Ross Baird of First Light Ventures on closing the gap between entrepreneurs and investors
The best social innovations can be stalled in the ideas phase without funds to get started. In this series social entrepreneurs discuss fundraising: strategies, pitfalls and sweat spent on the way to getting backing and raising money.
Ross Baird manages Village Capital within First Light Ventures which improves social ventures and accelerates impact investing through peer support.
Dowser: What is something concrete and tangible you have learned in the last three months?
Baird: We’ve learned of the value of peer support as a way to help build social entrepreneurship in general. This year, we have piloted the Village Capital model, an experiment that takes the spirit of the ‘village banking’ concept to the social venture level. Basically, we organize social entrepreneurs with very early stage enterprises/ideas into groups through an incubation program where they mutually assess each others’ ventures with a goal of refining and improving their models. The program also has financing for a small number of enterprises: in the end, the group votes on the venture they deem to be most successful. We also line up investors who agree ahead of time to fund the winner of each group.
We’ve found that entrepreneurs are able to accelerate and build one anothers’ enterprises in a way that investors never could. We invested in a local/organic food company, Jack and Jake’s, that NEVER would have gotten investment—from us or anyone else—without the growth that John Burns, the entrepreneur, experienced through the peer support companies. Now, Jack and Jake’s is opening a store that is revolutionizing food in New Orleans and is one of our most successful portfolio companies. Another company, Feelgoodz, was able to sell 7,000 flip-flops in a week because the entrepreneur needed to repay another entrepreneur, an education company. He never would have felt that pressure repaying an investor
What is a mistake or mishap you have learned from?
We’ve learned that the gap in expectations between entrepreneurs and investors is pretty big, and it stunts a lot of potential investments. We had an experience with an incubator where we pre-committed investment dollars through our Village Capital program to entrepreneurs. When many of the entrepreneurs looked at the term sheet, it was the first time they had ever seen investment terms. Concepts such as equity were foreign to the entrepreneurs; ‘You mean, I’m giving up ownership of my company?’
Investors need to be more understanding of what entrepreneurs know and where they are coming from—and realize that investing is what they do all day but is sometimes a foreign concept to an entrepreneur. Also, entrepreneurs need to be a bit more discriminating on who their investors are—every entrepreneur should ask an investor: what value do you bring besides money?
Interview has been edited and condensed.