Speaker 1: So we're deep in the throes of planning for afro
Speaker 1: Teche and COVID still sucks. While we still have some
Speaker 1: in person events, the bulk of the conference this year
Speaker 1: will be a digital experience. But never fear you've never
Speaker 1: seen a digital experience like an afro Tech digital experience.
Speaker 1: Last year in the virtual world, I met people from
Speaker 1: all over the real world, from Cape Town to St. Louis,
Speaker 1: and I didn't have to wear a mask get on
Speaker 1: the airplane. While I do missing you all in person
Speaker 1: that time we'll come again. But for now, and before
Speaker 1: we get into today's episode from one of our highest
Speaker 1: view YouTube series ever, Term Sheets, I wanted to share
Speaker 1: some of my most memorable experiences from afro Techen. Backstage
Speaker 1: at the conference, I got a chance to sit down
Speaker 1: with some of the biggest names in tech, media and business.
Speaker 1: I asked the things all of us want to know.
Speaker 1: How do we successfully raise venture capital? Are all our
Speaker 1: efforts in diversity, equity and inclusion helping turning us? And
Speaker 1: how do we find customers or strategic partners for our businesses.
Speaker 1: Marlon Nichols is managing partner in mac Venture Capital, a
Speaker 1: Los Angeles based VC firm. Which focuses on c stage
Speaker 1: companies and invest in visionary founders. Marlin is one of
Speaker 1: the most genuine people I've met in this industry, always
Speaker 1: quick to respond to an email and always full of
Speaker 1: great council it has a quiver full of strategic advice.
Speaker 1: We're talking backstage at afro Tech. Here's the conversation, well
Speaker 1: looks for afro tech here with my guy, Marlon Nichols
Speaker 1: of mac Venture Capital formerly Cross Culture Ventures. This is
Speaker 1: not your first afro tech. Tell me about your experience
Speaker 1: with afro tech and what Mexic Society. We first invested
Speaker 1: in Blinty maybe three years ago now, so it's been
Speaker 1: since then, and every year is doubled in size. I
Speaker 1: think this year might have tripled in size. So it's
Speaker 1: it's a amazing to see all these young black people,
Speaker 1: ambitious young black people running around. You gave a really
Speaker 1: great talk last year about cap tables and helping people understand,
Speaker 1: you know, their diverse, their equity distribution, and that whole thing.
Speaker 1: So a lot of tips advice come out of the
Speaker 1: Bay Area and raising money. But if I'm raising money
Speaker 1: in let's say, in Illinois or Tennessee, how do I
Speaker 1: apply that when my ecosystem may not be the same
Speaker 1: as raising money in the Silicon Valley, it's all the same,
Speaker 1: it's all the same games. So they're going to be
Speaker 1: investors and wherever you are, right, and it's about you
Speaker 1: finding them, particularly at the early stages. It's just simpically
Speaker 1: gonna be angel investors. So people that know something about
Speaker 1: the industry that you're going into that I want to
Speaker 1: support you, right, So target them first, get going build something,
Speaker 1: and then once you have something and attraction is rolling,
Speaker 1: like institutional investors are gonna follow that traction. Right. So
Speaker 1: as long as you build it right and it's doing
Speaker 1: what it's supposed to do, then you can start reaching
Speaker 1: out outside of your your a full ecosystem to bring
Speaker 1: an additional capital. Let's start start local and find the
Speaker 1: people that make sense for your business. You just talked
Speaker 1: about a little bit difference between angel investors and institutional investors.
Speaker 1: Can you dig into that a little bit, because if
Speaker 1: I'm looking at an angel maybe I don't have all
Speaker 1: the attraction and data points there yet to justify going
Speaker 1: to a institutional like a BC. So angel investors they're
Speaker 1: investing their own personal capital, right, whereas a Uh, institutional
Speaker 1: investor or a BC, someone like me. I'm investing out
Speaker 1: of a fund, so capital that I've raised from different
Speaker 1: groups of UM of investors, individuals, family offices, foundations, and downmands,
Speaker 1: et cetera. And I'm deploying that capital over a period
Speaker 1: of time, typically about five years. Right, UM, Angel investors,
Speaker 1: I said, their own pocketbook, Right, what they need to
Speaker 1: see from you versus what I need to see from
Speaker 1: you is gonna be different. Also, our check sides are
Speaker 1: gonna be different, right, Um, they require less, They're also
Speaker 1: gonna write smaller checks. Right, I'm gonna require a bit
Speaker 1: more and I'm gonna right a much larger sex somewhere
Speaker 1: a half a million to one point five right. So
Speaker 1: that's that's a that's I would say that's the key difference. UM.
Speaker 1: And they're they're usually willing to get involved at the
Speaker 1: ideation stage. Right, So you've got an idea in the space.
Speaker 1: I know the space really well. I think I can
Speaker 1: help you. I'm a fan of what you're doing, of
Speaker 1: you and your team. All right, let me put some
Speaker 1: money in here and also some sweat equity. I love that.
Speaker 1: So if I'm thinking about UM raising money and how
Speaker 1: do I know how to price it? So if am
Speaker 1: I just trying to get enough money to get myself
Speaker 1: off the ground, or am I trying to raise enough
Speaker 1: to build a war chest to not only get off
Speaker 1: the ground, but get far enough out to where I
Speaker 1: can keep competitors off? How do you think about that?
Speaker 1: Companies can get in a lot of trouble have gotten
Speaker 1: in a lot of trouble historically when they raise more
Speaker 1: money than they need. If you take on five ten
Speaker 1: percent more than what you actually need to hit your milestones,
Speaker 1: you're probably okay, right, But if you just pile on
Speaker 1: this capital and you don't have a you don't have
Speaker 1: a use for it, it usually gets wasted and um
Speaker 1: it gets wasted in the um in the form of resources.
Speaker 1: So now you're hiring a bunch of people that you
Speaker 1: don't need. You're probably pursuing a lot of different avenues
Speaker 1: that you shouldn't be pursuing right now, right because the
Speaker 1: name of the game is his focus and just laser
Speaker 1: in on something, uh, find success with that, conquer it,
Speaker 1: and then start to add, you know, layers to it.
Speaker 1: If you have all that money, you probably you gonna
Speaker 1: skip the stage of making sure that the thing works
Speaker 1: and jump right into step two and step three, and
Speaker 1: a lot of times failures happen as a result of that.
Speaker 1: So I always tell um entrepreneurs, you want to raise
Speaker 1: for investment cycle, which is eighteen and twenty four months
Speaker 1: at tashed to that is a certain number of milestones
Speaker 1: that you want to achieve, right, So how much do
Speaker 1: I need to raise in order to achieve these milestones
Speaker 1: within that within that time frame? Right? And let's say
Speaker 1: I'm giving myself twenty four months, Well, realistically I want
Speaker 1: to be I should have hit those milestones by the
Speaker 1: eighteen months um point, giving me time to raise raise
Speaker 1: money when I'm not running out of capital. And so
Speaker 1: it maybe an interesting question to ask a VC, but
Speaker 1: being somebody who's seen a lot of cap tables, has
Speaker 1: seen a lot of heartbreak, you know at the end
Speaker 1: of at the end of companies, talk to me about
Speaker 1: how you think about what entrepreneurs should be thinking about
Speaker 1: in the early stages of giving out equity to not
Speaker 1: only co founders but also to them early investors. What
Speaker 1: kind of things that they be thinking about. Keep as
Speaker 1: much of your company early as you as you possibly can.
Speaker 1: So I always tell entrepreneurs. There are only two reasons
Speaker 1: that I think that you should be raising capital right.
Speaker 1: One is that you absolutely have to hire the resources
Speaker 1: to build a product. There's no other way for you
Speaker 1: to build this product and get it to market other
Speaker 1: than raising venture capital to do that. The other is,
Speaker 1: you're at a point where you've built something and the
Speaker 1: only way that you're gonna scale this thing, and and
Speaker 1: let's say it's uh, it's a competitive space. There will
Speaker 1: be a competitive space. You gotta scale and scale quick, right,
Speaker 1: So now now you need the capital in order to
Speaker 1: do that. Scaling organically just gonna eg too long. Those are,
Speaker 1: in my opinion, the only two reasons why brounds should
Speaker 1: be looking to take on venture funding. In terms of
Speaker 1: like employees, you want to be fair their their their reports,
Speaker 1: in terms of like compensation reports um that you can
Speaker 1: get from recruiting agencies and law firms and all that stuff.
Speaker 1: So I'd say, get ahold of that and see what,
Speaker 1: um what what the average payout in terms of equity
Speaker 1: and salary, etcetera for companies at your stage is and
Speaker 1: just kind of stay as closer that as possible. You
Speaker 1: want to be competitive, but you also don't want to
Speaker 1: give a giveaway to farm We'll look ut here for
Speaker 1: afro Tech. Marlin Eckles mac Venture Capital formerly Cross Culture Ventures.
Speaker 1: You know afro Tech eighteen. I also spoke with Angela Right,
Speaker 1: a political and social commentator in fire Brand who takes
Speaker 1: no prisoners. She took to the main stage at the
Speaker 1: afro Tech that year to discuss the black opportunity in
Speaker 1: cannabis with some prolific black innovators in the marijuana space.
Speaker 1: We say talking about social justice, how legislation impacts the
Speaker 1: black opportunity in tech, and demanding seas at the table
Speaker 1: versus building well Lucas afro Tech twenty nineteen, I am
Speaker 1: here with the world famous angel La Right. How are you?
Speaker 1: I'm great, famous, but happy to be here. When we
Speaker 1: talk about tech, there is this I call Jesse Jackson
Speaker 1: approach that says, you know, we need to see that
Speaker 1: the table Facebook, Google and etcetera. And there's also this
Speaker 1: approach of we're gonna build our own table. Right, Can
Speaker 1: you talk to me about how you see that argument
Speaker 1: playing out with ten thousand black people here who are
Speaker 1: trying to build their dreams and what position we should
Speaker 1: be thinking about walking into the building into this just
Speaker 1: the greater surrounding area. It felt so good and felt
Speaker 1: so free. And I think that one of the most
Speaker 1: incredible things about Reverend Jackson's approach so far with the
Speaker 1: tech community, what he did with Wall Street has been
Speaker 1: UM that it's not just one way, you know, to
Speaker 1: go about this. There are several We need people who own,
Speaker 1: but we also need people with seats at the table.
Speaker 1: We need the people who haven't had seats yet, but
Speaker 1: we need someone to plus that door open, and Reverend
Speaker 1: Jackson has done a tremendous job of doing that through
Speaker 1: RABO Push Check twenties. So has the Congressional Black Caucus
Speaker 1: through UM their Tech Initiative, to ensure that we're not
Speaker 1: only UM hiring companies to be diversity and inclusion officers,
Speaker 1: but to ensure there's real equity at the at these companies.
Speaker 1: And while we have miles to go, I think that's
Speaker 1: where ownership UM, an opportunity to have access to capital
Speaker 1: to create our own comes comes into play. UM. There
Speaker 1: is no innovator like a black mind, and I think
Speaker 1: that is the unique space that Afrotech creates and reminds
Speaker 1: us of. Right, I think that we can't hear that enough, UM,
Speaker 1: and so I think it's wonderful that what you all
Speaker 1: are doing. So thank you for letting me be apart.
Speaker 1: And so you just came off and talked about cannabis.
Speaker 1: And when you look at the landscape of cannabis in
Speaker 1: the industry, I guess I should say, is what has
Speaker 1: been characteristic of the black companies who have found success
Speaker 1: in your view in this field where all the hurdles are,
Speaker 1: you know, placed for us to not be successful. Yeah, well,
Speaker 1: I have to be honest with you, I don't know.
Speaker 1: Of many, UM, the one that I am the most
Speaker 1: impressed with and do a lot of work with is
Speaker 1: forth Movement UM Kaream Webb, who was just on the
Speaker 1: panel UM talks about it and it's just this revolutionary concept.
Speaker 1: I say all the time that it's like, UM, if
Speaker 1: we were to create our ideal program for what reparation
Speaker 1: should look like, that's it. And what they've done for
Speaker 1: us by us is say, UM, there are these brilliant
Speaker 1: people who have been hamstrung in life by the fact
Speaker 1: that they were born in the families where they weren't rich,
Speaker 1: or they made one bad move and ended up incarcerated,
Speaker 1: or they had a sibling or a cent or a
Speaker 1: daughter who was incarcerated due to the War on drugs.
Speaker 1: We want to find that person, that UM person who
Speaker 1: has this great potential and train them for a year
Speaker 1: to equip them to be their own retail operator. It
Speaker 1: is an incredible concept and to me, it is exactly
Speaker 1: what social equity should look like. When we talk about
Speaker 1: opportunities in cannabis. It shouldn't be about a level playing field.
Speaker 1: It should be giving us what we deserve and what
Speaker 1: we have earned in part because we were punished. Do
Speaker 1: no no fault of our own to ensure that we
Speaker 1: absolutely and actually have viable businesses in the long run.
Speaker 1: You mentioned this and that there's not just one way
Speaker 1: to be successful in any of these industries. How important
Speaker 1: is it for our black voices to be in the boardroom,
Speaker 1: and not just with regards to diversity and inclusion, immensely important.
Speaker 1: One thing that we know right now is there's not
Speaker 1: a single black woman of a fortune five company, UM,
Speaker 1: not a single black woman's CEO. And uh, it's twenty nineteen, right,
Speaker 1: this is our four hundred year of being here. I've
Speaker 1: been saying it all year long. I'm continue saying it
Speaker 1: um since the first documented enslave person arrived on these shores,
Speaker 1: and for four hundred years, we have been building up
Speaker 1: the companies of everyone else, consuming their products, consuming their services.
Speaker 1: And we know that our culture is so often appropriate.
Speaker 1: We know that our neighborhoods are so often gentrified. We
Speaker 1: know that we're so often um at the cutting edge
Speaker 1: of whatever is the coolest and next best, greatest thing.
Speaker 1: Of course we should have a board seat. That's the
Speaker 1: least we should have as a board seat. When you
Speaker 1: think about anything from funding to access to consumers, look
Speaker 1: like neutrality and etcetera. How important is legislation with regards
Speaker 1: to finding success and each of either of these avenues,
Speaker 1: You know, it's key. I think about often, UM for
Speaker 1: the people who are watching this who haven't seen the
Speaker 1: documentary about Maynard Jackson, thinking about what he did as
Speaker 1: and it wasn't legislation, but it was through his executive
Speaker 1: powers as the mayor of the City of Atlanta when
Speaker 1: the airport project came up and said, no, let me
Speaker 1: tell you, how many people who look like me are
Speaker 1: gonna be working on this airport? Is thirty three and
Speaker 1: a third percent. No, we don't always have to rely
Speaker 1: on and set asides or goals or quotas. But what
Speaker 1: we know happens as a result of that is that
Speaker 1: we finally get our say, we finally get our opportunities.
Speaker 1: That does not happen if it's not forced, because unfortunately, historically,
Speaker 1: we haven't been in decision making seats. So that's why
Speaker 1: Maynard Jackson, whether he's a mayor or Keisha Lance Bottoms
Speaker 1: now as the mayor of the City of of Atlanta,
Speaker 1: or a state legislator, or a Maxie Waters who's the
Speaker 1: chairwoman of the Financial Services Committee, and said, let me
Speaker 1: tell you what we're gonna do. In order for this
Speaker 1: legislation of past, You're gonna have to have offices of
Speaker 1: minority and women inclusion in every financial service agency in
Speaker 1: the federal government. That's how this is gonna work. So
Speaker 1: if there's not someone there that's like, I'm gonna be
Speaker 1: the elbows and the mouth and I'm ensure that you
Speaker 1: do us right by my people, it doesn't change. So
Speaker 1: we need it. You're ten thousand people here for AFRO
Speaker 1: Tech this year. How important is this conference? Major? It's
Speaker 1: major for our mental health, it's major for us to
Speaker 1: see each other um in this space. I think it's
Speaker 1: major for partnership opportunities. You might come here and meet
Speaker 1: your next business partner, and if nothing else, you leave
Speaker 1: encouraged knowing that you're not in this space alone and
Speaker 1: you have the ability to keep going. So if I
Speaker 1: don't think we even have to say we shall overcome today,
Speaker 1: I feel like I'll overcame something. I feel like a
Speaker 1: conqueror in this speech. Shout out to Kirk Franklin for conquerors.
Speaker 1: By the way, I'm Will Lucas. This is black tech,
Speaker 1: green money. I'm gonna introduce you to some of the
Speaker 1: biggest names, some of the brightest minds and brilliant ideas.
Speaker 1: I feel black and building simply using tech to secure
Speaker 1: your bag. This podcast is for you. Richard Kirby is
Speaker 1: general partner on Equal Ventures. We're sitting on the set
Speaker 1: of term Sheets, afro Tech series about venture capital in
Speaker 1: New York City, discussing what it takes not only to
Speaker 1: be a VC, but what are the characteristics of a
Speaker 1: good VC. What is the makeup of a successful VC
Speaker 1: and how do I know if the gig is a
Speaker 1: fit of my personality and profile? Yeah, venture capital is
Speaker 1: about investing and supporting early stage entrepreneurs, and so that
Speaker 1: means you're you're finding companies that are hopefully diamonds in
Speaker 1: the rough. You're doing diligence and so you're trying to
Speaker 1: figure out if that investment is a good fit for
Speaker 1: your invested profile. And then you're making the investment. You
Speaker 1: may or may not be taking a board seat, but
Speaker 1: then you're also finding ways to be supporting on those
Speaker 1: companies and so what do they need to get done
Speaker 1: to make their chance of success much higher? You'll do
Speaker 1: So that means recruiting, happening with fundraising, strategy, business development,
Speaker 1: even maybe sales, and so those components make up a
Speaker 1: lot of different pieces of ventric capital. On top of that, obviously,
Speaker 1: if you're running a fund, you have to fundraise for
Speaker 1: your fund, and that's another kind of um back off
Speaker 1: of something that we try to focus on as well.
Speaker 1: So you you mentioned a couple of different disciplines, and
Speaker 1: I would think about if I was, you know, a
Speaker 1: person coming out of college and I wanted to do
Speaker 1: venture capital, you added other things other than just giving
Speaker 1: money to startups, and what are those the things that
Speaker 1: make a VC partner a good partner instead of just
Speaker 1: a checkbook. Yeah, yeah, I think it's um hard to
Speaker 1: add value because you never know what's happening in the
Speaker 1: day to day of a business and or startup, which
Speaker 1: is why you have to try your best to be
Speaker 1: as hands on as possible and be as intimate and
Speaker 1: closely as now as possible. And so the things that
Speaker 1: we work on is, you know, with our portfolio company CEOs,
Speaker 1: we talk to our CEOs every two weeks. We've got
Speaker 1: scheduled sessions so that we can ask them, you know,
Speaker 1: how things going on, how you how could be helpful
Speaker 1: Because when you're running a company, you're too busy. You
Speaker 1: can't think of like how can will help me? Or
Speaker 1: which help me? You need to have scheduled time for
Speaker 1: them to ask where your needs right now and how
Speaker 1: can I be helpful? Sometimes that maybe you know, I
Speaker 1: need to hire a VP of engineering, Can you help me?
Speaker 1: Sometimes that means I'm getting ready the fundraise, I need
Speaker 1: to practice, I need to get my story right, I
Speaker 1: need to figure out which investor I should be targeting.
Speaker 1: And sometimes that means, hey, we're thinking about changing our
Speaker 1: business like we were doing this today, we think it
Speaker 1: makes more sense to pivot in other direction. Can we
Speaker 1: run our strategy and our vision value to get a
Speaker 1: sense of like is this the right path us? And
Speaker 1: so it's a variety of things. But we try and
Speaker 1: do is be proactive and being helpful and make those
Speaker 1: conversations happen because it's really hard to elicit how a
Speaker 1: founder can need help without asking that question the first place.
Speaker 1: So at what stage should have started to be talking
Speaker 1: to a VC versus like an angel or just you know,
Speaker 1: family and friends. Talk to me about the different stages
Speaker 1: of the progression of the types of investors I should
Speaker 1: be talking to. Sure, sure, Um, you know, angel investors
Speaker 1: and family friends are just folks that kind of invest
Speaker 1: in a person, right, Um, you know, site unseen what
Speaker 1: your idea is. I'm a believer in Will. I want
Speaker 1: to support whatever Will is doing. And so those are
Speaker 1: they hopefully the first dollars you can get. Those dollars
Speaker 1: aren't easy. You know, as an undergrad to come out
Speaker 1: of college, I did not know folks that could give
Speaker 1: me a million bucks or half million dollars to get started.
Speaker 1: So it's very hard to find family and friends. Um,
Speaker 1: But they do exist, and I think that they exist
Speaker 1: for a reason. But that said, though, um, it actually
Speaker 1: can be easier to access. Sometimes actual METROC capitalists they
Speaker 1: have websites, their profile files, they build own personal brands.
Speaker 1: It's really hard to know who is an angel, who
Speaker 1: has capital as an individual or not. Now, the timing
Speaker 1: for targeting a venture investor versus an angel is tricky
Speaker 1: because some investors at a venture fund will invest in
Speaker 1: a company before it's even begun, before it started, before
Speaker 1: it's incorporated, before it's a product in place, and someone
Speaker 1: want to see traction and data, and so it's important
Speaker 1: to figure out what's the right fit investor profile for
Speaker 1: you as a company. Um So, if you're just starting out,
Speaker 1: maybe it's you and your co founder, you probably want
Speaker 1: to focus on what is now called precede funds. These
Speaker 1: are funds that will help you raise capital before they're
Speaker 1: actually built a product. The capital, you know, whether it's
Speaker 1: half a million dollars maybe less anymore, the soul folks,
Speaker 1: that capital is for you to get the product in market,
Speaker 1: so you can get to a spot where a c
Speaker 1: invest like myself will be more comfortable taking risk on
Speaker 1: you as a seed. Correct, there's there's been this new
Speaker 1: bifurcation amongst preceding seed where precede is no product. Let's
Speaker 1: give you capital build something, and seed is there may
Speaker 1: not be a product in place, but up what we
Speaker 1: think about it is you're about twelve months away from
Speaker 1: demonstrating product market fit. And when we try and work
Speaker 1: out founders, just to figure out what is proper market
Speaker 1: fit for your company and how can we help you
Speaker 1: get there beyond just the capital that we're hope we
Speaker 1: gonna provide to you. How do vcs make money? Yeah, so,
Speaker 1: so vcs make income in two ways UM one salary
Speaker 1: and the second piece carry and so um. You know,
Speaker 1: just to make the math easier, let's save a hundred
Speaker 1: million dollar venture fund UM. The GPS generally will take
Speaker 1: tent of the carry, which is twenty percent of the profits.
Speaker 1: So let's say hunter million dollar fund, we've returned two
Speaker 1: hundred million dollars of capital back to our LP I
Speaker 1: E have made a hundred million dollars of value for
Speaker 1: my investors UM eight sent that money will go back
Speaker 1: to your LPs as their profit will go to the
Speaker 1: partners of the fund, So twenty million dollars will go
Speaker 1: spread out. However, you guys agreed to amongst your partnership
Speaker 1: and that's kind of the the profit slash carry that
Speaker 1: you'll take UM at the early stage to the C stage.
Speaker 1: It takes a while to reach that because our companies
Speaker 1: are very very early. They may not exit for five, seven,
Speaker 1: ten years, and so it takes time to get to
Speaker 1: carry the early stage. It's it's a much short time
Speaker 1: frame at the leader stage and the last pieces. UH
Speaker 1: funds generally take two percent of those fees of of
Speaker 1: the capitol, sorry for managic few to run their business,
Speaker 1: and so human fun generally manage these two percent. So
Speaker 1: you have two million dollars in that example each year
Speaker 1: to run your business, and that two million dollars goes
Speaker 1: to pay your salary, your employees salary, rent, travel, entertainment,
Speaker 1: you know, if you feed your team. All these things
Speaker 1: go into that that that budget. You have to kind
Speaker 1: of manage that with that capital. So in your opinion,
Speaker 1: what makes a good VC? What are the characteristics of
Speaker 1: somebody who could be good at this? Yeah, I think
Speaker 1: the um the traits for an individual are just inherent
Speaker 1: in somebody else. It's not really about like what you
Speaker 1: studied in school. It's much more about like who you
Speaker 1: are as an individual. Are you intellectually curious? Are you um,
Speaker 1: do you enjoy learning about different things? And I guess lastly,
Speaker 1: do you enjoy helping others? Those are really three points
Speaker 1: that are you know, inherent to anybody that could make
Speaker 1: them inefficient or sorry, excess of ventric capitalists because the
Speaker 1: day sourcing is a big piece, so finding companies and
Speaker 1: that means do you get excited by finding new things? Like? UM,
Speaker 1: you can see that in any industry you could get
Speaker 1: excited by finding the rare sneaker that you haven't seen
Speaker 1: him out yet, or that new track on spot but
Speaker 1: you ever heard yet? That excites people, and finding a
Speaker 1: new company excites venture capitalists. UM. Doing diligence, so you know,
Speaker 1: diving deep to figure out, you know, what does company do,
Speaker 1: what space they in? How can this company get very
Speaker 1: very large? That's just learning. If you enjoy learning, you'll
Speaker 1: enjoy diving deep on the company understand how it works
Speaker 1: or the industry that operates in. And lastly, you know,
Speaker 1: when you're on a board of a company or an investor,
Speaker 1: you're trying to do everything possible to help that company.
Speaker 1: You know, try to get them as many unfair bandages
Speaker 1: as possible that the founder has less on their play
Speaker 1: and they tebeles listen to their play. That's all that
Speaker 1: is really is helping people. So if you enjoy helping people,
Speaker 1: that's a great way to have manifest that inherent trade
Speaker 1: yours to, you know, do good for a company. So
Speaker 1: let's talk about New York and particularly doing venture capital
Speaker 1: here in New York. Um finance capital of the world. Um,
Speaker 1: some would argue, How many would argue, and what is
Speaker 1: the difference between doing venture capital here versus doing it
Speaker 1: in the Bay Area or in other smaller markets that
Speaker 1: you think yeah? I think, um yeah, the Bay Era
Speaker 1: is the tech capital of the world, period full stop.
Speaker 1: We're not. I don't think we can lainly claim to that,
Speaker 1: but I think New York has you mentioned finance, New
Speaker 1: York has an epicenter of many different other industries, whether
Speaker 1: it be finance, media, advertising, lots of e commerce, and
Speaker 1: so we touch many many different fields. And so we
Speaker 1: may not be the technology capital of the world, but
Speaker 1: I think we're like the industry capital world because there's
Speaker 1: so many industries that are called New York their home
Speaker 1: and their HQ, and we think that allows us to
Speaker 1: kind of see and better n then different kinds of businesses,
Speaker 1: and so we don't have to just look at a
Speaker 1: pure software businesses. We can look at companies that maybe
Speaker 1: have a little software but actually still many other moving
Speaker 1: parts that aren't really suffer related. And because the nuances
Speaker 1: of these verticals that are based in New York, we
Speaker 1: have context networks that have a better understanding of these
Speaker 1: other verticals that maybe aren't just considered tech only. You
Speaker 1: had done a study, I don't know if you want
Speaker 1: to call it a study, but you did some research
Speaker 1: a couple of years ago on why there is not
Speaker 1: a lot of black people in venture capital across the country. UM.
Speaker 1: I want to say it was three or four years ago.
Speaker 1: Now the original post went up on your website. What
Speaker 1: did you learn then and what has not changed or
Speaker 1: what has changed? Yeah, I guess what I've learned is that, UM,
Speaker 1: I guess look at the data I learn anything, which
Speaker 1: is that I already knew there were very few black
Speaker 1: folk in venture capital. Um just I could probably count
Speaker 1: on one hand when I was back in the Bear
Speaker 1: in twin time I first started UH and so the
Speaker 1: data didn't surprise me. Um. I wrote the data. I
Speaker 1: wrote the report and the data because I wanted folks
Speaker 1: to have a voice. I wanted to kind of shine
Speaker 1: a light on the problem because I feel like when
Speaker 1: you discuss problems without data, people are like, I don't
Speaker 1: see it. I can't really, it's not tangible to me.
Speaker 1: I can't grasp it. And so I thought I put
Speaker 1: data around the issue, people would understand how bad it
Speaker 1: is and then think through how can we think about
Speaker 1: those changes. What I have seen positively though, is that
Speaker 1: there's now more and more African American as a black
Speaker 1: folk in the kind of junior ranks of venture capitals
Speaker 1: to the associate role, the principal role, which generally is
Speaker 1: you know, the stepping stone to become a part of
Speaker 1: the fund, which I think is great to kind of
Speaker 1: build that pipeline of folks. It's still not near enough
Speaker 1: to kind of replace the qual called the old guarden
Speaker 1: ventric capital, but there's more to do there. I think.
Speaker 1: The other thing that I'm seeing positively is that um,
Speaker 1: there's more and more funds started by black gps UM.
Speaker 1: I think the problem with trying to create or I
Speaker 1: should say correct the lack of diversity of venture capitals
Speaker 1: that most venture funds don't hire anyone in the year,
Speaker 1: Like the average venture fund hires zero people per year,
Speaker 1: is a small group of group of people with small teams,
Speaker 1: and so if you're not hiring every year, you really
Speaker 1: can't change the dynamics of your team. And so one
Speaker 1: way to actually change it is to just create newer funds.
Speaker 1: And I think as we create more funds, those funds
Speaker 1: themselves be more diverse, and then we'll see more progress.
Speaker 1: As in terms of diversifying the metricpol industry, have you
Speaker 1: seen a lot of progress with regards to black founders
Speaker 1: being able to raise money successfully and black women particularly
Speaker 1: being able to raise money successfully. There is some progress,
Speaker 1: not nearly enough though, I mean, I think the numbers
Speaker 1: are still very anemic on black female founders that are
Speaker 1: able to raise meaning amounts of capital. And I think
Speaker 1: it's um a couple of reasons why. One the initial
Speaker 1: dynamics when there aren't investors that look like you, they're
Speaker 1: less likely to trust you, believe in you, want to
Speaker 1: invest in, you want to support you, and that makes
Speaker 1: it challenging for anyone who's a person of color to
Speaker 1: be able to kind of raise capital. In the end,
Speaker 1: ironman Um similarly, it's hard to get in the venture
Speaker 1: industry as well as a junior member or not, because
Speaker 1: people aren't looking for that. I think the other piece
Speaker 1: two is accessibility, and so if the venture investors don't
Speaker 1: look like you, the chance that you're in their orbit
Speaker 1: or someone you know is in the orbit is very
Speaker 1: very limiting. Now on the positive side, though, we are
Speaker 1: seeing more and more funds pop up that are focused
Speaker 1: on women, people of color, African American founders. I think
Speaker 1: that's great. We need more and more of that, and
Speaker 1: I think as we see more of that, the legacy
Speaker 1: venture funds will realize they're missing things and spend more
Speaker 1: and more time on that dimension. And so I think
Speaker 1: the biggest challenge right now for a person of color
Speaker 1: woman founder is that seed stage. I think it's really
Speaker 1: hard to get that round done. Once you're prox and market,
Speaker 1: you've got traction, it makes it easier for a investor
Speaker 1: who doesn't look like you to get there because they
Speaker 1: can like put you aside and look at your numbers. UM. Now,
Speaker 1: with that said, it's hard to get to that point,
Speaker 1: and if your box stop from actually even having a
Speaker 1: chance of building in the first place, it's very very
Speaker 1: limiting pipeline. So I think there's a lot more work
Speaker 1: to be done there. I don't have all the answers,
Speaker 1: but they need see more done, more work to be
Speaker 1: done to thought thinks of that as well. Yeah, and
Speaker 1: again you just said I don't have all the answers,
Speaker 1: but I think about even if you know, with the
Speaker 1: amount of black investors we have today, black female investors
Speaker 1: and people like you, black man investors, there's so many
Speaker 1: amazing companies or potentially amazing companies, and there's just not
Speaker 1: enough of those investors to go around that are you know,
Speaker 1: tendable to being able to write them a check. But
Speaker 1: there's also a conversation about by enemies necessary, I gotta
Speaker 1: make this company happen. What do you say to those
Speaker 1: companies that are listening and watching this too, and who
Speaker 1: may run into you at Afro Tech or may see
Speaker 1: you in the street down in New York. Because what
Speaker 1: happens in my experience, I see so many and you
Speaker 1: guys become like the savior. So you're the only ones.
Speaker 1: So everybody's out to come see Richard. So if you
Speaker 1: can't fund everybody, and you can't listen to every pitch
Speaker 1: and you and so I see you at Apple Tech
Speaker 1: and you've got a line of a hundred people. A
Speaker 1: hundred people are pitching you. I may have the best idea,
Speaker 1: but I'm a number six five and you you're desensitized
Speaker 1: by that point. So what do you say to those
Speaker 1: folks who are, you know, trying to make it happen
Speaker 1: at the seed stage and even in precede stage, he
Speaker 1: didn't get to you. What do you say to encourage him? Yeah?
Speaker 1: I think, um, you said the best by any means necessary.
Speaker 1: And so it may be a cold email and maybe
Speaker 1: you know they know Will, and they know Will knows Kirby,
Speaker 1: and so they can use Will as as a conduit
Speaker 1: to get to Kirby. I think the challenge with having
Speaker 1: so few investors that are black in the space that
Speaker 1: wants support black founders is that, um, the legacy venture
Speaker 1: funds assume that, like Kirby, has seen every deal of
Speaker 1: every black founder, and so you know this, this founder
Speaker 1: came to me, I gotta ask what do you think
Speaker 1: about Will? And if I'm not investing in Will's company,
Speaker 1: that's like a negative signal to them, which which shouldn't
Speaker 1: be the case. As you said before, there's thousands of
Speaker 1: companies they can't all be a good fit for what
Speaker 1: I do. It equal ventures or what we do equal ventures,
Speaker 1: and so it's fine the right fit. And I think
Speaker 1: that is a dynamic that's bad for the industry and
Speaker 1: we need to find ways to improve that. And so
Speaker 1: I think that means having more people of color adventure
Speaker 1: and then that helps pursue or open the doors for
Speaker 1: more founders that can say, hey, I don't have to
Speaker 1: only come to Kirby or you know, folks are Home
Speaker 1: Capital or Charles a precursor or anyone else. It's you know,
Speaker 1: my officers are actually limitless, and we need to get
Speaker 1: to that point to enable as many founders of color
Speaker 1: as possible to raise capital at the early stage, because
Speaker 1: at the point in time right now, like founders aren't succeeding,
Speaker 1: not because their business sucks, the idea sucks. Not getting
Speaker 1: a chance, you're not even giving giving the capital to
Speaker 1: give you a shot to go kind of test out
Speaker 1: your idea, whereas our counterparts can have nothing to show
Speaker 1: for it, raise millions of dollars and go test it out.
Speaker 1: We need to get to that level of paralysm to
Speaker 1: make the inferent more equitable. When you think about taking
Speaker 1: that twenty million dollars and running versus You know, when
Speaker 1: founders come to you, everybody believes they have a billion
Speaker 1: dollar business. I would assume you know, in the in
Speaker 1: the macro sure, everybody thinks everybody wants to buy their product.
Speaker 1: How do you bring founders back down to earth in
Speaker 1: some respect, but also encourage them to think bigger than
Speaker 1: they may be thinking about the opportunity for their products
Speaker 1: or service. Yes, so we focus on the seat stage
Speaker 1: for us at Equal Ventures and so for us, most
Speaker 1: companies are coming to us with like an initial product
Speaker 1: in place. They haven't built out their full vision yet,
Speaker 1: but they have a larger vision for what they want
Speaker 1: to accomplish. And we call that initial product like their wedge.
Speaker 1: So what's your wedge into the market, the initial product
Speaker 1: that will get you access to your customer base of
Speaker 1: the future. And our viewpoint there is what are you
Speaker 1: building in turning your company that will allow you to
Speaker 1: attract more data too? Then you know, go after what
Speaker 1: your larger vision maybe whether it be a point solution
Speaker 1: today in a marketplace in the future, or a point
Speaker 1: solution today and building a platform for your category in
Speaker 1: the future. And our viewpoint there is we want our
Speaker 1: founders to know what that vision is. But even if
Speaker 1: that vision ends up not becoming a billon dollar business,
Speaker 1: that's still find for us. You know, we're a fifty
Speaker 1: six million dollar seed fund, and we don't require our
Speaker 1: founders to be able to have to build a business
Speaker 1: to be a billion dollars for it to work for
Speaker 1: our model. Now do we want to happen, of course
Speaker 1: when every company get to that size and scale. But
Speaker 1: given that we are a smaller fund, we take high
Speaker 1: ownership and write you know, large checks for seed rounds.
Speaker 1: That model can work just fine for us if our
Speaker 1: company sells for less. And so when we invest the
Speaker 1: seed stage, you know, call it twelve months later, we
Speaker 1: have a comm with our founders and say, hey, you
Speaker 1: have a point in time here where you can go
Speaker 1: the kind of supercharged route of taking more capital on
Speaker 1: and you know, putting the goal host you know, success
Speaker 1: much further on the road for you, or you can
Speaker 1: take a more less capital inefficient path and say, hey,
Speaker 1: you know what, I'm gonna go this other route. Build
Speaker 1: a great business, but don't have to have the kind
Speaker 1: of bearings of having to build a build into our
Speaker 1: company for success. In my mind. When you see people
Speaker 1: who have that sort of thinking, is it something about
Speaker 1: their personality that says, you know, I'm not trying to
Speaker 1: build Google. I just want to take my eyelash, you know,
Speaker 1: my eyelash product company and do a couple of million
Speaker 1: dollars a year and live a good life. Like what
Speaker 1: is it about those founders that say that you found
Speaker 1: that say, you know, I understand what the market is
Speaker 1: like for this, and I'm going to be realistic about
Speaker 1: it and just live a good life based on a
Speaker 1: good income. Yes, so I think, Um, two kind of questions.
Speaker 1: They're one is like, there's certain business that that shouldn't
Speaker 1: take venture capital. And so if your business will kind
Speaker 1: of um probably cash flow nicely out of the gate,
Speaker 1: and there really aren't scalable paths of building a off
Speaker 1: fore enabled business, you might not need venture capital. Might
Speaker 1: be other ways. Yeah, yeah, so you know, there there's
Speaker 1: um uh current workflows let's say across any industry that
Speaker 1: happened manually today, Like for instance, let's say, um benefits selection.
Speaker 1: So you know, I'm a large company. You mentioned Google,
Speaker 1: I'm Google. I may want to you know, work with
Speaker 1: a benefits broker to select with benefit I don't find employees,
Speaker 1: so I don't want dental or vision or what I
Speaker 1: want to offer my employees. And then that process today
Speaker 1: works with you talking to a broker, a broker talking
Speaker 1: to a carrier and a very like manual face to
Speaker 1: face email, phone call discussion. But now you think about
Speaker 1: how do you add software aut layers that you can
Speaker 1: have a more fluid and efficient process for benefits selection
Speaker 1: benefit discovery. And that's an example of what software navlement
Speaker 1: could look like in the benefit space, and that can
Speaker 1: apply to many other verticals in our opinion at least, Um,
Speaker 1: back to your previous question around like thinking about scale
Speaker 1: and so forth, and so that first class of companies
Speaker 1: you may not be a good fifermenture capital at all. Um.
Speaker 1: The way we think about founders are looking for like
Speaker 1: the home run or larger vision is twofold. One is
Speaker 1: founder market fit and we mean by that is you know,
Speaker 1: why are you and your team the best team to
Speaker 1: go approach this model? And we think people gather it
Speaker 1: in one of two ways. Either you've spent your entire
Speaker 1: career majority of your career in that market. So if
Speaker 1: you were in the benefits space, maybe you spent you
Speaker 1: know ten years and benefits no inside at out and
Speaker 1: you're the best person to go solve this. Or it
Speaker 1: could be you have um a personal experience or passion
Speaker 1: for it that led you down this path to become
Speaker 1: an expert. And so one of our companies in our
Speaker 1: portfois coming called Jerry Um. They work in the senior
Speaker 1: living space and the founder had an instance where his
Speaker 1: father had Alzheimer's and he had to find a home
Speaker 1: to put his father in a memory care scenario so
Speaker 1: that he could be taken care of. And he's from Canada,
Speaker 1: originally in Canada has you know, great medical benefits and
Speaker 1: it was super easy for him to do so UM
Speaker 1: fast forward, you know, a couple of months later, his
Speaker 1: wife's parents in the same issue. You live in America,
Speaker 1: and the process was very very different, very very painful,
Speaker 1: and he thought, Okay, I'm experiencing this personal experience and
Speaker 1: it pains me. I want to find a way to
Speaker 1: improve on this process and so you can have it
Speaker 1: either from you know, your career or your personal life.
Speaker 1: That founder market fit that we look for. And then
Speaker 1: at the end of the day, it's hard for anyone
Speaker 1: to turn down a great ex opportunity. Let's say a
Speaker 1: company comes and says, hey, we want to buy your
Speaker 1: business for a hundred million dollars and you own half
Speaker 1: the business or something like that. It's a lot of
Speaker 1: money for you. Even though you might believe that like
Speaker 1: this could be a billion dollar business that could make
Speaker 1: you know, hundreds of millions of dollars, the thought process
Speaker 1: there is it might make sense to think about secondary
Speaker 1: and so if you can give a founder some capital today,
Speaker 1: that fills them, you know, leaves the other stress of
Speaker 1: you know, paying for their home, paying for childcare, paying
Speaker 1: for school. And if you can take that stress away
Speaker 1: from them financially, they can think about, you know, envisioning
Speaker 1: that larger vision of that company that they have been
Speaker 1: succeeded in building. Black Tech Green Money is a production
Speaker 1: of blackty Afro Tech on the Black Effect podcast network
Speaker 1: and I Hired Media. Is produced by Morgan Davon and
Speaker 1: me Well Lucas, with additional production support by Love Beach
Speaker 1: Him and Risus Lewis. Special thank you to Michael Davis.
Speaker 1: Is the car savan Yan you know like the wine.
Speaker 1: Yes that's his real name. Learn more about My Guess
Speaker 1: and other tech disruptors and innovative to afro tech dot com,
Speaker 1: joining black tech, Green Money, and it was a five
Speaker 1: star rating on iTunes. Go get your money, Peace and love,