Seed Capital From Angel Investors: Lewis Hower, Executive Director, University Impact Fund (Part 7)

By guest authors Irina Patterson and Candice Arnold

Irina: Any more thoughts on funding at different stages of business’ development?

Lewis: If we are looking at something that’s a little more established, such as something related to microfinance or SME funding, we will look to fund at the later stage when there is more volume and ability to go into that space.

It’s going to be based more on quality relationships with the different funds and folks whom we’re going to be co-investing with and less on saying, “We do only very early stage” or “We do only later stage types of situations.” We’ll certainly take a balanced portfolio approach to our fund, recognizing how the overall perspective looks. But we won’t have any rules that say we can’t do one thing or the other.

Irina: Do you consider the size of the market when you consider investing in a company?

Lewis: Yes. We certainly do take a look at it. But if you compare – just to use specific examples – if you take this EcoScraps company as one, even if we just look at the U.S.-based soil and greenhouse market, that’s going to be a very different market size than perhaps Indian microfinance or global microfinance, for that matter.

So, it’ll depend on the situation by nature of the types of businesses that the impact investing arena usually looks at.

There is potential to have very large markets, if you take microfinance or microinsurance or some of the other products that are geared toward the base of the pyramid. Theoretically, the potential size of that market could upward of three or four billion people.

But if you take a look at something that is a little more focused and really homing in on one specific segment, that market size is going to change.

I feel like I’m giving you broad and wishy-washy answers, but part of it is dictated by the partners we’re working with as well as the specific opportunities that come up, which we’ll evaluate on a one-off basis.

Irina: So, if somebody comes to you with a niche, $20 million–market, will you consider them?

Lewis: At first pass, we would definitely be reserved in our approach. But if we really dug into that market and were comfortable with the fact that that market was small but this company has significant market capture and there’s a clearly defined path to exit for a market of that size, then yes, we would consider it. But we would have to be much more confident in that team and the service or product that they’re providing to know that they are the ones that already have or can capture a significant portion of that market.

Irina: Do you consider the business experience of the team?

Lewis: Oh, absolutely. In the impact and social entrepreneurship space, you see a diverse and wide array of backgrounds and business experience.

You have some individuals who come from the “traditional” side of the world. You know, they’ve been consultants or investment bankers or practitioners at Fortune 500 companies but really have understood and realized that they want to do something else for the world. So, they’ll come into it from the perspective of a traditional background.

Then you also do have folks who’ve been eating, sleeping, and breathing their social cause or initiative of impact and have been trying to surface for many, many years.

So, you see diverse backgrounds, and a lot of times, I would say more so than in the “traditional,” technology or software backgrounds, where it’s very clear and you can easily see if that team has relevant business experience. Sometimes in the social and environmental impact space you can clearly connect the dots, but there are times when that individual may not be a 30-year veteran of environmental response issues but she’s come from another background, and if we can get comfortable with her skill set and what she brings to the table, then yes, we would take a look at her.

Irina: Do you have any character traits that you’re looking for in an entrepreneur?

Lewis: Well, this is something we’ve been trying to cultivate in some of the entrepreneurs that we – I and some of the other organizations in the impact investing broader space – have been working with. One of the things that I like to focus on is having fundamental business abilities. In the social entrepreneurship space, a lot of times we like to say that 80% to 90% of whether they’re going to be successful comes down to basic business blocking and tackling.

This segment is part 7 in the series : Seed Capital From Angel Investors: Lewis Hower, Executive Director, University Impact Fund
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