Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Nitin Rai of Elevate Capital was recorded in February 2018.
Nitin Rai, Managing Director at Elevate Capital, made a compelling case for investing in niche businesses with the upfront goal of scoring early exits. Excellent discussion!
Sramana Mitra: Tell us about your seed-stage investment activities. Let’s get to know you and get you introduced into our community.
Nitin Rai: I started out as an entrepreneur back in the 80’s in Silicon Valley. I moved to Oregon in the late 80’s. I started a company called First Insight. Then I got involved with an organization called TiE. We launched the Oregon chapter in 2007, which was right before the meltdown. When there is an economic downturn, there’re lots and lots of entrepreneurs who are creating companies and looking for funding.
I was the champion for angel funding. We have invested in a number of startups in Oregon. Several of them were women-led and started getting some really great results. Our first seed investment was in a company called Zapproved with CEO Monica Enand. She just recently sold her company to Vista private equity with huge returns – probably the best returns we’ve seen in the last several years.
Sramana Mitra: What does the company do?
Nitin Rai: They’re in the legal tech space. They had a great outcome. As a matter of fact, Monica is a charter member in TiE. Portland being a small ecosystem, TiE angels became a force to reckon with in terms of deploying early stage capital and taking very early risk. From that experience, Elevate Capital was born.
I launched Elevate Capital two years ago. We have two funds. There is a fund called Elevate Inclusive that exclusively invests in women and minorities. It’s $2.5 million. We’ve already made all our investments. It’s very early stage and highly diverse. It invests across the board in different industries.
The sister fund, which is a larger fund, is called Elevate Capital. We haven’t closed it yet. We’ve raised about 60% of the $10 million and we’ve made 10 investments as well. These are early-stage companies. We invest in everybody. We invest between $100,000 and $500,000. These are usually pre-A type investments with room for follow-on. In total in the last six years, I’ve invested about 50 startups.
Sramana Mitra: Excellent. I want to get a couple of points underscored. Your investment activity is completely in Oregon?
Nitin Rai: The geography is Pacific Northwest with the ability to do some investments outside. We’ve actually done two investments outside of Oregon. There is a company in San Francisco called Blendoor. We have also invested in a company in New York called Rezi.
Sramana Mitra: What is your industry sector sweet spot? What do you like to invest in? What kinds of companies?
Nitin Rai: We are somewhat agnostic. We started out mostly doing tech. B2B was our sweet spot. Because of the inclusive fund, we’ve done a fair number of consumer internet products. Specifically, we’re in tech. Tech includes B2B, some B2C, VR. We’re just about to do a Cannabis deal mostly on the technology side. We have done some bioscience and apparel. Most of these industries are actually tech-enabled.
Sramana Mitra: You’ve invested in a lot of companies in the last six years. I imagine you have a very good deal flow. You have a unique angle and perspective into what’s happening in the industry especially with the Pacific Northwest. What trends are you seeing in the deals that are coming to you?
Nitin Rai: We have this intention of investing in the underserved entrepreneurs and also underserved regions. That also includes some of the industries like apparel, sports, and food where you don’t see a lot of VC activity. We position ourselves as a fund that intends to invest in those kinds of companies. It’s not that we wouldn’t look at other types of deals but what that did is give us a deal flow of women entrepreneurs.
70% of our investments are in women founders. That is very unique for Elevate. We get deal flow from all over the country. Unfortunately, given our location, we tend to invest more locally. There seems to be a strong underlying current of entrepreneurs that we’re seeing where women all over the country are applying to Elevate for funding.