Impactful Investing in Diverse Founders with Oralia Alvarez

Startups get the party. Startups get the party started. Startups get the party. Startups get the party started. You want tech and tacos, Tacos and tech you know we got tacos and tech is on smash border green guacamole keeper countins counting beans Contador Quentan frijoles found us trying to raise some queso la vida San Diego school of rappy rapping fire tortillas round jalapenos in these modern times a crappy beer and coffee my coding yoga posse fold the body origami we be surfing coronado eating tacos El gordo, the taco stand in pesto lucha libre and sombrero Got a shout out to cost angels by the ocean Watch the sunset la Hoya shores Entrepreneurs trying to get funded When San Diego Startup Week is popping in the summer Oceanside, the Tijuana esti be full of hustlers from couch surfing to penthouses right on the beach. Tech leaders who who believe stars are within reach we interview and founders who be shooting for the Moon SDTechOS with your host, Neil Bloom. Come on. Startups get the party. Startups get the.

Welcome to the Tacos and Tech podcast where we discover cutting edge San Diego technologies and the builders making it happen. I'm your host, Neil Blum, San Diego's tech ambassador and together you're going to put a face to the name of today's tech leaders with our own blend of local lifestyle.

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And welcome back to the Tacos and Tech Podcast. I'm your host, Neil Bloom and I am thrilled to be joined with Araya Alvarez, Director of Business development at Founders First Capital Partners, a San Diego based small business accelerator and investment company. Welcome to the show, Aurelia.

Thank you so much for having me here, Neil. It's amazing. I'm excited. You're a big powerhouse here for our region. So it's an honor to really be joining you this afternoon. So thank you.

No, likewise, likewise. And you're a recent board member to Startup San Diego, so welcome to the board. We are thrilled to have you joining us, linking in your community to, you know, the greater San Diego startup community. So. So thanks for joining there too.

Of course.

Do you want to give us a quick overview of what Founders First Capital Partners are.

Yeah, absolutely. So Founders First Capital Partners, we are an impact lender. We are the largest national platform for diverse led small businesses that are founded and led by diverse business owners that identify as people of color, women of women of color, military veterans, LGBT folks, and pretty much any entrepreneur that lives and works in low to moderate income areas. We do have a very unique approach as far as how is it that we work with the founders and how is it that we actually fund the founders and it's more of a three prong approach. Number one, we focus on mentorship, secondly, we focus on funding and thirdly, we do focus on advisory support. So when people keep hearing about this amazing success stories of how we're growing the small business, even though they're not high tech companies, they're service based, but they are tech enabled, how they're going from becoming like 50k in annual revenue to like a matter of a million dollars in revenue, 12 to 13 months. I tell people, hey, it's not magic, it's not voodoo. We actually have a very unique platform and a very unique that we do this. And we've been very fortunate to have worked with 400 small businesses from across the country in the last five years.

Wow.

And I'm happy to delve into any details as far as mentorship, funding or advisory if that's needed as well.

Oh yeah, we're going to do it. We're going to, we're going to, you know, pull back the Komodo. We want to hear some stats because that 400 number is awesome. I want to hear what other great impact you guys have had. But, but we want to get to know you a little bit first. I'm curious, where did you grow up and how did you end up down this path of helping businesses?

Yeah, so I came into this world. I'm just kidding. I won't tell you when I came into this world. But I was born and raised here in San Diego, California. It's interesting because looking back at my career trajectory, I never really anticipated that I would land on the impact world, which now I'm very proud to be a part of this amazing community. I initially kicked off my career in more of a more boring and not so innovative side of business. And that was like on the sell side and real estate side, specifically real estate investments. What I did with real estate, people think, oh, were you just like listing houses? I'm like, no, that's completely not what I did. So what I, what I did in the world of real estate, it was more of what we call a bird dog. So on the investment side, in order for investors to really be able to make a, you know, a home run, make a lot of profits, you usually want to be able to secure properties that never actually hit the market. So you don't want them to be end up in the MLS or you never want them to actually be public offerings. So I did a lot of networking. That's how I actually got to meet a lot of really cool folks around the city here or in our southwest region. But anyways, I sell all of that to share that as a bird dog. In real estate, you're pretty much sourcing. You're sourcing deals from other fellow real estate professionals that just never made it to the market. So that's what I did for like selling seven, eight years. And then as a result of those type of investments, again, I never planned it. It was just a sheer coincidence. I came up upon the opportunity to actually acquire a vineyard about five years ago. So I did that. It was not necessarily, I would say a wine aficionado, but I knew the business and I'm like, hey, as long as you teach me, or at least I have a little bit of understanding of what this looks like. I was able to delve into that. And then about two years ago, I did exit the day to day operations. So went from real estate to viticulture and now I'm on the impact side, and I'm so glad I'm on the other side because this is where I get to wake up. I do good every day. In real estate, you win when other people lose. In the impact side, we all win. There's no winners or losers. Everyone wins. So I'm happy to be on this side finally.

Oh, I love that analogy though. It is pretty cool to drink your own product, I would imagine too.

Oh yeah, and people would laugh when I initially, the first round of wine that we actually produced was strictly because I wanted to put my, my dog's face on it. By the way, my dog happens to be one of the first dogs in the entire country to have ever gone through stem cell therapy. So she's like a big deal in the doggy world.

Wow.

Her name is Charlie. More than you wanted to know. Right?

Is she a bird dog too?

She is not, but she's a rescue collie.

Really cool. I grew up with bearded collies, so I've been herded many times coming down staircases, being pushed to, to make it down the stairs on time.

Yeah, it's funny.

Really cool. So Kim Folsom, one of the co founders of Founder First Capital Partners. How did you, how did you guys meet?

Let me see. I wish I had a really fascinating story for this one, but it's interesting. So when I was actually running the vineyard, that's when I started doing more research about sustainability. What it really meant to do business, win in business and still do good. And as a result of that research and you know, just connecting with the right folks, I learned about impact investing. I got connected eventually to Kim and that's where we really started that dialogue about like what it meant to be a part of founders first and then just hearing the amazing work that she had done for the past three years. But really she's been doing this work for like many, many years. She's a six time tech entrepreneur. Amazing. She's one of the first black women actually in this country to have ever race venture. And that's a big deal. Like I stand on her shoulders and I tell her every single day, I'm an angel investor today because of you. Even though she like to take credit for that. I'm an angel investor. I am where I'm at. Because you were that one woman of color that was opening doors for me. Right. So myself, along with other generations are indebted to her. But yeah, that's how I met again. Just by really doing research and connecting with the right people and being introduced to her.

Yeah, Kim's got a great story. Luckily we were able to have her on last summer and tell it. You know, her history of financial education is huge as well too. Right. Of just unlocking access to so many people in so many different ways. And now you get to make one plus one equal three together, which is pretty great. Tell us some more about especially over the last year with the pandemic. God, the face of entrepreneurship really changed the access and just who has the availability to go through it? What's it been like over the last year or so, helping entrepreneurs get started?

Yeah, so it's interesting. So as soon as the pandemic did hit, knowing that we did serve the market that we serve, which tends to be underrepresented founders, we knew ahead of time, maybe even before any publications came out, that our market would be severely impacted. And that's because in previous recessions it tends to be that diverse business owners are always hit four to five times harder than anyone else. So we saw that coming. Right. So we were already preparing ourselves. Um, it's interesting because our investment team again as soon as we went into the lockdown, they started reaching out to our portfolio companies and seeing how they were doing and how we could support them more at a larger level that we had done before. Um, so we were definitely able to provide them with that type of advice. Not only support, but most importantly, advisory. Being able to really restrategize with them saying, okay, moving forward, how are your operations being done differently? Because that's exactly what the pandemic really challenged a lot of the small business owners to. To operate different that it had. It had been done before. And also with our portfolio companies, the way that we do our investments, to them, it is structured as a loan. So we were definitely very flexible when it came to, okay, do we need to rethink the terms of your loan, if necessary as well. So just having that flexibility, that's how we really were able to serve our immediate portfolio companies, our alumni companies as well. But I think at the broader or larger landscape, the type of services that we are providing and have provided in the past, there's a way bigger need for the type of support that we're providing. Because again, people are small business owners, specifically diverse business owners. They want to understand not only about how do we survive during this pandemic, but how can we actually stay in business, how do we adapt to the new business landscape and then moving from there, how can we count on you guys to actually help us thrive, regardless. Regardless if we have the financial resources or not. And I'll mention this really quickly here, Neil. For us, the way that we do work with companies, yeah, we do have this huge $100 million credit facility, but we're so careful to not necessarily lead with funding. It's more about building up the business first, making sure that your business model is sustainable and profitable. And how do we do that? First, we work with businesses saying, how do you scale as a small business given financial constraints and in a rapidly changing environment, if you can take those two major factors and really start mitigating risk, once things hit the fan like they did here recently, you're going to be ahead of the game. And that's exactly what happened for a lot of our portfolio companies. And now as we continue to circle back with them, a lot of those portfolio companies are actually have hired on more folks to help them continue growing their business. We've had folks who have actually opened offices during the pandemic, and a lot of them have actually increased their customer base. And that's not common, again, given the landscape that we're in. But we've been able to facilitate that for our portfolio companies. Given a lot of risk mitigation that we did early on.

That's pretty great. Those are some pretty impactful pieces to it. I feel like it's worth having just asking you the question out loud around revenue based financing versus equity based financing. Yeah, when should a business choose one and just give us the basics of them too?

So revenue based financing, I call it RBF for short. So rbf, it is structured like a loan because it does have to be paid back. Obviously I'm going to sound biased because the fact that we do provide rbf, to me it's the greatest invention ever. But again, it's not the only, it's just an alternative form of funding. So I'll start off by saying RBF really is founder centric, meaning that it's not focused the way that investors make money. When there are issuing an RBF terms, it's not depending on an exit. So there's never any pressure as far as saying oh I need to have that 10x multiple or you need to exit when A or B happens. Right. It's more investors make money when they're, when they're using RBF terms if and only if the business itself, it's actually growing its top line revenue. That's how investors get paid. Right. And I mentioned that before going into the details of rbf because from all of our research, from all the capital forms that are out there, this is really the alternative funding where we have identified that the founders and the funders interests are actually aligned. Investors are incentivized to support and to help the small business owners have their businesses grow. Otherwise they will never get paid, period. Right. So that's, that's a little bit of a background as far as what, what exactly is revenue based funding? Revenue based funding, it is a loan. The investment firm writes a check. And how is it that they eventually get paid back? The founder is going to pay back like the initial amount plus a cap. So let's say they're usually right for, for RBF loans it's like okay, we give you, let's say 100k in funding. You would pay that amount and no more than 1.5x from that initial. It's neat because the way that's paid back, it's based on your monthly, monthly top line revenue monies that you've actually collected, not accounts receivables, not what you secure in your pipeline. It's money that you as a small business owner have actually collected from your clients. So if one really good month, you have like 50k, the RBF provider would like a fixed percentage of that. Worst case scenario, next month you only made like 5k. For whatever reason, they only collect like the fixed percentage of that. So it goes up and down based on your business performance.

What's interesting is that it really incentivizes the entrepreneur to get to know their customer, so much so that they get revenue, which I think a lot of times in our early startup culture, there isn't a good incentive for raising money. In fact, the longer it takes you to get to market, the more money you have to go raise, whether you have a product market fit or an MVP or repeatable business. Right. So it's kind of interesting to think through that, especially in the early stages of business creation.

Yeah, and I'll mention this, I forgot to mention earlier, but I think you as a business owner, you always have to understand the type of growth that you really are seeking to grow your business too. Because the way that we see it here at Founders first, not everyone really is going to become a unicorn company. Like as an angel investor, I am looking, I'm looking for those unicorns. Right. That's outside of Founders First. So I'm not going to be ignorant to say, oh well, everyone has to be a unicorn, because that's not the case. But for those companies that are focused more on building businesses that are doing like 10 million to $50 million in annual revenue, those are the type of companies that we want to serve. Of course they're not going to start off with those numbers. They might start off as small as 50k. But again, it's like when you're able to utilize and really leverage RBF at the right time for your business, you will be preserving ownership because rbf, they will not take equity from your business. They will not take not even a board seat on your business. So you are preserving your ownership early on. And just thinking, let's say eventually, if you want to become that bigger company that's doing more than $50 million and at that time, you do need to raise bigger rounds obviously of funding. If you did utilize RBF early on, now you actually, you have more of leeway as a, as a founder to say, well, I have not diluted myself early on. So now it's like invest. You investors are going to invest in you based on your returns. You know, it's just that whole thing of keeping your options open.

Yeah, yeah, you're right. You really have a lot more equity and you can set more of the terms you got more leverage because you've gotten yourself through revenue to multiple cycles. It's a really good point. So take us through. What are you seeing Trends wise now 2021, are we seeing businesses that you're funding starting to expand open back up? What is 2021 you think looking like for a lot of your kinds of businesses?

Yeah. So for our businesses, again our sweet spot is it's service based businesses. A lot of them did have to pivot as a result of the pandemic. But as we, as we are 1/4 into 2021, I think at this point everyone, it's pretty much has been, you know, they've understand what the market looks like moving forward. And so I'm happy to report that all of them, again, all of them have grown their customer base. Everyone is doing relatively well. And it's interesting because all of our companies, none of them have lost like major clients, none of them have lost like major contracts, which is a good thing. And then as far as moving forward just with trends, I think we've definitely seen an increase in entrepreneurship and that's exciting time for us because that means that we, we have an obligation as an impact fund now to really be able to say okay, even though we're not necessarily funding companies that small, we are providing the education for them to say how, how is it that you can reach, you know, like a six figure revenue? That way we can actually be able to, once you hit those six figures, we can actually be able to inject perhaps capital into your business. Right. But again, the trend is more than anything we've seen an increase in entrepreneurship. There's definitely been a highlight on the disparities that do exist for our diverse founders when it comes to funding. So we've definitely been able to highlight that and I think it's important. That's not something that we're happy exists obviously, but we've, this has served as an opportunity to say this is what we've been working on for the past five years because that's how long Founders first has been around. And then I think the third trend is that there's definitely more of a cohesive ecosystem unison that maybe didn't exist before. And I think that it's very promising. So those are the three.

I love that. And part of that is I know you've brought in some new partners like the Rockefeller Foundation. Take us through. What do those new partnerships look like and what does that enable you to do?

Yeah, it's, I laugh when I tell people I can't believe that you need money to push more money. So about a year and a half ago, we were very blessed and very fortunate to have closed the $100 million credit facility with CIM. That's an impact asset manager. But in order for us to be able to deploy that, that credit facility, we needed funding. And as a result of that, we were able to do the initial close for a serious a. And that's $9 million. Rockefeller foundation happens to be the lead investor for that round. So we're using those newer fundings to be able to work with more businesses, be able to support them, and just really be able to get more growth capital out the door. It's interesting because, and I say interesting and I might overuse that word, but to me it's very fascinating. It really is because it's like Rockefeller foundation and even the other bigger, more prominent impact foundations, they are actually very, very curious to understand how can we leverage the power of RBF as a way to address the funding disparities that exist for diverse founders. So that's number one. Right. That's, I think, bringing on the Rockefeller Foundation. It's definitely getting the, the attention from other bigger investors. And then secondly, just having someone like that on our term sheet is definitely a game player for us. I mean, and we, we've had other amazing investors, but I mean, who doesn't know? Rockefeller Foundation. All right, so we're excited just as far as, like the capacity that we've been entrusted with. And just moving forward, we will definitely be able to fund more companies that we've done in the past. As of right now, we do have a goal of funding at minimum 20 small businesses by the end of quarter two. So that means we're not going to be sleeping along, which is okay. You know, it's a very good cost. But before I do forget, I do want to mention our other investors, aside from Rockefeller, Rockefeller foundation, that includes the CERNA Foundation, Impact Assets, Live in Cities, Spring Point Partners, the Impact Seed, and the Lynmore Foundation. So again, the. I would say amazing. I'm going to. Again, I'm a sound biased because I think the work that we're doing is amazing, but I think the amazing work that we've been able, that we've been entrusted with is thanks to partners like the foundations here.

Yeah. For foundations to see what you're doing and say we not just believe in you, but we want to have a seat at the table with you backing you is, you know, you're right. It's incredible. It's amazing. So congrats to that for sure. You know, this is maybe part of your work, but you do this, I think you do this in your sleep. You do this for fun. What compels you to, even as a volunteer, like help communities and help business owners just build and grow?

That's a good question. I'm answering four different parts. I, you know, I do really do believe their strength and their strength in numbers. I feel like, I really feel like I'm on a mission to save the world. And why not? You know, we only live one life. If we can do it, why not? If we felt, you know, if we fell massively, I think at least we try. But the way I see it is that if we really, if we really want to save the world, we can do more when there's more people involved, when there's more part. So if I want to get it done quickly and get it done at scale, we need more partnerships, right? So strength in numbers. Secondly, I love having fun and I don't want to go alone in changing the world. So to me, the way that I approach my business, it's the more fun I can incorporate to, to do this. And if I can treat business as a team sports where everyone is involved, then I'm going to approach my, my, my business development that way. And then thirdly, I would say it's a smart thing to be able to give or volunteer because if I'm trying to squeeze in some sleep and I'm trying to squeeze in more fun, you're going to be, you want to empower more people that can pick up from your energy and that they do good for this world as well. That way all of that burden is not just on my shoulders, right? So again, it's just bringing more people along in the journey. And then lastly, I might sound geeky here because I'm a political science major, but one of my favorite philosophers of all time is St. Thomas Aquinas, and he practices the importance of love. What is love? Love is when you become happy, when you see others succeed. And that's really how I approach the way that I live my life and the way that I do help others and give back. It lights me up when I see other people light up. You know, just thinking about this right now, I've been on, in conversations, on the phone with people when they tell me things like, oh, I was hanging on the ledge and I needed to hear that, or you've cut my heart open and I'm thinking like, if you hear things like that how can you not be compelled to keep doing the work that you're doing, or at least in this case I'm doing, you know, so just hearing things like that, I love it when people thrive. It energizes me. I wish that the universe continues to give me energy and that continues to entrust me to do this. So that's why I give back.

Wow. So succinct of just the passion there. I absolutely love that. I think you're going to motivate a lot of people to lean into where they find love and want to give it back too. So thank you for that. You're a superhero, but superheroes got to eat. Still busy saving the world, but saving the world takes energy, takes power. And some of that is taco based energy. And we got to know, where do you fuel up at? What are your favorite taco spots?

Yeah, where I definitely fuel up is El Veganito, which is out in Grossmont Center. So I will share this. Neil, I am vegan.

Okay.

I'm vegan at 5 9. You best believe I need to fill up around the clock, right? So that's why I love the tacos over at Veganito. They're the best. It's an amazing soup, small Mexican, family owned business and they do make their or they prepare their salsas from scratch. Being a Mexican myself, I know what a good taco is and it's not. And I can tell you, and I bet you guys $100 here that you will not be disappointed if you check out the tacos at El Veganito.

Okay? We love it. El Veganito. We're adding it to the database as we speak. No, we've had a lot of vegan people on who have mentioned, you know, the good vegan taco spots, but we haven't heard that one and we're adding it. Aurelia, thank you so much for, for being on. But even more thank you for what you're doing in the community. It's, I mean, you're making a huge impact. You're doing it with a bunch of others, which is what powers us all up, right? Is doing it together, building bridges. But your leadership's continuing to inspire others to take the leap and do it too. So thank you for that. I very much appreciate it.

Thank you. I'm excited. I have, I have supporters, advisors, advocates, sponsors. Alex, like you, it makes it so much more fun.

I love it. Where can people find more or follow you? Is LinkedIn the best or where do you like to be found? Online?

Yeah, I'm not necessarily the best cool kid, so I only hang out on LinkedIn with the grown professionals. So if you type in Oralia Alvarez, Oralia is not a common name. I might be the first one to pop up there.

So yes, got it. We will link people there in the show notes too as well as to Founders First Capital Partners. We'll link to the website, but any other resources we should make sure people know about to make sure they're finding out about what you're doing.

Once you connect with me, I feel like I'm a walking encyclopedia of resources. I really am. So even though we might not be able to help everyone, I feel like I know pretty much every resource out there. So if you connect with me, I'm happy to make those connections all day, every day.

Awesome. Well, thank you again, Aurelia. Thanks for being on the podcast. Thank you and we'll talk to you again soon.

Thanks for joining us on the Tacos and Tech podcast with Neil Bloom. Thanks again to Cox Business for helping make this possible by expanding the reach of the San Diego tech ecosystem. Big shout out to School of Rap for our rad intro music. And thanks as well to Nest Podcast Network where we are recording live inside their studio at Nest Co working in Bankers Hill. You can find Neil Bloom on Twitter eelbloom as well as Fresh brewed Tech and Tacos and Tech Pod on Twitter too.

Startups get the party. Startups get the party started. Startups get the party. Startups get the party started. Startups get the party. Startups get the party started. You want tech and tacos? Tacos in tech, you know we got it.

Hey Sam.