 Good afternoon everyone. We're gonna get started in a moment Thanks to everybody for joining us on are we on day two and a half or three of SoCAP at four o'clock in the afternoon It's not the easiest time to get engaged in a good conversation But I think we have a really interesting panel today. So hopefully it's energizing. My name is Kate Danahur I work at RSF social finance. We're a Local Bay Area non-profit financial services organization and we have been around for just over 30 years And we work to provide oh Sorry, I forgot that that was happening That'll be a interesting challenge So at RSF what we've done over the past 30 years is we make loans to for-profits and non-profit Social enterprises that are creating positive social or environmental change In one of our three focus areas sustainable food and agriculture Ecological stewardship and education in the arts. So I'm really honored to be sitting here on a panel with Three guys from three very cool companies that are trying to do a lot of the same thing With funds that they're taking out of their own their own company's profits and putting into interesting social enterprises so To my left, this is Greg with right road white road investments from Cliff bar Phil from Patagonia's 20 million in change fund and Pete who works with seven seventh generations Internal investment arm. I think is what we decided to call it So I think that the way we're going to start is I'm going to kind of set the context for the conversation Give each of these guys about five minutes to introduce themselves or companies of funds maybe give an example of one of the companies they've invested in that is a that kind of Demonstrates what their fund is trying to do and then we're going to dive into what I think is going to be a pretty interesting conversation So I don't usually use props on stage, but I wanted to start with At RSF we've spent a lot of time Trying to define for ourselves that we believe a social enterprises And so I wanted to take a minute to to read how we think of a social enterprise because I think it'll really help inform the rest of the conversation So at RSF we define a social enterprise as a business or corporation in which the economic activity is a means towards creating significant social and or ecological impact that has a public benefit Often social enterprises are formed to address a specific societal need But also may be committed to leading change in the respective industry or sector a Social enterprise views its values as central to all aspects of its work and is committed to holding itself accountable in pursuit of its mission Social enterprises are driven not only by what they can accomplish, but also how they accomplish it Social enterprises practice transparency in all matters of governance business practices and financial and human sustainability So we came up with that Maybe four or five years ago the term social enterprise hasn't been around for all that long But I do think that there are a lot of companies out there that have been around for 20 40 years even that have Rown up as social enterprises whether they self identified as that or not and I think the three companies sitting on stage are some of the best examples of how values and integrity can really build a Strong profitable and impactful organization and then what they're trying to do with their funds is really try and proliferate the movement of social enterprises or like-minded organizations to change the way this world does business so with that I'd like to hand it over to you guys to Take about five minutes each to introduce your organizations and your funds and then we'll dive into conversation Do you want to know about me personally sure I'd tell me whatever you want I will listen. My name is Greg Bagney My last real job was 14 years 11 months and one day ago I'm not counting but I was the senior vice president of marketing and product development for Schwinn cycling and fitness I was super lucky. I was standing in the right place at the right time God I Was picked to be part of the management team. They were bankrupt We picked them up out of Boulder or see me out of Chicago moved into Boulder Rebuilt the company brought them back to number one in the US and when the private equity firm the typical private equity firm Got ready to flip us for the third time in seven years. I Quietly left out the back door took some time off became a consultant. We're different than consultants We spread love and I focus a lot in natural foods outdoor bike ski areas to and travel consumer brands Enthusiast brands and I met Gary Erickson and Kit Crawford the founders of Cliff bar. Oh, I met Gary in my office in 1995 and we hit it off and we just kind of it was love at first sight and We stayed in touch and I was on a crazy bike ride with Gary I don't know maybe seven years ago and the Dolomites in Italy And he said that they wanted to start this fund because when they were growing Cliff bar They had no access to capital other than You know credit cards angels typical private equity if typical private equity goes bad, you know I mean things can get very ugly. There's no such thing as a divorce and I he said talk your wife And I said I'm going to talk to her but I'm in and then it was about a year later We were on another crazy bike ride in northern, California. He said it was June We're going to start this thing and in September we ended up starting in August and that was five years ago in September And we typically look for small mission-driven companies somewhere between a million dollars and 20 million in revenue We like when they sort of Mirror themselves after the aspirations or have a like-minded viewpoint of the aspirations of Cliff bar Where it's really all about the business and all about the brand and about people and product and community and the planet and We now I think have 13 companies that we're invested in we usually take a minority investment We're different because if you you know if you say hey, I'm in and out in three years We'll listen to you but at the same time we're a little bit more patient if you can do what you say you're going to do We'll hang with you for a while Especially if you're spreading the love and doing some good So with that said well, I think we have seven or eight natural foods to an outdoor to and bike and I Mean this I am personally the luckiest being on the planet to be doing what I'm doing right now I typically you know what I'm technically I'm a subcontractor I started year one about 20% of my time now. It's about 80% of my time and This job has raised my game I Act I mean, it's not radically different, but I act different now. I mean there's a level of responsibility and You know what I think I'm a little bit more thoughtful now a little less reactive Is it both in speech and mind and body? So with that said I owe That's a personal shout out to both Gary and a kick Crawford because they dragged me along on this thing and introduced me to two of my Colleagues, John Anthony and Devin Clements and Devin's the managing director technically. He's my boss Who I never met before So it's been a wonderful ride in relationship And we we're all happy right now because we had our first two exits this year And it wasn't really things we were planning it just sort of happened So Greg can you really quickly because I want everyone to get a flavor of the types of companies in your portfolio What was can you talk about one of the exits really quickly or the type of company it is Manitoba harvest Plant-based protein based around hemp industrial hemp. They make hemp hearts, which is an edible shelled hemp seed and they also make hemp based protein powders and They exited this year in May and then the other one was One we jumped into called Santa Cruz bikes they make mountain bikes and they were acquired by our large Dutch based Bike conglomerate and that happened back in May June also. Thank you So with that those two said I have a job for at least another year Well done Hi everybody, my name is Phil Graves. I'm director of corporate development for Patagonia and My path is similar studied the consulting thing for a while I started my career at Deloitte where I advised companies on investments mergers acquisition scenarios Corporate finance type issues and was getting close to partner I was in the pipeline with the next year or two and realized like there's more to life than money Like do I want to do this forever and work long hours just to get a really good bonus at the end of the year I've got three little girls love the outdoors love the environment and it was a challenge to Bring that into the work that I was doing because as a consultant you're very reactive so if a client has a need whether they're mission-driven or not mission-driven you trying to address it through whatever it is that you do and Came to that realization that I was going to look for something else and trying to line with an organization That had the same values that I did and Patagonia had been around a really long time As Kate mentioned always admired the brand and what we stand for and was fortunate enough It's ironic because I view myself as the luckiest person on the planet to with my role Maybe we can like Farquhar after the the panel to see who really is But I came to Patagonia a couple years ago and with my role heading corporate dev there I get to manage our 20 million and change venture fund and The fund is not like a typical fund where it's a seven-year fund or a 10-year fund where we make investments Hopefully have a profitable exit the the North Star whenever we make an investment goes to our mission statement Which is a little bit shorter, but it's it's an extension of the third part of it Which is use business to inspire and implement solutions to the environmental crisis So I view the fund is that taking these learnings that we've had for the last 40 plus years as a company and Applying these to these other industry verticals that can have an environmental impact Some of the nitty-gritty honor fund like the mechanics We also make minority level investments very similar to white road We like to come in around two to twenty percent ownership stake if we invest in a company And it's just if we do a million dollar investment, and they're gonna raise 500 million in capital We feel like that's probably not gonna be a meaningful amount of capital the company long term So even if they're doing great things for the environment, we generally will pass And on the other side if a company is just again with an idea We don't want to make a controlling investment. So we don't require a seat on the board. We typically Come it come in make give the company the capital. They need to do great things environmentally and then provide assistance as needed But it's less operational focus, which is maybe a little bit of a difference between the two An investment that all all highlights and it's tough because like you view these I'm sure you do too both of you as your kids So it's like how do you pick a favorite because you can't have a favorite kid Even though anybody's parent you kind of have a favorite kid just can't state publicly But the one I'll give a shout out to is Borreo This company turns fishing nets into skateboard decks and they collect Fishing nets up and down the coast of Chile. It's these three friends one was a consultant common thing a lot of consultants out there But he's an environmental consultant is working in Chile. Of course Chile has a long coastline And then these three buddies were surfers and we're really passionate about the ocean and protecting the health of the ocean And when you look at plastic pollution in the ocean, it's a major problem And so what they determined was 10% of the plastic in the ocean is due to discarded fishing gear fishing nets And so what they did they've established these collection ports up and down the coast of Chile Paid local Chileans to give the nets to them as opposed to dumping them in the ocean or hauling to a landfill or burning on the beach sometimes that was what was being done and With those nets they clean them mechanically separating them and turn them into a skateboard deck and they've been real Successful on the skateboards. They also just launched a Kickstarter that hit their goal six times over and launched sunglasses So the the sunglasses I've got here the Borreo shades and the plastic is the nylon that was formerly the fishing Fishing that so really cool example of a company that their business model is profitable like any other Sunglass company they do it and make money on it, but it solves an environmental problem through that business Thank you Hey, hi. Good afternoon everyone Pete Albersi from 7th generation and Our approach is a little bit different for example our our ventures effort is a part-time job of mine I get to do anything that has anything to do with customers worldwide with seven generations So anything with sales sales capabilities Customer service event is is one of my responsibilities and then I have the pleasure of being general manager of 7th generation ventures and You have to go back 27 years to Understand 7th generation and and the company was named for a specific reason and 7th generation is taken from Really the the Iroquois nation the Confederacy of the Iroquois tribes had a saying that said in every deliberation We must you know judge the impact on our of our decision on the next 7th generation So 7th generation was set up 27 years ago to think differently to think long-term To think about more than just the company. In fact, it was a mission without a business for many years in fact struggling to raise capital on its own and In the last several years, we've been able to turn that business around We've put over a hundred million dollars of growth on in the last couple of years in terms of sales and How do we then? Position ourselves in a in a spot that we can therefore lift other companies up So a lot of the capabilities we have as a company are to take Good solid businesses and this really comes out of a lot of coaching we've done with up-and-coming businesses in the health and wellness space We're good at taking those smaller businesses and making them much stronger and we think our effort is really about Inviting some of these businesses to join the 7th generation effort and one of our big efforts is to transform commerce and we believe that the Companies of the last hundred years really need to be doing things differently So it's it's a long-term perspective versus a short-term perspective. It's a How do we invest for top-line growth versus manage for quarterly earnings? It's full transparency versus hiding behind Avail and it's also really about authentic brands that mean something Versus brands that are created and targeted at a specific market. So to us, it's about Top-line growth and as I said one of our key tenants is to transform Business and transform commerce the bigger and stronger we are the more good we can do and that's one of the key Things that we're looking to do. So it's more of an an acquisition type position We would love for entrepreneurs to be part of something much bigger together And we can bring a lot of capabilities to bear to help them Achieve their original vision and be part of something and be an equity holder in a long-term growth going forward and so One of the companies that we invested in and then ended up acquiring early on was a water bottle company named Bobble It's a bottle that filters as you drink And there's an intense hatred for single-use plastic bottles. It's a good thing. There isn't one near Kate right now But you know right now we use about 52 billion bottles in North America a year That's over a billion bottles a week single-use Bottles they end up in sunglasses now, which is a good thing, but the waste is really ridiculous. So how do we think about? Solving that solution in a smart and stylish way So you're gonna see this brand we acquired a couple years ago completely relaunched in a couple of months with all new products and we think we want to do Do better in that particular business by giving people a smart and stylish solution and not just wagging your finger and saying you Shouldn't do that. So how do we provide something better and different and move forward in that way and be all stronger together? Thanks Apparently it's not enough to shame me backstage about my single-use water bottle I did Um So there's there's a theme that I just want to call out I think one of the first conversations I ever had with Phil we were talking about what he does and he's like I have the coolest job in the world and I was like wait wait wait. I Have the coolest job in the world and I think in our conversation last week You're like no no no I've got the coolest job in the world So I think we should just take a moment to recognize how lucky we all are to work in this space So I want to open this up more for conversation and my goal is to end with about 20 minutes for questions So we've got about 20 minutes to have the conversation, but I guess I wanted to start with Why you why are you guys? Uniquely positioned to make these investments and and create the change you want to see in the world What is it that you bring to the party and I want to set it in the context of we're all here talking about social capital markets in The world where a lot of the change innovation is happening, which is in food and consumer products There is a tremendous amount of money out there right now to acquire brands valuations are off the charts And it's a really interesting time and so I'm really interested in beyond the money What is it that an investor can bring to the party? So and I'd love for you guys don't have to go in order. I think it'd be interesting to have a conversation around it Whoever wants to start Well, I'll go first So that two things came to mind when you mentioned that like why why pat again? Why do we even have an investment from the first place? So back to the initial point pat again has been around for over 40 years and obviously do outdoor peril We have a food startup that we launched here in Sausalito called pat again and provisions but we've learned a lot across the last 40 plus years on Responsible things environmental best practices that aren't limited to making a jacket or making a pouch of salmon for pat again and provisions and Given the environmental crisis that we're in We thought establishing a fund that is truly unique and not like a typical VC or private equity shop That's out there could be a mechanism to hit on these these key areas Which for our fund it's food water energy waste and apparel and we thought we can invest We can with our unique structure. So again not being a technical fund We were at the investment arm, you know much like Peters for Patagonia. We can take the long-term position so we're not raising outside capital Patagonia is closely held the schnards are the only shareholders at this point and Yvonne has told me many times like I have enough money So like it's so refreshing as an investor to look at it from a 10-year perspective from a 50-year perspective and say like I don't have to report quarterly what the earnings have been for the investments or what are what our valuation of the portfolio is I mean I track that because I'm an investment guy and that matters and if we want to make a meaningful change that scales that other Investment shops will implement you've got to look holistically at it and so to have that long-term view to be able to Identify entrepreneurs and say hey, we're not even gonna take a seat on the board We're gonna we're gonna spend a lot of time vetting you and are you really all about this mission? Are you trying to make a quick buck and get sold to a strategic guy or have an IPO in the next two years? But are you in it for the long haul we closely examined supply chains so we do spend a ton of time on Diligence especially environmental due diligence and social due diligence how the workers treated What chemicals are used and whatever is that you're making? We have an army of in-house environmental types that I can pull into each investment we look at so it's to have that long-term view and to Offer a unique perspective in terms of connections We can make and focus on the environmental and the social aspect in addition to the financial things that'll enable them to be successful Why don't you guys take a like a board seat? I imagine a lot of your ventures would be like, please Right and that has happened and we've said yes before yeah, we don't require it So one is bandwidth, so we've made ten investments to date Over the last couple years, right exactly And the team is really small and so There's a lot of really cool things that happen at board meetings and some things again Like our mission is to keep them to their mission on the environmental side So one of the things that we do to protect that is include environmental covenants So if a company takes a wrong term from the environment uses a harmful chemical These barrio guys if they wanted to use virgin nylon in the sunglasses That would be what I would consider as a wrong term from the environment So we protect ourselves and keep the mission in the line that way But we don't necessarily step in and say hey This is how you should operate the business bring in a new chief marketing officer The one the one caveat to that I will say that we will do is we're gonna have a summit this year Where we bring together these 10 portfolio companies and share best practices So we'll have our COO or CEO All our execs there that are gonna be available have Q&A talk about things like Packaging or transplantation and like common issues that we all face whether you're making jackets or a food product or you're an energy company and Share those best practices. So that's kind of our view is of a board meeting if you will is the summits or symposiums Whatever you call it where we bring everybody together and talk through some of the issues that we're facing collectively I think you know, what's interesting about what we do is We're I would say we're operators We're sort of a typical private equity all of us have had real jobs before all of us have Had successes and failures before and with that said it that that experience can be powerful You know we I'm more of a market product developer brand person. That's what I did before Devon Clemens our managing director is a finance and ops expert John Anthony is a sales and distribution God in the natural foods business. We also have Jen cow Who's internal from cliff bar who helps us on the finance side also? She's a Fantastic so with that said we really can kind of cover all the bases with an emerging brand and I think the other piece of it is a you know, whether there's financial capital and intellectual creative capital We really pride ourselves on our connective capital. So like Phil it's great to have a mothership You know, I mean so that connective capital is everything from hey You need a good broker on the east coast call my friend Lenny or to hey, I need Creative help or we need ops help or whatever the case may be We have a really really good connective capital resource that we can tap into both that we have personally and with Cliff and all The companies around us so it makes a really big difference. We like board seats. We'll take one But we don't we're like you we don't need one But it's always great to sort of be in the room because we try and bring that value add to the party Yeah, I would add a lot of similarities from from my counterparts here The big key that differentiates what we're trying to do and we've been developing a lot of relationships with company founders and entrepreneurs for years Do a lot of coaching The big difference between what we're trying to do and maybe a private equity raise is that we're in this for the long term And we're in it for top-line growth. So how do we help this company grow? Significantly to serve the mission that it was founded to do and how do we help that that founders vision become reality? And I think that's really an important piece where we're more than willing to invest You know virtually all the EBITDA back into growth We're certainly a poor for-profit business, but we're a privately held business all our employees or shareholders We're all in this to change how commerce is done We're not here to position it to be flipped again in three to five years or seven years on a multiple of EBITDA. So People really appreciate that particular perspective and then there's the capable capital piece that you guys talked about in terms of 27 years we've been building a lot of capabilities that Any company that is up and coming say twenty million dollars in sales, etc If they're gonna want to do business with Whole Foods and Target and international distributors Serve the new millennium consumer that we know. Well, how are they going to build all those? Tools and resources we've already built a lot of that How do we leverage that better and accelerate that particular company an example would be R&D? You know, we've got a floor full of scientists who are working on packaging as an example How do you have a hundred percent PCR packaging? So, you know, we're not using any virgin materials to make packaging We have scientists who are working on formulas. How do we have completely bio-based formulas that don't use petroleum products? How do we help? Companies and we help companies that we're not even involved with financially Formulate their products better to serve the consumer, but also serve the earth and nurture nature, which is one of our other tenants So it goes all throughout Supply chain, you know, we have 21 manufacturing locations. We have six distribution centers in the United States alone Why not put more through those particular pipes? marketing sales direct consumer and we do business with every significant retailer Frankly in most of the developed world particularly in North America so that gives a few good reasons why it makes a lot of sense and again, the whole point is is we can be much stronger together if we Create what I'm what I call with a bit of tongue-in-cheek a parallel universe to the Procter and gambles and the Kimberly Clarks You know, we're really tired of companies that do the minimum to get by in terms of regulatory issues or human health issues We want to go that extra step. We want to be totally transparent You know, we're the first company years ago that put every ingredient on the back of a bottle of laundry detergent You know people thought we were crazy. Why would you do that? Because everyone else wants to hide their formulas wants to hide what's in them We think the the new way to do this for the next seven generation will win because that new millennium shopper Cares about these things much more than the previous generations did Thank So my next question is around so when investors invest equity, they're generally looking for some kind of exit which in a lot Of cases requires fast growth scaling selling selling Acquisition and we see a lot of that in our space and I'm wondering how you guys since you all you know, some people don't take a minority, you know You don't take a majority share. You don't take seats on boards. You really partner for for long-term growth How do you guys have the conversation with your companies around? Their growth trajectory and their exits and how do you how do you address the liquidity issue? I? Will start on that one, you know, it's funny are we're called white road investments because if you haven't read Gary Erickson's books raising the bar I would suggest doing that. It's a great read But you know if you go to a Michelin map all the big super highways are red The medium roads are yellow and all the small little cool back roads are white and those are the best Traveled coolest most rewarding a little bit harder a little bit more adventurous and That's the way we approach that so most of the time. We're very direct We say hey, what do you want to do when you grow up? I mean what's gonna happen in five years? Do you want to do this for the next ten years? Do you are you three in and three out? I mean so we have very open conversations up front with our founders and Principles of the business to say what is it exactly you want to do with this thing most of the time? They have a pretty good idea sometimes they don't you know, I mean so we kind of roll with them along the way but to tip both these gentlemen's Theory, you know, we're not in a big hurry, but at the same time we still love to see forward progress We love to see them, you know make a positive impact on the things that they're doing that would add we are the exit for Many founders who want a really great place to see their brands and their companies and their employees Flourish going forward, so you know We're in conversation with a company now that the the founders are looking to retire and slow down a little bit So how do we how do we look at a four-year time period where you know the business continues to grow where it is? We can invest in it. We can lend a lot of our capabilities a lot of connections from a broker on the east coast To a place to manufacture product. How do we improve things? How do we market to the new millennium mom as an example? There's lots of opportunities for us to Shepard a brand further and there's nothing more rewarding to a founder than to Look back 10 or 12 years and say wow look what look what my babies become to some degree And it's in the hands of the right kind of people who aren't just looking to you know flip it for a bigger multiple down the road so We actually are don't have an issue. Thank goodness with the liquidity issue. We have a deep enough bench of investors in our company that Every every 18 months to two years will do a liquidity event So if somebody wants to sell their shares privately back to existing or new investors, then we're certainly able to do that today, so it kind of is a Self a self-feeding system, which is a beautiful thing I should also mention that our second largest shareholder base is our employees Which is really cool. So every new employee is a is an equity holder in the business and also Creates a lot of alignment for the long-term perspective that we do have That's really interesting. Yeah Here they come I'm sponsored by the Blue Angels. I'm sorry. I brought them along today You're gonna fly off. That's right. Wait for a ride. That's great Very similar here from our perspective. We do the same things that Greg and why road dude? So we want to Get our get our arms around Get our arms around why are the founders doing it? Are they doing it because green eco-friendly is sexy right now? And that's where all the VC dollars come in and that's what they're looking to do or are they really passionate about the product? Like on the Brio example, they're passionate about getting these nets in the Nylon out of the ocean to avoid the ocean plastic pollution It doesn't have to be that sexy of a story Like there's another company we invested in who recognizes the water crisis that we're in So they have a liquid to CO2 based platform that can clean and coat textiles So they're passionate about the water side and not necessarily getting sold in a couple years So I mean on one hand we recognize that liquidity is important for the entrepreneurs and it's gonna happen So maybe a company we invest in will go public and that's okay. Maybe one will get sold and that's okay Hopefully it's to the right like-minded buyer if it's if it's out there, but we're also okay If a company wants to stay private Patagonia has done it We've been a private company for over 40 years how do you any pays dividends the founder? So as an equity investor we can receive dividends So there doesn't have to be a liquidity event outside of dividends for us to be content with our our investment Yeah, and something Phil that you said that Because I'm constantly thinking about as companies scale how they maintain the integrity of their brand and their values And of course coming into one of your portfolios I think is is number one the best way is aligning the capital that you're bringing in with your values But I'm wondering specifically you said that you guys build covenants into your into your agreements and your documents to keep them at least Yeah, keep them on the on the road. How do you? Pete you guys might not have to deal with that because you're actually acquiring a company So you have some control, but how do you to? work with companies to make sure they stay on mission and Is that ever a tough conversation you have to have with somebody or is it just the stars always aligned for us It's for us. It's pretty simple. You know, this is bottom line This is all about two things really people and product and process kind of comes up behind it But more importantly, we're if you don't have it in your hand We're really helpful and mission vision values Blank brand platform will sit down with you and take you through that process We know how to do that and we'd like to be involved with it and like to help you with it if you need the help But what if people see an opportunity to scale? But it's going to require a dilution and some of the values and principles that the company was founded upon how do you? Do you deal with that as an investor we can it depends a lot of it depends on You know our our investment and you know, sometimes we're not the we're minority investors Sometimes we're not the largest investor, but I think I think most of the time you got a pretty good feel for where somebody's headed Yeah, I mean that's a little bit of gut and a little bit instinct and I know that scares some people But that's a big deal. I was gonna say gut check even for us as lenders is really important We've gone and done a site visit with a company that we had a term assigned term sheet when we were in underwriting and we met the management team and we Handed their deposit check right back to them because it just didn't feel right. It goes a long way on a side note We had We had an opportunity and it was about a week before we were going to close and We paid some legal fees out of our own pocket and we passed we walked away because it got a little bit weird And I hate it when it gets weird Got a little jiggy and with that said we all the flag went up and everybody's gut went up and said hey You know what it's probably best that we don't do this right now. Yeah, so and I think I think gut checks are really important in this space But I also wonder How much you guys rely on? external kind of metrics or values based standards when you're looking at a company so there's B Corp if everybody knows what B Corp does there's 1% for the planet. I know you guys encourage a lot of your companies to participate There's gears and iris ratings the rate impact So do you guys look at that as a company more interested? Interesting to you if they're already involved What's the value and you encourage companies once they're in your portfolio to try and push towards? The Corp certification or anything like that happy to take that one Seven generation is a founding B Corp you know, I think seven generations stumbled around for your for years in terms of Putting some true metrics behind that mission and how do you how do you balance the people of the planet? The profits and all those three things to keep keep the business going forward. So we think the the B Corp Organization is doing a wonderful job clearly if a company we're talking to is already a B Corp that gives us a lot of comfort and You know early in the days of seven generation It was all about transforming commerce and how to enhance enhancing health building communities all these things that B Corp do So we want to have a bigger Stakeholder group than just our shareholders. So we want to be good stewards of the communities We live in we want to make sure we're inspiring a revolution of health and wellness We want to make sure we're doing the right thing even if it takes a longer path to get there And there's certainly ways that you can be more expedient in the business We could launch new products faster that don't meet our standards. We could do a lot of shortcuts But we're not going to do that because Transparency is everything to us Authenticity is everything to us and you can't break that trust, you know our friends at Volkswagen are figuring that out today Probably right? Yeah For sure that authenticity thing is a really big deal and I think you know admittedly We're probably not as disciplined up front with metrics Because mo everybody we're talking to they've already stepped up to the table before they talked to us And that's what we look for Yeah, we're very similar powder gum is a B Corp and a benefit corporation. So it's it's very near Near and dear to our hearts just like the Blue Angels are every time you talk. Yeah I So yeah, it's very important to us when we look at a company We don't require them to be a B Corp, but we say have you done the assessment if they've done it We look through it and make sure it's like kind of on the standard that we would expect if they haven't done it then we encourage them to fill it out and That helps us in our vetting process and on the back end So everything you mentioned we've looked at those plus others in the whole landscape of impact metrics because there's thousands out There and what we've done is create our own internal system that kind of picks and chooses what we thought would be the most meaningful So again, we're food water energy waste and apparel So we look at things like greenhouse gas emissions that are averted how many pounds on the social side How many jobs are created how many Native Americans are engaged and each quarter? I send out a questionnaire to our CEOs they fill it out Have somebody on their team fill it out send it back And then we have a nice little snapshot of five environmental metrics for the portfolio companies in aggregate and the social metrics And we place those actually ahead of the financial metrics on where we're tracking and report that out to the shenards and the board and our CEO That's awesome. Yeah at RSF We we have an internal metric system based on five criteria that we think are really that that is really important to RSF and our identity And how we want to create change in the world, but we also were a founding b-corp And we also make every single company as part of their loan their term sheet Conditions precedent closing take your b-corp assessment figure out at least where you score And then we're gonna make you take it every year from now on and see if you get a little bit if you if you can bump your score So it's really important I'm going to take the liberty as a moderator to give myself a give us a few more minutes past the 20 that I promised We cut ourselves off because I want to ask and maybe this is just to make it explicit But to me we see it as lenders we see companies that are fairly well established Are probably profitable have a strong track record you guys are working with companies that are much much younger and We see companies coming to us all the time who have just the wrong cap table They don't have the right set of investors not because they're not values aligned, but they're just not the right Partners and so I'm curious to this is a two-part question What advice would you give to entrepreneurs that have a values aligned product or about a values driven product that that want to grow and Why is it so important that we align that businesses align their sources of capital? with their company and their growth You hit the nail on the head I'll take that one just because it's very near and dear to my heart and very applicable recently so The cap table is everything if we just if we if I go to Rose our CEO with the investment list What we've got in the pipeline one of the two things we look at is what's the cap table? Who are their existing investors? Is it husband and wife team is it friends and families and angels or are there already some big private equity names that are out there? And it really does matter so to your point We had a deal we looked at a year ago and wanted to invest in the company There was a nice supply chain connection It was husband and wife majority owned at that point, but there was a private equity that was involved They had some unique rights and preferences Well, they could actually block us from from coming in and investing even though at least in my opinion We would be a great partner for them to give them some capital they needed fast for a year That private equity shop tried to take control of the business and we have since come in We've been able to structure an investment where we can keep the husband and wife founders as controlling shareholders because to us That's very important and it's it's huge because as an entrepreneur if you don't take on the right capital You could you could lose your business and that's a really big deal Whether you're mission-delined or not and so be very selective on who you take in be very selective on the amount of capital that you take Into that's huge if you think you're gonna raise a million Can you get by with 500,000 like I keep going back to the Braille guys, but I love how scrappy they are They're applying for $5,000 grants $10,000 grants there They're so thrifty with that and it benefits us but it also benefits them because they're the controlling shareholders the company And that's how we want to keep it. Yeah The first thing we say to anybody The first thing we say to anybody is you know, you really shouldn't take money from us You know, I mean if you can use your dad or Revolver bank Friend family angel. This is the best thing you could ever do Because your life will be become more complex When you take money from an outside investor and it can also become very wonderful to find the right one And it can become not so wonderful. I can as I said in my intro I can speak from personal experience on the third flip I realized that my life and job had changed and it wasn't pretty so with that said it's not like a divorce You just can't say hey, you know, I want to get a divorce. You're in Otherwise you're trying to find money to buy them out at the multiple that they need and it can be pretty ugly So I'm with you on this one that cap table and who you align yourself with is incredibly important We're a small fund. So sometimes people need more and we partner up with like-minded Partners and so we're very careful about how we pick those partners also And I'll look at it from from an outside in perspective When we're looking at a company who we may want to partner with we need to absolutely fall in love with the The founders right because as you mentioned, it's it's you know, you're getting in business for a very long time You're gonna spend a lot of time together. You're gonna go to the mat together make things happen and You really really have to get the people peace and that fit right Or else it's gonna be problematic for a very long time And and unwinding it is is incredibly painful. That's for sure. So I won't rehash a lot of these things these guys said But I totally agree that you know if you don't need to raise capital Don't raise the capital ask for advice ask for help And then then when you're when you're ready to do something Not to be self-serving of people on the stage or you know With a certain lens, but just be careful of how You pick your partners because it is incredibly incredibly important obviously. Yeah And I would say that So it seems like the common piece of advice is is be picky about your partners. You don't always It's hard when you say I need a million dollars to get through the next six months How do I have time to be picky about my partners? But it really matters even to folks like lenders that are you know down the road It really does matter that you guys figure out how to property properly capitalize a company Because there's good people that are gonna want to help you along But if you don't have the right mix from the beginning it's gonna make it really challenging So I was gonna stop there We have approximately 13 minutes, and I wanted to give a chance for some Q&A I don't get to control who gets the microphone, but these two people do Question for you. I'll feel that Hello, okay so we're a B certified benefit Corp and GI IRS certified and I was curious I don't want you guys to be swamped after this, but this question might do it how far from your core Businesses like you in clothing you in food and you in products like that. Do you are you interested in? You know, we're in media and but we you know, we do things that are towards your goals But we're clearly not in your business So is that something interesting and hopefully this is of a value to other entrepreneurs so that they can get an idea Should they be talking to you or not? Did you guys understand my question? Yeah, absolutely. Okay, lately. Yeah I'll take a quick crack at it. It's real simple for us We need to be able to focus on what we're good at and you know We've decided to focus in consumer packaged goods and we're focused in the non-food side of it So, you know if you make great pizzas, you know, I'll probably turn you over to somebody else or make a connection for you, but If we can continue to leverage our capabilities and understand where our capabilities are it's going to be better for us all together So how can I really be helpful to a company that approaches us is a lens that I will look through? Yep, and so like I mentioned earlier, we're food water energy waste and apparel We prioritize investments in our supply chain because it's it's mutually beneficial, right? Like in that instance where the company does a liquid CO2 based platform We can make introductions to our suppliers. They can sell machines. That's where we get the benefit. So in that example This year we have the potential to save 3.5 million gallons of water that investment into one little part of our supply chain So it's it's a it's a great ad that we can we can contribute in terms of value that being said We have made investments of the 10 there are two or three that have nothing to do with our supply chain or very very like You know, it's a stretch if you want to call it that but the primary lens that we look there is is this a business model that benefits the environment in the long term and You know, we've had 750 applications that have come in and our funding rate is you know You can do the math. It's pretty low and we do look outside the supply chain as long as it hits our environmental business criteria, but we prioritize the supply chain stuff we you know we love building brands We love brands and we love building brands and and I think we think we're okay at it At the same time though, we like to sort of get it in our core competencies However, I can give you a specific example We just invested in a small company in the Bay Area right here in San Francisco called fire clay tile to take truth I don't know Jack about tile however When we would talk before about people Eric Edelson the CEO there we wish we could clone him So we jumped into that because we had some people that we knew inside and also We felt so strongly about the management team and the other thing we love is we love new categories And this guy is a new category taking custom tile handmade tile direct to consumer and circumventing the retail channel So with that said it was just sort of a little kind of a nice little alignment We decided to jump in but so we do stretch out when we when we need to when we want to but media forget it Just getting that Any other questions There've got to be something we got we got Thank you for a great panel and right before this one I came from a diversity panel and with all the work that your larger companies are doing do you consider Diversity in terms of the management team when you're making your investment decisions Yeah, we absolutely do We we embrace it. I can't say it's a mathematical computation we make at all but It's something we struggle with because in one hand we want to actually specialize in the businesses that I just spoke about to the previous question and There's a lot of like thinking there and how do we bring new perspectives to that all the time and so all the elements of diversity come into play and I think it makes us stronger You know to have different perspectives different backgrounds So we would see it as a clear positive for sure Yeah, and we're the same way so again like environmental impact, but in terms of diversity women-owned businesses We we also prioritize first-nation investments So communities that have been impoverished can we make an investment that benefits a first-nation tribe as well So we look at all those things, you know, we have the environmental Ethos of the fund but through that I mean it's hand in glove with the social side side to and diversity and We ought we track it. So to me if you track it it's something that you care about I'd answer yes, but not as we're probably not as metric as we need to be Two examples would be we just invested in bio light smaller wood burning stove that is doing wonderful work in emerging markets And I just got back from San Diego with the honest kitchen, which is a pet food company 10 pound box of dehydrated Human-grade food instead of a 40 pound bag of kibble, which you should not feed your dog But anyway, we did an innovation day with them and out of the 12 people there eight will win and this was super cool That's great RSF also I We lend to companies a similar size of these guys invest in so we actually We have 1700 investors at RSF and I believe 60 percent. I'm looking at Melinda our director of 60% of those people invested in RSF that want to align their money their values are women There's an incredible movement how it is a good time to be a woman in business and RSF is actually Right now raising a an internal fund to support women in leadership and women in business. So It's important So you all have talked about the importance of the cap table mix I was I'm interested for Since this is sort of the context of sort of corporate venture corporate M&A activity Have you all you all have philosophies or hypotheses or experience where you've looked at a deal and there's been an Estensible competitor on the other side of the cap table and you've kind of walked away for sort of competitive reasons And I guess I would just contextualize thinking about sort of the broader compact of impact investing where is There like a pre-competitive space where the business and the kind of social value of your kind of respective strategies could align Or is that something you all have just given any thought to? Thanks We look at it from a so we do outdoor peril and then food as well So we look at it as is there another big food company that's invested So like how is that gonna work because oftentimes what we do with our fund is trying to unlock an environmental innovation So disruptive technology or eco innovation and then we want to be first to market with it Which kids your question pose some problems if the other investors are competitors Right after we're first to market though our our model is to open it up to everybody because that's if we invest in a company That has a kick-ass environmental innovation They released it at scales and as an investor we benefit in that and then we're first to market as well It's something that just a brand you know builds your brand as well So for us we definitely consider it we haven't run into too many instances where we haven't done a deal because of that But again, we closely examine the cap table for that very reason Our perspective is it's a field of dreams, right? So if we can build it, you know, the consumers are coming this way We all know that the you know Fight a birthday party when I turned 10 my mom would have bought you know Doritos and coke Right and if somebody does that today for their 10 year old, you know The rest of the moms will be you know incredibly upset about how could you do that to my kids? So in one generation the the world has changed and so we're gonna continue to lean in together So we're cheerleaders for anyone who's doing a similar thing we do so Our competitors are really the the companies that that that ruled the last hundred years And I never see them invested in anything. We're looking at so Companies that are somewhat in our space. I'm happy to line up and fight with together We actually just closed on investment Doritos and coke. Is that is that bad? I probably shouldn't mention Doritos before I got up and I'm just craving for more right now You know, we've never we've never had a cap table we've We've said no because of a complexity To a cap table up to this point in five years We've never said no to sort of a competitive threat on a cap table. So it really hasn't happened to us So I'm probably not qualified to talk about it We have time for one more question There it is You guys are boring So it sounds it sounds like you have adequate deal flow inbound Because of the position you're holding and the value of what you're able to provide as an investor Do you consider or do any activities that are kind of outbound seeking particular? You have your areas of focus But do you ever do any activities? Maybe issue RFPs or look for deal flow outbound? Yeah, wow RFP that that just scares the heck out of me. You haven't heard that since your first job 14 years you know even as a consultant I would refuse to fill out RFPs I'm a one-person shop. I design it would never do that, but to your point our outbound is more about Is all about our network? It's all about trade shows. It's all about conferences like this It's all about like-minded individuals that we find by just being outbound That that's kind of our MO and Technically, it's always best to find us if you're you know I mean it's sort of tongue-in-cheek, but if you're filling out the contact page on our website It's not really the way to meet us the way to meet us is face to face We really like that with that type of contact For sure He agrees. Yeah. Yeah now we We're the same way, so we've had 750 applications that have come in a couple of those We've actually resulted in an investment and funded the company, but we prefer the ones where we have relationships So Kate gives me a call and say hey We're looking at providing debt capital these guys you want to come in on the equity side on the capital stack And those are the deals that we're more likely to invest in and then we also try to be strategic Because you don't want to just sit around and be a taker of everything that comes in we want to say hey there's a huge need and Waterless dying in the outdoor apparel supply chain or whatever the problem of the day is and then we say okay Who's doing it? Who's best in class? Is this a type of company that we can invest in like are they already 500 million dollars or are they small and are you know One the $20 million sweet spot and those are the ones where we've had the most success pulling things through and they're gonna be our Best investments real quick specific example. I run to the bathroom last minute I run into trip Baird who's a super smart investment dude who I love and He tells me about something right out in front. Hey by the way And so most of the time that type of connective capital is where we find it Yeah, I totally agree. It's all about networking connections We do outbound 99 and a half percent we look at companies that we think would be Appropriate good mission fit great people running them. I pick up the phone and I call people Maybe reach out through LinkedIn We have had no luck with inbound and generally Those are those are troubled companies what I've found in terms of hey We have you know $5 million in sales and we're only losing a million dollars a year And we have 5,000 SKUs and all these issues and it's like wow, you know, we we can't Bury ourselves by doing you know 20 Fix-it deals and so we may have some bandwidth to do some of that, but we really Want to enhance businesses that are getting some traction and again, it's all about the people first and you know Is this something we can build upon? And I'm gonna take the last word on that because at RSF we get a tremendous amount of inbound and we take all of it But we've actually as over the years We've we've gotten a lot more clarity about the the type of change we want to see in each of our focus areas We've we've become experts in our focus areas and we build networks And we build relationships with people that keep us top of mind so that yeah, I get a call from Phil I get a call from Kate story at renewal funds And I will always look at what they send me because I've spent a lot of time with those folks talking about what we do and if our And if and if they know what we're doing we're gonna look at it We partner an awful lot with folks and I guess the one piece of advice when you guys are giving your pieces of Advice about what would you say to an entrepreneur from my perspective? On the on the debt side and watching companies grow and and build their capital stack is start now This is a relationship-based business the average I think I think for RSF at least in food and ag it takes approximately Two and a half to three years of knowing us from your first conversation to when we actually will lend you money Good point and that is a that's a long time So start now shake hands meet people you met you probably are not gonna be a fit for them right now But in two or three years you just never know and you never know who you're gonna run into on the way to the bathroom That's gonna say hey, I have a deal for you. I saw trip in that conversation. I was like trip I've got a deal for you while he was probably pitching you another deal So this is it's that's how it works. So and I should just add we get a lot of inbound, too Yeah, and some most of it is not it may not fit But we always reach back out talk to people say hey, thanks, but no thanks and hey Why don't you talk to my friend here or so we always try and help out because we think that that's those are good deeds That need to be done. Yeah Thank you. You guys thanks so much for bearing with us until 5 o'clock. Appreciate it