Eric Collins of Impact X Capital joins Nick to discuss The Changing “Search Image” of Founders, Lack of Diversity = Missed Opportunity, and COVID Effects on the BLM Movement in Europe. In this episode, we cover:
- Walk us through your background and path to VC
- What’s the thesis at Impact X?
- As a black CEO and fund manager, in what ways do you think your experience fundraising was different than your white, male peers at other firms?
- How do you approach sourcing?
- What’s unique about the way you’ve built your network vs. other firms?
- Less than 1% of venture funding goes to black-led and we’ve heard the tired line that “not enough companies are founded by underrepresented founders and black founders”… Are you concerned that you’ll have fewer deals or less pipeline?
- What’s the right number of deals per year where you feel like you’re seeing a sufficient amount?
- I’ve heard about the “deep analysis” you do and how that creates the edge. Can you describe what this entails?
- Do the issues run deeper in the LP community than even the GP community?
- Are the return expectations different for your LPs vs. a non-Impact fund?
- A lot of the impact you are creating is long-term in nature. What are the leading indicators of success for your fund?
- How do you set objectives and measures to know if you’re winning/exceeding the plan?
- In response to the pandemic, the gov’t created a number of programs to help fast-growth companies. What was the impact on your underrepresented pipeline and portfolio?
- Black Lives Matter has been the center of attention here in the states. What’s the status of the movement in the UK and how has it impacted your efforts at Impact X?
Guest Links:
Takeaways:
- Successful organizations always take a sounding of their environment then decide as to how to invest in a way that is looking at some areas of inefficiency.
- In 2018, the Impact X team looked in Europe for the places where people were not getting investment, the sectors, and the entrepreneurs running those organizations. They looked at investment portfolios of other European VCs, particularly in the UK, and noticed that certain groups were underrepresented. The underrepresented people were black people, brown people, and women of various races. That’s where Impact X saw an opportunity.
- When other people say they would love to invest in underrepresented entrepreneurs, but they can’t find the talent. It is suggested to those organizations that their search images are incorrect.
- Impact X’s believes that going forward, we are going to see more and more opportunities that are being created and more and more disruptive, and industry and sector defining plays, coming from places where other people don’t look.
- The conversation about there being a dearth of places to place capital is a myth. It is coming from a very non-creative space, and it just is not true.
- If you look at the Kauffman Fellows Research Center, and you look at their study that looks at 250,000 founders and 20,000 companies. Indeed, diverse founding teams exited a 30% premium, over non-diverse teams. And that indeed, they tend to raise more money, especially in the later rounds than non-diverse teams.
- Similar studies have been done by McKinsey and other sorts of places, not one study, it’s multiple times that this has been shown that there is a benefit and a premium investment in diverse teams.
- The one thing that changes the search image is who’s doing the searching. We’ve changed the search image, we should change the eyes that are looking at the opportunities externally
- In the UK, the Black Lives Matter movement and Covid caused a change in the way that they talk about race, and particularly race in terms of equity allocation.
- Those sorts of conversations, then begin to get something which is very important, and that specificity around the problem, which is then necessary for specificity around the answer