The View From the Office.

I met up with Alex Friedman, co-founder and CEO of Novata at The Smith in Chelsea for breakfast. I had the goat cheese omelette and a latte; Alex had the avocado toast and a cappuccino. 

Novata is B Corp-certified and a public benefit corporation with a group of investors from private, public, and not-for-profit organizations. It aims to provide private markets with tools to manage sustainability data, like carbon emissions or workplace metrics.

The end goal is the establishment of analytics and benchmarks that can help drive regulatory and stakeholder decisions with the same same discipline as financial metrics. 

Alex has had a fascinating career. After graduating from Princeton undergraduate and Columbia Law School, he spent a year in the Clinton administration before working as an M&A banker at Lazard in New York. 

In 2007, a friend recommended him for a role as CFO of the Gates Foundation. During his interview, Alex says he told them “I’m not qualified. I’m not a CFO. I don’t manage money.” They said: ‘that’s why we want you!’”

Early in his tenure at Gates, he advocated for “impact investing” which was just emerging at the time. The idea was that in addition to making grants, the foundation would invest in ways to maximize the impact on global health, education, and poverty.

Alex soon realized, however, that the data to assess the efficacy of those investments was largely unavailable. It was a challenge he would continue to confront after he left the Gates Foundation to become CIO of UBS in 2010 and then CEO of GAM Holdings.  

He took a break during Covid and lived in Wyoming with his family while he considered his next move. He realized that the need to gather non-financial data to establish metrics for private companies remained unsolved. 

He founded Novata in 2021 to start to close that gap. He noted that there are more than 300 million private companies in the world, compared with 60,000 public ones. Private firms make up 87% of the businesses with more than $100 million in revenue. Nine out of ten people work at private firms. 

One initial solution Novata has used to collect data has been to approach private equity firms that invest in private companies. In exchange for providing the data, the PE firms receive aggregated data back they can use to evaluate performance.

Alex says it’s going to take time, but making more data available could spur investment in a similar way that it did a century ago. He noted that the standardization of financial reporting in the 1930s sparked confidence in capital markets. 

You can connect with Alex via LinkedIn or DM me for a warm intro.