I'm with Lucas and this is black Tech, Green money. My Easter League is an angel investor and startup advisor working at the intersection of venture investing, startups, and social impact. Her work aims to build a more equitable future through strong businesses, new models for investment, and supporting founders that
are frequently undervalued. Startups are going through a lot these days, and commitments to back and support black companies, black founders, and black startups, so all sharp increases in twenty twenty and twenty twenty one. I asked my issue of the window of opportunity I existed just a short time ago. It's still open.
I think a lot of entrepreneurs and emerging find managers are asking whether or not they're going to take a week. I think it depends on who you talk to. There's a few things happening right now in the fundraising climate that make it challenging britt large. A lot of it's like the financial uncertainty, what's happening in the US economy and the US kony tends to drive globally what folks are thinking about in terms of startup and tech investments.
There's a change, though Aude I think we saw it really when Elon Musk over Twitter, which seems like a cultural moment. How does that directly connect to how investments are being made. I think that a lot of folks were uncomfortable with the commitments, the social justice commitments that were made around sort of following the untimely passing of George Floyd, and they are leveraging market conditions as a
reason to retreat from some of those commitments. We can't do this because there's not enough of X. No one was really asking people to make car bouts for black and brown entrepreneurs if you believe in them, if you believe in the track record or the evidence that's sort of played itself out in the US economy. Black and brown people tend to create their own businesses at overwhelming rates, sort of outstriping their white counterparts, and their businesses could
happen to be quite successful. They weren't asking for car abouts. They were just asking to consider my investment as for what it is, which is something that's a high quality that justice a very specific market need. You might not understand, but millions and millions of people sort of understand. Because I'm building against the issues that I know, despite not asking for a car about that's how excuses are being
made now to retreat to old behaviors. Start, I should say some investors, not all, but a good number of them have not ever really been daring in terms of where they've put their money. Venture capital as a general matter does not encourage people to be daring in terms of where they put their money. Just sort of pattern
matching exists for a real reason. It's rewarded the industry, and I think there's a lot of that behavior that's returned in large part because, like I said, to the macroeconomic conditions and then examples of leadership that are giving people cover or for changing their behavior. I would even add that. And almost immediately after some of the commitments were made, we saw the founder of base Camp. We saw a ton of founders who decided that they were
going to take politics out of their businesses. Sort of another way to suggest that we're not making those types of commitments. Meritocracies the thing that matters the most. Also, no one's debating that, but so sort of there have been, I should say, immediately after George Floyd. But even now they're more and more excuses for people to go back to their old behaviors, so it's changed.
And so you touched on a couple of these points, and I wanted to isolate them with this question, like what long term effects related to the commitments made or the initiatives after COVID and George Floyd can be found? Are there any positive things that can be you know, realized out of those communities?
Think so? I think so. I mean it's sort of like human behavior tends to operate in a bell curve, right, and so in the early days, it's like, oh, something's happening, should we make commitment. There's a spike in commitments, and then there's a reaction to that spike. I think as a result, in twenty twenty, we saw a ton of people who had the courage to step out in really big ways and raise rounds. And whether or not founders got investment because of the societal moment we were in
or just because people are finally paying attention. I think there are a lot of great companies that come out of that and have really incredible rounds as a result of it. I think that the challenge for everyone, and I think a lot of skeptics at the time are asking how long would this commitment stick? I think that that's where the pessimism comes in. That said, you know, I think that we'll see that batch of companies that raise money in twenty twenty, twenty twenty one, who is
a really big year. Things start to get dicey towards the end of twenty twenty one. We'll see how they make out the next five years. I think that that's when the really prove themselves out. But how valuable those early commitments actually were.
You've spent a lot of time working with corporations and helping, you know, provide bridges for startups to work with big corporations. And how do corporations treat carvos? You know, I think about a lot of state and government you know carvos where it maybe a state will designate twenty percent of its dollars have to be spent with you know, a minority owned company or some companies will have prime vendors and sub vendors, and you got to work with the prime if you want to get you know, in it
at all. So how do corporateations typically work in this regard?
I think actually for whatever reason, perhaps because they're publicly traded and they're for publicly accountable, they're doing a bit better, but a lot of corporate leaders don't see it as a car about. You've got folks that are coming in and really want to align their investments with their consumer base, which trends right to groups that tend to be underrepresented
in the venture world. I think that those that are successful navigating corporate innovation teams, the sort of purchase managers and corporations are faring a bit better than those in the private markets. And that really might be about the length of a commitment a company is used to making, or the folks that are sponsoring the work within.
What are better ways corporations should think about how to engage with minority own founders, because a lot of the times it gets put on like, you know what, we may not have a capacity to do business, and yeah.
You know, that's a really tough one. I think that you know, some companies have done interesting things like ramp ups. They've partnered, you know, sort of sort of partnered people that they want to do business with with smaller chunks of the business and then grow with them. And we've moved them from early entrants into their ecosystem to preferred partners. I think that folks that are planning for the long term do really well. There's a really interesting effort by
Aerial Capital out of Chicago. This is John Rodgers and others. They're focusing on investing in companies that I believe it's like a ten million ar are black owning companies at
ten million ARAR and boosting them up. And the powerful thing about their initiative is that Aerial Capital does a lot of work with some of these larger corporations, and their ability to pull in mid cap or sort of slightly larger than mid cap black owned companies to do their work is a great opportunity that early day of like small business, interacting with the big company is difficult
for everyone. They don't speak the same language. I think that what companies that are trying to be successful at it are doing is really creating more intermediaries or opportunities that smaller companies can grow their way into, taking advantage of, and then partnering with larger entities that are calling them to see sort of MidCap or higher MidCap companies that can service them directly because they are there. I think that people talk about black businesses and these really small
things all the time, and that's not true. There are really really incredible companies that have you know, global contracts and have been around for decades that deserve do.
And so it's no surprise that anybody listening to this that we're having, you know, a real strong conversation about banking in the United States and the implications of bank collapse and over leveraging and all these different things. What lasting implications might it have for startups when a bank collapses.
Yeah, I mean, if we think about what we just went through with SVB specifically, which I paid really close attention to, I think the challenge for the market and
that's this fight background. It is hard when you're a small business interacting with the banking, with the standard banking system and the power of a partner in the case of SVB that really understands funky cash flow, really understands the early elements of an idea and how to sort of reconcile whether or not that deserves an investment that's not simply about that's not simple adventure, right, A short term bridge loan or a line of credit or all
these other things. Absence of that deep understanding of the ecosystem is going to be a problem for a long time, I think. I mean fundamentally, you know, there are a lot of big banks that try really hard and have a plethora of programs. Chase is really a great example of that that's targeting small businesses. But in innovation, when you're starting with just you and another person an idea, you know, your first or second purchase order, that's not enough for banks to really make a bet on you.
You really needed up someone that can that knows what they're looking at. And so in the absence of that, I think we're seeing some of the challenges right now. Typically, when the venture market is a little bit slower in terms of deal flow, and it depends on the sector that you're in, it's a little bit slower, you can go to the private markets for you know, credit, but because as a general matter, people are concerned about the US economy, it's harder to get credit or as a
general matter, and so what would have been easier. I found it easier for some businesses that I've worked with as recently as last year to talk to a banker about giving us a line of credit to float us in the short fall. We had you know, really great revenue, but we're really trying to extend our runway a little bit or just have something in the back pocket in case we came up against a challenge that that partnership
is not there. The longer it takes a founder to go into the market to find capital to meet their need is more time they are away from solving a problem for the customer that they sought to address. So it's a it's not just that there's the absence of somebody that understands the harder it is to find capital, the harder it is to grow a company really successfully. And so I think that for a while we're going to see will be sort of tough times for smaller
companies that are on a growth path. That said, I think there's a lot of opportunity. I think that the tools to grow a strong business are becoming more and more available and more and more dynamic. There's a way to get through, but you can't tool your way or mention your way into success. Capital is involved in that, and absent a partner that understands that, it's just going to be a little bit harder for a while.
You know, one of the things I saw pervade. My Twitter timeline when SVB collapsed was that it was propping up and banks in general and VC in general were propping up startups that actually didn't know how to make money, and so people were saying, you know, we got to focus on actually getting dollars in the door versus just venture capital angel dollars and et cetera. And I wonder what your take is on that. Do we have enough of our startups actually trying to sell something? You know?
I think that there just like all these places, right they say there are levels to this. There are some people who were really getting by by raising capital as a way to pay to do payroll, right. I don't know, I know some of them. I don't know a lot of those people. Everybody I know that started business needs to cut a check today, like someone is paying them,
they're putting in the bank, they're pushing that money out. Yeah, I mean, listen, I think that venture and I love the space, even though it sort of creates heartache, you know, it's it's a really interesting industry to be in the fact that that could be the case. There's a there's a period where it was about innovation that real innovations.
Inventing the internet, you know, it takes time, right, and so it's okay for you to go round after round to get capital to be able to hire the people to do the thing you need to do for the major breakthrough. But the last few years sort of the railroad tracks of innovation are already there, right, but the mindset was outdated, and so you had a lot of
people that were you know, had grocery come companies. I don't I don't know if I should day something some of them, but like you know, well, well yeah, go puff is a great big example, right, who are sort of burning cash, right, and it's like, well, this is groceries. You have a product, give it to a person, they give you money fair exchange, and they still weren't sort
of making ends meet. Sort of got the old idea of of sort of patient I shouldn't say patient capital, of like letting venture capital be the cash flow mechanism for companies and then having companies be surprised when the music stops. I think existed for certain people. I think
for others who just didn't. The last few businesses that I built don't operate that way, right, Like, you know, they can hit seven or eight million ar R without ever talking to a venture capitalist, And even in those instances with healthy revenue and years of experience and a solid book of business have trouble getting lines of credit from banks. I think that, like the music stop for
a certain group of people, it will impact some. I'm mostly concerned about the biotech indust I'm hoping that investors I don't spend a ton of time there, spend some time there. I'm hoping that investors sort of sort of don't look at the challenges that the industry has had. In the same way, biotex is a long lead thing. It needs cash for a long time before it even improves, whether or not it can bring something to market. So listen, I think for every person it's going to be different.
My hope is that it's not in some sectors and for others the music to serve to stop.
Yeahh And so let's imagine, because you just talked about some things about venture capital have to change. Let's imagine venture capital is a patient going to the hospital, right, and he's got a broken leg, broken finger, and it's bleeding out. Lots of problems, lots of problems, some more severe than others. We know a lot of things could be broken about VC. What's the part that's bleeding out that's like, yo, we got to fix this before we focus on the leg and the broken finger.
That is a great question. I think the most urgent challenge, or the thing that comes to mind most immediately, is risk aversion. So it's like venture capitalists, yeah, I do. I mean it's like it's like everything's falling. Perhaps you should be, you should operate more in a more safe manner, But I'm hoping that sort of comfort risk tolerance. I should say i'd risk first, but risk tolerance, essentially I hope,
is something that the industry fixed fastest. The way I will break this down is that you know what you are rewarded in venture capital, not necessarily by companies that go the full distance. You're most immediately rewarded by whoever picks up that company in a following round. So as a result, when you write your first check, it doesn't
matter how much you have conviction that one found. You are always thinking about when they leave my office, when this round is done, well, the next group of investors that they have to convince say yes, And as a result, you can imagine when you think about the industry and the makeup. Folks get real really tight about the definition of a founder that would do really really well in that environment, and you hear it all the time in
investment committee meetings. People get really really excited. But the thing that stops them is like, I don't know how this founder will do when they go out to raise additional capital. And that is where I feel like that that is the that is the bleeding out part of venture that I think stops it from going as far as it could go.
Right.
I think there's a there's another there isn't If if we were more risk tolerant, we were more comfortable with the fact that and we knew that our colleagues are more comfortable with taking risks on what they what they on what could be great, and what a good company looks like. Look at the bones of the idea and
be more risk tolerant to the individual. I think that'll help us go further, because at the end of the day, no matter how much capital you raised, you have to deploy it, and you have to deploy into companies that can actually have delivered to a customer, that can grow successfully.
Add infinitum right dot dot dot right. And I think that the real challenge for us is a lack of imagination and an inability to take on significant take on risk beyond what we think our colleagues might be interested in in order to sort of, you know, make a big bet. I think that's the biggest challenge we can invite. We won't invite more people into our industry, The deal phil will get tighter, the range of a founder that
gets funding will get smaller. The more we're sort of confined by who we think our friends will like in the next round, as opposed to the validity of the idea itself.
Oh that's good. You talked about some of the things that Silicon Valley Bank filled the gap in, you know, with regard and they understood how financing works for a lot of startups. Who fills that void now?
I don't really know. I think that remains to be seen. I think it's an exciting opportunity for anyone that wants to make a market. It takes some time. I would ask myself, like, where the people who are at Silicon Valley Bank, what are they doing now? What do they want to do? It would be interesting if a part of a group of them started something new during the crisis itself. Rex did a lot to fill the gap.
It's a little bit different because, as far as I understand, REX is like a fintech company, it's not sort of a proper, proper bank. I think that you know, they do know the startup ecosystem exceptionally well. It was a really good moment for them to bring in new customers. We talked a lot about startups, but it doesn't just expect startups. It expects fund managers, which are startups themselves, right,
they're businesses themselves. It will be interesting. I think it's a really great opportunity for folks that want to pick it up because there's a real gap in the market. Even Brexit. It's best the more products that it spins out in the absence of SPB, it won't be enough. There's in a single institution that should cover all of the bases there and I'm excited to see who fills the void.
So we've talked a lot about, you know, the actual banking relationship, but with one of the other things that we're hearing a lot about is interest rates and its impact on how people spend their dollars. How much discussion their income people may have, But what is what should a startup be thinking about maybe having three raised money or having raised money? What do startups? What should startups here when they hear interest rates going through the roof?
Yeah, so you know, I'm not an economist, but I'll do my best here. My sense of it is that, you know, lower interest rates sort of laws would be flushed with cash. They're more dynamic and where they place it. Higher interest rates gets people to being really specific about where they place their capital. I saw a post recently
Jenny Fielding, who runs the fund. I think they're calling themselves everywhere Adventures now is selling founders that you know act as if this last round is the last capital to raise. I don't know enough to say if it should be that dire, but it's fair right, it should be really intentional about where you put a dollar. You only can spend it once and we don't know what you know what future rounds will look like, if there
will be the same size as they once were. In large part after SVB, there was like a pause when people went back to business. Things seemed to be fine. People had access to the capitol, but there is more and more churn and chatter about the size of rounds being a lot smaller than one they once expected. So if you're building an expensive company like logistics or grocery stores, for example, and you sort of mapped out how much more might need to raise at each step, you might
find yourself in a higher position than before. So just be aware. I think this is mostly advised.
We've got a pretty interesting financial climate on our hands and raise it up in facing is high bank's abilities in question. Even crypto is struggling to recover. None of this discounts the fact that many startups still need venti capital and many are out actively fundraising. So how do vcs behave differently when you consider all these factors? May should speaks on it.
I think they become more conservative, like we all do with our money. You know, at the end of the day, everyone has a loss. Venture capitalists their LPs are looking at them in terms of the returns they can generate. People get more conservative. I think that folks will do that.
I think that the venture capitalists that do really, really well, we'll get really really specific in their thesis, hyper focus in an area so that they make choices that they really can believe in, and when they make risks, they have strong conviction about why they're making them. And actually that's a lesson to us all. Where you put your money should be in the places that you think matter the most, and double down in the areas that you
think are really important. If saving for retirement is really important, this is the time that's been all of your time. Really understanding a bit about where you're putting your money in that regard, it'll help you make the right choices in the moment. So I think that the same thing. The way to think about bunch of capitalists is the way we all are. Everyone has a boss, they're held
accountable too. They've taken capital from other people the responsibilities to deploy it with return, And I think that the folks that do well will be open to risk in their very specific sectors that they know really well.
Is I've talked to a few different founders who recently owned this podcast who were super successful in raising money during COVID when we didn't even know what the world would look like coming right COVID. It's crazy, yeah, And I wonder with this current climate, is it still a good time to raise so how do I know if this is a good time to raise.
You don't have a choice, right, like? You really, there isn't a perfect time for anything. I think the COVID moment surprised a lot of us. You know, the world is ending, and yet it's easy to get capital. The world is ending, and ten people just want a house. This is a really wild moment, you really. I mean, if you're a founder and you're building a company, I think that let's see what are the risks of you beginning to put feelers out there starting to raise money.
If you're unsuccessful, you stop the race, get feedback, make an adjustment, figure out what's wrong. If you are successful, no love lost. Right. If you're not as successful as you thought, you have capital, and then what do you do? Right? Like, I think that you know, we can try to pick our moments in the best moment to do this. If the next level of your business requires capital, the best thing you can do is move in that direction, right, And the only thing failure will teach you is how
to do better next time. I don't think that there's any any way to hesitate or resist there as a general matter. If you're thinking about maybe I shouldn't raise at all.
Maybe I should tweak something in my business. I think it just really goes back to the things you learned back in the day with your mom or your dad, which is really like, you know, spend money what you have, try to keep as much reserves as you possibly can, and try to be smart about the choices you need to make over communicate with your team who are in this with you and are equally nervous because their jobs
are connected to the choices that you're making. But I don't think there's a really there's no really way, as they say, to time the market. Got to do what you can to do.
Yeah, yeah, And I've heard it said, or maybe I said it myself. I don't even know if you said this, but I mean, it's always a good time for good companies. Like good companies don't necessarily have to think about what the market looks like. And I wonder if that apprehension, or the potential apprehension to consider the time, does that tell you more about the founder that maybe they're not as confident or maybe or what does it tell you? Yeah?
I mean you mean if a founder delays grazing, now, what does that tell you? Yes, yes, it could tell. It could be a lot of things. I remember, there are moments where you know, we're building a business and our CFO, there's a fractional CFO worked with lots of other companies, just it was a good time to raise money. We had money. We just wanted a little bit more leverage. Discourage us for raising money because our priority at the time, you only can spend one minute, one time, one way,
needed to be the fundamentals of our business. Right it was going to make or break this in the long term. And sure, we knew exactly who to ask for money and we're probably going to get it, and we decided not to. So sometimes founders decide not to raise because they prioritize something else that they think is more significant in their long term success. Doesn't tell you much of anything. There are some founders that you know, I have moments where I talk a good game and then when it
comes time to do it, I'm nervous about it. Like there are some founders that are people periods who aren't going to hesitate because of confidence. I think that that's not a problem, that's not a character flaw, that's not a suggestion that they're not good at their their their job, or their business. It's a scary time, right, and fear can be a great motivator if they're connected with the right person. So I don't really I talk to founders.
I try to be as open and as helpful as possible, and so you don't have to come to me as a perfect founder. We can talk our way through it. It doesn't really tell you much. Accept that they're human and they're reading the tea leaves and they're being realistic about, you know, whether or not there's a good use of or investment of their time.
And so I want to ask you about because you've spent a lot of time again working with big companies and helping them build those bridges with startups. I was reading this list that Michael Seibel from y Combator had put out, and it was a pocket guide for essential YC advice and this will one line this yeah yeah, and this one line piqued my interest and it said avoid big company corporate development ceries. They only waste time. Yeah,
And it got me thinking about something I do. I have a marketing company outside of this, and I've been thinking about I don't even respond to corporate or governmental RFPs because they take so much time to respond to them and tip the resources put in, the investment put in is not worth the reward.
Yeah, the reward.
So I wonder what your thoughts are on this idea.
With everything, it depends I respect Michael, I know your experience is real. You're a master entrepreneur yourself, and I've seen it. It depends. What if I told you that the decision maker in there was like my best friend of twenty years, so right not do it? It just really depends correct people. Here's the thing all everyone will
waste your time if you let them. Number one, number two, lots of people together operating, because a group will definitely waste your time if you let them, and that's the case of companies. I think it depends on what you're going to get. Say you and I were building a business for five years of marketing business and we decide that we're gonna get put into this. We're going to
put into the RFP. We've met three people that we think could influence the decision at Nike, for example, and we're doing it because it's probably going to be a loss leader. It's going to take a lot of work, we're going to service this business for three months because the long tail, the ability to be able to say that we had Nike as a client, it's going to crue to our benefit in the long term. We're not
gonna make this our whole business. If we've been running a business for a while, we can make that choice. I know a founder who was a really incredible marketer, has an innovative way of doing it. She's most of her team is part time. She's got Disney as a client, she has Vogue as a client occasionally. You know, there are times when a business can be a lot more trouble than it's worth. But in part par for the course, she's gotten to meet the m and a teams of
these of these years. So it's just it really is about what the life cycle of the business. Where I think Michael's right is that starting a business where you know you're gonna have a few clients and that's gonna be the thing that you chase, that's probably problematic unless you came from that industry. This is the same playbook for any B to B business and have the relationships to get you in the door over with your hurdles faster.
It really depends. It's wise advice because they can take a lot of time, but strategically they can be worth it. It's the same reason why you know you might join a board, right and not an unpaid board. It's like, actually everyone want here. I'm going to probably raise money from in a few years, so that's you know, like it's like you're making an investment that doesn't really show out right away, but could be a long term, long
term to be powerful. Ultimately, though, I will say to our corporate friends, they know they have challenges interacting with an innovative and small businesses. They know they need our innovation. They have teams thinking about it every day. It's probably part of the problem. They know that this is a thing that they want to get better at who're not there, and they admit it. And I think that that's just sort of everybody's got their problems.
And to that end, go let's go one level deeper. What is some of the pre work that not enough of us do to make sure that when we do respond, we have a better we're better positioned to win those deals.
Yeah, I think the enterprise clients as a general matter, are different than everyday consumers. They despite knowing that you're a young company, will expect a lot of you. Typically they're going to ask you for insurance requirements that you might maybe be ready for professional liability insurance. Ask your founder friends. There's probably a great recommendation they can make for you can get a cheap and quick These insurance people are use getting these calls last minute for small
businesses because it happens a lot. Yeah, yeah, right, it's always it's always a surprise. It's always a surprise, and someone's tragically text messaging someone to get it's fine. You know. I think that understanding that when you're doing an enterprise client or working with them, you've actually got two jobs. There's delivery of the work and then there's sort of delivery of the client, like managing them and helping them be success in your story. I don't think it's specific
to us. I think that the more you have exposure to servicing enterprise clients, or the more you can find people in your network you have experience doing it, the easier it is to figure them out and navigate them. As long as you've got a strong website, a clear path to issue invoices on time, and you know how to and you figure out how to manage your client through milestones in your contract, You're going to be fine.
There are little sort of tips and tricks will ask you when you sign up, but all those things, some of them you can kind of flow through. They don't really care. You're surprised.
Yeah, And for those companies who are working through their internal challenges to onboard startups and particularly black founders. I mentioned earlier that too often we get put into we don't have the capacity sort of you know, bucket, what are because you've done this work, what are some of the strongest cases you've found that are effective in helping big companies see startups as potential partners versus risks.
Yeah, almost always. The opportunity lies in some innovation that the big company cannot pull off on its own. And even the most innovative companies, the advantage that a small company has that big company does not is that based on your height search of the customer. So say the customer is like this height, and you're this tall, and the big companies that tall, you're just so much closer to the sensitivities of a customer. The sensitivity is the
market that they don't feel because they're too massive. There are insights you can bring that it would take their best team weeks and weeks to do desk research to figure out because you're living the reality and every day, and so I would kind of flip it a little bit. I would say to small and medium businesses to assert your superpower, which is really the you are eating what you kill and as a result, you know where the fish are right and they're sort of and you've really
got to assert that and connect it. The other thing I would suggest, which I see a few companies do this, particularly in marketing, less in some of the more durable like hardware businesses do. But it is possible team up with someone in the business that you admire to go after the big business. So if you get a feedback about capacity, right, you know, well, your marketing business can be paired with on the other person you know on the market who might be a competimate. Like you guys
are good friends, they're kind of in your space. You respect what they do, but you're running two different businesses. There's a lot of relationships like that. Come together and go after the business together and figure out how you guys are going to manage it. Through, especially if the contract could be something that, as I said, is a long term of value as you market your services to the clients you've been serving to, even other larger organizations.
Stas Black Tech Green Money is a production of Blavity, Afrotech and the Black Effect Podcast Network and iHeart Media and it's produced by Morgan Debond and me Well Lucas, with addition of production support by Sarah Ergon and Rose mc lucas. Special thank you to Michael Davis I Vanessa Serrano. Learn more about my guests and other tech disruptors and innovators at afrotech dot com. Enjoining Black Tech Green Money shot us to somebody go get your money, Peace and love,