Interview: Alicia Robb

Intro

In this edition of Lived It, we sit down with Alicia Robb, the founder and CEO of Next Wave Ventures, which seeks to drive diversity in high growth entrepreneurship and angel investing. While Alicia has been angel investing for only a few years herself, she is passionate about narrowing the racial and gender gaps in entrepreneurship and investing and increasing the participation of underrepresented groups in these spaces.

If there was ever a shining example of an angel investor who learned through action, it’s Alicia Robb. She is part of the founding team behind Next Wave Ventures which just launched The Rising Tide US Fund and Angel Training Program on Sept. 25, 2015. The fund will be made up of 99 female angel investors, and will be managed by 9 seasoned women angels, taking part in this transparent and interactive process, creating the next wave of sophisticated female angel investors. She is also the co-author of A Rising Tide: Financing Strategies for Women-Owned Firms.

In this interview, we talk to Alicia about everything from the barriers (both internal and external) that prevent women from becoming angel investors, the value of mentorship offered through The Rising Tide, and how to make the most of a $10,000 investment.

Meet Alicia

Years as an angel investor: 3 years Number of investments: < 20 investments

A day in the life of Alicia

“I actually work from home, so when I’m not traveling, which I do quite a bit. I would say a third of my time or even more is traveling. I work from home otherwise, and I sit in front of a computer and I can do work that way.

“I spend half or more of my time doing research on entrepreneurship issues, like entrepreneurial finance, women in entrepreneurship, etc. The other half my time is spent managing some of our research and data projects that we have in the foundation. I also go to entrepreneurship events like research conferences, symposiums, and summits.”

First Investments

“They say never make an investment that you can’t afford to lose, so $1,000 didn’t seem like a huge amount. I just found an interesting company called Freight Farms out on the East Coast, that built these self-contained ecosystems of farms within shipping containers. It’s an interesting way to address how to produce food in more urban areas, locally for production in urban areas. I just thought it was a really cool idea. I didn’t do a ton of due diligence or anything like that, like I would have done if I was making something like a $25,000 investment.”

Alicia said it just seemed like an interesting company and she loved what they were doing, which is what drove her to make the first investment through the platform WeFunder. A few of the larger first investments she made outside crowdfunding platforms or AngelList syndicates were things she really wanted to see go to market, from a consumer viewpoint.

“One of the first mistakes first-time angels always make is, they look at it from a consumer side, the consumer perspective, not an investor perspective…the other mistake people make is they just invest, right off the bat. You need to look at 20 or 30 deals before you ever make your first investment.”

“Of course, I invested in the first things I saw because I was so excited. I haven’t lost any money yet. I haven’t had any exits, yet either. I haven’t been investing for more than a few years.”

Alicia says that when she first started angel investing, she knew a few people that had done deals but wasn’t actively involved with a community that was actually making substantial angel investments. By that time, she knew of them and had researched them and interviewed some, but within her community of friends, very few were active angel investors.

“Of course, I invested in the first things I saw because I was so excited. I haven’t lost any money yet. I haven’t had any exits, yet either. I haven’t been investing for more than a few years.”

Alicia first started getting into in the world of angel investing when she began working as a Senior Fellow at The Ewing Marion Kauffman Foundation, a private, nonpartisan foundation that creates programs to nurture economic independence in communities by improving their overall educational achievement and entrepreneurial success.

“I just learned more about it and thought it was really interesting,” she said.

Alicia’s dissertation was about entrepreneurial finance and had always studied small business financing. When she began work at Kauffman, that’s when she started to learn so much more about angel investing, especially when she and Susan Coleman wrote their first book called, A Rising Tide: Financing Strategies for Women-Owned Firms. The popular blueprint taught entrepreneurs that they can finance their venture, regardless of whether it’s home-based, and lifestyle or high-growth, high-tech, and what to do when looking for VC funding.

Other Investments

“I have several investments through one investment into a Foundry Group Syndicate Fund, which has made about eight or 10 investments, and then I’ve made fewer than 10 investments independently of that funds investment. Obviously I’m in both of the Rising Tide Funds that are going to make six to 10 investments in Europe, so I’ll be making another 15 investments this next year. But I typically make 2 or 3 individual investments per year.”

Alicia invests about $10,000 to $20,000 per investment, depending on the deal.

Now, Alicia’s working with her co-managing partner for the Rising Tide Program, Trish Costello, the founder CEO of Portfolia. The women pooled their resources, such as their respective platforms, networks, and programs to find the 90 women investors they needed to round out the $1 million fund.

The program requires a $10,000 investment, but it’s invested over a number of deals, so it allows a first time investor to achieve a diversified portfolio with that first investment rather than just an investment in one company.

“We’re bringing together 99 investors,” Alicia said. “Nine that are experienced and successful angel investors, and then 90 who are new and emerging angel investors.”

Why do you angel invest?

“I have this amazing job of getting to be involved with everything around entrepreneurship. Every day I get to meet amazing entrepreneurs, amazing investors, and amazing policymakers and researchers. Angel investing is one way to actually be more actively involved in entrepreneurship. It’s one thing to research it and attend summits, like Startup Grind, the Global Entrepeneurship Summit, or Web Summit, or attend 1 Million Cups, and Meetups and so forth, but to be actually investing in entrepreneurs, it’s a completely different level of engagement.”

Deal Flow

When it comes to deal flow, the amount of time the angel investor spends on their portfolio and working with companies depends on the individual, Alicia said. To manage and find her investments, Alicia uses CircleUp, Portfolia, AngelList, and Wefunder. She focuses on very early stage investing, but in quite a few different industries. She self-identifies as “a generalist” who tends to lean towards consumer products.

“That’s one main reason why I’m really excited to be involved with the U.S. and European funds,” she said. “Because it is going to give me greater insight in developing my investment in my thesis portfolio strategy going forward. Since I’m only three years in right now, I don’t necessarily have one that’s well thought out. I really want to spend the next year or two thinking more about that and building out the strategy and my portfolio.”

“My process for finding companies to get involved with is not necessarily systematic, but I do tend to look at companies coming out of the accelerator and coming through the angel group pitch sessions and other pitch sessions that are around.”

“Of two of my last investments, one was a friend of a friend who was starting this really cool company in Boston and then the other one was a company here local, in Boulder that was started by a professor and a PhD student in Engineering. You find deals not just the accelerators and the pitches. It is through your network, as well.”

“My process for finding companies to get involved with is not necessarily systematic, but I do tend to look at companies coming out of the accelerator and coming through the angel group pitch sessions and other pitch sessions that are around.”

The investor’s strategy also depends on whether she is flying solo or is part of an angel group.

“I’m not actively involved in any of my portfolio companies so that doesn’t take any time at all. I read the monthly or quarterly reports as they come in and that’s about it. In terms of looking at deals and doing my due diligence, that’s part of the benefit of being part of an angel group, so you can share responsibilities and not have to do everything yourself.

“Also, there’s going to be much more experienced angels in those groups that can help you vet the investment. You can invest all of your time and all of your money in angel investing. I would say most people don’t do it professionally. They’re involved somewhat, and so if you don’t have five to 10 hours per month to contribute, then you probably want to do something like an investment in a fund or a syndicate that requires less time and effort.”

Who do you go to when you need advice on your investments?

Alicia says there aren’t currently any particular people in her network that she relies on for advice when deciding to make an investment. After less than a moment’s thought, she said she should. “I’m definitely going to leverage the lead angels in the Rising Tide fund moving forward,” she said.

Alicia says she has learned from her early mistakes in angel investing, and there is one investment that still makes her question her decision to get involved with the company.

“There was one investment I made which I was sensing some problematic team dynamics and my gut said, ‘There’s something there.’ Trust your gut because my gut said, ‘Don’t do it,’ and I did it anyway. I haven’t lost my money yet, but if I do it’s an expensive lesson to learn!”

Thesis

When it comes to the money Alicia decides to invest, she says that she is very aware of the risks.

“I realize that in all likelihood, I may lose the money,” she said. “So I never invest money I can’t afford to lose.”

That awareness of the financial risks she takes is just one part of Alicia’s evolving investment thesis, which is currently forming through her work with the Rising Tide Program.

“I will say that one of the things I hope to get out of the Rising Tide Program is a really solid foundation in how to go through the due diligence process, make the right investment decisions and then add value to the companies. Because after that, I really am wanting to focus on one specific segment in the market of consumer market: food products. I’m a vegan and I’ve been supporting some vegan companies. I really see a lot of disruption happening right now in the food systems.

Alicia said she has noticed the increase in the production of plant-based alternatives to animal products and the success some of these companies have had in getting into mainstream distribution.

“I think that is the future of food, and what is necessary for a more sustainable and humane planet. I tend to think that all, or most of my investments beginning in two years, are going to be along that vertical.” In addition to her niche-specific investment focus, Alicia said she has also tended to invest locally.

“Most of my larger investments are local, I just have one in Boston, that’s not local for me. Clearly these key portfolios in the U.S. and European Rising Tide are going to be very much geographically dispersed. I would tend to think that going forward, my large investments will be local, especially if they’re not along that vegan consumer product vertical, and so I will probably have both.”

There’s a good reason behind the local focus, she said.

“Boulder is ground zero for organic, the food movement, and so forth. But I see one of the things that I’d like to help build out is an Accelerator for vegan food products, so that we get companies coming here to launch and scale. But if they’re not, then I could see myself investing more broadly geographically if it was along those lines.”

The future

“The Rising Tide Fund is the inaugural program, and we’re really excited about it and we’re excited to have our nine lead angels that are going to help us mentor the next wave of women investors,” Alicia said. “We’re doing the same thing in Europe, and we have nine amazing lead angels for nine different countries in Europe. We’re also going to have 90 new and emerging angels from Europe and a few from the U.S. and Africa in that fund as well. It should be fun to kind of cross-pollinate, get to know one another across the ocean, and learn how to do some investing overseas. That fund will just be investing in Europe, but there are several investors that are going to be in both the US and European funds.”

In addition to the European launch, The Rising Tide is also going to have programs for impact investing, as well as funds along geographical and sector verticals. Taking the education of female funders to the next level, Alicia and Susan Coleman’s follow-up book, Next Wave, is due out next Spring, and will focus more on the high-tech, high-value spaces as well as the gender gap in angel investing.

For aspiring angel investors:

In doing the research for her next book, Alicia spoke to many venture capitalists, angel investors, and researched the gap on the angel investor’s side. She found an obvious gender gap on the investor side in equity in financing, and Alicia said she realized that there were serious barriers or challenges to getting more women into angel investing.

Among the major barriers Alicia found preventing women from becoming angel investors, was that many were risk-averse to making that first big investment in the range of $10,000 to $20,000 into one company. She found that many women also don’t know much about angel investing, and while that’s not necessarily a trait that is women-specific, lack of awareness about opportunities is crucial to taking that first step of getting informed, and then getting involved.

Another reason is that women don’t know other angel investors, Alicia said. They don’t see deals, so they don’t see investment opportunities and, as a result, they’re not asked to invest.

“They don’t feel competent or trained, or ready to invest, Alicia said. “That first investment, I think, is key. But the thing is we want people to have a good experience with their first investment.”

“One of the things that I want new angels to do is learn from our mistakes and not repeat those. Angel investing is risky, but there are ways to mitigate some of the risk.  If people go in, make their first investment and lose everything, that’s a bad experience that will color their future participation in angel investing.”

Most startups fail, and so there’s a high risk of not getting your money back, or the loan making a return, she added.

Alicia says she hopes new angels take their time and not rush into investing in the first company that excites them, like she did. While says she was lucky and hasn’t lost any money yet, a bad experience can set the path for an angel investor to become very discouraged very quickly.

“One of the things that I want new angels to do is learn from our mistakes and not repeat those. Angel investing is risky, but there are ways to mitigate some of the risk. If people go in, make their first investment and lose everything, that’s a bad experience that will color their future participation in angel investing.

“They might just be dissuaded from doing any more angel investing, and I think the way that we’re tackling this problem by having this portfolio of investments in The Rising Tide, and being led by experienced successful angels, mitigates a lot of that risk. It’s still completely risky. We could lose everything. But certainly we’re doing in a way that mitigates as much of the risk as we can. I think that way we’re going to be much more likely to have positive exits, and outcomes, and that will drive future successes for angel investors.”

“One of the things that I want new angels to do is learn from our mistakes and not repeat those.”

“I think any women who are considering making their first investments should immediately join the Rising Tide Program. We’re going to be closing in a few of weeks, but that I think it addresses all of the pain points and I think it’s going to be an amazing year of networking and building ties to the angel investor community. I’d love for them to be a part of it.”

“There are a lot of great programs out there, including weekend programs, and longer-term programs like Pipeline, 37 Angels, and Astia Angels, and Golden Seeds. They all have investor training opportunities. Angel groups, like the one here in Boulder, often have various seminars and workshops to build your skillsets doing due diligence, evaluating term sheets, and opportunities, and so forth. There are tons of resources out there.”

“The Angel Capital Association is a great membership organization of angels and angel groups and they have many webinars and other resources on their websites that you can just download for free.”

For entrepreneurs trying to get in touch:

Alicia said that she is only looking vegan entrepreneurs pitching vegan food products for the next year, because she is otherwise staying very focused on her two funds.

She also recommends to apply for funding from Rising Tide Funds. Entrepreneurs can register their company on Portfolia, and recommends that they find an “in” with one of the nine lead angels in the fund. Alicia suggests going to nextwaveventures.com and taking a look at the nine lead angels in order to connect with them. The best way into the fund would be to find an “in” with one of their nine lead angels because they are going to be setting the opportunities and bringing investment opportunities to the group.

That said, there is also a mindset that Alicia says is crucial for entrepreneurs to bring to the table when courting angel investors.

“It’s the passion, the motivation, and the ability to work really hard to see that scaling to fruition. Being an entrepreneur is not easy and it’s full of challenges and obstacles and setbacks. It’s just really hard so if you’re not passionate about it and you aren’t committed, and you don’t have the ability and patience to persevere, then you’re not going to be successful. I do look for those characteristics in the entrepreneurs.”

“I know many people look for past successes and serial entrepreneurs to invest in. It certainly makes things easier because they’ve been through it, and they know how to do it, and how to scale. Part of the value-add of investors is to bring to that founder or cofounders the other set of complementary skillsets that they need, that they may not have themselves whether it be a cofounder or employees that can provide the missing pieces there. It is about the team, but it is also for me, about what the product, service, or idea is, as well.”

Alicia recommends reading:

There’s a book coming out this fall by a group of women that went through the Pipeline Fellowship that started Wing Pact that I would recommend. It’s going to be great. I think it’s coming out next month. I’ve read many of the chapters and that’s going to be a great resource and it targets women investors.