Sep 9, 2014 · 3 minutes

Revenue. Profit margins. Traction. "Network effects."

These are the kinds of terms that are usually tossed around when discussing the intelligence of a particular investment. And they're tossed around as well at Index Ventures, Danny Rimer's global venture capital firm which counts Skype, Dropbox, and Etsy as some of its biggest hits.

But there's another question Rimer asks when considering an investment: What does this company do for the social good?

Nowhere is this investment thesis more evident than in the announcement today that Index has led a $21 million Series B round in Good Eggs. Good Eggs is a platform allowing customers to order groceries online that are grown by local suppliers -- basically the kind of fare you would find at a farmers market -- at lower costs to both farmers and buyers. By utilizing smaller operations that deliver products locally, this helps support a more sustainable, environmentally-friendly food cycle. And because many (though not all) local farmers eschew pesticides, hormones, and heavily-processed ingredients, startups like Good Eggs can be a boon for public health.

But venture firms aren't charity organizations, nor should they be. So I reached out to Rimer to find out exactly how big a factor a startup's contribution to society is when Index decides to make an investment. After all, another one of Index's biggest investments is in Secret -- and while Rimer has made the case that the anonymity app is something the world needs, in practice the app poses a serious risk of bullying and teen suicide.

For Rimer, while helping socially responsible companies is at least a subconscious motivation, the strategy is as much about what's good for his firm's business as what's good for the world.

"Our view is that, fundamentally, this millennial generation is very engaged from the get-go and don't really tolerate businesses that don't show a social responsibility," Rimer says. "We view [social responsibility and profits] as very complimentary, where the investors thrive because the customer is really an evangelist for this business because they feel good about purchasing products or services from this business rather than another one."

What Index won't do, Rimer says, is invest in social entrepreneurs that rely heavily on college endowments or other funds for revenue. "It has to be a business model, and the company and founders do have to focus on value creation and shareholder return."

The role of venture capital and private investment in "saving the world" is a favorite axiom of the Silicon Valley libertarian set. Who needs government subsidies when models of building and investing in startups can lead to the kind of "disruptive" businesses that can help usher in a brave new world?

But that's easier said than done. Just look at legendary venture capital firm Kleiner Perkins' fall from grace, precipitated in part by its heavy focus on cleantech, which constitutes an array of sub-sectors that are often too primitive to succeed without significant subsidization and infrastructure investments from the government. (Solar energy is a perfect example of this).

Rimer firmly believes that, in many investment sectors, help from the government can offer incredible value.

"I'm definitely not one of these venture capitalists or investors or entrepreneurs who views government involvement to be negative in every case," Rimer says. That said, if you can cut it in the private sector, that increases your chances of success greatly. "To actually make it through this culture of a private investor, whose job it is to back extraordinary businesses, you're more likely to have extraordinary returns than it is for the companies who are relying on government support."

It's less about shunning government intervention and more about finding areas of need that the government is unable or unwilling to address. Rimer cites his investment in the artist marketplace Patreon, which despite my cautious skepticism is creating meaningful revenue for many creators, as an example.

"By definition what you're doing is promoting the arts in a way that the government, unfortunately, the National Endowment for the Arts just doesn't have the budget to do."

So what's the message to socially-conscious entrepreneurs? Find your business model. And if Rimer is right about millennial buying habits, it may not be as hard as you think.

[image via tippi t]