Sramana Mitra: Given your target audience, where do you source deals from? What is the strategy that gets you face to face with such entrepreneurs?
Julianne Zimmerman: This pertains to one of the fundamental myths at the heart of the current incarnation of the venture sector. We have this deeply-rooted pernicious myth that there’s a shortage of investable talents. You’ve probably heard VCs complaining about pipeline problems.
What I say in response is, we have no pipeline problem; we have a network problem. The simple fact is that the vast majority of capital is disconnected from the vast majority of entrepreneurial talent. For us, our deal flow cultivation practice is very much about a combination of outreach in the form of relationship-building with early stage investors who also focus on our target founders.
We are actively in conversation with incubators, accelerators, and other programs that provide services to our target founders. We also do our own scouting. We go where the talent pool is rather than expecting them to come to us. We go to events like Black Tech Week and Spectrum that are specifically for and by the founders we are seeking.
Most of the time, our conventional venture peers aren’t there. It’s not difficult at all to find outstanding talent. We actually have way more high-quality deal flow than we can engage.
As a result of making the effort to find and engage the founders we are interested in, we enjoy inbound connections. People actively make introductions to us. We have founders who come to us and say, “I have a term sheet from a venture capital but I would rather have Reinventure as my lead investor. How long would I have to put them on hold in order to have a conversation with you?”
That is just an extraordinary validation of the value of creating those kinds of relationships.
Sramana Mitra: Let’s start with the fund size and check size.
Julianne Zimmerman: The fund is a modest one. This is our first fund under the Reinventure banner. It’s a successor to a predecessor fund. It’s a $50 million fund investing solely in the US.
We invest anywhere between half a million and $5 million in a company. Typically, around $3 million per company. For first investments, we would frequently invest towards the bottom of that range.
Sramana Mitra: I want to get into some examples from your portfolio including how you met the founders. What is it about the founders that you resonated with? Before we do that though, I would like to understand the DNA or you and your partners’ background.
Julianne Zimmerman: Let’s start with my senior partner Ed Dugger. He is one of the pioneers of impact investing here in the United States, starting in the 1980s, long before we even had this phrase of impact investing. He is also one of the few black statesmen in the venture community.
He was formerly the President of a practice called Urban National Corporation (UNC) based here in Boston. That was a pathbreaker in investing in undervalued and underinvested founders focusing primarily on black and brown founders.
He developed quite an extraordinary track record. UNC fund returned 32% IRR to its investors, which is top-tier performance for any venture strategy. Its portfolio was majority success by design. Two-thirds in that contributed to the financial return.
Of the remaining third, about half returned at least some or all of the invested capital. It’s almost an inversion of the prevailing venture practice both in terms of the makeup of the portfolio and in terms of the return profile of the portfolio.
Ed was quite appropriately a media darling for a time because of this distinct differentiation from the prevailing venture community. Very shortly after that fund was harvested, that story fell into collective amnesia. It was so different from the stories we are accustomed to hearing and reinforced that it got lost.
Ed decided that it was time to do the same work again and recreate that example. It was my great good fortune and honor that he sought me out to recruit me to join him.