Founders First Capital Partners brings a different approach to diversity investing – TechCrunch

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Kim Folsom Came He moved up the engineering ranks in the 80’s and 90’s before establishing the first of the six companies, three of which successfully withdrew. Currently she is the founder and CEO of. Founders First Capital PartnersA San Diego startup investment company that uses a non-traditional approach to financing, called Revenue-based investment Invest in historically undervalued founders.

Unlike most Silicon Valley venture capital, Founders First isn’t looking for the next unicorn. Instead, Folsom struggled to get external investment to help build a business from a historically undervalued background (female, colored, LBGTQ, veteran), solid ideas and decent. Well, if not brilliant, look for a founder with revenue and growth.

She focuses on B2B companies in the tech industry, usually with a product and some wraparound services that go with it, which can be turned into recurring subscription revenue. And with additional support from the founders, coaching and guidance transforms the business into a continuous revenue growth engine.

Rather than buying stock at a startup and expecting it to end at some point, Folsom has partnered with these companies to invest $ 50,000 to $ 1 million, averaging $ 300,000. I would like to make a loan at. If they succeed, she succeeds by being repaid over time based on monthly revenue with the company’s profit cushion.

I talked to Folsom last fall about her career journey and why she decided to set up another type of investment company for people who live and work in areas not visible to Sand Hill Road. We talked.

Startup dream

Folsom, a black woman, grew up as an engineer in the 1980s. She clenched her teeth at a company like NCR and helped design an automated teller machine, IBM PC’s early state-of-the-art technology. But her goal was always to run the company. She knew it wasn’t possible at the company she worked for.

“I [early part of my career] I’m trying to understand how I can learn enough at the different companies I worked for so that I can go out on my own. And then, in the mid-’90s dot-com era, I started my first company, and then six before I started Founders First, “she told me.

She raised $ 30 million along the way and learned what it takes to set up a company. This is valuable intelligence that can be shared with the companies that currently fund it.

Folsom didn’t have many role models in the business world when she started. In the 1980s, fewer women played an engineering role, and even fewer were colored. Also, women did not become leaders in major tech companies until Meg Whitman was appointed CEO of eBay and Carly Fiorina was appointed CEO of HP in the late 90s.

Even today, only 8.2% of Fortune 500 companies’ CEOs are women, and colored women make up only 1% of CEO positions across Fortune 1000. Female business collaborative..

When it comes to color-leading startup women, she rarely gets venture funding when she starts, and today that number isn’t that good. Crunchbase discovered in the first half of 2021 Only 1.2% Of the $ 147 billion in venture funding, it was paid to the black founder.When we narrowed that data down to the founders of black women, the number was Minimal 0.34%..

After her experience as a founder, she wanted to set up a company that would allow people who are usually left behind in this process to have easy access to funding sources.

“Whether you’re a female, colored, military veteran, LGBTQ, or low- and middle-income region, the journey of diverse founders is the same. Smart to grow your business and earn positive wealth. It’s difficult to access money. It produces results, “she said.

And that’s why she launched Founders First in 2015.

Giving back

Folsom knew that he had this wealth of experience as a startup founder who founded a company, raised money, and successfully withdrew. She wanted to find a way to help others build their business and get all the same benefits. The world of venture finance.

“By experiencing this several times in my own experience, I felt I knew enough that I could try something, but what I knew about the market I was trying to serve. I wanted to build this in a way that leverages, “she said. ..

Folsom recognition The withdrawal provided a rational way for both investors and founders to make money, but the process was not so efficient as there were many viable companies that failed to achieve revenue and growth. I also knew that it didn’t work for everyone, and most traditional VC company requirements.

By using revenue-based funds instead of equity, she builds a company around the founders of a new class, creating a successful investment tool for partners, while at the same time they are the founders of these. They themselves decided that they could help grow into a company that was far more successful than they could have.

“The unicorn perspective of the dot-com era wasn’t as it is today, but the road to a unicorn company means you have to do it. [ignore] There are a lot of really good companies that can have such a big impact on the market, “says Folsom.

Folsom is not a unicorn, but “zebra.. ” of 2019 story about Zebras UniteZebra, the organization that builds the community of zebra founders, is described as follows: Investor. “

That’s exactly why zebras are trying to help them because they “can make a big difference and build wealth in both the communities they serve and the founders,” Folsom says.

Financing

When she launched in 2015, Folsom struggled to find an investment partner, despite her impressive qualifications. Initially, she says, most investors were too unorthodox in the idea of ​​investing in diverse founders using a revenue-based model and didn’t want to miss an opportunity. She started by investing her money and then went to the people who invested in her in the past.

“When I started Founders First, I said I wanted to focus on funding a variety of founders, but people were crazy about me because I wanted to use a model that was more appropriate for business owners. So I raised money in the past, and my early investors were … mostly betting on me and people who bet on me in the past, “she said. rice field.

She did a proof of concept at 10 companies in 2017, and when it worked, she started looking for Series A.But before that happened, she secured in 2019 $ 100 million credit line From Community Investment Management, an organization that promotes inclusion through lending, a company that appears to be in perfect agreement with Folsom’s goals.

The company won a total of $ 11 million in Series A this year. $ 9 million chunks in March Continued from the Rockefeller Foundation and the Surdna Foundation $ 2 million in November From WK Kellogg Foundation, Pivotal Ventures (Melinda French Gates company), Schultz Family Foundation, Arc Chicago, LLC.

She said the increased awareness of institutional racism triggered by the killing of George Floyd certainly helped companies like her trying to increase the diversity of investing to raise capital. say. Still, the company is based in San Diego, but she says California institutional investors have never stepped up to take part in the round, as was the case with all her startups. ..

How to use

Folsom is looking for a company that is already profitable beyond the conceptual stage and has the potential to grow by properly adjusting its business model. She says the founder must have the right amount of experience, expertise, and commitment to growth. In addition, the founding team needs to be surrounded by new people who can help drive its growth.

She said they value their investment in the company based on their income strength and predictability, but never ask the founders to put in their personal credit or assets. The company’s profits serve as collateral.

The funded company will repay the “loan” based on the agreed limit over a specific period (usually three years). “For Founders First, the limit can be 1.35 to 2 times that period. The company makes monthly payments using a percentage of sales, which is 2% to 10%. Agreed on scope [of revenue], “She explained.

As an example of a success story using this model, she Clarinet solution, Provides managed services for Microsoft SharePoint and Office 365. The company’s mid-six-digit revenue was flat for three years before teaming up with its founder. The founders helped create new sources of revenue, including recurring revenue, doubling the size of staff while achieving 2.5x revenue growth over two years.

Folsom uses her expertise and experience to help other companies like the clarinet have access to financing, and to grow and develop their business in areas that are usually left behind when it comes to technology financing. I’m trying to help.

She wants people to understand that helping diverse founders is not a zero-sum game. From her lifelong experience, she understands that the current climate, which promotes diversity and inclusion, can change rapidly. Folsom sees the opportunity window open in the past and says it only closes a year or two later, hoping this time to be different.

“The window opens and then closes for a year, 18 months, or two years, and then [I’m hoping that] This time when the window is open, [few people] It comes out from the other side. Thousands of people must be able to make it that way. “

Perhaps as companies like Founders First surge and historically undervalued groups gain access to more investments, they leave their windows wide open and communities left behind in the past. Helps create wealth and employment throughout.

Founders First Capital Partners brings a different approach to diversity investing – TechCrunch Source link Founders First Capital Partners brings a different approach to diversity investing – TechCrunch

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