Note: This article is the sixth in a series of interviews highlighting the work of interesting impact investors.
Melissa Bradley is the Founder and Managing Partner of 1863 Ventures, an investment fund that accelerates New Majority entrepreneurs from high potential to high growth by bridging entrepreneurship and racial equity. Melissa is a serial entrepreneur, investor, professor and researcher. Through her career she has developed expertise in (impact) investing, technology, financial services, (social) entrepreneurship, venture capital, social responsibility and media. Melissa has significant start-up experience, and has facilitated successful investments for many start-up and emerging companies, as well as extensive board leadership and engagement.
Melissa, 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 have been an impact investor for 30 years. After becoming a successful entrepreneur, I decided it was time for me to help other entrepreneurs like myself. The journey to start my first business was plagued by racism and sexism. Once I was able to transition from the business, I became an angel investor. I supported other women and entrepreneurs of color who needed early capital to launch their business ideas.
When I started 30 years ago there was very little conversation about investing in women and people of color. There was no ESG framework. Most angel groups were comprised of white men with a sprinkling of women and usually 1-3 people of color at the most.
Angel investing has become more diverse thanks to the increased economic status of women and people of color, as well as the increase in angel investing education and formal investment groups to help engage potential investors and demystify the process of investing.
As I reflect on my journey my hope is that the S in ESG gets more attention as the demographics of entrepreneurs has shifted and most new businesses are led by women of color. I also hope that the work of ACA and others to diversify the angel investing networks continues.
Looking ahead in early stage impact investing, what are you most excited about? What keeps you up at night?
Until my hopes for a more diverse investor base become reality, I am excited about the diversity in new business starts. I am excited about the increase of Black and Brown and female GPs to partner with on deals. I am excited that there are more businesses being started by folks who look like me and are meeting historical gaps in critical sectors.
Do you have a thesis or focus on any particular type of founder, company or industry?
I am sector agnostic but prefer financial services/fintech and CPG; areas where I have expertise. I am always open to other areas as I seek to learn emerging technologies and fast-growing sectors.
My thesis is to invest my financial and social capital in entrepreneurs who are driven, possess sector expertise, understand the numbers and have a vision to be profitable and change the world. My preference and priority are people of color.
How did you prioritize which ESG issues you were going to focus on?
Since I started, I have been laser focused on the S in ESG. Due to the barriers as a woman and person of color when starting my first business I have been determined to reduce the friction that I endured. I give priority to entrepreneurs of color for investment consideration and prefer women.
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?
I am focused on creating wealth in historically overlooked communities. Therefore, I focus on the potential for wealth creation for the founders and team, the trajectory of job creation and growth, and the impact on local communities. These metrics are tracked regularly, and the founder is held accountable to reporting and achieving predetermined goals.
Do you expect market rate returns, or are you willing to accept concessionary returns for especially worthy companies?
I always desire market rate returns. However, if I believe there is a greater good achieved with concessionary returns then I am open to a discussion to make sure the greater good is reasonable and measurable.
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?
I leverage a range of investment options that include equity, SAFE and revenue-based financing. Since my desire is to create wealth for the founder and team, as well as myself, I must be mindful of cap table dynamics and try to make sure founder/team dilution does not happen prematurely. I am mindful of making sure that it is not only the investor that achieves wealth but the founder and team as well.
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?
I am surrounded by deal flow all the time. I belong to a few angel groups. I run an accelerator that sees over 1k+ entrepreneurs a year. I accept referrals from trusted sources. I do not respond to cold emails.
What would you say makes you good at what you do?
My experience as a serial entrepreneur helps me be a better investor. I understand the challenges of being a founder and can be empathetic and helpful since I have had an exit. I am also a finance geek and can help the team achieve their goals and support profitable returns.
If you could give entrepreneurs one piece of advice about working with you, what would it be?
Know your numbers and be honest at all times.