns to cover their liabilities. So they view impact either from the lens of enhancing returns or from the lens of risk management - i.e., how does climate change and wealth inequality impact their ability to meet their fiduciary duty to their beneficiaries?
PMK: Looking ahead, when you imagine our economic system in 20 years, what would you hope to see?
The other day on one of our fund limited partner calls, there was a conversation around how impact investing will continue to grow. They highlighted how they think the impact investing space will grow a ton, but they also said impact will never be the norm because most businesses aren't inherently impactful in terms of their product or service - most businesses are doing neutral things that are not specifically solving a social or environmental issue.
But, if you look at things through our lens, that is, it's not just about the product and service that's tackling a specific issue. It's about ownership models: it's about stakeholder commitments, B-lab and benefit corporations, employee ownership, steward ownership, or whatever other new models emerge.
A lot of the stuff that we're talking about didn't exist 20 years ago. I do hope that we will shift towards a more multi-stakeholder model in some way, shape, or form. Whether it's including workers on boards, whether it's more robust regulation around reducing compensation inequality, participation of workers in ownership and/or distributions, I do hope these things become the norm.
We're constantly seeing the cost of social and wealth inequality, at a national and global level. I think we need to fix that ultimately through something like a multi-stakeholder model.
PMK: Absolutely. I read that you have a strong interest in conflict resolution, specifically due to your proximity to the Israeli Palestinian conflict. Do you have any tips on how to approach conflict in a way that's productive?
In our everyday life? It's interesting. I've been doing a lot of thinking about this as we shift our focus to what it means to build our own organization: our own organizational culture, structures, and systems. Through this process, I've learned and seen bad systems that make people feel weak, uncomfortable, judged, whatever that may be. Those systems are recipes to breed conflict.
So I wonder: are conflicts driven by just certain personalities, certain people that just won't get along? Or is it more about the system that they're placed in? I tend to believe it's the latter. A group of people can work together wonderfully, or they can hate each other's guts depending on whether the system is organized in a way that feels productive.
PMK: So in terms of conflict resolution, you're actually focusing on preempting the conflict in the first place by setting up a system where it is less likely to arise. That's an interesting framework, especially when you're thinking about organizational development, building a company, and politics.
My wife is a neuroscientist, and her research focuses on the neuroscience of empathy. In particular, how it is common to observe helping behavior and pro-social behavior within "in-groups" that people are a part of versus "out groups."
The good news is that it validates what you would've thought, which is that if you create a shared experience – if you mix schools, mix workplaces, and create a broader definition of who's "us" – that's productive.
We're very much in this time where the world seems to be heading in a very different direction. Whether it's politics, social media, etc. In the pandemic, every issue seems to pit us against each other, into groups of "us" versus "them." Then the other side gets dehumanized and there's very little patience and understanding of the other side's perspective.
PMK: Totally, and with steward ownership or multi-stakeholder companies, you're bridging some of those gaps, it's less like: "labor" versus "management" or "owners" versus "workers." We're all in this together, especially if you structure it correctly.
Absolutely. For me, the experience of attending the first stakeholder gathering at Organically Grown Company was honestly an emotional moment. Seeing various stakeholder groups: the nonprofits, the workers, the investors, and management all sitting around the same table and problem solving together. I mean, it was sort of utopian.
PMK: What is a book that you gift or recommend often?
Thinking Fast and Slow by Daniel Kahneman is one which is really good at highlighting our many biases.
Another is The Divine Right of Capital: Dethroning the Corporate Aristocracy by Marjorie Kelly - that one really inspired my early thinking in this space.
PMK: You're from Israel, and you recently moved back there. I've never been, but it's at the top of my list. If I go to Israel and could only visit one city, where should I go?
I can't not say Tel Aviv. I'm here. I love the city. I love its energy. It's a unique combination of the middle east, Mediterranean vibes, and some weird kind of startup West Coast vibes thrown in there too. So, yeah, it's a special place with a very special energy.
PMK: What should I eat while I'm there?
Be ready to put on some pounds <laughs>. A lot of street food is great. We don't have much ethnic south Asian or east Asian cuisine because we don't really have those communities here in an organic way. But really anything else that is a combination of Middle Eastern and North African cuisine mixed in with European cuisine is all really good. I have a list of recommendations if you want them.
PMK: Okay. I'll follow up when I visit! I feel like you've traveled a lot for your work. Do you have a favorite city in the world?
I mean, Tel Aviv is still high on the list. It's a great city. But I also love Lisbon, Paris, and Berlin.
PMK: So you mentioned at the beginning of the interview, you have two daughters. I had my first child this year, and am curious what parenting advice you have for me?
I credit my first daughter for pushing me into this space. I knew I didn't want to stay in management consulting long term. I wanted to work in a space that was asking these sorts of questions around equity, social justice, and capitalism. Having a daughter really pushed me over the edge to be my full self at work and not just do work outside of my life and family. It really helped break down those barriers for me. So I guess let that happen.
And my other answer is just to be there as much as possible.
PMK: Love that. Any music that you're loving right now?
I took my first guitar lesson today!
PMK: Wow. Like the first lesson of your life?
Yeah, I'm in this midlife crisis thing where I'm trying to do all these hobbies that I never pursued when I was younger. I don't think it's too late. Honestly, the nice side effect of having kids is it's a perfect excuse to re-experience things or experience things that you never did. My daughter and I were taking skateboard lessons together because I wanted to take lessons with her, you know?
Anyway, to answer your original question, my guitar teacher also asked me my favorite music. It's all over the place. My music taste formed in the nineties, so my go-to music is probably electronic music and rock music from those years.
PMK: Love it. Ok, two more questions. If people want to support any of your portfolio companies, are there any consumer facing ones that come to mind that people can look up and interact with?
We don't have many consumer facing businesses. There's a few. Firebrand for sure. Tanka Bar, which is structured to always have a majority native ownership. If you're into bison meat, bison bars, they're the best.
PMK: How can people follow your work at Candide? What's the best way for them to stay tuned?
We know we haven't done a good enough job to write up stuff on a more consistent basis. We have our Medium channel and a newsletter. I think we are going to be doing better because we're very excited that one of our team members, Jasmine Rashid, is now our full-time Director of Impact. She's going to be developing more content around impact. We’re also hiring a full-time digital communications associate. So we're going to be putting out more and more content in the near future.
PMK: Can't wait. Aner - it was great to reconnect and thank you so much for your time and your generous answers.
Appreciate the opportunity. Thank you.
[Editor’s Note: Portions of this transcript were edited or condensed for clarity.]