Headstream Capital Scan 2022

CAPITAL LANDSCAPE IMPACT SCAN

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Insights about the capital allocators funding youth digital wellbeing innovations

Headstream Research Team David Ball | Sr. Director Headstreamr | david.ball@seconmuse.com Riza Aryani | Sr. Manager Impact | riza.aryani@secondmuse.com

Headstream Website: www.headstreaminnovation.com

OVERVIEW OF THIS CAPITAL SCAN Headstream exists to foster a thriving entrepreneurial ecosystem that transforms the ways education, health, and social tech sectors prioritize the wellbeing of young people.

In this way, Headstream has a dynamic relationship to understanding the forces that shape this emerging ecosystem. We both respond to known needs like entrepreneur support through the Headstream Accelerator, and investigate new perspectives to inform ecosystem development approaches like our Digital Delta research project.

In 2021, Headstream created a common framework and tool for impact measurement and management in this youth wellbeing sector, Impact Navigator.

The tool’s MVP primarily serves youth wellbeing companies and organizations by tailoring evidence-based metrics to their innovation. To expand and deepen Impact Navigator, we set out to better understand the impact measurement needs of capital allocators in this space.

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Why we did this scan. Digital wellbeing innovations are complex in their legal structures, their business models, and their customer bases; so they tend to attract a mix of investment along a continuum from private to philanthropic capital. This brings a diverse group of capital allocators to the ecosystem. This scan was a first step towards bringing a portrait of the youth digital wellbeing capital landscape into clearer focus.

How we did this scan. As an ecosystem developer, Headstream intentionally builds relationships: we started there. We engaged, through interviews, with Headstream’s existing network of foundations, venture capitalists, and impact investors. Then we expanded our scan to include new entrants and targets. We analyzed publicly available information to see how different types of capital allocators discussed their focus on youth wellbeing, their funding sources and sizes, and their impact expectations.

What we learned. We learned the types of entities that are driving investments to youth digital wellbeing innovations, and the language they use to present their focus areas. We also unearthed additional considerations around supporting impact-first allocators, organizing common framing, and deepening our investigations into capital trends. Explore these learnings in the following pages.

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WHY | Capital Allocators & Impact

Much like the challenges and users innovators aim to impact, this space is characterized by complexity and diversity. Innovators are up against longtail paradigm shifts in health and education systems alongside rapidly developing technology. While the users are technologically savvy digital natives, they are typically minors who are not paying for the services and products. Those payers are ultimately gatekeeping adults, or intermediary service providers looking for cost savings and quantifiable benefits.

Although youth digital wellbeing innovations are often technology products, their business models and growth trajectories look nothing like the “hockey stick” exponential growth typical of web2 startups. This means capital allocators are also navigating uncharted waters where traditional risk modeling approaches simply don’t fit.

This is a steep hill for impact measurement tools to climb. Without standard metrics on success, both sides of the funding relationship are looking for answers and guidance. This project initially set out to discover more about investors’ impact measurement needs. We started with testing the viability of a roll-up impact snapshot for investors and philanthropic funders to gauge portfolio-level performance on youth wellbeing. After a handful of conversations, we kept hitting this same question:

“Who is this for?”

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Impact investors, high-growth-oriented venture capitalists, and grantmakers may all be swimming in this pool, but they have drastically different styles and needs when it comes to quantifying and qualifying performance.

At Headstream, our motivation is to build resources that reflect the community in their design; so we wanted more detail in our answer than: “this is for whoever is funding youth digital wellbeing innovations.”

40% Who’s funding Charitable digital youth wellbeing?

55% VCs

— Based on a scan of 87 capital allocators

02. HOW | Sampling The sample set of 87 entities included capital allocators that engaged with Headstream programming, or have been recommended to Headstream staff through existing relationships. Engagement may include investing in one of the innovators in Headstream’s Accelerator, attending a Headstream convening, professionally advising Headstream innovators and/or youth, guest speaking at an ad hoc business fundamentals workshop, or engaging with a partner like Going Digital Behavioral Health Tech Summit. This sample set was extended by prospecting for additional capital allocators that publicize some work in youth digital wellbeing. We defined interest as having some type of website or portfolio information expressing interest, or having invested in companies with a youth wellbeing value proposition.

— A few methodology notes

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This scan was limited by: ● Lack of common language ● Ambiguity in topics like “wellbeing” ● Sector movement (e.g. mergers, acquisitions, launches, and closures) ● Cultural influence (i.e. news articles drawing attention to adolescent mental health issues) ● Unavailable public information For practicality, we left out: ● Deal specifics, especially regarding angel investments ● Non-U.S. based funders ● General youth funders (e.g. Jewish Teen Foundation) ● Funders of capital allocators (e.g.

Limited Partners, families of family offices and foundations) ● New entrants after summer 2021

Impact capital leads the way 03. WHAT | Information and Findings The scan looked at: ◨ Range of focus areas within youth wellbeing; ◨ Target funding motivations; ◨ Target audience of the funded organizations; ◨ The extent to which these were “impact funders”; ◨ Amount of money invested/granted; ◨ Funder type (e.g. Venture Capital, Foundation, Non-Profit, etc.); ◨ Size of funder (defined by the number of organizations it has funded)

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This report presents high level takeaways; please reach out to Headstream regarding the full data set.

72%

45%

49%

Impact Driven Our scan indicates a majority of capital decisions are made with a lens or a mandate for positive social impact

Large-sized funds

Minimal focus

45% of scanned organizations are dispersing tens of millions of dollars

However, almost half of scanned organizations made no notable mention of youth wellbeing in their focus areas

03. WHAT | Data Snapshot

Is Youth Wellbeing a small slice of their overall priorities? Or is it central to their purpose?

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What are the Capital Allocators incorporated as?

Small = Thousands of $ Medium = Millions of $ Large = Tens of Millions of $ or more

03. WHAT | Learnings — Language The youth digital wellbeing space is a busy crossroads of a wide range of social challenges and solution ideas. This word cloud is just a snapshot of the many terms we found for describing capital allocators’ areas of interest that may align with or be presented alongside youth digital wellbeing.

This underscores the need for organization in the ecosystem around common framing. Towards these ends, Headstream engages in the HX Project to support movement towards shared language. HX, short for “Human Experience” sits at the intersection of many existing fields all working on ways to make our lives healthier, more equitable, and more human.

Common language can lead to a common set of metrics that provides clear direction of innovators and streamlines the ability to track impact.

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— Impact Forward The assumption that impact-first allocators are currently driving this ecosystem has been fundamental to Headstream’s perceived sense of the landscape, and was confirmed across the sample set we investigated. Broadly, we consider impact-first capital allocators to make decisions from a place of social return over financial return.

We catalogued funders with strong mission statements but no impact reporting as “impact aware.” The trend of this disconnect makes sense as young people are rarely the paying customer for innovations that serve their wellbeing, so traditional profit-motivated investors tend to avoid the perceived riskiness of current business models.

Headstream’s position is that impact-first allocators’ philanthropic and private working capital is critical to derisk this investment space for traditional private investors. This underscores demand for Headstream to focus on building tools and frameworks that serve impact-first allocators’ needs and use cases, rather than designing for the traditional angel, seed, or early-stage investor motivated by expectations for near-term exits and higher returns on investment. This has immediate applications to tailor Impact Navigator’s product to support impact-first allocators’ impact management practices of their portfolios of youth digital wellbeing innovations.

See the Appendix for an example prototype of a potential Impact Navigator feature for impact-first capital allocators: a checklist to manage youth digital wellbeing impact.

04. WHAT COMES NEXT? This project surfaced several themes that warrant further investigation: Hidden capital Where else might resources be flowing from? For example, entrepreneurial support organizations may be providing non-dilutive funding in under-publicized ways for participants in accelerators and incubators.

Headstream aims to investigate the extent to which creative, alternative sources of capital may reach youth digital wellbeing innovators.

The user vs. payer challenge In this scan, Headstream further encountered the challenge that capital allocators typically target intermediaries; that is, not young people themselves. Allocators may distribute financial resources to technologies or programs that service teachers, health providers, and other caring adults essential to youth wellbeing. Technology innovations centered on youth users also encounter this challenge, since they need to find other payers for business model viability. Headstream continues to explore opportunities to advance ecosystem knowledge and solutions to this reality.

Cultural trends In recent years, there has been a strengthened trend of news highlighting teen mental health as a crisis. When new documentaries about this drop, or when a staggering headline makes its way to large audiences, an upticked cultural focus on teen mental health occurs. How might this phenomenon affect capital availability, flow, and allocators’ interests in the space over time?

New arrivals This is an emerging sector, so it is rare to have lots of experience in this niche. By engaging with this scan and dialogue, Headstream noticed that allocators may “feel new,” coming from adjacent industries like technology product development, health systems/providers, and educational institutions. It may indicate upcoming demand for more tools and resources that support orienting new capital allocators to the unique dynamics, needs, and opportunities of the youth digital wellbeing ecosystem.

ENGAGE WITH US ● Contribute to the sample: Help build our collective knowledge.

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This scan is a good start, help us make this landscape more comprehensive. If you’d like to learn more about the research or share how your work is reflected in this synthesis we welcome new additions. Contact us to continue the discussion and help us improve.

● Impact Navigator: Share the new and improved tool with your portfolio of investments!

Nine new measurement instruments have been added to show companies and organizations focused on youth digital wellbeing how to measure and assess their impact.

● Digital Delta: Understand where to focus your investments Explore our free crowdsourced tool that worked with over 800 stakeholders, including 400 youth, to identify the catalytic factors with the largest potential to impact the system.

APPENDIX

YOUTH DIGITAL WELLBEING IMPACT CHECKLIST PROTOTYPE

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As we explored the utility of Impact Navigator for capital allocators, we co-designed with a number of funders, a prototype tool that meets some of the specific needs identified during our scan.

This checklist prototype for youth digital wellbeing innovators and their funders could outline steps for ensuring and maximizing positive impact on young people.This prototype presents information with multiple hypothetical assessment methods, including: ● yes/no checkboxes, ● letter scoring based on a standard, ● numerical scoring based on a standard, ● progress bar (red, yellow, green), ● and quantity write-in

APPENDIX

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CAPITAL SCAN LIST .406 Ventures

Dreamers VC

Patrick P. Lee Foundation

1501 Health

Einhorn Collaborative

PhotoWings

7wireVentures

Emerson Collective

Pivotal Ventures

Acumen Fund

F-Prime Capital

Polaris Partners

AET Fund

Flare Capital Partners

Porticus

Altimus

Ford Foundation

Raikes Foundation

AmFam Institute

Reinventure Capital

Arc Capital Development

Forum for Sustainable and Responsible Investment

Ataraxia Fund

Funders for Adolescent Science Translation

Rock Health Capital

Autism Angels Group

General Catalyst

Samueli Foundation

Ballmer Group

Grantmakers for Girls of Color

SecondMuse Capital

Bezos Family Foundation

Gray Matter

She Invests

Blue Ridge Labs (Robinhood Foundation)

Hearst Ventures

Siegel Family Endowment

Blue Run Ventures

Hello World

Silicon Valley Community Foundation

Blue Venture Fund part of Blue Cross Blue Shield

HopeLab

Spero Ventures

Humble Ventures

Steinberg Institute

Born This Way Foundation

Jumpstart Nova

Telosity

Boundless Impact Investing

Kapor Capital

Town Hall Ventures

Bridgespan

KidsX

Trailmix Ventures

Bright Ventures

Klingenstein Philanthropies

Unseen Capital

CARE

Lightship Capital

Valor Ventures

Chan Zuckerberg Initiative

Longview

Vive Health Collective

Chavez Family Foundation

Loup Ventures

Wellspring Philanthropic Fund

City Light Capital

Lovell Foundation

William and Flora Hewlett Foundation

Claritas Capital

Monta Vista Capital

Wolverine Angels

Colorado Health

National Public Education Support Fund

WXR Fund

Conrad N. Hilton Foundation

Nesta Impact Investments

Zebras Unite

Cooney Center (Sesame)

Oak HC/FT

CoOrigin Ventures (rebranded as Alpaca VC)

Obvious Ventures

David and Lucile Packard Foundation

Omidyar

Draper Richard Kaplan Foundation

Optum Ventures

Rise-Schmidt Futures