 All right, lights there. Heat lamps. All right. Welcome, everybody. I'm Wes Selke, one of the managing directors and founders of Better Ventures, based over in Oakland. And I have the esteemed privilege this afternoon to be facilitating, moderating this panel of some really awesome people. We've got some serious firepower up here, as I'm sure you saw in the program, some excellent GPs that are working with top-notch VC firms working at the seed stage in sort of the impact space. I know each and every one of them quite well, in fact, have co-invested, I think, with everybody on the panel. And actually, Julie was just pointing out that Brian, all four of us invested in Book Nook and you passed on Book Nook. Not yet. OK, not yet, not yet. Next round. Yeah, that's a typical venture answer right there. Not yet. It's always leave it open. But yeah, I just wanted to maybe quickly frame this up before we dive into some questions here. But I've been working in the impact space for about a decade. And there has been tremendous evolution of this space since I joined. I was working with Good Capital, right out of business school in 2007. And we would go out and raise capital for that fund. And we really made people's heads hurt when we talked about impact investing. They just really didn't understand, shouldn't this be philanthropy? Are you just giving money away? And this space has really evolved over those years. And a number of us on this panel started off with accelerator programs that then sort of evolved into venture funds. And years ago, there was very little early stage capital available in the impact space. And that has really changed quite significantly in the last, you know, call it seven to 10 years. And this panel is a great example of that. So I do want to just sort of dive in and maybe allow the four of you to maybe quickly introduce yourselves, your firm. Maybe talk briefly about your strategy. Want to kick us off, Julie? Yeah, thanks to us. Hi, everyone. My name is Julie Lean. And I'm the co-founder and managing partner of the Urban Innovation Fund. We invest in startups transforming our cities. And we specifically provide seed capital and regulatory support to entrepreneurs tackling our toughest urban problems with the goal of getting them to be tomorrow's most valued and impactful startups. We also started as an accelerator program initially. My co-founder Claire and I launched an accelerator program called TUML about four years ago focused on urban ventures. Through the accelerator, we incubated 38 startups working in areas like transportation, energy and water, workforce development. And after the financial and impact success of many of those startups, we decided to formalize our investing efforts through the Urban Innovation Fund. And if you are a startup out there tackling an urban problem, I'd love to talk to you after this panel. Great. Hi, good afternoon. My name is Shantel Poulson. I am a co-founder and general partner at Reach Capital. We're an early stage fund focusing on companies who are pursuing issues of access and opportunity in education. We're a $50 million fund. We primarily invest at the seed stage, although we will do some Series A and Series B. We spun out of New School's Venture Fund. We spun out of New School's Venture Fund, which is a nonprofit that focuses primarily in the K-12 space. So to date, most of our investing has been within K-12, and we're starting to broaden that to both early childhood and post-secondary education. Great. Hi, I'm Tasha Seitz. I'm with Impact Engine, which is the only non-bay area that is fun, actually, now that I think about it. We're also a black sheep. So we're based in Chicago. We also started life as an accelerator fund for impact companies. And a few years ago, we sort of made the observation that companies that were coming out of our program, it was taking them a long time to raise funding. There were a lot of investors they were meeting with who were quite interested in making impact investments, but weren't quite ready to pull the trigger on writing a check. So we saw an opportunity to launch a fund so that we could invest on behalf of interested investors into impact companies. So our focus is software companies that are driving improvements in education, health, resource efficiency, and economic empowerment. We invested the seed in series A stage. And because we have that background as an accelerator, we have an amazing community very, very deep in Chicago in the Midwest that we can put into service of the companies and use that community to help and add value to companies in a variety of ways. So hopefully we'll get a chance to talk about that, too. Thanks, great. I guess to that point, how many entrepreneurs are in the room? Oh. Okay. Just wanted to get a poll. I'm Brian Dixon, one of the partners at Capricapital, and we're a seed stage impact fund in Oakland. And I think the thesis of our fund is how do we help close gaps that acts as an opportunity similar to reach and many folks on this panel, especially for low income communities and communities of color. So anytime we're making an investment in a product, that's kind of the filter we put things through. And as a seed stage fund, we get a chance to work with entrepreneurs in their first round or first institutional round funding. And I've been there for six years. Awesome. Thank you. Great. Okay, so I've got about 100 questions for you guys and 50 minutes and definitely want to leave some time at the end here. So we got a show of hand for entrepreneurs. How many VC fund managers or sort of aspiring VC fund managers do we have in the house? Okay. And then LPs, investors in funds. Okay, we'll meet you guys backstage afterwards. Okay, we have snacks back there. We'll hang out. Great. So I wanna, there's a lot going on. There's a lot that goes into kind of seed stage fund strategy. And I've learned a great deal about that in the last seven years as have my colleagues up on stage. So I think what I'd like to do is sort of ask some questions around fund strategy, a number of things that we'll get to that we talked about before and also want to kind of, so speaking to an audience of VC fund managers as well as entrepreneurs and we'll get to some questions that really relate to entrepreneurs as well. So my first question is, do you think of yourself as an impact fund? That can be a little bit of a loaded word, the word impact, just like social, it means different things to different people. Depending on whose office you walk into, impact can sink your ship if you're trying to raise money or it can rise it up. So I'd love to, maybe very quickly, how do you guys think about impact? Do you talk about yourselves as impact fund? You wanna kick us off? Sure, I'll, I think they're switching to this. All right. I'll kick it off. So yes, we are an impact fund and why? Well, that's the whole reason for why what we're trying to do, right? It's when we're making an investment, we're not only thinking about, is this gonna get us the return, three extra turn of the fund, but also how does this actually make a difference? And we started rolling out with founders, pretty much creating a social impact deck where the founders, especially at the early stage, a lot is unknown and a lot is unknown with the business, a lot is unknown with kind of impact. So now we have a deck that we can kind of meet around or speak around. What does this look like? What do you think you'll be in 12 months? What will the impact be? And I think that was for us, one of the game changers, declaring we're an impact fund and actually putting some structure around that. Nice. Tasha? Well, impact is in our name. So we are very clearly an impact focus fund. It's part of our brand. We really do care about it and we're looking for entrepreneurs that are impact motivated. So that's why the brand matters. We dig in pretty deep with them. On impact, we create a separate sort of logic model around each company that we invest in in terms of making the link between the product that they are delivering to the market and ultimately the outcomes that we think that product can create. And so for us, it's also important on the LP side as well. So part of what we do is provide investors with opportunities to engage, to deepen their own understanding of impact investing. And so selecting LPs and bringing in investors that are impact motivated is important for us. So yes, it's an important part of our branding. And frankly, we love the entrepreneurs who I call them the closet impact entrepreneurs where they may be doing a company in health. They've got some great mainstream technology venture investors and then we say, hey, we really would like to talk about impact and dig in and construct a logic model and they're so excited to talk with us about that. And we love those kinds of entrepreneurs. Great. So yes, we also consider ourselves to be an impact focus fund. And I think unfortunately the word has gotten very diluted. So most funds you're gonna talk to today are impact funds. They'll have impact in their branding, impact in their deck, but what does it actually mean? And when it comes down to it, I think actions speak a lot louder than words. So we're impact by the nature of what we're doing in terms of being focused within the education sector. But I think we take it to the next level, both in terms of who we're investing in. So we like to say that we look for missionaries, not mercenaries, right? So I think it first comes down to that initial screen in terms of the entrepreneurs or are they in it for impact reasons? Are they in it because they're passionate about improving some aspect of the education system? The next piece is just how we evaluate impact as the company progresses. And so we work with a third party who helps us understand who you're impacting. So Brian talked about low income communities, communities of color. We look at that in terms of the user base. So we're not gonna invest in companies that are only serving like high net with individuals, for example. We also look at the usage and penetration. So we wanna make sure that our companies are not going to schools and ever being used by teachers, right? So we look at impact in terms of the depth of the usage and then just the satisfaction of those users. And then lastly, obviously, the holy grail is just improvement in student outcomes, right? And so because we're so early stage, you might not be able to get to that last aspect, but we'll have some early indicators showing that they are making progress towards their internet impact in terms of student achievement. Awesome. So at the risk of being, echoing what many of my panelists have said, we are a market rate driven fund with a specific investment thesis around urban innovation and making our cities a better place to live. For us, we are absolutely impact driven, mission driven, world positive, whatever spin you wanna put on it. To Tasha's point, I think many of our entrepreneurs would not necessarily self identify as impact because they worry about the challenges of that word. It is a charged word. And I think to some investor's mind, it does trigger, oh, maybe this is concessionary, maybe you're not focused on market rate returns. I think more and more we're moving to a place where you don't have to be concessionary when you're achieving impact goals. But I do understand why some of our entrepreneurs have shied away from it. I think it's true on the LP side too, right? So you'll have LPs that'll say, well, I don't wanna look at it impact focused fund because maybe they'll have lower returns. So like you said, we wanna lead with, we are a market rate return driven firm, but also looking at impact. Yeah, and to that point, actually many of our investors would not necessarily self identify as impact. I would call many of them impact curious, which is a name that actually Rick from Better Ventures came up with. And it refers to many are looking for differentiated investment theses. Many are looking for new types of fund managers that look a little bit different, act a little bit different from the norm. And I think that's a really great trend. Yeah, I think we must have come up with maybe 60 different ways to say that we're impact driven based on the 60 iterations of our investor deck for our last fund. And I do remember one time Rick and I were shooed out of an institutional LP's office in Chicago because we muttered the words mission driven. And I think his response was, what the hell does that mean? And clearly they were a good fit for the fund. But yeah, nomenclature is really important. Real quick, one word answers, do you measure impact? Yes, yes, yes. Absolutely. Oh, look at that. All right. All yeses. Okay, when you're evaluating a deal, what is more important to you between the team or the market? And what else do you look for? Maybe we'll just have a couple of you guys answer because we have a lot of questions to get to here. Tasha, what do you look for? What's more important team or market? Do I have to? I'm a both and kind of investor. I'll go, I'll put a stake in the ground. So for us it's team. And first and foremost, especially at the earliest stages. Because at the end of the day, they're the ones that are driving the company and if it is the right team, they'll figure out the market. And if they're not in the right market, they'll pivot to the right market. So really it is the team and can they execute and do they have a large enough vision? And I could just jump in and add, I completely agree we also look at team, but a lot of times when people talk about investing in the team, what does that mean? And a lot of times I think in venture capital you see a lot of affirmation bias where the same types of faces and names and ages get funded over and over. And for us when we look at team, we really try to place a large stake on execution. So showing that even when you're early stage you can still have traction, you can demonstrate that you're hungry and scrappy and working really hard and starting to have a lot of market penetration at an early stage. So for us that's really the most important thing. Well and I'll just jump in on the team piece because I mean the old venture capital rule of thumb is you want an A team and a B market or with a B product rather than a B team with an A on all other counts. But I think, so I think the execution piece is key but we also do look for entrepreneurs that are either targeting large markets or where we see market adjacencies because we are trying to drive attractive financial returns alongside and there are a lot of companies that have great products, maybe even great teams but if there's not sort of a big market opportunity it's just hard to grow a big valuable company in that space. And both are important. So you're all early stage investors and sometimes a complaint is often no one will invest in my company, I'm too early, it's a chicken or the egg, I need the capital to build the product but I need the product to raise the capital. Brian, can you comment quickly on what do you look for, say we all know sort of team and market are really important but what is it that you see in an entrepreneur and in a team that signals to you okay, we're ready to go in here. Yeah, so I think it comes down to the why. Why is this the problem you want to spend the next five years tackling? For us a lot of the entrepreneurs we invest in they have some lived experience for why they're tackling the problem whether it be in education or whether it be in health we just made an investment in a company called Hustle and it's scaling text messaging, personalized text messaging. And it's like well why is that important to the founder? It turns out that his father and his grandfather both worked in politics and this is a problem that when he sat around the table as a child growing up, he wanted to solve and it's something that he wanted to solve for his whole life. So we're always trying to get at the why and probably ask that question too many times just to get the real answer. But if you ask the question why and you get a response that you like but it's still really, really early, will you invest or is there certain traction thresholds that you need to see? That would bring us in. We want to try the product. So that's the first thing, we like to touch the product. So do you not do pre-product? So we do not do pre-product at all, so that's one. Pre-revenue, we do pre-revenue? We do pre-revenue, but we want to talk to folks who are using it. So you might have a free product in a pilot stage. Well, let's find out who's using it if it's in the school district, talks to some teachers and see how it actually is going. Ultimately, I think any company who's gonna get a seed stage investment has to get to a point where they have revenue to get to an A. We know that as investors but I think sometimes entrepreneurs think it's possible to raise without a product and then possible to raise an A without revenue and we've seen that to be false. Yeah, agreed. Other thoughts? I mean, I'll jump in. When I started the venture business 20 years ago and it took $5 million to create a product and the world has changed dramatically. It doesn't cost a lot to build a product, a minimum viable product that you can get out there and test. So part of understanding whether an entrepreneur has that sort of those execution chops and they are a GSD entrepreneur is have they hustled, gotten something built, gotten out in front of customers, gotten it tested? So, we will also invest sort of if they're committed pilots, we like to see money changing hands in those pilots but entrepreneurs can get a long way without a lot of cash nowadays in terms of at least getting something out there that they can test. It may not be the final product, they may be a lot more money that needs to go in to make it robust, to make it complete, to make it scalable but you can get something done on a little and the more scrappy can be as an entrepreneur the further you can get, the more impressed I am. Yep. And I'd love to jump in with an example. We had an entrepreneur who came to us and when we first met him he just seemed so early with his product. His basic premise was to try to make commuting in cities better specifically during commuter hours starting with San Francisco. And he came in, pitched us the idea, we like the passion but it was so early and we basically said, okay, this is a little too early for us. Two weeks later he shows up in our office and he's like, I did it. I started driving a van, I leased one myself and now I'm driving people, picking people up around San Francisco. And I'm like, oh my God, the regulatory nightmare but I was still impressed and it was amazing because he showed not only the passion but that willingness to get things done immediately. And you know what? He started transacting money, showing real revenue and growth. This company that we were the first investor in is called Chariot. You might have seen it around San Francisco. It's a crowdsourced commuter shuttle and less than two years after our initial investment they were bought by Ford Motor Company to build out Ford's smart mobility line. So I think it shows the power of being scrappy, being tenacious and even when you don't have the technical side all figured out you can show that there's a willingness to pay. And we think that entrepreneur is a great example of execution at work. You know, I asked you not to bring that one up because she introduced us to the founder of that company and we passed. And now I see a Chariot van just about every single day and I'm constantly reminded that we passed on a deal that was a nice exit after about two years. But you know, as a VC you have to get over the ones that you missed. We'll have other ones. Yes, I'm sure you will. No, both of us. That's right, that's true, that's true. You can send those to us. Brian's gonna miss out on a book note. Great, why don't we shift gears a little bit. I'd love to talk a little bit about sort of portfolio construction. And this is a big topic. This is something that Rick and I talk about a lot. Our advisors, we get a lot of advice from our advisors. I think maybe we can demystify it a little bit for maybe the entrepreneurs in the room as well because this gets to things like follow on strategy. You know, it's important to know when you're talking to a venture investor do you reserve for follow on or is it just a one and done kind of investment? You know, which can be good and bad. I mean, if they don't follow on, then that tells you something about what the next round is gonna look like. If they do follow on, but end up not falling on into the next round, that could be a negative signal. So these are things to be thinking about as an entrepreneur as you've got to fundraise. But maybe get a couple of you guys talking about how do you think about portfolio construction in terms of shots on goal versus going sort of wide or deep, you know, are you stake driven? Do you reserve for follow on? You maybe talk a little bit about that. You wanna take that one? Yeah, I can start because this has really evolved. It's evolved with both the landscape evolving as well as our fund strategy evolving. So recall that I said we spun out of new schools venture fund. And so when we were still part of that nonprofit we had a very different strategy. Number one, we weren't financially return driven. And so the goal was really about seeding the market, right? So we were making very small bets, 100,000, 200,000, kind of spreading those bets around. We made 50 investments, so lots of investments and zero follow on. So again, entrepreneur new or is new, like here's your kind of seed money to get you started. And our goal was let's grow this ecosystem, let's talk to other co-investors, other series A investors that can take you on the next round. But that was really the goal. So we were really just kind of sprinkling and kind of seeding the market. As we moved to reach one, we became more opportunistic. So still making small bets at the seed stage, but then really wanting to double down into our winners. So that means we reserve capital, but not everybody, like you were saying, not everyone we're gonna necessarily follow on on. It's really about do they reach certain metrics and certain milestones that we feel comfortable really doubling down and basically choosing our winners. And so that's kind of half of our capital now is just going into doubling down into our winners from our seed. So less initial companies and then doubling down. As we're moving forward, we're becoming more ownership driven just from a fun strategy perspective. And so we're actually making even fewer bets, taking a larger ownership stake from stage one and then again doing a double down. And that's partly driven by the fund economics that we're trying to achieve. And so part of it is also driven by your LPs, their expectations. And so that's kind of driving our strategy forward. So I say now it's more a couple of seed deals and then identifying the winners and doubling down on those. And what's your typical reserve ratio when you look at a deal? Yeah, it's usually 50-50. So 50 for the initial check and then the other half. So one to one? One to one. Okay. Other thoughts, Tasha? We're one to one. Yeah, we're one to one. I mean, I would say a very similar strategy in terms of doubling down on the winners. I will say just having been in the venture capital business for a long time, when you get to larger venture funds, you sort of are expected to participate per Rata. And as entrepreneurs, you should sort of think about this as a small fund. We do have a little bit of money to do follow-ups but not a lot. And as a small fund, you tend to have less expectation of larger funds around the signaling effect of whether dollars come in or don't come in. But that is something to think about. I mean, sometimes as an investor, as an entrepreneur, having pockets around the table that can buy you a little more time if you need to hit those milestones is really critical. And then other times, that signaling effect is important. It's tough to do as a small fund. So we're trying to be more strategic about where we place our follow-up bets but we're one for one. All right. Same. Same? So boring. 10 to one, no. Yeah. I will say that on the portfolio construction, there are some funds that are ownership stake driven. We're multiple of return driven. So that's part of how we think about it. We don't think, oh, we need to own 10% or 20% of the company. We really want to see the ability to make at least 10 times our money on any individual deal, ideally with upside from more than that because we are taking that early risk and that's sort of a different mindset around how we look at opportunities. Great. So let's shift gears again, talk a little bit about what the mechanics look like at the early stage. These days, before it was seed, and that was the first stage, but now there's a stage before seed called pre-seed. Who knew that there was a stage before seed but there actually is now called pre-seed? And I like to think of pre-seed as kind of a continuum of investment, right? Where typically you have a founder raising on notes over time until they get to the point where then they want to raise a priced round. So these days, as a founder, you're typically raising on convertible note, you're raising on a safe or you're raising a priced round. I'd love to hear from maybe two or three of you on what does that typically look like for you? I know some firms like Vanu Kamar that canine ventures and others just won't do notes and they won't do safes. I know we've got a bit of an allergy to safes at Better Ventures, but we do do notes. And others are much more flexible and sort of open to doing whatever. And I'd be curious to hear your thoughts. You wanna? Yeah, sure, I can kick it off. We're open-minded, so I would say that the landscape, since we invest in the pre-seed and seed stage, we typically write an initial check between 100 and 500K. We're open to convertible notes, safes, priced rounds. We're pretty open-minded. I would say that landscape we've seen has shifted much more heavily toward notes and safes just given the fact that we are at the earlier stage. And I would say that for entrepreneurs just being careful around notes because they always warn you, but a lot of times when you have multiple notes with different caps, it gets really messy and it's hard to know your exact ownership percentage, which is why I think investors certainly prefer to have clarity around it through a price model. That said, it's less expensive and entrepreneurs need to be conscientious of time and you wanna be scrappy and thoughtful about that. So we are open-minded. All right, yes, same for us. I mean, I would say 80% of the seed stage deals we do are gonna come in on a safe note or a convertible note. And we're just flexible and kind of working with both. I agree to the point of when you're doing a lot of notes that kind of rack up and nobody really knows or nobody's paying attention to, what does that mean when they convert? And that's the problem probably why you guys don't do safes or convertible notes because you're trying to avoid that. So one of the things that we try to do is just educate entrepreneurs, especially first-time entrepreneurs who might not know kind of the pros and cons of the choices that they're making. You know, safes are really easy to do. Anybody, you don't need a lawyer, you can kind of just download it, update. I think it's like three things you can choose. Valuation cap, a discount, or no discount, no valuation cap. The funny thing about safes though is when you do the drop-down on valuation cap, it starts at 10 million. Have you noticed that? Well, you gotta pay up for that, is it? Besides that point, I think that as a C-stage fund, you've gotta be flexible because you don't wanna miss deals. And for that reason, we do both. All right, all right. Any other thoughts about that? Yeah, okay. I mean, I would say we're open-minded, flexible. We do a lot of safes and convertible notes. We would never do one without a cap and lower than 10, typically. Yes, that would be nice. You can write that in. Right. I'm curious your thoughts about, you know, innovation and disruption in the venture market, especially as it relates to, you know, investing in the kinds of companies that we're investing in, you know, mission-driven companies. I had a long talk with someone just recently about, you know, the 10-year fund structure. Like, does that make sense for impact? You know, most of us are, you know, 10-year fund structures. I know you guys are set up a little bit different, you know, being structured as you are. But, you know, typically, you know, you see the 10-year fund structure and then, of course, there's, you know, pressure, increasing pressure as the years go by for exits. You know, I'd love to hear some thoughts on, you know, what's broken or what doesn't work about the VC model as it relates to mission-driven entrepreneurs and, you know, what are you doing or what do you think needs to be done to, whether it's, you know, looking at evergreen fund structures, looking at alternative exit strategies, you know, just different approaches that are maybe, you know, unconventional as it relates to the more traditional VC space. Yeah, I'd say for us, one of the things that we're really thinking about is the exit outlook for a lot of our companies. And so, primarily right now, it's gonna be M&A and extra fees, but it mainly be PE. So, within a tech, that's what we're seeing right now, versus an IPO route, but even normal tech is not seeing the IPO route as much. So, we're thinking about, what are some alternative exit strategies? And we actually just had one company, they're called Goldbook, they do technology for a special education market. And what they did is they got to, you know, raise a small, only raise a seed round, got to profitability, became very successful. And they decided to do a management buyout, right? And so, basically they bought back their investors and became employee-owned, which was a great story. It was, you know, a decent return for us. The founders are now, you know, completely owned the company and they're still making a large impact. So, we're thinking more about, is there other kind of exit opportunities like that versus the traditional IPO and M&A route? Right. Is REACH setup as a 10-year fund structure? We are set up 10-year. How many extensions? No extensions? Well, no, but you have extensions in place, if you need them. If you need them. Okay, got it. So, I'll jump in just because we have a unique setup, which is single LP structure, but run exactly like any other fund. And the reason for that is, well, one is benchmarking. If we want to kind of see our performance. Two, we've grown. I mean, we've got 130 portfolio companies in the portfolio and I think probably used to run more so of an angel investment kind of shop or a family office shop. But once you start bringing on folks to invest, investment professionals, and you have to manage this type of portfolio, it was just best for us to actually set up a fund structure. Bringing partners and recruiting is a big part of venture, right? And we all know carry is an incentive for folks. How do you have carry without a fund structure? So, for us it was, even though it ran as an angel shop for a while, probably 2013, the goal was set it up as a fund, raise a quote unquote, raise a fund one, although it's sole LP. And then have fund two and fund three after. I mean, I'll jump in. I mean, of the previous venture funds I've been involved with, every single one of them has used every single one of the extension years and then often still had businesses left in the portfolio. So I'm not sure the venture fund model works for the venture funds, but there does need to be a liquidity timeframe for limited partners. One of the things that we've been thinking about but not done yet is for those companies that can be sort of efficient and capital raising and nice cash flowing businesses, does it make sense to put in a revenue-based financing kind of a structure? You need to have investor alignment around that and you have to have the entrepreneur lined up so we have not found that right opportunity yet, but I think with looking at alternative structures for liquidity as an industry is really important. I would just say that we think it's important to actually match a lot of the best practices from a venture capital model and while there are certainly a lot of struggles including liquidity problems and extensions being used, I do think that there should be rigor in place from both a venture fund model as well from a startup model around expectations and our expectation is that you do return liquidity to the fund and that we return that to investors. I guess one point on that is that we have a bunch of folks who've raised funds in Clinton U.S. Would you go out with a different model? Like would you go out with a five year or four year model? A four or five year model? Yeah, like a shorter or a longer. No, I'm thinking longer. I mean, each fund we're gonna inch it out a couple years until we get to Evergreen. Some day. I mean, I think this is a hard issue though because I mean, as venture funds and we're sort of market rate venture funds, we are looked at and compared with other fund structures that are out there in the market and so anything that you do that deviates from that is a little flag that goes up and sort of more little flags go up and then becomes more difficult to get that done. I agree that with the comment about rigor and tracking carry and those kinds of things. But I do wonder if we should just call a spade a spade and quit calling them 10 year funds and call them 14 year funds. I did some research recently and was quite, well, not too surprised but found out that the percentage of funds that are fully liquidated after 10 years, four. Four percent. Four percent of funds fully liquidated after 10 years. Once you go out to 14 years, you're still not even at half. You're at about 48, 45, 48% of funds. Not just the impact. That's not just the impact. That's traditional. So this is the traditional space. Arguably, we're a bit more patient, maybe a little bit more longer term, a little bit pickier on our exits because we wanna make sure their mission aligned, but there's some give and take there with the length of fund. My question would be why should impact funds be the one leading the way on that? Yeah, everybody should and impact already has enough barriers against it. I don't think we need to create another. Agreed, agreed, but we're innovative, so people need to follow us. Last question and then I wanna open it up for audience questions. Speak to the entrepreneurs in the room. Do's and don'ts of fundraising. Do's and don'ts of fundraising. You're an entrepreneur. You're getting out there. You're gonna pitch one of us. What to do, what not to do. So what to do? Know how much you're raising and why. And why? And I'm out, right? A number, not a range. A number, like I'm going out and we're raising a million, a million and a half, two million, and here's what we're gonna do with it. So that's one. I think having the team pull together, we're gonna raise and then go find the team, but show up with the team and maybe some hires that you've identified that when you raise, they will convert, but you've identified all the folks to make this thing kind of work. You spent time on your product. You have something to show, to test with the minimal viable product, so that you can actually use it and see what real customers think of it. Those are all, I think, mandatory for a seed round. If you're pitching an impact fund, what is the impact? How does this play out, not only in the next year, but in the next five years? And kind of how is that piece of the impact attached to the vision? Because as we all know, it's really hard. And sometimes the impact is the first thing to fall off. Well, why are you doing X? If you got rid of that, you can increase your margins by X percent. And it's those things that we're trying to look for of what we call core impact, so that it actually cannot fall off because it's attached to the product. I mean, I think if you have those four things, you're in a good place. I'd say do your homework and know who you're talking to, right? So come in to, you're gonna come talk to reach. I love it when entrepreneurs are like, I know I've looked at your portfolio, I know you guys specialize in ed tech, I know you guys specialize in seed stage. This is why I wanna partner with Reach specifically versus all the other ed tech funds. So really know who you're talking to, have done your homework about the fund, and really kind of convince me why I am the fund that you wanna work with. I would just add one of the don'ts is please don't fundraise for multiple rounds at the same time. We've seen this quite a bit and it's surprising where an entrepreneur will come in and they'll be raising seed and a series A. Or, oh, I'm raising my series A in one month once I close this, but it might get pushed if this doesn't happen. And it creates this confusion for me that makes me feel like you don't have real game plan in place. So I would say this seems intuitive, but it's amazing how often this happens. I mean, I would just say just a couple of different. I'm very impressed when entrepreneurs can go from big vision down into the details and then come back up again. I think that's incredibly, it's incredibly powerful and it means that I know you're gonna be on top of where you're going and where you think you can bring this company, but also be on top of the details that matter in terms of getting there. The other thing I would say just on the impact side, if I can articulate your impact story better than you can, that's not a good sign. So I think sort of be crisp about it, if there's evidence, share it, if there's not evidence, then make the case why I should believe that the impact is there. And that is something that, we do see entrepreneurs come in not prepared to have that conversation. What about cold emails? Will you answer cold emails? Yeah, so we answer all cold emails. We actually also have on our website, you can just click on a button and actually fill out an application. And so we're responsive to everything coming in. It does help though if you have a referral, but we're open to cold, inbound. But if you're gonna send a cold email, make it unique to the fund you're sending it to. Don't send me in Chantel and Brian, don't send us the same one, because I can tell when I read it. So you're not an advocate for the carpet bombing approach? You can't send it cold, it just can't be a carpet bomb. What if we, they CC everybody on the email? Oh that's even better, yeah, don't do that. Yeah, try to be subtle if you're gonna have a carpet bomb. I will say just one point for the cold email. Obviously it helps when you have a referral, but we actually feel very strongly about the power of keeping our cold emails open. We have open submissions on Angelus. What we found is it's really helped diversify our pool of founders. So for example, with our accelerator program, 76% of the founders have a woman or person of color on the founding team. We're really proud of that and we think a big reason for that is because we accepted entrepreneurs from everywhere and we didn't have to have, oh you have to go through my buddy Bob who's at the country club with Sue. I'm making that up because I'm not part of a country club, but the premise here is please be open and we wanna hear from you. Yeah, I second that. We have open submission, send any email, you'll get a response, it just doesn't go to a black box. You gotta think, entrepreneurs are working so hard on their business. They deserve a response of some sort. And I think that's how we ended up with the same numbers. We're over 50 or 56% of our founders are either a woman or a person of color. And a lot of folks just don't have those networks and that's okay because they have great businesses. Yep, great, awesome. So we've got about a little over 15 minutes left. Wanna make sure we answer questions in the audience. I'm not sure if we've got microphones in the audience but maybe just speak up. Yeah, right there in the front. I can hear her, I can hear her. My question is, what do you all think about equity crowd sourcing, both from an accredited and an unaccredited side? How does that impact your decisions if somebody's equity crowd sourced? Anyone wanna comment on equity crowd funding? Yeah, so I'll jump in because full disclosure, we're investors in AngelList which does accredited investors crowdfunding. I think it's great. Crowdfunding is great. If you have some traction, I don't think it's the place you go to start your fundraising. If you're trying to raise a million dollars, I would not start on AngelList. I think if you have 750K lined up, then you can kind of close out the round on AngelList because the angels who are investing on the platform generally don't have a chance to talk to you. They don't have a chance to ask their questions and they're really investing based upon some other investor has vetted this deal. So if you're gonna go out for entrepreneurs in the room to raise, try to get some initial cash in the door or commitments and then use AngelList to finish out the round. Great, other questions? We do have a microphone. Just raise your hand if you wanna ask questions so everyone hears your important question. I think this session is called The Rise of Seed Funds but I've read a couple things lately about a lot of seed funds moving up into Series A and there being less seed funds. Can you talk a little bit about that please? What was the last part of your question? Talk a little bit about funds, not a rise of seed. The fall. If there's a fall of seed funds. Thoughts? I don't know. I've actually seen a lot of movement towards pre-seed. So I think people are actually, there's both, there's people moving upstream but there's also a lot of movement downstream and I think you're also seeing a lot of the angel funds or the micro funds kind of move into that seed stage. I think what also is happening is that seed is becoming the new A, right? So I'm a seed stage investor but I'm writing $500 million checks right into seed. So just the terminology is changing so what used to be seed I think is now more pre-seed so I think it's more of a terminology versus people actually moving out of the space. I mean I would say there's also a fund economic component to this because if you've got, it's hard to make the economics of a small fund work so as funds become successful they will likely raise larger subsequent funds and if you're raising a larger subsequent fund your check sizes get bigger and then you end up being maybe more suitable for companies that are raising larger rounds and so I think there tends to be some natural progression over time but I do think that there's a lot of micro, you know VCs, there's a lot of seed capital out there now which I think is a great thing for entrepreneurs. Great, we got a question in the front. Where's that mic? Shall I go? Sorry, quick question. You talked about the struggles sometimes with exiting, sorry right here. Just curious, are there secondary impact investors and do you have examples of where you've sold your positions to other impact investors and is there a need for more players in that space? I mean I have not seen that yet. It's interesting sort of in the main VC space you see that a lot, it's driven by the need for liquidity for limited partners and funds and I think the impact fund space is still relatively young and the investors in these funds are still, you know, they have this sort of expectation, they don't need to drive that liquidity so I haven't seen that come up as much. I mean I do think there's an interesting opportunity with private equity buyers to create liquidity for venture funds once companies get to a certain place and you're starting to see more impact private equity funds so I think that's promising from a liquidity perspective, I don't know if others like that. Yeah I mean that's, we mainly see it in private equity so we were able to get secondary in one of our deals through Insight Venture Partners who does a lot of education work so I do not necessarily impact specifically but do have a lot of large education focus so I do think more PE and then I think you'll see some of the Bain capitals or maybe TBG can also provide some of that kind of secondary capital. We're here to shout. I'd like to know your experiences of being approached by B corporations for seed funding. Have you seen them coming to you? What percentage of them actually get the money? So if you could talk about that, that would be helpful. Yeah I can jump in and say we've seen a lot of B-Corps and I would just kind of differentiate there's B-Corps which is the certification by the nonprofit B-Lab and then there's the public benefit corporation model which is when you're actually legally incorporated for example in the state of Delaware and we've seen a lot of startups in that space so out of our first portfolio of 38 we had eight companies that were public benefit corporations. In fact one of our startups was one of the first startups to become a public benefit corporation in 2013 when Delaware passed that law. So we think it's great and a great model and it sets up expectations really well but again all of these are for-profit startups pursuing market rate returns. I think where it's really helped is when you have a beneficiary for their product or service that's lower moderate income and it really aligns incentives around the types of constituents that you're serving through your product. So I think it's a great way to kind of communicate that to the external world that you're for-profit but for impact. Chris. My question is regarding for an entrepreneur when do you think he should approach early stage fund like months before he's actually ready for the money? Do you guys like to be updated? Here's where I am right now. I'll be ready in a few months from now or should they go right when they are ready to receive the money? I would say today right after this panel is the right time to talk to us. I think building relationships is a good thing. Obviously you don't wanna spam or be premature in your approaches but certainly putting a face to a name never hurts so if you wanna talk after this you all should. I think it's fine to do updates but I will say is just make sure there's meat with those updates so sometimes I get an update just checking in. It's like that's not helpful but if there's an update and you're saying hey we just closed this big contract, we just closed this big partnership that's more helpful just as you start to reach different milestones I'm happy to be updated. Heard you mentioned seed and precede. It seems like the definitions of startup and early stage are morphing and this whole class of seed and precede can you give some definition for the entrepreneurs in the room as to what you consider the differentiator between seed and precede? Sure, I'll hop in and say that as someone pointed out I think Sean Tell pointed out, so today's seed round was yesterday's series A round so seed rounds are priced seed rounds are two to three million upwards of sometimes even four, even five million and then today's pre-seed rounds are sort of yesterday's seed rounds. Everything just kind of shifted up one and part of that is because it's never been cheaper and less expensive to start a technology company because of Amazon Web Services and software that's available to use for free and so it's just there's never been a better time to an easier time to start a company and as a result there's been sort of an institutionalization of seed and so I think of pre-seed as that really early you've got the team, you've got the sort of founding team you've got an MVP but you're kind of just getting started and I still think there's even a round before pre-seed which is really kind of friends and family or slash accelerator so you raise like 100k from your friends and family use that to get an MVP into the market get a little bit of traction then go raise a 500,000 to a million dollar pre-seed round try to get a fund involved probably do that on a convertible note and then use that to get about 12 months maybe 18 months of runway to get some more traction then go and raise a sort of proper priced seed round of anywhere from two to three million that's typically what we see that's not always the case if you're a multi-time entrepreneur sometimes you can come right out of the gates raise in a really big seed round and then go and then raise a series A the other shift we're seeing is the multiple seed rounds so now on average companies are raising two to three seed rounds so it used to be seed straight to the A it is now seed series C2, series C3 which is fine and that's not just in the impact space that's kind of industry wide so now we're seeing entrepreneurs raise multiple seed rounds as well and I encourage entrepreneurs to think about raising to milestones like what are you are you raising enough to get to your next milestone what is your next milestone so rather than think about my seed or my series A we want to have that conversation with you beware of the bridge round don't ever call it a bridge round in my opinion at least whenever we see bridge rounds we usually run away because it's like a bridge to what it's an indication that you know what we didn't quite get as far as we thought we're running out of money we just need a little bit more money and it's a bit of a nuance but if you're raising subsequent rounds even if you're still at the seed stage so long as the next round is bigger than the previous round then it doesn't look like a bridge round it just looks like a next round but if it's smaller than the previous round then it looks like a bridge round and that's a bit of a red flag but if you haven't accomplished anything since your last round it still looks like a bridge round even if you raise more yeah, yeah right, right, no matter what you call it just because time went by that doesn't mean the valuation goes up like you actually have to make progress hi, I'm from Brazil and I'd be interested in hearing if you have strategies to invest in entrepreneurs from emerging markets and what those strategies are if you're looking at Brazil specifically anybody emerging markets? so for our fund we invest only in companies that are incorporated in the US what we do tend to see is that many entrepreneurs will come to the US and they want to use the US as a jumping off point and so we're open to that as long as they do incorporate as a US entity for us when we think about urban problems they're obviously universal not just here in the US where 81% of Americans live in cities but certainly across the world where two thirds of the world's population will be urbanized by 2050 so it's important to us that when entrepreneurs grow in scale that they do scale outside of the US but I would say for our strategy specifically we're mostly North American focus for now I had an emerging markets question too I represent empowerment works and we have social innovation trainings and also an event called the Global Summit where we like to use that as a platform for sourcing innovators and startups impact startups and so I'm wondering about your experience and how it might be best to work with you like rather than starting our own fund allowing you to do what you do best and ask more on the sourcing just what your experience is working with events that are sourcing and providing a challenge to bring out those entrepreneurs and encourage new ideas was there a question in there or just a statement? How do we work? With your experience with event platforms to identify investment opportunities is that efficient for you and how could you be approached and what would be a good way to approach that for us? Any thoughts or examples of... I think it depends on how targeted the event is so if it's sort of a sweet spot I know it's gonna hit like software companies in one or more of the areas that we're investing in and I know there's a high likelihood then that is an event I might come and attend I would say it's hard to sort of commit the time because time is sort of the most precious thing that we have and so I think the more targeted you can be and the more targeted the set of investors the more effective those events can be at least that would be sort of my two cents. Yeah, yeah, I mean the more sort of sweet spot and overlap you can hit I think the more people will be willing to come and spend their time attend the event, travel to it and then I listen to all the companies. And your challenge question I think identifying an area where maybe we're having a difficult time sourcing where we're not seeing a lot of entrepreneurs so I have seen challenges work in that case where we're not seeing a lot of that activity for example in, I was gonna say like we are now let's say early childhood and we want to spur early childhood innovation like a challenge works great because then you identify entrepreneurs that maybe we didn't have access to before so those type of challenges are really useful. I would also jump in and say we love events because it's a great way to source entrepreneurs so again if you're an entrepreneur come talk to me but I would also just add I'm really mindful of the fact that there are predatory events out there not that that is yours but there are some events that will charge entrepreneurs thousands of dollars to get access to an elite group of investors and I think that is just morally wrong if you're an entrepreneur don't do it and we refuse to participate in events like that. Great, we've got time for one more question. Okay, make it a good one, make it a good one it's the last one. Yeah, I know the pressure's on. You gave examples of when an entrepreneur comes to you a little too early so they need to go out develop some more evidence that this is gonna stick, has traction, et cetera. Can you give examples of when you tell an entrepreneur that they don't need you or they don't need you yet because they're already generating enough revenue? Idea here being when is it not in the best interest of the entrepreneur to engage you? There is a lot of skepticism about or fear about being taken advantage of by seed stage investments. I'll jump in. So I think a lot of these challenges happened the first time entrepreneurs because you don't know, you started a company it's going well, you don't want to lose control of the company. So one of the ways to do that is just look at when you're raising the first round choose your investors wisely, right? I think we all do deals all day long or a couple times a year and we have way more knowledge typically than an entrepreneur who's doing it for their first time. So there's an unfair advantage mostly for VCs. We try to ease that pain or ease that situation by sharing some of the things they should think about when proposing kind of the seed stage deal. So that's one. I think legal counsel is really important. You should have legal to kind of give you some advice for what should you be doing? What should you be thinking about? How should you write terms? And I think the third thing to do is once you raise the seed round that's probably the first of many rounds. So you've got to think not only about this round but about the next three rounds. And if you do it that way you can set it up in a way that even by point A or series A you're not gonna lose control of the company. Series B you won't lose control of the company. Now when you get to series D and beyond it gets pretty tricky. I think the other thing to think about so there are times I've met with entrepreneurs and maybe it's just not a venture business, right? So that could be the other consideration. Like you look at, if you talk to them and you hear about their vision and what they're trying to build it's like, oh this is a lifestyle business or this is a small business, mom and pop, type of business. This is not necessarily venture business. And we can have that conversation and say, what kind of business are you really trying to build? Do you really want venture investors? Does that mean something in terms of control and expectations? Or maybe you're happy just to run the business, get to profitability, bootstrap. So having those kind of conversations is important too. Great. We are out of time. I want to thank you all for coming and thank our panelists for participating and sharing all your great insights and knowledge. Thank you guys.