Last week, ONE WORLD hosted a Winter Gathering, engaging purpose-driven founders and values-aligned investors in a series of conversations and activities designed to help the community prepare for 2022.
[00:4:27] Our first conversation featured Macy Marriott, Director of GlassWall Syndicate and an Investment Professional with Stray Dog Capital. Macy’s work focuses on pre-seed/seed/Series-A-stage investments with some follow-on resources. She reviewed GlassWall Syndicate’s approach to investing in plant-based start-ups that makes the fund-raising process more efficient for entrepreneurs by engaging their 200 mission-aligned investors in reviewing and funding deals collaboratively.
Upon reflecting on the year, Macy’s key insights and guidance for early stage entrepreneurs include:
A significant influx of angel investors wanting to participate in plant-based start-ups
Investors want to see:
Mission alignment
A strong team that is willing to pivot and take feedback to grow the strategy
One indication of this quality comes during the diligence process and how entrepreneurs respond to suggestions without being defensive.
One red flag for potential investment is a lack of clarity around financial assumptions.
And Macy’s predictions for 2022 include:
A sustainable competitive advantage will be very important for entrepreneurs in the plant/cell-based arena given that the space is now becoming more crowded.
GlassWall itself will continue its journey with plant/cell-based food options, but will also begin to focus on next generation materials.
Macy also responded to audience questions, specifically covering GlassWall’s approach to expanding investments in BIPOC/API/LatinX businesses.
Our next feature, How is Your Pitch Landing with Investors, showcased a ONE WORLD CEO Network member practicing her pitch and receiving live feedback from Nick Mindel, a partner with Amberstone Ventures, a venture fund backing entrepreneurs building breakthrough food, beverage, and consumer products. Relevant feedback for all pitching entrepreneurs includes:
Define the issue and your solution to address the challenge.
Review key sales channels and plans for expansion, as appropriate.
Be ready to respond to questions about fully-loaded gross margins, as well as data around capital raise(s) to date and your efficiency in raising/deploying capital to drive sales.
Provide information about historical performance and projections moving forward
Sketch out future SKU development and/or guardrails for the brand.
[00:21:00] Our third session highlighted the work of another Seed Investor, Jenna Nicholas. Jenna is the CEO of Impact Experience, the Vice President of One Planet VC and also leads Corporate Development for the One Plant Group where she helps to direct the mergers and acquisitions work.
Highlights from Jenna’s comments from a 2021 retrospective include:
Engagement of investors around the role of equity and racial justice is becoming more integrated not only in the investment process, but also across the board in hiring, retention and board selection.
There is new capital at the intersectionality of climate and race.
Institutional players continue to enter the space, leading to a more deliberate need for thinking about impact measurement.
When transitioning from Pre-seed to Seed to Series A, entrepreneurs should recognize that while there will be significant change in approach and strategy, it is critical to remain focused on one’s north star, never losing sight of a business’ broader goals.
Entrepreneurs shouldn’t underestimate the Importance of identifying value-aligned investors.
Jenna also shared her 2022 Angel Investing predictions and hopes, including her desire to see the focus around racial equity continue. She also observed that more and more people are entering the industry and looking for ways to engage.
Jenna graciously responded to participant questions, reinforcing the value of networks such as ONE WORLD where there is intentional space to learn and grow as well as tips and tools for continued engagement with investors and potential investors in our current virtual environment. Final words of wisdom included guidance on the pros/cons of venture-backed accelerators and the importance of prioritizing one’s mental health during these particularly stressful times.
[00:33:50] Our morning moved from a focus on Pre-Seed and Seed investments to Series A and beyond, engaging Tim Brady, a partner with Y Combinator, Co-founder of Imagine K12 and Yahoo’s first hire.
Brady shared his thoughts on 2021:
He’s never seen money flow into venture in the last 30 years as he has this past year. A number of reasons for this growth include:
Growth funds (i.e Tiger Global) are now investing in Series A, instead of waiting for Series B or C, which has led to this incredible increase.
The introduction of SPACs (Special Purpose Acquisition Company) – the ability of primarily startups going public in a unique way that has required less SEC scrutiny.
The community has moved from feeling US-centric to more global now.
There was also a traditional IPO window that opened up in 2021, leading to a lot of tech companies going through the window.
Tim also imparted his wisdom in assessing a companies’ growth potential based and thresholds for Series A raises based on his Y Combinator experience:
Values-aligned investors are primarily interested in highly capable founders, helping them prioritize the multiple issues they inevitably face:
Are you building something that people want? The process for ensuring this is by talking to customers and adjusting the product based on feedback until it is clear there is a solid product/market fit.
This focus helps minimize the distractions – which do become important at a later period – until there is a solid feedback loop. This critical guidance boils down to “Don’t waste your time on things that don’t matter… yet.”
Most high growth companies have an element of tech.
A common entrepreneur mistake is raising too much money. This doesn’t correlate with building something that people want. Most companies that Y Combinator backs were very frugal in the early stages until that product/market fit became evident.
Once the money is in the bank, it is difficult to resist the urge to use it. This leads to a common flaw of solving problems with money instead of with creativity.
In regards to keeping investors engaged, it is imperative to both pick the right investors and set short-term, achievable goals that can both be celebrated and used as a target for raising more funds.
For Series A consideration, historically the guidelines have included $1M in annual revenue and 20-30% growth monthly. The current environment allows for some flexibility around these historical metrics, and growth takes precedence over revenue figures.
When probed about social enterprise companies and the belief that an investment in these kinds of companies don’t generate a market-rate return, Tim used the example of renewable energy to counter this belief: “Renewable Energy is clearly a social impact field and yet, currently yields much stronger returns than oil and gas investments.” He also reminded entrepreneurs that investors also have bosses (Limited Partners) whose goal is to optimize returns. Entrepreneurs should communicate the big vision behind a social company where there is more than likely a longer gestation period vs. a “traditional” company. Over the last five years or so, there has been a shift in thinking in that what’s good for the world tends to also be good business, thereby making it slightly easier to secure traditional investment dollars.
Following Tim’s words of wisdom, we shifted into a second round of How is Your Pitch Landing with Investors. This round had Julie Lein, co-founder and Managing Partner of the Urban Innovation Fund providing live feedback to another ONE WORLD CEO Network entrepreneur following his pitch.
Key feedback from this exchange that transfers to all pitching entrepreneurs includes:
Be upfront about credibility and individual story
If your business has a product, make sure to share not just details about the product itself, but how customers/end users are utilizing the product and typical engagement
Provide details about how the product/service makes life easier for users and customer traction
Balance the details about the problem and the solution offered
[00:54:25] Our final session with a combined audience of investors and entrepreneurs featured Spero Ventures’ General Partner Shripriya Mahesh who reflected on 2021, shared her guidance about the do’s and don’ts of virtual fundraising, commented on the accessibility of capital, and provided her take on mission-driven returns.
Shripriya’s 2021 highlights include:
Getting comfortable investing in founders that investors have yet to meet in person, and perhaps may never meet. Zoom meeting and diligence is now the norm
A number of companies have raised multiple rounds in a 12-month period, reinforcing earlier comments about the strength of the funding environment
When probed about virtual fundraising, Shripriya shared her belief that virtual fundraising can help entrepreneurs by removing geographic and travel barriers. She further counseled the importance of being on time for virtual meetings, ensuring a quiet environment, and creating authentic connections as a strategy for standing out. Shripriya also boldly stated that raising too much capital “kills companies” as once the money is in hand, it needs to be spent, and many times, companies are moving fast, but not necessarily towards something. This said, she also acknowledged that while 2021 saw a large increase in this macro-funding environment, the outlay of funds still favored certain kinds of entrepreneurs.
Shripriya provided her take on impact companies’ and returns, commenting in her opinion the word impact has come to mean sub-commercial returns. Spero has replaced the word “impact” with “mission-driven companies and mission-driven founders,” suggesting that entrepreneurs seeking venture investors consider replacing this language internally as well. She further stated that mission and return shouldn’t be in conflict; entrepreneurs can reinforce this notion with a business model that both generates revenue while at the same time creating a positive impact on the world. As companies grow and seek more funding in different rounds, Shripriya confirmed that companies moving from Seed to Series A must have achieved product/market fit since by Series B companies will be measured on their metrics.
Entrepreneurs wanted more detail about the balance of raising adequate funds vs. raising too much money. Shripriya acknowledged that while this topic has been referenced multiple times throughout the morning, the majority of entrepreneurs won’t run into this issue. She continued that one good measure for finding that sweet spot is if an entrepreneur has funds to grow their business for 2-3 years, that is sufficient; founders don’t need to be burdened with additional funds that lead to the weight of high valuations and preference stacks which ultimately can hurt the founder. Having enough capital for 2-3 years also helps protect the company against future macro-funding changes; once resources cover approximately 6 months’ of spending, the entrepreneur should begin to fundraise.
[1:08:44] Our day concluded with an entrepreneur-only session that featured a breathing and resetting exercise lead by CEO Network member Bailey Farren of Perimeter as well as an overview of both 2021 network milestones – including this ONE WORLD CEO Network member holiday gift guide - and a peak into 2022 planning.
ONE WORLD is grateful for the wisdom shared by our multiple investor guests and our entrepreneur participants. What are your predictions for 2022? Feel free to reach out to info@oneworld.training and share your wisdom and perspective with us.
