Note: This article is the second in a series of interviews highlighting the work of interesting impact investors.
Alicia Robb is a Colorado-based author, researcher, angel Investor, and managing partner of two early stage venture funds. In addition to her work as an impact investor, Alicia is a Ph.D. economist specializing in entrepreneurship, entrepreneurial finance, and international development.
Alicia, thank you for participating. How long have you been an impact investor and how did you get started? What would you say are the main ways the impact investing world changed during the time you have been involved?
I started investing through crowdfunding but did my first angel investment in about 2014. I realized soon after that I wanted to make an impact with my investments and focus on investments that were solving real societal and environmental challenges. There has been a surge in interest in impact investing over the last 5-7 years. I remember organizing an impact investing breakfast at the annual Angel Capital Association summit and it was standing room only. But that was the only session that was focused on impact. We created a half track and then a full track in subsequent years at the summit. The sessions are very well attended so I know many investors are seeking to make a positive impact with their investments.
Looking ahead in early stage investing, what are you most excited about?
Now that impact is more mainstream, I think I’m most excited about challenging the traditional venture capital model and figuring out ways to innovate along investment structures, investment theses, and models. There are still such glaring racial, ethnic, and gender gaps in the funding going to entrepreneurs and in the investors doing the investments. I’d like to see capital invested in ways that work for entrepreneurs. For example, flex equity or entrepreneurial redemption models— investing in a way that allows the entrepreneurs to buy back their equity at a later date if they prefer to seek that path of growth rather than being acquired.
Do you have a thesis or focus on any particular type of founder, company or industry?
I’m industry agnostic. My main focus is companies that are providing solutions to our climate challenges and wealth inequality. I tend to seek out female and BIPOC founders and companies that are removing animals from the supply chain, but right now I’m really interested in finding companies that are innovating around sustainable packaging.
How did you prioritize which ESG issues you were going to focus on?
I seek out companies addressing issues I’m most passionate about. I care about eliminating poverty, improving the lives of marginalized populations, finding solutions to climate change, and creating a more compassionate and vegan world.
How do you measure the impact of your investing and the portfolio companies you work with? Do you use company-specific and/or portfolio-wide KPIs?
We look at SDGs (sustainable development goals) for the fund as well as for my own investing, as well as specific company metrics depending on the sector that each company is in.
Do you expect market rate returns, or are you willing to accept concessionary returns for especially worthy companies?
I dislike the term market rate. As Morgan Simon in Real Impact notes, if the market rate is something that contributes to rising wealth inequality and the destruction of our planet, why should that be our default? For the same reason, I don’t like the term concessionary---you are giving up financial return in concession for making the world better? I prefer the terms sustainable rate or restorative rate. Kachuwa Impact Fund, on whose board I serve as a director, is an impact first fund, more patient capital, and seeking a sustainable rate of return for our investors.
Do you do straight equity investments only, or do you utilize other early stage deal structures such as lending, revenue-based financing or grant-making?
We tend to do equity investments, but are open to convertible notes, revenue based financing, and loans, as well as flex equity. We also invest in cooperatives, which pay dividends.
Where does your best deal flow come from, and do you ever feel frustrated or limited in terms of deal flow by having a specific impact focus?
My deal flow comes mainly from my network of investors in the Next Wave Impact and Kachuwa Impact Funds, from my vegan investor angel group, and a broader network of funds and investors who share my investment theses. I have never felt limited in deal flow!
What would you say makes you good at what you do?
The people around me! My investment committee and limited partners at Next Wave Impact and my investment committee colleagues at Kachuwa Impact Fund and my colleagues at Vegan Investors. I surround myself with people who are way smarter than I am and their different perspectives also improve my own diligence process.
If you could give entrepreneurs one piece of advice about working with you, what would it be?
I value transparency, honesty, and integrity and see my investment as a commitment to supporting your success so please make sure our values are aligned. Taking on investors is a commitment and a long term relationship that takes work on both sides.
What's the greatest advice you received about early stage investing?
When I was writing The Next Wave with Susan Coleman, we interviewed a lot of angel investors and venture capitalists and asked them what advice they’d give to new investors. My favorites include: 1) look at 20 deals before you make your first investment; 2) make sure to look at the investment with your investor hat on, not your consumer hat–don’t invest just because you want to buy the product; and 3) invest with others through an angel group or syndicate and don’t try to do it by yourself. All three of these were pieces of advice I wish I had had before making my first investments! If I would have had that advice and listened to my gut, I wouldn’t have made and lost my first larger angel investment that I did! Trust your gut too. If something seems not right about a deal or an entrepreneur, there is probably something to that feeling.