Alex Lazarow, Author of Out Innovate
Alexandre (Alex) Lazarow has spent his career working at the intersection of investing, innovation, and economic development in the private, public, and social sectors. He is the author of Out-Innovate: How Global Entrepreneurs - from Delhi to Detroit - Are Rewriting the Rules of Silicon Valley (HBR Press). Alex is a venture capitalist with Cathay Innovation, a global firm that invests across Africa, Asia, Europe, and North America.
Previously, Alex worked with Omidyar Network, a philanthropic investment firm that has invested over a billion dollars in hundreds of startups around the world. He has served as a strategy consultant with McKinsey & Company, a financial regulator with the Bank of Canada, and an M&A investment banker with the Royal Bank of Canada.
Alex is an adjunct professor specializing in impact investment and entrepreneurship at the Middlebury Institute of International Studies at Monterey. He is a Kauffman Fellow, CFA Charterholder, and a Stephen M. Kellen Term Member at the Council on Foreign Relations. He earned an MBA from Harvard Business School and a B.Comm from the University of Manitoba.
Alex is a regular columnist with Forbes, and his writing has been featured in the Financial Times, Harvard Business Review, McKinsey Quarterly, Entrepreneur Magazine, TechCrunch, Fast Company, VentureBeat, Business Insider, and Quartz , among others. He speaks regularly on global innovation trends and has presented at Collision, Endeavor, InsureTech Connect, the Social Innovation Summit, SOCAP, and the Corporate Venture Capital Summit. He is most proud of having once been called a ‘sad, low budget Ryan Reynolds’ on Twitter.
“ I believe that some of these businesses in this impact world are building not just fabulous business models, but something that has impact aligned with it. And as they scale they will scale to their impact as well.” - Alex Lazarow
Alex joins me today to discuss his background in impact investing with the Omidyar group. We discuss financial ecosystems around the world and how they differ from the changing ecosystem in Silicon Valley. Alex shares some advice for people seeking investment and with those who want to become an investor. Alex shares his secret to getting fifteen minutes with a venture capitalist.
Today on Startups for Good we cover:
- Frontier Ecosystems
- Global Financial Inclusion Investing
- A camel as an example rather than a unicorn
- Blitz Scaling
- How to develop a team in a frontier market
- Multi Mission Athletes
Connect with Alex on his website or on LinkedIn or Twitter
You can purchase Alex’s book Out Innovate on Amazon or like Alex suggested your local bookstore.
The authors that Alex suggested: Brad Feld and Bill Draper Startup Game
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Transcript
Miles: [00:01:44] Okay, Alex. Welcome to Startups for Good so glad to have you.
Alex: [00:01:47] Thank you so much for having me.
Miles: [00:01:50] Why don't we start with a little background on how you got into investing,
Alex: [00:01:56] Happily I'm, in many ways, a little bit of a accidental venture capitalist.
I, when I started my career, I thought I was going to think about questions that it's intersection of innovation, finance, investing, and emerging markets and economic development. I thought it was going to do PhD. And I ended up having the opportunity to work, , on the Canadian version of wall street and Bay street in Canada and fell in love with the tool of finance.
And while I wasn't in love with selling big Canadian insurance companies, I realized it was a really strong potential for that to have impact. This was at the rise of micro finance and the beginning of impact investings and, and that's what really got me focused on this question of investing. And so today I'm a venture capitalist.
I worked for a fund called Cafe Innovation. It's a globally focused fund investing a third in Europe, out of Paris or headquarters, a third across Asia, and of course a third in North America, it's the bit that I work on. We also have a Pan Africa venture, fund in partnership with Africa Bash and the whole groups affiliated with Catholic capital.
And so that's my day job investing in startups, both in North America and around the world. And outside of work, I've been teaching entrepreneurship at the Middlebury Institute for International Studies, which the Middlebury college's graduate program. And in both those worlds have been thinking about how do you build and scale startups around the world.
Miles: [00:03:13] Awesome. Yeah. And we'll be diving into your book as well. You also previously had been an investor with an organization, more of a explicit impact orientation, right?
Alex: [00:03:24] Yeah, I was with Omidyar network for about five and a half years, which was a incredible experience. I mean, your network is the family office venture fund impact fund Pierre and Pamela Omidyar, the founder of eBay.
And I was focused on our global financial inclusion investing, spending about half my time in the U S and half of my time across a bunch of different emerging markets. And most of what I was doing looked like very traditional, venture investing, but with a very clear focus on things that affected the mass market in a world positive way.
But I also was working on ecosystem grants, working with government entities or nonprofits and others that were doing some of the really hard sector building work. And so in many ways, the things I love are really this intersection between innovation. And entrepreneurship, but also the hard work that it takes to build startup ecosystems in the enabling environment to make them succeed and thrive over time.
Miles: [00:04:19] What's an example of an ecosystem where you've seen it go from not really working to thriving and what made the difference.
Alex: [00:04:27] I think one of the stories that gets a lot of a lot of plays the story of M-Pesa in Kenya, But I think what's missed is how that catalyze and how a couple of things around that created a startup ecosystem and M-Pesa was a technological innovation not founded by a traditional startup, but actually it had deferred funding.
So the British aid agency in partnership and incubated within Safaricom the local telco and create a mobile payments network that today is virtually ubiquitous. In Kenya and has been a really strong platform to not, not just offer financial inclusion, to be 2 billion people around the world have no access to traditional financial products and services, but also on top of that layer on a range of products, savings, lending, things like that, but also powering solar energy products where you can all of a sudden transform a really expensive home solar system into a daily, weekly, monthly system that goes into your home. And so it created this platform to enable a lot of other startups, that model of M-Pesa inspired, a movement around the world. And I was on the steering committee, the board of the Jessica mobile money program, which worked within the telco organization, helping telcos do this.
And there's now a couple of hundred of these telco led mobile money deployments, as well as a range of startups around the world doing this some, a single startups and others within. Other platforms think of what Go-Jek and Grab are doing within their ride sharing platforms, adding mobile wallets and things like that.
So that's really an ecosystem of how do you solve this underbanked model through technology innovation and business model creation in a really powerful way. And I think it germinated with a couple of these experiments like M-Pesa and it's really become a successful global movement.
Miles: [00:06:09] In your book Out Innovate.
You talk about this concept of the frontier. And would you put these ecosystems you were just talking about in that category of frontier ecosystems?
Alex: [00:06:20] A hundred percent. And I, and I will say I think it's tough to, to, to divide the world between Silicon Valley and not Silicon Valley. And the reality is the whole world is so heterogeneous.
In the book, I took a little bit of a simplification and I said, look, there's this range of emerging startup ecosystems around the world. So there's 480 startup ecosystems that are building over a million venture backed startups and, and a big chunk of the world's biggest companies is getting built there as just one data point, right?
2013, only four startup ecosystems. And created a billion dollar business last last year 85 startup ecosystems had created a billion dollar business. So huge businesses are getting built all over the world. But within that, where they're getting built has a bunch of different varieties. And if you take two dimensions that I think are pretty important, one is.
The rate of development of the country developed country versus developing. And the other is how strong and vibrant the local startup ecosystem is. And so if you were going to draw a two by two, you might say Silicon Valley's top, right developed country, very developed startup ecosystem. In the book I bring us as far as Pyongyang in North Korea, right? Very nascent startup ecosystem, if any, and a very developing country. And then between those two extremes are places like Bangalore, which I've very developed started because it was operating in an emerging developing context. So there's places like my hometown in Canada, Winnipeg, which is a developed country, but has a very nascent startup ecosystem.
And what I argue in the book is that those ecosystems have more in common with each other as they do with Silicon Valley, despite the fact that there's a lot of heterogenaity, but that there's an opportunity for these entrepreneurs to learn and compare notes on what it takes to scale in these.
Emerging startup because it was and how to build a successful businesses.
Miles: [00:07:55] And you go into a lot of detail in the book, but I'll ask you, like, what are the one or two takeaways that you would want entrepreneurs to know? And maybe that'll wet their appetite to read the book. Well, what are one or two of these takeaways about what these frontier ecosystems have in common and how you should behave differently?
Alex: [00:08:15] So I'll start by saying one. What is most exciting is that innovation is rising everywhere. And I described that in a little bit with, with the number of startups emerging around the world. I think what's really exciting is it's not just big startups and a lot of startups getting built. It's the world's best startups are getting built around the world.
If you think of the world's biggest education technology business, I know a topic close to your heart Miles, is built in India, right? Biju if you think of the world's leading credit led new bank, that business came from Brazil, it's new bank. If you think the largest robotic process automation business that came from Romania UI path and the biggest super apps came from China.
And so that's, what's really exciting is that these new models are emerging from all over the world. The second is. The way to build startups looks different in these other ecosystems. And it isn't as easy as just copy pasting the Silicon Valley method to around the world. And so in the book, I talk about how you have to build with sustainability and resilience in mind, why it's okay to build in a global way where Silicon Valley says you should build locally and how we should rethink how we build teams and hire people and think about them for the longterm.
So I think the, the third idea is really that The rest of innovation is global. The way we think about supporting entrepreneurs as well as change VC is government and all other ecosystem builders and how they build it in. So those are three of the topics that I would love my readers and folks listening into the podcast to come away with.
Miles: [00:09:38] So this idea of being global and it's okay to be global instead of building locally. Do you think that idea is changing and Silicon Valley itself?
Alex: [00:09:47] A hundred percent. When I started the book project in 2017 and 2018, really conventional wisdom and really a kind of best practice was. Look, start your business in Silicon Valley. Your first customers will be local. If you're a B2C, right? There's a ready community for B2B. A lot of the businesses around there are willing to experiment this other tech startups build your team locally. You have to be local. To, to build a team. And yeah, that was kind of the model of how you, how you scale to start up.
And today what we're seeing is the model is changing. And in part entrepreneurs around the world have already been doing a bunch of these. They are born global, they're building across multi, multiple markets. Part of this is a. A philosophical choice and part of it just practicality local. If you're building a startup in Singapore, the local time is often too small.
You have to tackle all of Southeast Asia. And if you want to build a team, you know, in some, in some markets there, isn't the same depth of talent of trained, been there, done that startup talent to be able to do it. And so you hire the best people wherever they were. And so distributed teams were part of the strategy from the get-go. What's happened now, is that, as innovation is going global VCs are looking around the world more and more, but also startups from around the world are coming to the Valley, like the story of UI path. And as we're contending with COVID-19, the whole world has moved to a remote strategy and it means we, and when we look for best practice on that, it's no surprise Miles that some of the most successful companies doing remote from the get-go are companies like Basecamp out of Chicago or Zapier out of Missouri and others like that because they had to do it all along.
And so I think that's how attitudes are changing. It isn't just a necessity, but it's also a recognition that these playbooks are actually quite successful and, and actually quite resilient as well.
Miles: [00:11:27] I saw this changing even pre COVID talking with investors in Silicon Valley, you know, leading seed fund told me that their most recent deals, this was pre COVID.
You know, their most recent fund was over half outside of Silicon Valley. Whereas previously they had really been very focused on Northern California. So I think there are a lot of reasons why that's changing and I think it's going to be really interesting to see more of these ecosystems raising. What I hope to avoid personally, my vision of the world is that these ecosystems are learning from each other.
And I hope to avoid this fragmentation where we have the Chinese ecosystem, the X ecosystem, the Y ecosystem, you know, the U S ecosystem. Do you think we're in danger of multiple spheres of influence like that?
Alex: [00:12:14] I think that if you read the headlines, it's seemingly seen it's seemingly. An unstoppable movements of borders coming up and, and and this regionalization of tech.
But I think that if you strip away a lot of that those arguments, I think what you see is actually that tech is more global and more cross-pollinating there ever before. I think the best ideas are coming from everywhere and they're getting influenced and improved by the ideas coming from elsewhere.
Think of ride sharing, for instance the model emmerged in Silicon Valley with Lyft and then Uber. And it's scaled around the world. There's now big startups doing this in every geo 99 in litem, Kareem in the Middle East Grab and Go-Jak Southeast Asia. And of course the biggest ride sharing company in the world is not even in the U S it's in China.
It's D D and those models are influencing each other. Go-Jek for instance, took inspiration of Super Apps in China. And instead of just offering ride sharing started offering a plethora of services on that. And it's no surprise that that's influenced the original and Uber now has Uber Eats and a financial product.
And a lot of the things that. Go-Jek and others were incorporating in their, in their products. And so that's how innovation is playing out, where these ideas are mixing and getting improved and intersecting. And this is across the board, even in our COVID response, right? A lot of the vaccine development came because early sequencing of the genome of the virus in China, collaboration, across borders the strength of immigrants, arguably the, the, the world's strongest cross pollinators in that way.
I also think it would be really, really sad if that was stripped away, but I think that the momentum is on our side. And I think that the way innovations are proliferating and getting developed is also on our side. And so that's why I believe that it won't come to pass or at least here's to being optimistic.
Miles: [00:13:58] That's great to hear a perspective on that. Part of what you talk about in the book. And we've touched on a little bit here, is that your approach to capital, to fundraising for your startup as an entrepreneur needs to be different in a frontier ecosystem. You talk about this concept of a camel instead of a unicorn thinking.
And can you explain that a little more?
Alex: [00:14:21] Yeah, happily. So first, what is a unicorn mean? A unicorn in the Valley is a business that's worth over a billion dollars. There's a numerical value, but it also comes with this philosophy on how do you build a successful startup and that philosophy in some ways it's underpinned by this notion of growth at all costs where it's okay to have unsustainable unit economics in service of growth, where it's okay to burn ahead of the stage and the size of the business in service of growth, where it's okay to take a short-term approach in service of growth.
And that makes sense for certain set of businesses. And, and they're both blitz scaling for instance. Reed Hoffman and Chris Yeh talk about winner takes all markets that have lots of capital flowing in and and competitors that are arising. And in that context it could make sense to do, do that approach.
And, and in many cases it does, but I believe that that is only representative of 1% of all venture. Back startups in their context and those startups, by the way, by the way, are only 1% of, of the rest of kind of startup innovation as well. And for most of the rest of the world, context is different.
There's less capital timelines take longer. There's less enabling infrastructure. So it's harder to build the startup. And in that context, I think this winner takes all approach isn't isn't correct. It's also just not practical. And so I offer this idea of the camel. Why the camel Camels are animals that can sprint across the desert and drink water faster than almost anything else in the planet.
So when times are good, they can thrive. They still want to grow as a startup. They still want to scale, but they are built on a foundation of sustainability and resilience and they can survive when times are tough and they can manage longer term. And more difficult timelines. They're based on a foundation of sustainable unit economics of managed burn and a long-term outlook.
And I think with that, that's the reason that outside of the Valley, I believe the camel approach is is the right one. And by the way, you could still be a camel and a unicorn. You can be a successful business with a strong foundation that is worth a billion dollars. And those are the ones that I'm trying to invest in.
They're, they're going, they're going to grow that way, but they're underpinned by this different philosophy on how to get there.
Miles: [00:16:27] And is that philosophy just to reaction to less access to capital? Or is there something more?
Alex: [00:16:33] No, I think that, so I think one, there is less capital as a as a practical reality and obviously capital is rising around the world.
And yet I, I still see the camel approach being built. I think one of the challenges that we see in w when we look at a successful startup, Is we see the outcome take Uber or whatever you want and you say, wow, they got to X valuation. How did they get there? And then you look at the method, but what you don't know is if you replay that story a hundred times, In different macroeconomic contexts in different settings or where it took her longer to get to product market fit, or what have you how many of those times you replayed it would you get to the same outcome?
And I believe that we're making the mistake of looking back at how companies got there by only looking at the ones that got to that outcome, because if you replay the story, we're not going to get it on a pro-rata basis, quite as much to those fantastic outcomes and with the camel approach, you're building startups that can survive through adversity and resilience.
So it isn't just about less capital it's when we get shocks like COVID-19 or a great recession, or even just the difficulty in getting partners in, in markets with. Less used to doing that or, or what have you those startups can get to the same finish line. I I interviewed Mike Evans, the founder of Grubhub and he talked a lot about the fact that every time he raised venture money, it was for specific purpose. It was expand to a couple of new cities. It was to make a small acquisition. And that every time he raised funding, he was actually profitable. They have the option to do it or not. And I asked him, "why don't you just raise more money and scale a bit faster?" He said, "look, I could have exited in eight years. It took them about 10. But I would have done so tremendously more risk." And that's really what I'm talking about is getting to the successful outcomes, but doing it with a managed risk, such that if you play it back more often, you will get to the same outcome.
Miles: [00:18:17] So you've been polite here. And in your book, you, you point out blitz scaling is a different approach than the one you're focused on. But are you actually anti blitz scaling? I want to understand,
Alex: [00:18:30] You know, in the book you're kind of forced to put a, put a flag in the ground and say, this is what I believe, but the reality with a lot of these things that things are nuanced, right.
And Chris Yeh read the book and, and endorsed it. And, and, and I think in the same way there are times where an approach like books at blue scaling could make sense and they say it themselves in the book, right. It's we know takes all market, highly funded competitors moving very quickly. And in that context, it could make sense to raise a ton of capital capital and win that market. I think the problem is that approach has been extended far too wildly to a bunch of startups that are not winner takes all. There's very, very few that are truly winner takes all markets. And when there's unsustainable unit economics, and I think we're building ideas, but not businesses.
And I think it's for this big chunk of the market where I think the, the blitz scalling approach just doesn't work and has been over extended beyond the intention of the book originally. So that, so that's kind of a more nuanced perspective. And I think that the, for the vast, vast, vast majority of startups, the camel approach is the right one over the longterm,
Miles: [00:19:35] Thanks for that.
I want to get back to the team part of the equation. You were talking about a little bit, the remote and distributed nature of teams. How else in a frontier market do you have to think differently about building your team?
Alex: [00:19:49] And by the way, I think that a lot of the themes that we're talking about in the book, if I was going to take a step back, it's facing adversity, building a strategy to get there, and then that strategy offering a conferring, an advantage.
And so the camel approach, for instance you're forced to build sustainability and resilience and the business model as a reflection of the ecosystem in which you operate, but it yields a business that can more often scale and succeed over the long-term. I think the team approach is another good example of that.
Where, you know, we talked about distributed for instance where you're forced to do things that look a little bit different than conventional wisdom, but in times, like COVID, if you have teams all over, you end up having a more resilient business to be able to react to it. Some of the other strategies that entrepreneurs are taking are around how they are discovering talent.
How they are selecting and building the pipeline and how they're thinking about retraining. I will say that these are some of the more nascent approaches, and I think we're going to see more and more evolution here. One startup that I admired, for instance in Nigeria, Hotels.NG built a virtual internship for selection.
They felt that they were tapping out the local talent pool and Legos, and they wanted to find different types of entrepreneurs across the country. And so they set up a, you know, essentially a weekly internship where it was a digital. Digital project around, you know, this for engineers. So coding project, and it started with over a thousand of these engineers and over the coming weeks, anyone to answer the question, right, they got the next one and the next one until they got to a class of 10 or 15, most of those folks by the way, were outside of Legos, outside of traditional schools and with a greater diversity.
And so they're able to find new pipeline that otherwise wouldn't have gotten a chance. Shopify, which today is obviously over a hundred billion dollars startup, but, but in their growth story took a similar approach around how they built their pipeline. Actually, for instance, one, one story, one of the initiatives they did, which I thought was really ingenious is they partnered with the university.
To create a engineering degree in partnership with Shopify, they paid the students' tuitions but got them to take courses that also got them ready for a career at Shopify internships were there. And then when they graduated, they had candidates that were ready to plug into the system. So they were thinking about the way they built their pipeline differently.
And then there's some really interesting experiments around retention beyond beyond just stock options. And, and things around hybrid RSUs, be able to give it to everyone or even thinking about a long-term career path for folks to really give them a vision of where they're going to evolve and Silicon Valley it's okay to have a 13, 15 month tenure average, like at Google and Uber and others, because there's a seemingly bottomless pit of awesome, very qualified talent.
But when you're operating a tougher ecosystems turnover as part of the business model is just, doesn't make sense that you have to think critically around this. And I think by the time I write the sequel we'll see some very exciting examples of doing this totally differently at scale.
Miles: [00:22:32] Yeah, I think so.
Tell us about how mission orientation comes up in these kinds of markets as well.
Alex: [00:22:41] I think that's such an interesting question. And one that's close to both of our hearts and work. When you look at the data and you say, well, before we even talk about how startups are built and you ask the question, what startups are built the problems that global entrepreneurs are looking to tackle look different and I believe are more important.
In Silicon Valley, less than 20% of startups are doing things, like finance services, healthcare environment, agriculture, whatever in many emerging started because it was the numbers are flipped in Sub-Saharan Africa for sensitive over 60%. And so will you see as a shift in the problem selection, but also in how they build their business model. In the book, I call this building MMAs but instead of mixed martial arts it's multi-mission athletes, but the idea is the same as using different techniques to get to.
The same successful outcome and the best entrepreneurs around the world in some of those business models are building a strategy and operational model that mixes operational success. And impact where the success in one leads to the success of the other. And so you could do this in in B2C.
There's, it's pretty clear ways to do that. I alluded to when we're talking about IMCOPA about some of the electrification, a company like Zola, for instance or IMCOPA another business in Kenya. They sell home solar systems, it's finance, or for the same cost of daily, weekly, monthly They might pay for care.
Kerosene, literally jet fuel to burn a little candle. You can have a modern home system. And so for every system you sell every family electrified that's linked with very, very strong, direct, clear socioeconomic outcomes around better school outcomes because kids have light to study at night. Better health outcomes because of the fumes or the risk of a home burning down et cetera.
So it's very, very easy on the consumer place, but we're seeing it also happen. And B2B plays. I love the example. Ravigo billion dollar business in India. You know, logistics space. India has one of the most inefficient logistics ecosystems in the world. And one of the reasons is that there's high driver turnover or drivers are driving long distances, one direction with a load, but they're coming back totally empty.
And so ravigo has built their business model around driver health. Their tagline is making logistics, human. And the way they work as a driver, picks up a load and drives maximum 24 hours in one direction. And it gives a little to another driver who does the same thing. And then they'll take a load home the other direction.
And in that Daisy chain, they drive better utilization, but they also make sure the drivers at home more often has a better life and thus have lower turnover and thus have a more efficient system. And so they built driver health into the operations, into the metrics that get reported to the board, which are directly correlated.
With with the outcomes of the business. And if you think about it, this is a pretty different way to think about impact, right? And a lot of businesses people give impact on the backend. They have the business model and then they might have a CSR initiative or a buy one, give one, or what happened, but when times are tough, That's the first thing to go because it's a cost center here in this MMA approach it's core to the businesses required.
And and when times are tough, it stays in when times are good, it scales. And I think that's, what's powerful about that model.
Miles: [00:25:40] Do you think that these multi-mission athletes are thinking about impact the way we might talk about in the U S or are they essentially. Because they're working in developing economies required to focus on needs that are lower on Maslow's hierarchy.
And so with a U S lens, we think, Oh, that's impact. And is it a, what's the difference? So I'd be curious to hear your thoughts.
Alex: [00:26:10] I think the word impact means a lot of things to a lot of people. And you, you know, even in the impact investing spectrum, I, you know, I was working at Omidyar network. What that meant for us there was very different to players across the range. There's foundations like the Gates foundation that does PRIs to the for-profit world. And then there's things like Generation Investment Management, which is a hedge fund that, that invests around companies that have ESG and there's everything in the middle.
And so I'll start by saying the world, the word impact itself has a very broad spectrum of what it means to a lot of different people in a lot of different places. But actually everything I'm talking about in the book around this MMA question, I think works equally well in a startup in Silicon Valley, as it does in a more emerging market context. I think you make a very good point, right? That naturally if you're solving a more basic needs lower down in the pyramid, it's easier to do it, but you can do it in the Valley too. So I'll, I'll mention three investments that I've made. I, I think of myself as a closet impact investor in my work at Cafe.
But Chime bank, for instance, which is a digital bank for the for the mass market in the U us, no fees, no overdraft fees, really a driver of financial inclusion and a driver to access to other fabulous products. They work when and they succeed when their customers succeed, they only make money when customers use their card.
They don't make money with monthly fees or anything like that. So they're incentivized to make an awesome product. That's, pro-consumer. Sidecar Health Investment is the health insurance company, that's remaking how we think about it around cash based insurance, trying to lower the price of it by up to 40% from other plans.
But by doing it by providing transparency on price for consumers, they win when consumers win. Because of retention and utilization and proactive care. And Zen business business around helping entrepreneurs, having a single platform, a single view in their business. And they do LLC formation, but they help you make your first dollar sorta to earn, but then to grow they help you with building a website, things like that.
They work when people, when their businesses work and they scale with their businesses. I think it's possible to do those kinds of things anywhere without approach of building a business model that is inextricably tied with social impact and the consumer to try to help. And by the way I believe the biggest markets in the world are the ones where you are tackling an attractable problem with a new technology, a new business model.
And that's where not only can have a lot of impact, but you can build a fabulous world changing company.
Miles: [00:28:27] Well, that's certainly exciting. You mentioned this concept also that you're a closet impact investor, and I don't want to out you here to all your coworkers, but how does that dynamic play out when you're talking about a deal?
If you don't have an explicit impact mandated at your investment firm.
Alex: [00:28:44] I believe that some of these businesses in this impact world are building not just fabulous business models, but something that has impact aligned with it. And as they scale they will scale to their impact as well. And so the three examples I gave you a second ago, I think are business models, that you know, mainstream investors have invested alongside us in all three of these. We just announced today on, on the day of this recording a a massive funding round for for Sidecar with Tiger Global and Menlo and Drive and others. So mainstream investors, I think about this it happens to be a massive market.
Incredibly underserved with a business model that works. And I think that when you find that intersection there's something beautiful that happens. And so the, that's one of the reasons that I think impact is worthy, it has a pretty broad range of what it means, and I'm investing in part of that spectrum where there's tech enabled businesses that have the potential as they scale and with business models that can scale to also have a ton of positive world-changing impact.
Miles: [00:29:42] Do you have any tips for founders, as they're thinking about raising from someone who may be not explicitly an impact investor, but the founder does care about the mission of the company?
Alex: [00:29:55] It's such an interesting question. I actually think that mission alignment is really important. And even if the fund and the person you're taking money from is not an explicitly, focused person on impact. I think it's still really, really important for there to be mission alignment. Over the long-term the average venture relationship I tell my students is longer than the average American marriage. And so if you don't have that trust, that mission alignment I think it's really tough.
And so I would spend as an entrepreneur a lot of time building that relationship and understanding what makes that investor tick. They don't need to be passionate about your particular problem. They don't need to be over, but I, I think it's important to really understand whether or not they're going to be aligned over the long-term on the vision of what you're trying to solve.
And so that would be the heuristic. I would try to think about as, as you approach a venture capitalist for money, regardless of that person.
Miles: [00:30:47] Thank you for that.
Alex: [00:30:50] By the way I'm curious Miles, how, you know, cause you're also at the, at the intersection right there with me. Does that resonate for you?
Miles: [00:30:56] I think so. Something I've written about on venture patterns that working with a VC to align on values is a really important strategy, both for the founder and for the investor.
I do think that if a truly mission oriented business is looking to raise capital. It is good to have investors who understand that and are aligned with it. At least not actively against it. I certainly think you can have a very successful business as you alluded to that have investor bases that have mixed motivations. They don't have to all agree on the, on the one thing, but you, you certainly want to be careful who you work with to your point. It's a long-term relationship. Someone who's going to have influence and power in the organization and someone you're going to have to spend a lot of time with. So knowing, knowing who you're doing that important deal with as they become an investor in your company is certainly important.
Alex: [00:31:52]
And by the way you building, on what you had said. I think that it's okay to change how you message the company. If you understand how the person reacts. I'm not saying tell two different stories, but if you're, you know, if you're talking, if your business has a consumer angle and a B2B angle, or what have you tailoring your story, to what the what the VC that you're speaking to. It was about. You know, they might be a industry expert in part of your business model or what have you, or tailoring the story around the business model. But I think that you can also tailor the story around the impact model depending on who the audience is.
And so I think it's also figuring out who you're talking to and what are the things that make them tick as part of the conversation, but just making sure that they have a very strong alignment on the whole as well. I think that's pretty crucial. As part of it.
Miles: [00:32:35] Yes. And this is an interesting topic. I sometimes get the question from founders, whether they should have two versions of their deck, for example, their fundraising materials and maybe this is, you know, coming from the fact that my father was a lawyer or maybe it's coming from the fact that I was a public company, executive who probably spent too much time worrying about the SEC but the idea of having different fundraising materials for different audiences. Makes my hair stand up.
This is not legal advice, but that's something I wouldn't feel comfortable with. No, and I don't think that's what I don't think. I don't think you were saying. I, I think giving the same written materials, but spending more time or emphasizing different parts, depending on what the audience is interested in talking about is just a natural and a very useful way of connecting with your audience.
So I totally agree with you.
Alex: [00:33:24] Yeah, exactly. I was, I was arguing that versus versus the other, other version of it a hundred percent.
Miles: [00:33:29] Yeah. But I do get this question and people sometimes do wonder, you know, do I have two versions of my deck, the impact version and the mercenary version or something. And I discouraged that personally.
Do you have any tips for people who want to become investors?
Alex: [00:33:46] I, I feel very fortunate to be a VC. It's my favorite job in the world. And you get a, I feel like I have the incredible opportunity of working with and serving some incredible entrepreneurs. My advice. So I think there's a, there's a bunch of roads into VC. And VC, isn't, kind of a career path in the very traditional way of, you know, do this and then get to that. But there's a bunch of different ways that people have gotten into it. One is, you know, having worked and had startup experience and, and this doesn't necessarily mean being a founder, but just being part of the story and understanding that there's a lot of paths into it.
There's a lot of paths that come from having some amount of functional expertise. So in FinTech, which is one of the areas I spent some time in or healthcare having an experience that's deep and functional around that can help you get into more specialized VC role or something like that.
And there's also kind of the a more finance road as well. Where, you might have some previous finance experience either in Corp dev or what happened or investment banking or something like that. And in that transitioning into it I think there's a bunch of these different. Different things.
VC is a little bit like entrepreneurship in, in early entrepreneurship and joining a team it's they tend to be small firms. They tend to be relationship driven. It's a long-term hiring cycle. You know, people are not just hiring all the time. When I got into venture, I didn't know, a single venture capitalist.
And I actually had only been to San Francisco once for a weekend. So the whole world is pretty foreign, but I was pretty focused on financial inclusion. That was really what I w w problem I wanted to tackle. And I made a list of the most interesting companies that I'd been admiring and then looked at who were their investors and beg, borrow, and steal to be able to, to have 15 minutes with a bunch of these folks and try to keep the relationship going.
And over time, some of those conversations became half an hour, one hour conversations. And and at one point one of the folks I got to know, I don't know, at Omidyar network, a guy called Argent Acosta started looking for someone to join in and I joined him to be employee number one on his emerging financial collusion, FinTech fund within Omidyar network.
And so that was how I got into it. Right. I think a lot of this is. Is building that relationship. These are small teams and finding folks that you really resonate with that are investing in the same kind of things that you care a lot about.
Miles: [00:35:50] Yeah. I'd love to get into a little more detail if you're willing to share about how did you get those first introductions and meetings?
What, what was the stated purpose?
Alex: [00:35:59] For me to be honest, I a lot of it was just information. It was a, Hey I've, I've seen X, Y, and Z company. This is some of the work that I was doing. I'd love to just spend 15 minutes on your calendar. I think that a great time. I often tell my students, you know, use the fact that you're in school as a reason to connect with folks.
And it particularly alumni were very happy to chat and, and doing it in a low, low impact way. And then trying to show value in some, in some way to them. I think that if you're candidate looking to be in venture and you have a view on the sector or stage, I think it's important for you to have a very strong perspective.
On the kinds of things you find interesting. And when you talk to a VC, being able to tell them, Hey, have you heard of this company or this company, or, or what have you, and, and show, show that you're really being thoughtful about it and putting into action, your desire to have this career. And so that, that was a little bit of how I was doing it.
I I had the opportunity to see some folks I was able to meet through alumni. But a lot of it was just very, very slow going where I would talk to friends that were at, you know, X company. And they would introduce me to someone and it was, it started only being kind of n+3 type folks.
Argento was the way that that had happened. That one was, it was an introduction for a friend. To a friend of them who then, then, then introduced me. And so it was a little bit of a con convoluted accident. And, and I think that's how a lot of this is. And so it's, it's about taking a long-term view.
It took me a well over a year to do that. But it was actually. Because I really cared about the topics and it was something I really wanted to do. I actually found it to be a really fun exercise. And by the way, all those relationships I've made at the time actually helped me later on in terms of just having a ready network in the space.
Once I, once I was in venture to be able to talk about companies and sectors and things like that. And, and and, and actually add add a little bit more of an expanded network to, to the firm I was working on.
Miles: [00:37:45] Well, thank you for sharing a little more detail there. Do you have a book, article or website you would recommend to aspiring founders or VCs?
Alex: [00:37:55] Do you mean from
Miles: [00:37:56] your own?
Alex: [00:37:57] Oh, aside from my own. So a couple of things that I think are great, required reading around innovation on just kind of how Silicon Valley emerged, things like that. I really liked, some of the work around Something Ventured around the technical around venture.
I think Brad Feld has done some great work around around his foundational books and around things around the global innovation landscape, of course, besides Out Innovate which I'm biased towards. I think some of the writing of Chris Schroeder and he wrote a great book about the middle East called Started Rising, Bill Draper, who I think was one of the very early global venture capitalists which, you know, he obviously did a lot of work for Senator Hill launched, the VC fund in India was head of the UNDP he wrote a great book. Called The Startup Game that talks about his career, but also the rise of of this innovation movement. So those are some of the things that I've, I've really enjoyed and resonated with and have inspired me in my own work.
And then I think the work at Endeavor The Global Entrepreneurial Ecosystem building organization, I think is very powerful and it gives you a pretty strong, ready sense of what's happening around the world as a startup, you know.
Miles: [00:39:02] Great. And for closing, where, where can people follow you online?
Alex: [00:39:06] Happily. So you can follow me Alex lasara.com, L E X L a Z a R O w.com and sign up for my newsletter. If you're interested in the book Out Innovate, How Global Entrepreneurs from Delhi to Detroit, Are Rewriting the Rules of Silicon Valley it's available anywhere where books are sold, of course, on Amazon, but given COVID and everything happening, I'd really encourage you to consider buying it from your local bookstore as well.
And you can find me on Twitter and LinkedIn just searching my name, Alex Lazarow Miles. Thank you so much for having me. This was a lot of fun. Yeah.
Miles: [00:39:32] Thank you. I've really enjoyed this.