My podcast interview with Eric D. Collins on his journey to co-founding Impact X Capital, a soon to be completed £100 million pound Venture Capital Fund to support and invest into underrepresented entrepreneurs in the UK and EU.
Host: Shiraz Anwar (@madeinmanc)
Guest: Eric D. Collins, Co-founder of Impact X Capital
Listening Time: 52 mins
Sponsored By: Colony Co-Working
A special thank you to Aaron, Becca & Jamie from Colony Co-Working who looked after Eric and I whilst recording the podcast at their awesome co-working spaces in Manchester
Quick links to
Podcast audio
Quick links to transcript of our podcast interview
What is an underrepresented entrepreneur? (00:54)
Why did you choose the EU and the UK over the US? (03:40)
Risk appetite (06:25)
What sectors are you looking to invest in? (10:42)
Africa as an opportunity? (12:40)
Bicultural (18:34)
Stalking Universities (21:28)
Business model of the VC (25:14)
What are some of the biggest challenges you faced? (35:00)
What did little Eric want to be growing up? (39:23)
What was that step that people took to bring Impact X into existence? (44.58)
How do you define success and what does that mean for you? (49:00)
Eric, first of all I want to say thank you so much for agreeing to have a conversation with me, and even more than that, coming down to Manchester or coming up to Manchester, I should say 🙂
(Eric) Now that I know I’m very far North, which you’ve corrected me 😀
I’m hoping that even though you’re here for a conference, you have a great time and I want to see you back up here, but not just attending a conference. I want to have you spending some time and enjoying the city
(Eric) Yeah, absolutely 🙂
So I am really happy to introduce our listeners today to Eric, Eric Collins, CEO and founder of Impact X Capital Ventures who has raised a fund alongside his fellow partners, specifically looking at supporting and investing into what they call underrepresented entrepreneurs.
(Eric) Correct
So there’s a couple of questions there. What is an underrepresented entrepreneur?
(Eric) Thank you so much for inviting us to talk about Impact X.
It’s always an opportunity and a privilege to be able to discuss with a group of listeners what is happening in your world and why and how that helps to create pipeline and all sorts of opportunities for us. It’s a great, it’s a great, great opportunity to be here. One thing that I would say is that we are raising our fund.
We haven’t finished closing yet. We’ve raised substantial amounts, we still have more to go and we can talk a little bit about later as to why we, even though we have a target of 100 million, why hundred millions is just a drop in the bucket with respect to underrepresented, which gets me to the last point that you said.
What is underrepresented?
So when you look at the world of venture capital take between 2008 and 2018, if you’re just looking at the United States, it’s an isolated venture capital market. $425 billion was invested via venture capital vehicles and not private equity generally, but venture capital in particular in that time period, less than 1% of venture capital funds went to black entrepreneurs less than 4% and went to a women led teams.
Underrepresented means for us. And we think that this is actually a good term of art. Anything, anytime you look at venture capital portfolio and you find people who are not in it, types of companies that are not in it, types of entrepreneurs who are not in it. That’s what we’re looking for. So it’s actually a very wise sort of an investment thesis. Don’t go where everyone else is going. You go to a place where there is some green field.
And so that’s what we’ve chosen to do. We’re looking at a greenfield and underrepresented in Europe is a fantastic investment thesis for we think two things, not only significant return on investment, which is our fiduciary duty to our limited partners, but then also secondarily to the social impact, the positive social impact that we seek to have and which our LPs find absolutely critical.
Our LPs could put their money anywhere and they put their money with us in part because they can get that double bottom line. And so we’re a double bottom line venture capital fund focusing on underrepresented.
I love that. I think having the for profit and for social impact, I think it’s an exciting area that a lot of VCs and investors are starting to look into because it’s the way the market’s going, it’s the way consumers are looking to become a lot more ethical in terms of the choices that they’re making.
So it seems to me that this is where a future model is, is potentially looking at, but you mentioned that, you know, you’ve, you’ve raised, you’re raising this fund, you’re looking at the EU, you’re based in London at the moment. You’ve been in London for a few years now.
Why did you choose the EU and the UK over the US?
(Eric) That’s an interesting question. And the reason it’s an interesting question may not be at first blush apparent what we have in I think an example of Silicon Valley, which is the ultimate example of venture capital in the world, right? More so than Asia, more so than any place else.
Everyone would say that if you’re looking at what has spurred the growth of very large organizations, it’s sort of epitomize this idea of small initial investments lead to big outcomes. You know, all the $4 trillion valued companies in the United States, which include a what Google, which include Amazon and Microsoft and Apple are all almost started with some venture funding.
So everyone knows in the United States that actually does make sense. But that’s a pool where they’re thousands of VCs that are out there, right, that are focused on that particular portion of the world. One of the things you’ll notice in Silicon Valley, if you are looking just beyond the initial numbers I gave about that 400 million that has been invested that in the companies that I mentioned, the money had been invested.
There is a problem in terms of women in high ranking positions, people of color in hiring ranking positions just go down the litany of underrepresented, they call them minorities that are just not represented. And so for us, the question of do we want that to be the same outcome that we look forward to 20, 30 years later in Europe? Why would you want that to Mississippi?
The case and most of most people would say that if you look at the investment, in the VC investment world in Europe, it is not as mature as the VC investment world in the United States, particularly on the West coast. So coming here actually allows us to be a little bit more on the ground floor of things. It’s not the complete ground floor because obviously there’s a very robust venture capital system in the UK and elsewhere, but it allows us to hopefully get people who are underrepresented involved in funding, being funded, building reputations, building this.
We would consider a virtuous circle that allows for amplification of the monies that we’re putting into companies and allows the gamification of impacts that we’re actually making. So choose and we want it and we are doing it now. Okay. We should have done this 50 years ago, someone should have done it 50 years ago, but we’re doing it now because we can’t wait any longer. So that’s the other piece about this that Europe and now is absolutely critical to our investment thesis.
And do you think part of that is risk appetite as well?
So you mentioned in the US has significantly a lot more investments going in to startups. We are catching up now with the funds that are being made available, but there’s still a perception that it’s easier to raise money over in the US than versus here because of the risk appetite.
Is that something you experienced yourself?
Is it something that you feel with your background and your career, within the tech industry and raising finance and exiting some companies coming over here could give you a slight advantage in terms of the way that you’re able to appraise and do due diligence on some of the opportunities that you might see here?
(Eric) Okay. Very good question. That one’s complex. You’re not going to get back in this conversation here. Again, your listeners may never hear your voice again 🙂 it is an excellent question. I would have to go back to my own experiences.
My experience is I’m one of the people who in the United States began my venture career on the East Coast and in the Northeast in Boston. So Boston is probably the second is the second city after San Francisco and maybe some people would say Seattle is bigger because it’s produced Amazon. It’s also produced Microsoft but you know, and Adobe and some other things.
But let’s just assume that we can say that Massachusetts has because of all the educational institutions produced a great number of fantastic companies and there’s a lot of private equity and it’s actually in Boston. So that’s where my venture started.
And then I went down to Washington DC in the mid Atlantic. I’ve never really had a big San Francisco, although I’ve been based in San Francisco and Palo Alto. I’ve never really been with a huge organization. That’s one of those really big fast growth on the West coast. So mine is an East Coast.
The East coast is a bit more like Europe insofar as the focus has always been with the organizations. Even one of the organizations of which I was COO, it had SoftBank in its portfolio. It was one of the investors. But we still were expected to be money-making.
So you hear these stories about create, create a business, create a business model second, get your, get your audience, get together, aggregate sort of a large number of people and then there will be all sorts of opportunity to put a business model on top of it and then there’ll be an opportunity to from there actually then monetize your audience.
That hasn’t been sort of the kind of business that I’ve grown. I’ve grown enterprise to enterprise businesses, B2B businesses, some direct consumer, but they hadn’t been sort of, those were from the very beginning.
The venture capitalists have expected us to be, to have some sort of a business model that we have proof very early. Likewise in Europe, the two companies for which I’ve worked in now, the venture capital company for which I am, which I’ve started, our thesis in all of those has been in our venture capitalists had been very much you need to have a business model and we are helping you to get you to perfect your business model early on.
But we want to see that relatively early in Series A, Series B in terms of your funding, when we’re, when you’re raising a million, when you’re raising 5 million, raising 50 million, all of those are expected. So it’s a bit different in that respect. Many people would say, and I don’t know whether that is, I don’t know. It seems to me that that’s true.
It might be just mythology, but it seems to me that it’s true that there are certain places in the world and really I think it’s only Silicon Valley where you can have a business that doesn’t have a real business model and you can get lots of, you can get lots and lots of funding. Most of the rest of the world that expectations a little bit different. So I wouldn’t not say that.
And so maybe it does go down to risk, but I also think it’s a kind of business that people focus on. So communication networks, social, sort of congregating of audiences. That’s a real specialty of the West Coast of the United States. Here in Europe, what we noted is there’s FinTech, there’s fantastic Property Tech, you know, there’s Health Tech. There are lots of those organizations and lots of those businesses.
A lot of it’s delivered as a B2B solution as opposed to a B2C solution. So maybe those differences are in some ways influencing this question of is it really a risk conversation or it maybe it is actually.
You weren’t kidding about me not getting back in there 😀
(Eric) If you stop asking me these good questions, then I can just answer with one word 😀
🙂 So it’s interesting you mentioned some of the sectors FinTech, Med Tech. What sectors are you looking to invest in or is your fund looking to invest in?
Are there particular expertise within the partners that match better to certain industries than others?
(Eric) Okay. You’re creating that same problem again, here we go 🙂
So we are investing in three categories. Digital technology is a broad category so you could get Health Tech, you get Insure Tech, you get AI, get SaaS to get all of that in the context of digital and technology. Then we also specifically invest in health education, lifestyle and then media and entertainment.
One of the reasons why we do that is because if you look at underrepresented entrepreneurs across Europe, and I did a study of this before we launched the fund, you find that the areas where those individuals are spending their times in their careers in which they have experience in which they have sort of deep, sort of systems knowledge or sector knowledge or vertical knowledge or places where like digital technology, health education, lifestyle, media and entertainment.
That means that we also find and we find an over indexing of their sort of participation in those sort of spaces and the types of businesses that are coming from this group of underrepresented entrepreneurs also tend to over index. So for us it’s just a smart move to then make sure that we’re investing in those areas.
There are other places that, you know, like Agritech we didn’t find a lot of that but, and, but we found a lot in some areas that were very surprising we found in terms of modularity, space travel, all of that. So we found some very interesting opportunities also that were somewhat unexpected, but then we put, we can put them in the category. I think that answers your question…
Yes, so effectively what you’re saying is you’re looking to invest into the sectors and industries where those underrepresented entrepreneurs are setting up those types of businesses, which makes sense.
You mentioned Agritech and you’re looking at the EU and UK, but what about potentially Africa as an opportunity?
If you think about the Agritech industry as a whole is it’s a massive opportunity there.
Climate crisis, food production, you know, the demands and the, the scales of the challenges that are representing within that sort of sector or industry.
Is that something that potentially is on the horizon or, or again, are you just, you’re still raising this fund looking at EU in the US, sorry, UK?
(Eric) So, so far we’ve invested, we’ve looked at about 600 companies in our pipeline. We’ve vetted about 200 of them. We’ve committed to 15, and we’ve closed deals on 13. So we’ve been investing since the early mid portion of 2019.
I would say that Agritech for us, Agritech is very important to me and to my family, my family for generations, you know, hundreds of years we’ve been in the United States, as you can imagine, we’d been involved in agriculture since we’ve been in the South, but even at post-slavery had been involved in agriculture as farmers as, oystermen as crabbers and that sort of thing.
My father actually workforce was chemical company. Well he started life as a professor and he was working on issues of plant and crop yield.
So acreage yield and trying to make sure that acreage had the most yield possible in order to feed the world. This was during the great society era and how do you make sure that you don’t have so many starving people, you make sure the crops are drought resistant, et cetera, et cetera.
So that’s what he was working on it. Then he went to work for a company called CIBA, which has now morphed into Syngenta and Novartis. So I grew up with agriculture as part of the center. That’s what dad did. Dad, you know, worked with farmers, dad worked with chemicals. Dad worked with modification, seed stock and that sort of thing.
When we look at it now and we’re looking at sort of the question of can technology generate the sort of phenomenal changes that are necessary in order to be able to feed the world in order to be able to feed the world in a healthy fashion, in order to be able to minimize the use of water and the wastage to grow crops.
We do see that those things that we do see some innovation in that area in Europe. We do also see particularly a lot of innovation around energy and clean energy associated with those types of things.
There are two companies, one that’s a French company. And then there is another one which is a British company, actually not a London-based company, but outside of London. I think it’s actually Birmingham.
These are two companies which I find very interesting because they both are dealing with different, different areas of the question of how do we, how do we make sure that we are growing in African and other places, much more, sustainable crops and we have the water which is necessary and we’re not wasting and losing just because maybe it’s present for the moment that maybe it won’t be present very soon.
The thing that I find also interesting about investing in the UK in particular, but also we see the same thing in Germany. We see the same thing in France. We see the same thing in Sweden. As we looked at our pipeline, we find that many people have sort of a hyphen in their identity. So they would be British, they would be Ugandan, they would be British, they would be Malawi. They would be French, they would be Côte d’Ivoirean
So you find that sort of hyphen and many times that hyphen actually denotes that they’re not just they just don’t identify that way, but they actually are very bicultural that they can actually exist and not just exist.
On the surface, i.e. go visit and be able to speak the language, but they can actually as you and I were talking early some go native. And then go native in terms of a marketplace, it’s a very, it’s a very specific thing.
Are you able to understand the intricacies of the market in terms of everything from the supply chain to the remittance process to be able to then adapt what you have, which you’re very familiar with in another culture to that environment.
And that’s often where companies go awry, right? If you go from I want, I want to start a company in the UK and then I want to take it to Uganda, it’s like, well maybe you can do that. But there are some things or some structural differences that might make that sort of transference a little bit difficult.
With these bicultural people, as I call them, particularly those of the African diaspora. What we’re finding is that everyone, most of those, not all of them, but many of them say that what they’re trying to do is to have to have an impact in a country of origin.
And that, you know, when this other side of their bicultural identity and that indeed they think of it as a growth opportunity because the combination of having had what it, whether it be sort of European experience, European education, whatever, and then being able to apply that is not only an effective means of differentiation and actually service to an economy and to a project, but then it also is a way to make them even more competitive and better positioned to be able to leverage the full ecosystem of both places.
I mean it’s a long winded answer, but I would say that, you know, agriculture as a start is interesting. And when we look at these bicultural people that them exploiting sort of all elements and bringing to the table all elements that go into their existence and then using that to actually drive.
I really like these aspects of bicultural and tapping into the, the local knowledge, experience culture from both sides.
But particularly what I found interesting there was the growth opportunities because then, you know, it allows you to, to think bigger and broader because you’re looking at a solution in one area, but then you’re realizing that there’s a market opportunity with one foot perhaps where you were born and one foot where your ancestors were
(Eric) So I went to the UK Africa Summit last week, I guess it was last week. And then I’ve spoken on a radio show, BBC London this weekend, this past weekend about this question of investing in Africa. And it’s really a, very pertinent question. I mean it does have relevance today.
Yes Africa has the youngest population in the world. Yes. Africa does have a very large overall population of, you know, billion plus. Yes, Africa does have a huge middle-class, hugely growing middle-class with an appetite like all other middle classes, aspirational and otherwise to be able to enjoy life and to be able to enjoy the benefits of what they’ve been able to grow, you know, sort of financial stability and all that other sort of thing.
But there are differences right?
The question of can you trade easily? Can you do a number of other sorts of things are what in the panels that I’ve seen in action, as I said, watching the panels that were at this, the UK African investment summit.
You know, there are some specific differences that make it relatively challenging. It’s not as seamless. It’s not as easy as saying let’s, you know, go to, so I’m in London, let’s go to Manchester.
It’s like saying I’m in, I’m in Manchester, let’s go to Bergen. I’m in Manchester, let’s go to Stockholm. You know, there are very few, there are very few things. I mean, yeah, obviously there is on Spotify, but there are very few things that are so easily able to go. Particularly when you have language and other sort of barriers.
Currency barriers are just, some things just don’t translate quite as easily and it makes it hard for a venture capitalist who’s looking for great opportunity to say we’d love for you to expand, but you know, we, we need to think about this a little bit more because there’s all sorts of things that are gonna make that a challenge.
Legal, law systems, the paperwork that you need, the admin, the red tape, how do you navigate all of those types of things.?
Thinking about the Agritech as well, there was something I came across, it was a Ted talk. It was really interesting. It was about programmable biology and some of the innovations that are going on in that space whereby the example they gave was plants and photosynthesis.
You know how it’s been perfectly perfected through evolution over years. And you know, if they could really sort of understand the chemical level, how that works, they could potentially use that into other plants to make them efficient and crops yield better. You know, as you sort of mentioned.
So that’s an exciting area where in a lot of of research and development is going into, and I guess that’s in universities too
Here in Manchester was the birthplace of graphene, you know the wonder material, we’ve created a Graphene Institute and there’s a lot of exciting potential developments coming out of that from the research that they do.
And one is creating a graphene filter for clean water, so is that something that you’re potentially looking at?
I know that you’re looking at to reach out to these underrepresented entrepreneurs. What about also looking at some institutions as well, like educational institutions. Is that something where you’re looking to have a presence?
(Eric) So, absolutely. We are, I wouldn’t say it’s we’re stalking, you know, cause stalking has such a negative connotation 😀 But we spent a good deal of time at a number of universities, everything from the University of Heidelberg to Imperial, Kings College
University of Manchester?
(Eric) University of Manchester. We spent a good deal of time in Birmingham because all of these institutions, almost all institutions.
There’s a model, I guess it was started maybe at MIT called the Media Lab where the institution says that there’s all this great idea that all these great ideas that are coming out and we need to then figure out how to we leverage, can we actually, because we’re paying often for people who are researchers and others to be able to do their work.
Is there a way that the institution can then fund itself in part and benefit from sort of licensing arrangements and other sorts of things when people come up with products that actually makes sense, but that they’ve spent time working with our students and working in our facilities to get that to happen.
So almost every university college does that and they have become so good at then inviting in organizations like Impact X, the venture capitalists to come in and see and talk. You know, Cambridge does it also very, very well. And we have partnerships with a lot of these organizations.
One of the things that we find, and this is where I come back, is that often even within these institutions, even if you have a large number of underrepresented students who are there, that when you look to see who is coming through the, you know, the incubator, which is the university’s incubator or the college’s incubator.
What we find is that because there are so few faculty members who are underrepresented because there are very few graduate students who possibly, who were on the research side who were underrepresented and because they’re men, and because most of what we’re looking for has some technology underpinning it.
So we like to see companies that actually have a technical founder as well as maybe a business founder that we’re finding that we go from a huge potential to the ones that we’re focusing on.
Relatively small number of people who are of color who are coming through these. If you ever go to a pitch deck of a pitch day here at the university and see how many people of color are pitching and you’d say to yourself, well, when I walk around campus, there’s so many. I’ve seen so many women. I see so many blacks and browns.
Yeah, good insight. Great insight.
(Eric) Yeah, but then you go to these other, these sort of activities and sort of where, where cultivation is actually happening. It seems to be, and I don’t know what that’s about, but you know, I can’t dwell on what’s about and why that’s the case. I need to make sure that it changes.
And so that means we have to then expose people to that. We’re here like, and doing a podcast like this helps people to know that we’re here and that we are open for business. No we’re not open for business for all people.
And you and I were talking a little bit about that because you know, some companies are too early, some don’t fit within our investment thesis. Some are lifestyle firms and exactly able to make a venture like return.
So that’s super interesting because one of the things I was going to ask you about is, when founders start their own businesses, they’ve got their own business models and they’re looking at the market opportunity and how to exploit the potential returns from their thesis and business model, how do we capture the returns from that?
How many founders when you come across them, actually understand the business model of the VC as well. So if you can get that alignment, if yours is that high growth potential business where you really need the money to pump in, that will allow you to do that growth spurt. You’re in a win win situation.
But how many founders think it’s just about the money, but it’s not just the money, it’s, it’s everything that comes with that in terms of, if you want to take on this institutional money from the fund there’s going to be certain growth milestones that you’re going to need to hit
You’re going to be accountable to those. If you hit those fantastic and we’re going to be happy, we’re going to help you and support you in every way that we can along that journey.
Now you’re answerable to a whole other set of stakeholders. A big reason why a lot of founders started the business is because they want to feel that they’re in control of their own destiny.
It’s something that they are super passionate about and there’s a dichotomy. Is that something you’ve come across….
(Eric) It’s again, another very sophisticated question that I think gets to the heart of one of the challenges that we have.
If you were to look at the 600 companies that are, that we have in our pipeline. You notice that the funnel has gone from 600 to 13 that we’ve actually closed deals with, right? So that’s a big, that’s a big drop off.
Part of that, and if we took probably 50% of them off the top as organizations that are either too early for us, just because we focus at a stage, it’s not that they’re not venture fundable, but just they’re too early for us. So you take some of those out.
Then there’s some that are just not venture fundable that are also in that category. They’re just businesses that are, you know, someone who wants to start a restaurant, or someone who wants to do something like that, which is sort of a single proprietor. They don’t really want to grow. There are all sorts of reasons why it makes sense for them to deliver.
And that might be 100% right for them
(Eric) It’s great for them. So you know, but that just doesn’t make sense for the investment thesis of Impact X. I think quite frankly, if a person’s listening to this and they’re saying, am I right for venture capital?
Think of venture Capital. And I think you described this very correctly as a parent who really, really wants you to mature. And wants you out of the house, right?
They want you out of the house. So the point is not to stay with me forever. The point is to sort of become that fantastic, fully realized adult.
So what we as venture capitalists we’re trying to do is we certainly are trying to invest and in you and sort of nurture you and work with you, but ultimately we understand that and you should understand you need to go.
And one of the things that is very fundamental, the business model of venture capital is that you have a term during which you have to, you raise capital, you’re able to invest capital, and then you are, and then you must return capital.
That’s about a 10 year timeframe. And at the end of 10 years, you need to actually return all the capital that was invested to the limited partners and you need to return it. And no one wants and no one’s gonna invest in you again if you’ve just returned their capital 10 years later with no with no upside.
And everyone knows the story of Facebook. So everyone’s looking for those sorts of returns. And that’s why they put their money in a risky situation, in a risky asset class.
So you know, quite frankly, if you are not ready for people to come in who are beholden to a series of LPs, you know, we’re supporting you, but it’s the LPs that are the ones who are really paying our salary. You’re making a reputation, but the LPs are putting in the money. So we can help you to get that great reputation.
And so we have to serve them. And we’re not only going to raise one fund because as I said at the beginning, a hundred million pounds sounds like a lot of money. Our estimation alone is that within the portfolio of fully scaled portfolio that we have right now, meaning those companies would be at the epitome of their growth.
We’re talking about them needing about 2 billion, and these are just the numbers that we see today.
And then that means every year we’re supposed to find at least between 500 and another thousand companies. So the 100 million doesn’t go very, very far and we need to continue raising.
So that 100 million people put in, that first hundred million and LPs, the companies that put in their first hundred million, they need to see that we’re doing the right sort of work, we’re making the right sort of decisions.
And that means that they’re getting exits, are getting return on capital because also these are organizations that are pension funds. These are organizations who are individuals who want to give to charities and foundations of their own.
So they have reasons why that money needs to come back to them in an amplified way. They’re not there to babysit. They’re there to support and to help, but they’re also there to again, get people out of the house.
I mean, that’s so interesting and I think it’s something that founders should look into a lot more, just for their own educational processes to see whether this is right or not for you?
And if you do take on that sort of fund or that capital, you then know what’s expected and you can filter that into your process moving forward. But you know, you’re talking about a10 year life cycle for a return on that investment.
Then if you think about the digital and tech space, the life cycle of companies, the technology and the products and services that are launched in 10 years, that’s a long time.
The pace of change is astronomical within that. So what might be launched initially won’t necessarily be the thing that’ll be returning your investment in 10 years time.
Who knows what the landscape is going to look like then. Is that something that you consider, how do you factor that in to some of the investments that you’re making? How far in the future do cashflow forecasts need to be?
How often do you revisit that? Do you get them to look at a 10 year horizon scan…
(Eric) We have them look at a five year horizon, three to five years, depending on what the business is. It’s not really for us a question of sort of when their exit, and can I spin this a little bit different way?
One of the things that we note about underrepresented entrepreneurs is sometimes underrepresented entrepreneurs are able to get funding, but what they do not get is they don’t get a break.
They don’t get a benefit of the doubt. So if indeed things don’t go exactly according to plan, then it’s like, you’re watching that television show? Dragon’s Den or Shark Tank… I’m out.
So suddenly the people who are funding you are just, they pull back and so you don’t have this sort of opportunity to pivot your organization, to really experiment. And that is one of the reasons why an organization like Impact X needs to be there and needs to partner with organizations.
We haven’t done this empirically, so I don’t know this to be a scientific fact, but what we seem to get from episodic knowledge is that people are, who are entrepreneurs get a chance to make a mistake but get a chance to start a business, but then they don’t get a chance to make a mistake.
And if a mistake happens or if something is a reversal, that reversal is punished much more so than their peers
That’s another interesting insight
(Eric) Okay, good. I’m glad. I’m glad. You know, as my mother would say, if you’re going to have air time, can you please say something interesting? 😀
You’re dropping knowledge bombs 😀
(Eric) These are good, okay 🙂
So that’s one of the reasons why we’re around, because over a five year period, over a 10 year period the two companies that I joined were here in the UK, one for eight years before it’s sold and the other one started in 2013 and still hasn’t sold.
I was chief revenue distribution officer of the one that sold to Microsoft and the other one I was COO and that business is still an independent venture backed business.
But these sort of companies, you do have these ebbs and flows. Things happen. You’ve got to test, as you said, the market changes, we’re not in a static world. There’s a great example of a company called Magic Pony that sold to Twitter. It was a fantastic organization here in the UK and they started in two years later, they sold to Twitter for what, 170 million. But they’re very few of those sorts of companies.
Most companies. We find that the sweet spot for selling is in sort of the seven to nine year period. Okay. So these companies are in business for a while. So if you’re going to be in a fast growth company, fast growth is sort of a longterm view that it was fast because it didn’t take a century to do.
But you know, so it hasn’t taken, you know, Facebook, you know, a hundred years to become the IBM. It hasn’t taken it 40 years to become Microsoft, but it didn’t take two years. I mean that took, that took quite a lot.
Even if you watch Social Network, you know, it looked more than a, it took more than a week for that to happen. It took two more than two years. I mean, you know, it took a while and for it to become the juggernaut that it is, it took a lot of deliberate sort of action.
We mentioned about making a mistake, underrepresented founders making mistake and giving them that opportunity to do so, but then to carry on versus their peers.
How about yourself, Eric?
What are some of the biggest challenges you faced or failures that you’ve had growing up or in your career and how did you overcome that?
How did you like mentally think, wow, well that’s happened to me, I’m going to move forward and carry on because you know, now you’re in a great place, but it can’t have been a smooth Hollywood style movie.
There must’ve been some ups and downs?
(Eric) That’s hilarious 😀 My life made it into a Hollywood movie, I’d want it as an independent black Hollywood movie 😀
I’m going to give you an example. This has little to do with my career, but actually sent me on the path to venture capital. So I went to undergrad in the United States and then I went on to law school immediately following, partially I went to law school because it was a finishing school. Get a graduate degree and you know it be, it’ll be good for you.
So when I went to grad school, I went to law school and Harvard law school, the first day, my first class I sat, I was listening and I said, I’ve made the biggest mistake of my life by actually coming to law school because, you know, I thought of law school as being sort of a different type of study than it actually turned out to be.
I was able to, and this is, I think going to the point that you, that you mentioned what, what I could have done was say, well look. And in fact, I actually did apply. So I applied to Harvard business school.
This is the second month that I was there because I said, this is not going to work and I need to go to business school. And business school said, you have no experience working in business.
Why do you think that you should come to business school? So that’s not going to happen. So that sort of helped me to sort of get a little bit of a grounding. And then I decided, well, what I could do, I’m at, I’m at law school, I’m at Harvard law school.
You know, people come out of Harvard law school, been presidents, most of the, like many, president of the United States, they’re people who are presidents of organizations or people who are doing all sorts of things. That degree must be useful for something.
That’s corporate mafia level 😀
(Eric) Very much 🙂 And there are many venture capitalists who have that sort of a background. Even more so at Harvard business school or Stanford business school backgrounds, but you’re sitting there and here in the UK they have Oxford or Cambridge backgrounds and we can talk about that too.
So you have to then say if indeed there are these components of this opportunity and this is what I can see other people doing with this credential associated with them, that maybe I can figure out another way to utilize these experiences, which many people use in one way, but I’m going to have to use a different way.
And that’s actually what happened. So I started to, I spent more time not studying corporate law and complex financial transactions so that I could then become a lawyer in a New York law firm, which is kind of what I’d expected to do.
And instead of doing merger and acquisition law, but instead I then started to design a life in negotiation theory and practice, how to get the best deal possible, which then led me into strategy consulting, which then led me to do my first spin-out, which was a technology firm.
Thinking about processes that were sort of started with this theory and practice around negotiation. And then to move onto that. And then that’s sort of been my career, but that I did have to actually take a really big reboot, reassess where I was, and then say, this is what I can do with it. And it wasn’t quite that linear.
Let me tell you that first, that those first, that first semester wasn’t so much fun, but in time it became one of the best experiences that I had. I’ve met some of the most fantastic people in the world.
I was back in Boston back in Massachusetts this summer and I ran into any number of people doing interesting things and influencing the world. And one of the people who was in my class was a young man named Barack Obama.
So there are some people who’ve done some very important things and have changed the course of history. So, you know, I figured, okay, there’s something that certainly I can see how this is very important and very great opportunities.
So don’t squander the opportunity. Don’t just, you know, throw it away. Let’s see how much we can get out of it.
You know, that reminds me of seven degrees of separation. I’ve just realized that I’m pretty close to Obama now 😉 …
(Eric) Because of me?
Yeah, absolutely 😀
(Eric) That’s very good though. I like that 🙂
I mean that’s amazing you went to Harvard, but is that something that little Eric imagined he would be doing growing up?
Did you know what you wanted to be? You went to law school was this something that was in your radar?
(Eric) My growing up. So, you know, there’s a sociologist and an academic here named Paul Gilroy, who wrote a book called Black Atlantic. And there’s so many fantastic scholars that I’ve been reading recently, Stuart Hall.
These are people I didn’t grow up with and sort of study, even though I studied African-American history. There are so many sensational academics who are writing about the dynamics of being black in the diaspora. And most of the cases I’m talking about now it’s in the UK as opposed to in Germany or as opposed to in Portugal, et cetera. And the experience of being black.
The reason I mentioned Paul Gilroy first is because Black Atlantic talks about the differences that actually exist between what is black American versus what is black British.
So one of the things about being black American, if you were born in the time that I was and you were born on a segregated college campus, I was born at Tuskegee.
If you were born and you’re the first person in your family who has the constitutional right to vote in an election because they’re suddenly the voting rights act just before I was born.
You are in a situation where activism and making a difference and impacting the world is one of the things that you see that comes from a very early age. You’d have no choice. You are not taught that you are allowed to sit and ponder.
You need to be out there and doing. Now, do you need to do that by going to Harvard law school? No. Do you, can you go to divinity school? Yes. Can you go to, can you go to high school and then get out there and become a community organizer whenever you want to do.
But those are the sorts of things that are expected of you. So that’s key. That’s what young Eric was taught over time.
Young Eric is then refined into his given choices, you know? And so my parents would also say, and what we’re here for is to give you as many opportunities as possible, sort of like a VC. And they have, and my parents have three children, so you do one thing.
So I have a brother who’s a doctor and have a sister who got her MBA. So you know, it’s like you all do what you want to do, well let’s, but you’re going to do something with it. And so then you are able to, so they invested and said, here, go and let’s see, but get out of the house. It’s the same thing. Get out of the house and so, uh, and go make the world a better place.
So was it going to be law school, not necessarily. Was it gonna be Harvard law school, not necessarily, but it was going to be something that hopefully I can make a difference and then I would keep that sort of consciousness in a very conscious, very forward consciousness about these things and be proud of it. Absolutely.
I was going to ask you if you were not doing this, what would you be doing, but I guess after you’ve just explained how you’ve been brought up, you would be doing something along those lines where you were able to make a positive impact and, and give back in some way…
Or I’d be Beyonce and do the same thing. You know, that’s not a bad life either. She probably is involved in more conversations
I think that I would hopefully be doing something that would have an impact. It might not be Impact X venture capital, I expected it to be running companies for a long time.
I’ve been fortunate that many of those have exited. And then the companies, the companies become part of, are not companies that either wanted me or that I necessarily wanted to work with them.
So, you know, that means that you then figure out what you’re going to do with your time and you hopefully leverage what you’ve done in the past and hopefully you’ve created. One of the things that it has been fortunate though is to create relationships, uh, and not through networking, but through, you know, delivery of, of value to people, which says, when you say, I’m going to try something like this, and you can say, I think it will satisfy some of your needs.
And then people will say, well, if you’re, if you’re interested in this and you can explain to us why, then this is what we’ll then we’ll put money behind you. And that’s kind of what’s happened with me here.
That’s how I’ve been, that’s how Impact X got started because a group of 20 of us got together and said we’re going to stop talking about this and we’re gonna put our money where our mouth is.
And Eric, if you can, if you know, if you’re willing to, you know, put together, put in the work and find the team, recruit the team and put together the thesis that we’re going to back you.
Wow
(Eric) And so that’s what, that’s what’s happened. I’ve been very fortunate that black, it’s all been black at the moment quite frankly. So I want to be very specific about that.
We believe in underrepresented and the people who stepped up, first of all black, and there’ve been black French, black British and black Americans who’ve then pooled their resources and then open their networks, which is how we’ve been able to raise so much money to be able to then fund this thesis that we have.
Were there any moments in that journey where you thought this might not happen?
(Eric) Everyday
You know it’s still a big commitment isn’t it? To you put your money where your mouth is and then commits. Was there a tipping point?
Was there something where you pulled the results together, you got enough of the right people together, you develop the thesis enough whereby right here we go, we’re all in now. Cause it’s the same thing with as a founder.
You know you can theorize about something but then it comes a point where you, you have to put your money where your mouth is, you have to take that step
What was that step that people took to bring Impact X into existence?
[Eric]: I think anyone, anyone who is of color in the world, in the world that where they are not necessarily the dominant or majority will note that there are dynamics that they want to change. And I think I can even broaden this statement.
Everyone notices that there’s some things that they want to change. Right?
Suddenly you’ve gone from being a single man having children and suddenly you’re now very concerned about, you know, what is the, what, what genetically modified things are in the baby formula. Okay. So there are all sorts of things that will cause that to happen. So everyone has this.
But I think in terms of particularly walking in the shoes of an underrepresented person in the world for my entire life, some of the things that I notice are things which feel inherent in systems who have system systemic challenges and sort of people might call it even institutional impediments to what I want to have happen.
Others seem to be sort of cultural, but this is sort of how things had been done and therefore, and have these historical underpinnings. And so it’s not necessarily that there are statutory or they’re not as other institutional problems, but they’re just sort of laziness or habits that just sort of persist.
And so if that’s indeed the case, the question for a person like me is, what do you do? What do you do if you do? Do you just sort of sit there and go along to get along or do you cha or do you do instead do something about what you can.
And I think as again, as a person of color, that is something that is consistently with me. I don’t think therefore that there is some moment that’s people say, you know, there could be something, it could be something like a Grenfell fire when there are all those people of color who die or it could be something like a killing.
So, you know, it is police brutality, which eventually ends up in a death like in Stoke Newington. It could be any of those sorts of things. But I don’t think you have to have a galvanizing moment to say that the problems that we, that exist around us for opportunity for ourselves, for our children sort of, um, uh, sort of a diversity of possibilities and potential outcomes for them, is something that we want.
And therefore, the way we have to do it is ourselves. We cannot rely upon persuading somebody else. It’s very hard to persuade the government, but that’s the most important priority to us. It’s the most important priority. But to the government is not necessarily the most important priority.
And so what we have to do is we have to do it sometimes do it ourselves. That’s what I think is sort of that habit of mind or that sort of mindset that then causes people who have that mindset together and they have a conversation.
Maybe it’s a conversation ends up being galvanizing. Maybe it’s sort of the willingness of one person to say, well, I’m going to step back from what I’m doing and then, and present to you a business proposition that you should follow.
Maybe that’s enough, but I don’t think that with Impact X, I think it was a long time in coming. And as I said before, you know, it should have happened 50 years ago. It didn’t.
But if it needs to happen now, so let’s move forward. And when I, and I was a little bit joking about sort of, you know, every day is a struggle, but every day, you know, I still am a long way away from a billion pounds or 2 billion pounds to have to invest and entrepreneurs in Europe.
I’m still not there and I need to get there and it’s not going to happen in a week. Right? It’s not going to happen in a year. It’s, so we have sort of a six year fundraising plan to how do we get there and what are the things we need to do along the way.
And just as you said before, it’s like being in a, it’s like being one of the portfolio companies that we support. You have a forecast, you have some ideas as to which what to do and then you sort of make those happen.
That brings me nicely to wrapping up our interview. I was going to ask how do you define success and what does that mean for you?
I think you sort of alluded to it a little bit in terms of Impact X backing these underrepresented entrepreneurs and founders on their journey, helping them to succeed and in return with them succeeding, you’re getting a return back on that capital.
They pay back to your LPs and investors creating that social impact as a result of that product or service going into the marketplace.
But then also as well allowing them to attract more funding, institutional funding so that you can back more funders and those same funders on that journey.
Is there anything else professionally that you would like to do that would sort of define success for you or even personally?
(Eric) Interesting…
You know what I would say I’m getting more comfortable these days with the idea that toil sort of having a, having an, it’s almost like, you know, I like a musical too. It’s almost like a the impossible dream.
It’s sort of battling against… tilting against windmills. You might not, you might not beat it, but you’re going to keep on going at it. And that I’m getting more and more comfortable with the toil that’s involved in terms of the work that I’ve chosen to do to make the venture capital world more inclusive, to make it work better for underrepresented entrepreneurs, particularly women of color who it works miserably for at the moment.
There’s going to be a lot of fits and starts and that I’m going to be happy with fits and starts. That’s kind of success, that I have enough of opportunity to move forward, step back a little bit, move forward, maybe sort of retrench a little bit and then move boldly forward.
Sometimes alone, sometimes with a very big group, maybe sometimes recognized and sometimes I’m doing it anonymously. If I’m able to get comfortable with the various guises in which I’m going to need to be able to lead a successful effort, which we ultimately think is almost a social movement.
It’s almost a social movement because anyone who’s listening to this podcast can actually invest in an entrepreneur of color, an entrepreneur who’s a woman, anyone can.
Because what you need to do is you need to take some money and you need to make it available to that individual, buying into their dream and thesis and help them to grow their business, put your shoulder to the wheel.
So if I can get at the end of all this, more people doing that, that would be success. More individuals thinking that this is what I should be doing. Buy your house, do all of those sorts of things. Buy some gold.
If you want to buy gold, that’s fine too. Invest in commodities, but invest in people by investing in underrepresented entrepreneurs because they would be happy to know you at the angel stage.
They’d be happy to work with you and you could help also. And that’s a great way. That’s a great sort of a movement. It’s like the civil rights movement and I think it can make as big an impact.
And I think with that powerful speech we’ll call this a wrap 🙂
(Eric) We’re going to wrap it 🙂
Yep, Eric thank you so much
(Eric) Excellent questions. Very good questions. And you hurt me this early in the morning 😀 Thank you.
I appreciate that, Eric, thank you 🙂
(Eric) I’ll be back to Manchester to see you soon 🙂
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