Alicia Robb, founder and CEO of Next Wave Impact is no ordinary fund manager. Describing herself as an 'accidental venture capitalist', her research with the Kauffman Foundation led her to found a fund with a current goal to diversify the investor base, helping to close existing gender and racial gaps, while supporting entrepreneurs pushing global solutions and having a positive impact. In this episode we cover the nuts and bolts of investing, delving deeper into Alicia's background and the research that led her on her path today, as well as what she looks out for in a good pitch and how you can come prepared. We also cover the ins and outs of her syndicate Vegan Investors, the value of a human network, and her journey navigating ethical qualms when it comes to choosing who to support in the startup world. Whether you're a founder looking to learn, or simply someone who wants to get more involved in the space, this episode is for you.
Alicia Robb wasn't always a venture capitalist. Economist by training, she was previously a Senior Fellow with the Kauffman Foundation for more than a decade, with her research being centered around entrepreneurial finance. In particular, she honed in on the gender and racial gaps that existed in the space, soon realising that the gaps on the investor side were even larger.
Alicia: 'I really became focussed on how do we get more women and people of colour investing in companies, because by diversifying the investor base, we're going to get more diverse entrepreneurs funded.'
To demonstrate just how salient the issue really is, we asked Alicia to talk about the stats that she's found in her work.
Alicia: 'Less than 3% of venture capital goes to women-led companies, and less than 1% for founders of colour.'
Which essentially means that we're missing out on a lot of good businesses, that have huge economic potential and could bring a lot to the market. But Alicia's ideas didn't end there.
Alicia: 'I also wanted to focus on companies that were making solutions to the global challenges that we're currently facing, and not just investing in women-led companies or companies founded by people of colour. They had to be impact companies as well.'
That's how Next Wave Impact was born.
Because she's a vegan and an angel investor, Alicia also decided to create Vegan Investors, an early-stage investor group that focusses on early-stage vegan-led, plant-based companies, with the aim of getting more diversity there.
Alicia: 'One of the things I look at, as an investor, is how we can make capital and the investment vehicle work for entrepreneurs.'
Alicia: 'That might mean not scaling their company so that they sell to a Tyson. It's building a scaleable business where the ownership will be maintained by the founders and employees.'
Since we also wanted to get into the practicalities of investing, we also spoke about the diversity in return agreements and what they can look like.
1. You get paid back interest as a return, just like a loan.
2. Revenue-based financing, which is basically a straight percentage of what a founder's revenue is that month. This option helps companies that don't have a predictable or continuous flow of income (quite a common occurrence in the startup sector).
3. Flex equity or entrepreneurial redemption, where investors take equity but there's an opportunity for the entrepreneurs to buy it back over time for an agreed upon return.
When asked upon which one is the 'best' or more favourable agreement that investors should look for, Alicia shared that there isn't too much research on alternative returns, and that it really is dependent both on the investor and the relationship with the entrepreneurs they are funding. Essentially, there's no one-size-fits-all!
We also spoke about scaling up, and the controversies around selling to larger companies.
Alicia: 'There's definitely a tension in this space.'
Alicia: 'Do you want someone like Tyson to buy you and then have that distribution channel and get you to scale much faster? I've struggled with that over the last several years.'
Her take on things?
Alicia: 'I would rather both the entrepreneur and the investors keep the wealth creation within the vegan community that have aligned values than give those profits to profit-maximising companies that exploit animals.'
We also spoke about the differences and similarities between her syndicate Vegan Investors and equity crowdfunding.
What it seems to boil down to is the fact that people don't just look for investors to get finances, although that's a huge part of it. People also look to investors to get the mentorship and human network, something that often doesn't come into play with equity crowdfunding, although it is another way to raise needed funds.
Alicia: 'A lot of times I suggest to entrepreneurs to do a crowdfunding campaign on a rewards-based platform to show product market fit, to show you have customers.'
And if you are a founder who's looking to pitch to a group of investors?
Alicia: 'Really figure out who the investors are in your space, who's investing in plant-based alternatives. Really know who the investors are, because the best time to start a relationship with an investor is before you actually need the money.'
Alicia: 'Doing pitch competitions, being involved in the startup ecosystem, attending events where there are going to be investors.'
Alicia: 'Make sure you're aligned in your values, and want the same things.'
In summary, do as much background research and spend your time choosing who's going to fund you, in the same way the investors are going to be selective choosing you.
And if you're choosing between a fund and a group of angels? A syndicate can often bring you a larger human network.
Alicia: 'That's what we're trying to build with Vegan Investors. To build this community of accelerators and investors, and professions from different strategic support areas.'
On the practical side of things?
Alicia: 'We want to see that there's a product market fit, and that the team actually has a plan to scale and get our return back.'
Alicia: 'We're looking for a scaleable business model with a large market.'
Being able to meet these targets and criteria could be really helpful, if going forward with investments is what you see for the future of your startup.
We also spoke about whether there are any ethical dilemmas that come up when investing. I mean (thankfully) there are a tonne of startups to choose from in the space, how do you choose? What about clean meat companies, or vegan-run companies that sell products to meat developers?
Alicia: 'Even though it does help reduce meat consumption, we're not looking for ingredient companies that are going to be combined with animal products.'
Alicia: 'There are investors who are interested in investing in clean meat and I think it has the most potential to reduce animal suffering and exploitation, so I'm a huge fan and supporter of it.'
Alicia is also a prolific author on entrepreneurial finance, with books including
- A Rising Tide: Financing Strategies for Women-Owned Businesses
- The Next Wave: Financing and Investing Strategies for Growth-Oriented Women Entrepreneurs
- Race and Entrepreneurial Success
If you want to get in touch with Alicia or learn more, you can head to her website www.nextwaveimpact.com or email firstname.lastname@example.org. Otherwise, have a fantastic day and remember to #biteforwhatsright!