Investing in a Future for Everyone: AMA with Investors & Startup Experts from ICA Fund

Hello everyone, welcome, welcome. I see everyone joining us here today. Thank you so much for being here. You're here for an Investing in Future for Everyone webinar, and this is an AMA with startup experts from ICA who I'm very excited to introduce you to. Who am I? Well, I am Rachel Shepherd, Director of Global Marketing at Founder Institute and the co-creator of the Female Founder Initiative. The Founder Institute is the world's largest pre-seed startup accelerator, having helped launch over 5,000 companies across 200 cities and 6 continents. If you're interested in learning more about us, we're currently enrolling across all 6 continents. You can go to fi.co/enrolling. Today we're here to— we have an amazing panel, especially if you're a coffee company. We've just been chatting, and if you have— if you're making something related to coffee, we are your people. We are— we've all just been discussing that, but in all seriousness, we're here to— with an amazing panel from ICA, which is based in the Bay Area, to get some questions answered regarding investing, impact investing, what do they look for in startups, all different types of things. So if you're a startup and you're an early-stage startup, please do ask your questions in the chat today. So I have my amazing team member Felicia is in the chat, and she will be bringing your questions over so that we can get everything answered for you today. And really, we're here for you. So let's make this a great conversation. Without further ado, I'm very excited to introduce our panel. First up is Willis Wilson. He's the portfolio manager at ICA. Willis is an impact investor and portfolio manager. Previously, he served as the investment and growth strategist at Alpine Software Group and a consultant with ASG's legal tech vertical. Both domestically and abroad, Willis has advised early-stage startups on building strong business models, product positioning, accessing capital, and exit opportunities. Willis earned his bachelor's degree from UC Berkeley, where he was an active member of the UC Berkeley Entrepreneurship and Technology Community. Welcome, Willis. Is there anything you'd like to share with the audience?

No, thank you. Great introduction. Thank you for having me.

Absolutely. Thank you for being here. Next up is Diana Tremblay, Chief Program Officer at ICA, responsible for the operational scaling success and mission alignment of ICA's programs. Programmatic offerings. Diana believes that small businesses are the fuel of our economy and are the most effective changemakers in our community. Diana's mission is to leverage all available resources to support the growth of high-potential but often overlooked entrepreneurs as they scale their business. Welcome, Diana. Thanks so much for joining us.

Thank you.

Awesome. And last but certainly not least is John Go, Chief Investment Officer at ICA, responsible for ICA's seed capital strategy, investment and loan portfolio, and oversees the development of ICA Growth Fund. John's investment career spans over 20 years, including international banking, corporate finance, and impact investing. Prior to ICA, John founded a registered investment advisory business focused on impact and essential services investing hedged with alternative assets. Currently, John is focused on utilizing capital to build and grow businesses, fund good jobs, and create inclusive wealth opportunities for workers and the gender and racial equity gaps. Welcome, John. Thanks so much for being here with us today.

It is great to be here. Hello, everyone.

All right, awesome. So without further ado, we'll just jump right into some questions and start really understanding, you know, sort of investments from the mind of our wonderful panel today. So first up, let's go ahead and start with Diana on this one. So for startups in the audience, Diana, finding investors can be challenging. How do you evaluate startups in the ICA community and pipeline, and how do you determine if they're right, the right fit for your investment?

Yeah, for sure. I will first say it's a group effort across many teams, both the program side and the investment side. And we're really looking for companies that are first aligned with our mission of closing the racial and gender wealth gaps by offering wealth-building opportunities to their employees. We're also looking at the viability of the company. So first you have to have a company that works and that the business model is sound and could be sustainable over time. And really looking at the entrepreneur as what is their growth ambition? How do they want to grow the business? How are they aligned with us in that way? And of course, you know, it's always like the— like I said, the financials, really understanding the business model. But for us, it really comes down to really the social impact a company can have with us. And as far as the impact of the scaling impact a company can have in their own community as well. And Willis and John, you can— If I forgot anything.

That's great. Yeah, one thing I just want to emphasize is maybe the things we don't look at when we evaluate startups. We don't pull credit reports. We don't look for personal guarantees. We don't look at collateral. And so we're really focused on the entrepreneur and the founder, the work that they've done with ICA, We're looking at the cash flow and the underlying businesses. We're looking at the grit and the resilience of those founders over time. So those are some of the key things that ICA is focused on.

Yeah, I guess one, like, last thing to add is that we invest in founders in a variety of ways. So in addition to having, you know, our seed fund for earlier-stage businesses with limited traction, our growth fund that invests up to $1 million in underrepresented founders, we also have a loan fund. We work with the California Building Fund as well, so we provide debt and equity capital. And we try to meet the founder where they are, especially if we think they're making a meaningful impact in the industries they serve or within their team. So you can think of a company like Goal 5, which addresses inequality in the sports industry and has a completely, you know, woman-led team or a woman— is a woman-led organization, or a company like Something Better Foods, which is, you know, doing some innovative things in the alternative protein space and is completely, you know, owned and operated by an African American team and provides opportunities to employ— or opportunities of employment for people that are generally left out or excluded from employment opportunities and leadership opportunities. So, just to add.

That's wonderful. And I— there, you mentioned so many awesome companies that ICA has participated in, has supported in a variety of different ways. And if you haven't already, go check them out because I— we were talking about so many before, and both myself and Felicia have a long list of shopping to do from these wonderful companies that you've invested in and supported. John, I wanna circle back on something you said too about grit in the founding team. How do each of you identify a great team? So how do you measure for grit? How do you determine that a founder is gonna be resilient or have grit and what other sort of intangibles you look for in a founding team?

Sure, maybe I can kick it off. And by the way, a lot of the portfolio companies are behind me with the logo, so. Yeah, we put a lot of stake in the founder themselves, and grit is certainly a big part of it, and resilience. And, you know, with the COVID crisis in 2020, we launched a rapid response liquidity fund which provided 0% loans to founders. And it was really interesting, you know, everyone was hit through this, through 2020, with the pandemic, and companies and small businesses in particular were hit more than most. But It was fascinating to see how some founders were more resilient and some bounced back and some were able to diversify their revenue streams and their customer set, maybe move to e-commerce or diversify their suppliers or other things. And so that's something we look for over time is, you know, the resilience and the growth mindset that a founder or entrepreneur might have in the face of what can be very trying times.

I think the thing I would add to that is because the program team and the investment team works so closely together, through programs we're oftentimes able to see, you know, when you think about what does grit boil down to, it is the ability to hustle, is the ability to do a lot of things with very few things, and it is the ability to just keep going. And a lot of times those things are seen as risky to other capital providers. So if you're going to a bank and you're doing 5 million different things to make things work, they're gonna be like, "No, you're not focused enough." So one of those things that we're looking for is, it might feel counterintuitive, but for us grit is the ability to do so many things with so little, especially with underrepresented and underestimated founders where there are systematic barriers to be able to get what you need. So I wanted to add that, that we're able to see that through programming and our programming also offers us a chance to, help companies become more resilient in the first place. So we, we instill that into all of our programs and everything that we do.

Absolutely. I think it's, it's so important to be able to understand and get to know a team a little bit and see them, you know, kind of bring some creativity to the table when, when things get hard, because any founder will, will meet roadblocks at some point, right? And it's a— so for founders in the audience, a great way to demonstrate that is to bring creativity, bring solutions, and keep pushing. You know, even when things get a little bit challenging and we know it's hard, but it is a great way to showcase to your investors or potential investors that you, you know how to keep going. So one thing to ask, and Willis, let's kick this off with you. How can founders stand out to an investor? So as you're getting all of these cold emails, all these cold outreaches, as well as probably some warm intros as well, what are some things that stand out to you specifically?

Yeah, that's a great question. We definitely, so we look at impact first, of course, and think about, you know, what the company is doing for both the communities they serve and for their own internal team. So in that same vein, we look at, you know, the mission of the company, the vision of the company, the founder's background, but not in a traditional way. We think about the grit and the passion that the founder has displayed since the inception of the company and before. Like a lot of founders, you know, have experience in a particular industry, and then go on to do something in it. It could be food, it could be beauty, it could be, you know, anything. So I look for mission, impact, some traction, because we don't look at all the traditional metrics like, you know, a Stanford MBA or things like that. We like to see that you've proved out a decent bit of what you believe to be true about your business and the market that you're going after. Another thing is a team. We like to see a very diverse and representative team. We like to see ownership. Of the company by the members of the team, and people have like decision-making power and influence on where the business goes. And something else I kind of look for is passion, and that comes out in a couple different ways, whether it's the activities the founder's done thus far or in the conversations, the mission for the company, etc. So I would say those are some of the key.

John and Diana, anything in particular that stands out to you when you're evaluating companies? And thank you, Willis, that's That's wonderful information for founders to have, but anything else that you guys would like to add regarding evaluating things that stand out when you're being outreached to for the very first time in particular?

Yeah, Willis mentioned the social impact that the founders and entrepreneurs are making, and that's both in the community but also with their own team and employees. And so we are— looking at how the founder is thinking about equity ownership with the employee base. Are they thinking about co-ops? Are they thinking about perpetual employee trusts? Are they thinking about other forms of wealth distribution that's wide and dispersed amongst their employee teams? You know, and if it's earlier stage and maybe there's only a couple of employees, are they still thinking about that early on? And, and that's a really encouraging sign to us that they're thinking beyond and thinking about their community and the people that work for them.

Absolutely. Community impact is really huge when it comes to what a startup can do. I think particularly right now, right, as we look forward to recovering from COVID no matter where you are in the world joining us today, whether you're in the Bay Area with us or you're in Boston or Malaysia or Australia, we're all going to be relying on our communities to recover. So really kind of considering how startups play play a role in that is really critical. So I want to ask Diana, as an investor, as a leader in ICA, how do you measure impact? How do you hold startups accountable as they grow to continue to have impact within the portfolio?

Yeah, for sure. And I'll just— my preamble to this one is we're a nonprofit, so our impact is also measured. So we do a lot of like, our funders measure our impact, and in turn, we measure our companies that we work with impact. And we do that in a couple of different ways. So, you know, one, we're of course looking at companies here in the Bay Area, and how are they contributing to their communities? Are they creating jobs? What kind of jobs? Are those jobs accessible? If they're, you know, are there opportunities to be promoted? Are you stuck at entry level? Are you not? Like, where Are they hiring from within? Is there a diverse team? We're also looking at, as John mentioned, really wealth creation and what those opportunities are. And if you're not able to do it, because we understand that, because it takes money to be able to do that and you have to grow your business, you have to create value, you have to wait for the value of the company to increase, your net profit has to increase. But do you have a plan? And is that your intent from the beginning? And then if it's not, it's not usually not people's intent because they don't know how to do it. They don't know where to start. So we really are looking at how do we support people to start that and how do we measure that over time. So every year we do send out surveys to our, our companies that we work with to get that information. So we're asking, how much capital have you raised? How many employees have you had? How many folks have you promoted? How many folks have you had to let go? We're gathering a lot of information because we want to make sure that we're staying true to our mission. And we also want to be able to help the company stay true to their own mission, which is entangled in our mission. So there's lots of ways that we measure impact. And sometimes it's a phone call. It might not be a survey. It might be a phone call and Willis is talking to a company that needs help and we gather information that way too. So we gather it in lots of different ways, but measuring impact is incredibly important for us. And it's, it's, it's, I like to say it's how we pay back our funders and our investors. We pay back in impact.

That's wonderful. And that's super interesting too, that there's this incredible focus on jobs. 'Cause I think when we talk about impact at a global level, sometimes we're talking about it, often we're talking about it in regards to the UN Sustainable Development Goals and these sort of major, major projects that the world is working toward, which are incredibly important and, you know, really worth, absolutely worth investing tons of resources in and startups in and things like that. But there are also very small ways that startups and small yet very large and impactful ways that startups can go about creating impact within their business model. And it sounds like jobs is a really big one from ACA's perspective. Willis and John, are there any other things that stand out to you that you look for in impact and hope to measure for founders as well as they grow and scale?

Yeah, I think they covered them all. So job creation, team diversity, access to opportunity, and diversity of ownership are always the things I look for when determining the impact of a company.

Absolutely. That is so wonderful. And I'm so excited too about team formation. And I have a question and, you know, maybe, John, you can weigh in on this one too. Does that include as well, you know, sort of diversity across, of course, the founding team, but as well as advisors? And, you know, how do you measure sort of diversity across the team, especially as they're scaling and growing? you know, and kind of pushing people to make sure that they're still doing everything they can to create diverse opportunities.

Yeah, it's a really good point, Rachel, because we look at the leadership and the management, and we want to ensure diversity across that, but we also are focused on ownership and the board and the equity ownership of the underlying company, and is it diverse in that way? And I think it's important to really look at how wealth is generated with ownership and assets and see if it's diverse in that way as well. And that's very important to ICA. And we facilitate deeper ownership across the employee pool a lot of times through our investing. And so that is important. You mentioned the UN Sustainability Development Goals. One of our most recent investments Willis mentioned was Goal 5, and they actually were not an accelerator. I noticed one of the questions in the chat was, do you only fund accelerator companies? And this company was not in the programs team, but we had known the founder. And Goal 5 stands for UN Sustainable Goal number 5, which is for women's rights and women empowerment. And it's an apparel maker in women's sports. Ties directly to those UN Sustainability Development Goals.

Absolutely. I was checking out their website earlier today, as a matter of fact.

Oh, good.

Yeah, really cool. Because I saw that and I was like, immediately knew what it meant, right? That Goal 5 was really about— yes. And that's a great example of an apparel company that is really attacking a much deeper mission and a much deeper level of impact, right, in their community, as well as Across the nation and across the globe as well, I'm sure. And so that's really fantastic. So one of the other things I wanted to check in, actually AI in the chat has a question as well as investing in companies completely local to ICA or to San Francisco in the Bay Area. Does ICA only invest in companies in the Bay Area? And what about relocation, which I think is an important question for people in the chat because I know we have people all over the globe. If they are, have a base here, what does that look like for ICN and polio? Willis, or Willis, do you want to start with that one?

Sure. So, yeah, so we invest solely, primarily in the 9-county SF Bay Area. The question regarding relocation, if you have a hub or a headquarters here but have a dispersed team that's other places, that's also fine. But our We look to invest primarily in the 9-county Bay Area. I'll let John and Diana add a little bit if they want.

I'm just gonna say the 9-county Bay Area is 101 cities. That's a pretty large geography for us to cover. So that's, yeah, but we've had companies who, less on the investment side, more on the support side, have been, have other places, as Willis said, there are other places, but their headquarters, or they have an office, or they have a presence, and there they are employing folks who are based in the San Francisco Bay Area. That's the part that's important for us too.

Yeah, and I know Founders Institute has some incredible offices in Singapore and all over the world. I know that our charter with CDFI is focused on the 9-county Bay Area, as Willis mentioned, but there are companies we work with. I'm thinking about another coffee company that has ties to Colombia, and I know someone in the chat is from Colombia. And they work with local farmers directly in Colombia, and this is a fourth-generation Colombian who comes from the coffee-producing part of that region and is in the Bay Area. So the headquarters is in the Bay Area, but it does reach and extend globally, and I think that's an important part.

Absolutely, and I would just add to, you know, to Diana's point, that's 131 cities in those 9 counties. It's a big area, and there are a lot of areas outside of San Francisco. So, you know, it's the Bay Area is, you know, we're in all different sorts of places in the Bay Area right now. And it's a big, it's a big area of which you can join in. And there's different nuances to the startup ecosystems as well. So I think everyone sort of thinks of Silicon Valley, which is really the thick of it in terms of startups and technology. But there are lots of areas around too, and lots of opportunities to still have tremendous impact. Impact in a community as well, and impact abroad also, which was a great example about the coffee company. So other than coffee, which we've established we all love, what are some of the biggest industries you're excited to see growing right now and you're focused on funding now? Diana, do you want to kick us off with this one?

Yeah, ICA has a deep, deep, deep history in food and beverage manufacturing, like really deep. We all love food. That has influenced who we work with and who we invest in. End of the year holidays are— there's lots of food around our office. We're really excited around not just food, but food tech. Food technology is really exciting. Also really interested in health and beauty. So we have a number of health and beauty companies in our current cohort, which is really exciting because we're able to see these really high-potential businesses who just need some support and some capital, and we're able to really support them. So I'm excited about food tech and health and beauty, and then John and Willis can tell you what else we're excited about.

Yeah, you hit all the good ones. I throw in CPG in general as well, and maybe some apparel manufacturing as well. We have two things coming up exciting there as well.

Yeah, and I'll say, you know, we've grown quite a bit, and as we've grown, we've been able to expand the number of industries we serve. And so, you know, focused on consumer products and tangential industries to food and beverage, I think is an important direction we're going in. And technology is, you know, is embedded in almost every industry now. So we're seeing a lot more in the technology arena as well.

That is wonderful. Yes. And we established that we all love food as well, you know, sort of in our pre-call. So food and coffee, there's a lot of opportunity here in the Bay Area to disrupt that industry and to create impact, which is awesome. But we have a question from the chat, and forgive me if I mispronounce your name. Padbenik said, how do social impact entrepreneurs who are at sort of this early, early stage really kind of access funds, or how do they get creative when it comes to building their MVP and then getting, you know, sort of the support and investment they need after that to continue to grow their company? So, John, do you want to kick us off with this? So advice for founders who are trying to bridge that very important gap between sort of they have an idea, they've established demand, but they're looking for their MVP and don't— and also need investments to get there. How does that look for you, generally speaking? And any advice for founders trying to bridge that gap right now?

Yeah, and we actually launched a new a new workshop called The Lab, which kind of addresses this. Maybe Diana can kind of dive into that because we're trying to fill a gap that we see the same thing. We're trying to fill a gap there. And we think there's a lack of access to capital as well. But Diana, do you want to talk about The Lab a little bit?

Yeah, sure. Sure. So I'll do it from ICA perspective, which is general perspective too. So, you know, we— before folks So we've been running our accelerator since 2016, but we've been doing advisory support consulting with small businesses for the last 25 years. And when we launched our accelerator in 2016, you know, there's revenue minimums, there's years in business minimums, there's criteria to get into each program. And what we were seeing is that the companies that were really high potential, often run by founders of color or female founders, weren't getting to the spot we needed them to get to. And we needed some earlier intervention points. So what we did is we created a new program called The Lab. It's a 4-week accelerator really based on the fundamentals, but it's paired with our seed equity product. So we worked really closely with the investment team to create a seed equity product that's $25,000 to $50,000 of equity, not debt, equity, because there's lots of micro lenders out in the world. And, you know, for us, that was the bridge that needed to be crossed. It was the— you have been, you know, you're post-revenue, you have a little bit of traction already, but you need additional capital to be able to really take off. You have that some semblance of an MVP, but you're still proving out your business model, but you're high potential. So we created the Lab and the Seed Equity product to be able to do that. And then outside of ICA, it really is knowing what's in your entrepreneur ecosystem. There's so many resources out there for entrepreneurs, both online, in-person, play space. And really it's how do you figure out in your particular ecosystem? And granted, not all entrepreneur ecosystems are built the same or all at the same spot. There are some locations that don't have the ecosystem, so you're dependent on other spots, and that's where online resources really, really do come into play. So I'm like, Hello Alice is a fantastic virtual online platform. There's so many resources in there from grants to early stage investing. So it really is globally understanding what resources are out there. And if you don't know, you can call or email someone like ICA and we will put you on the right path. There's lots of folks out there that are willing to help even if they're not a good fit for our particular services. Willis, John, anything to add?

I was just gonna say Willis is an MVP, most valuable player, so he's gotta have Oh man, yeah, no, what are you gonna say, Diana?

I think you did a great job. You covered all the things I would've said around, you know, the Seed Equity Program, how we also, oh, one thing we didn't talk about is how we provide additional support. So with the Seed Equity Program, we have the Lab that supports them along the way. So we don't just say, you know, here's $50,000, good luck. We say, we're gonna support you, provide you coaching connections in addition to capital to be able to help you get to that MVP and also learn more about your market, learn more about your customers. And really put your best foot forward and put you on a path where you could get, you know, if you want more traditional VC-style funding or a larger check from us, you know, up to, you know, a million plus or a million, I guess, to continue to grow and further your business.

And you bring up a really great point, Willis, which is, you know, as an investor, the ICA is bringing to the table a lot of resources with it, but not all investments are the same and not all investments sort of come in that fashion. And so As a founder, when you're building your cap table, basically, right, and you're making room for people to make investments, is there a certain way in which you recommend founders go about sort of identifying investors, either very hands-on investors who are going to make key connections versus capital? Any thoughts on that?

Yeah. Step 1 for me— you're going to hear mission a lot from me— but making sure that they're mission-aligned. There's a lot of capital out there, a lot of A lot of people wanna be in the venture capital, angel investing space. A lot of checks can be written, but making sure, especially when taking on equity, that you get the right partner, 'cause of course you're giving away, or maybe not giving away, but, you know, selling part of your company in exchange for capital, and you would hope they will come with something more that can be strategic to the further growth and development of your business. So kind of to go back to answering your main question, definitely find an investor who's mission-aligned and is a strategic fit for you and your org and understands where you're trying to go. Hopefully they have some industry expertise that they can share and guide you kind of along your journey. Now I know that that's not always accessible, but if you can help it, those are some things I would consider.

Yeah, and maybe I'll just run through, I mean, just thinking about debt versus equity in the capitalization table and what is the appropriate amounts, you know, for founders to think about. I think that's an important thing as you launch your business. And for debt, you wanna ensure you have a sustainable amount of leverage on your balance sheet. You don't wanna be too levered. Can the business with the cash flow that's generated repay that debt comfortably? And I think comfortably is the right way to think about it. There's a lot of benefits to lower cost debt. If the use of proceeds is a strong return on investment, because you're gonna launch a new revenue channel or a new product, then there's a lot of value and you see a return on investment for that fixed cost of debt. And then on the debt side as well, thinking about short-term versus long-term. So I think you wanna match up, you know, the use of proceeds. Is it a long-term fixed capital investment like equipment or something? Then you wanna try to find longer-term, more lasting debt obligations. To use to fund that business growth and expansion. If it's more working capital, if you're just going to buy some inventory, for instance, then you want to get shorter-term debt and match up, you know, try to match up your assets and liabilities. On the equity side, it's permanent capital, it's patient capital. If it's the right partner, you know, it could come with advisors and things like that, and that could be really valuable to the ongoing strength of your business. The con with equity, of course, is that you do give up a certain percentage of ownership as a result of that equity. And so that's just some of the, you know, pluses and minuses when you think about your capitalization table and how you fund your business.

Absolutely. That is super helpful for all the founders in the audience. And you will get a recording of this, by the way, so in case you didn't catch all of that the first time around, all those lovely pieces of information John just shared with us, you can, you know, you'll be able to check it out again because that's really important to understand. And I think in particular, a lot of the founders in the audience are probably looking at a lot of pre-seed money right now, potentially even like angel investment money. And I think it's, it's equally as important to assess your angel investors accordingly as well, right? Particularly as an impact-focused, mission-driven company, because you want to make sure everybody's in alignment as Willis mentioned before. So one of the things I wanted to follow up on too is, and Diana, maybe you can kick us off with this one, is any advice for founders on leading and building a strong culture around their mission impact? So we talked a lot about that in terms of fundraising, but as they're growing and scaling, keeping mission as part of a key component of a growing company, especially one that's growing quickly, is very difficult. And so how have you seen founders successfully navigate that?

Yeah, I've seen it navigated all kinds of ways. I think, you know, successful, unsuccessful. It just, you know, when you're in a rapid growth or even a strategic growth mode, like, it's not like you have to be putting, like, hiring 20 people a year or a month to, like, be thinking about how do you maintain your culture. It starts with when the founder first begins the company and the culture comes from the founder. So even if you don't you don't say what your culture is, your culture will just be created spontaneously. And you want to make sure that you have some say in that because once a culture is created spontaneously, it is really hard to change it. So as a founder, you are the culture amplifier, you are the culture champion. And then as you're hiring, you have to find more folks that you're hiring that align with you in that way. And that can then be your culture magnifiers and amplifiers too. Because as a founder, you can't do it all the time. So if you're out raising capital, You cannot be the culture amplifier that whole time either. So it's really important to do that. And it's really important at the beginning to sit down and think about what kind of culture do I want to have? How do I want people to feel when they're at work? What do I want? How do I want people to talk about this place when they're talking about it to their friends, when they're trying to recruit? What are the different things I want to hear? And as I'm telling people about my company, what do I want them to hear and how do I make that be a real thing? So, you know, when you create culture, it's— there's things that cost money, like making— like figuring out what your compensation philosophy is and figuring out the different bands. There's also things that are free. Giving feedback is free. Creating a culture of feedback is really important, and creating a culture of really direct feedback that is kind and steeped in empathy is even more important. So I think it just boils down to really thinking about what do you want to create, how do you want people to feel, and how do you as the founder want to feel? And having those culture amplifiers on your team that can also help you do that work. And building culture never goes away, ever, ever, ever, ever. You're constantly doing it every single day.

That is amazing advice, and, and, and those are some great particulars to focus on as well, and, and to keep— make sure, you know, maybe that's part of your weekly processes or what have you, is to check in on culture, check in on morale, make sure you've created those feedback loops. I love that. Willis, John, anything to add on culture? Culture and mission alignment for founders as they grow and scale?

You know, Diana is a tough act to follow. You know, I don't know if I could add much on top of what she said. She mentioned team, which is the most important thing. When I think about carrying the culture and making sure they hold you accountable to the mission and vision that you've set for your organization, same is true for having a board that also encourages and makes sure you stay aligned. So when ICA takes a board seat or sits as a board advisor, we look to serve as that social compass and say, wait, you know, you want to do XYZ thing, what does that mean for the customers you serve and your employees and your team? And so that's what I'll add.

Fantastic. Yes, and it gets very top to bottom, right? Consider that for every person you bring in to help you grow and ultimately design your company and its future as well, and the impact in particular. I think it's incredibly important when you have an impact tech piece is a key pillar of your company. And I will say ICA walks the walk because I've spent 30, you know, I said 30 minutes on the phone with this wonderful panel before we went live and I'm ready. I would like to be at your company parties, you know, we'll definitely hang out in the future because the culture, you can tell you guys all get along so well and the culture is definitely there. So ICA, you know, the advice Diana is giving is, I can tell, is real and working within the organization already. And so I love that. So for future of investing, I wanted to get your thoughts on this, John. ICA is investing in supporting small businesses as well as startups. How do you see these two worlds positively influencing each other in the future?

Yeah, it's really fascinating to think about that and the ecosystem that can develop. I mean, one of the things we're trying to do, and Willis mentioned advisory boards, and I know there's a question in the chat as well about, you know, how do you establish an advisory board and some of those things. You know, one of the things we're trying to do to develop this cultural consistency is to allow founders of one company to cross-pollinate and sit on the advisory boards of other companies that are either coming out of the accelerator and maybe not even funded by ICA, but need, you know, an advisor and need a board member, or cross-pollinate within companies that ICA has funded. And I think that's going to be an important thing for us going forward. People learn, if you're an earlier stage startup, people then look toward the folks that came before them and wanna stand on their shoulders. And I think we have a lot of examples of that where like Firebrand Artisan Breads, for instance, has a really interesting model where they allow for some deep employee ownership and in a structure that makes sense. And a lot of founders have since tried to replicate that. And so we see that when you talk about the future of investing and where you are in the various stages, we can see that follow-on activity that's happening. And we want to facilitate that and engender that and get people thinking about that.

Yeah. And something I'll add in to that is that we're we're really building an ecosystem, you know, of mission-driven entrepreneurs and companies. You know, some of the businesses that start small will grow to be venture scale, and, you know, and some of the businesses that want to go or think they have venture scale might not be, but we're building an ecosystem and believe that the founders will continue to help and support each other. And we're also seeing some big things in, you know, like the increase in crowdfunding or different groups and things that are, more people are involved. So you think about, you know, you have an idea, you want to get it funded, you know, there's less dependence than there was historically on I need VC dollars. You can go out, if you have a community, you can say, community, you know, I'm doing this thing, you want to support me? You know, and a lot of times they answer with a loud, very resounding yes. And we hope to build that not just with the customers, but also with the ecosystem of founders who have unique experiences and are likely walking on the same trails, the same paths, and can pay it forward and continue to build upon each other.

Absolutely. You brought up a great point about crowdfunding being a really unique way to sort of bridge that gap and kind of getting back to the other question we had earlier too, of like that early funding opportunity. You know, if you have a community, especially if it's a consumer-facing product, there's often— those are your early adopters. It's also traction as you're building your funds as well, right? But yeah, I absolutely see small businesses as well sort of The definition, I think, of small business is going to change as we're moving, you know, into continuing to play in this hybrid virtual world that we'll be in for quite some time. Because I think small businesses and startups, I think, have been thought of as separate. But in the future, there's an opportunity for, you know, what many people think is they have a small business is actually a startup and vice versa, right? And to think about how that plays into the community.

And you know what's interesting is like the definition of what a small business is, is very different than what people often think of. People often think of like your Main Street businesses, your mom-and-pop shops, but I believe if I'm not, you know, if I'm not mistaken by the U.S. government definition, is any business with under a certain number of employees and under $50 million in revenue. There is some room for some sizable small businesses that can make some major impacts. You know, in a lot of these businesses, And I had experience with this in my last job where you don't think of like that in-between space where there are businesses, you know, with tens, hundreds, low millions of revenue, then there are businesses with, you know, multiple tens of millions of revenue that aren't quite venture scale but create great jobs, support great communities, and are often not considered to be small businesses. So we think a lot of the businesses we support will also fall into that gap where they're doing actually some really significant business and creating some great opportunities. But still aren't quite venture scale because their market isn't large enough.

Exactly. I'm excited to see that future for small businesses, especially as they create multigenerational wealth opportunities, right? Because I think the idea before was that small business maintained revenue positivity and sort of maintained themselves, and startups created these great wealth opportunities. And I think there's going to be a lot of space in between for a lot of communities to create opportunity that extends far beyond the here and now, but isn't, isn't quite giving up, you know, sort of going the unicorn route, I should say. And so that's really interesting. And then back to this one, Willis, Carolina asked, how many companies do you see in a year and what is the chance of getting funded just in general? So again, and I'd love for the founders to get a perspective of what your inbox looks like, you know, how often are you being reached out to in a cold email? And then honestly, how many investments does ICA plan on making, just so that they know what that funnel looks like?

Sure, yeah, that's a very interesting question. So, you know, we'll call it, you know, the new ICA is very active. Through our two programs, we'll do somewhere between 20 to 40 investments this year, some larger in the multiple hundreds of thousands, some lower using our seed equity fund of $50K on average. It just kind of a, I guess, using some data, we've done, you know, 4 deals in the last 4 months, and we plan to keep that trend going. I get about, maybe 3 to 5 emails a week from inbound from founders looking for funding. They're not always a fit, but if they're not, we try to either send them to our programs or connect them with some other resources that can help. What are your chances of getting funded? Assuming you have some traction, you kind of meet some of the basic criteria, being having a big area of presence, mission alignment, some traction, diverse team, etc. I would say it's a lot better than your chances with a traditional VC fund instead of going or like the impact VC route. But it's just really hard to say, it's a case-by-case basis. We look really heavily for mission alignment, you know, traction, 'cause we don't look at like the traditional metrics of, you know, MBAs and things like that, team and all those things. The market you're in matters, but not quite as much. We're not necessarily looking for unicorns, but you wanna have a decent addressable market. Yeah, so that's it. I said we keep a running list of anywhere between 50 to 100, a pipeline, equity pipeline of 50 to 100 companies that are, you know, high potential, we rank them according to level of interest, documents collected, stage, we track their participation in our programs. And if, let's say, I get a company that reaches out to me and says, you know, I want, I need investment, et cetera, you know, I'll look at their pitch deck or whatever they send over, sometimes it's their historical financials and projections, and I'll say, okay, maybe not right now, like you wouldn't be a legitimate, you know, fit for investment currently, but try this, just take a, or take a look at our programs. We think we can add value in these, you know, key ways, and we'll definitely revisit it post, and you'll come out of it, you know, everything in tow, your data room ready, ready to really not just raise capital from us, but capital from, you know, our ecosystem of investors who invest in companies like the ones that we invest in.

Wonderful. And that's— and thank you for providing all of that clarity. And I would say too, can you go a little deeper on what is traction? So I know founders see a lot in their they're being told like, I need to get traction and they walk away. I, because I've heard them tell me this, they walk away and they're like, I don't know what that means, you know, exactly what that is. And so I know it's industry specific in many cases, but if you can give us some general idea, is that, you know, is that followers on a social channel? Is that an email list? Is that revenue? What does it look like for you?

Yeah. Thank you. And thank you for clarifying that. Something actually, some feedback we've heard or some, something we've heard from founders who are looking to raise from other investors is like, you know, investors always say, "We need more traction," you know, and we're like, they're like, "We gave them more traction and they didn't invest." And we're like, you know, we understand that that's a very ambiguous term. For us, we look for at least a year in business, you have a product, you're selling it. It doesn't have to be perfect, but you need to have some customers and have been in business for at least a year. And that's what traction means to us. There's no specific, Yeah, buzzword clarity. Exactly. Uh, there, there's no specific dollar amount. Um, but you know, it should be okay. I guess I'm always going to be vague again. Let's, let's say low tens, low tens of thousands of dollars. At least, um, you have a product, you're selling it and generating low tens of thousand dollars on an annual basis.

I like your low tens of thousands of dollars.

At least, at least, at least low tens. And that'll qualify you more more for like the lab and the seed equity, not so much the larger pools of capital, but it gets you in the door and it establishes that working relationship with us. And, you know, we support our businesses through and through. Once you're admitted to an ICA program or you get an investment for us, you're part of the family, and we do all that we can to support you. A great example, like John mentioned, is the Rapid Response Equity Fund, 0% interest loans, you know, to people and businesses in our— not people, businesses in our community averaging $50,000, no credit check, no background check, none of these things that a traditional barriers to getting capital. And a lot of the businesses we've supported are doing well and thriving and participate in our program continuously. They pay it back, we pay it forward and support additional businesses. So we try to, to be supportive. And if you come to us with that traction, you know, even if it's small, we try to make that mean something and help support you to grow further.

Perfect. Thank you for providing clarity on traction and for giving us some numbers. I know it's hard when we're not talking about a specific industry or company, but it really is helpful, I think, for founders to have some idea of what does that mean to any investor, you know, and also just kind of, you know, getting some more clarity there. And Luis from the audience actually had a very specific question, and I will put this out here for whoever feels, you know, they can feel comfortable taking it. It's, would ICA recommend a startup to take on convertible debt notes at a pre-seed stage, even if the startup does not reach positive cash flow for the next 12 months?

Yeah, I can take that one. There's a number of instances where, you know, you're post-revenue and generating— you have customer relationships, you have a product launched, and you've got some revenue, but you're not necessarily profitable and you don't have positive cash flow, but there's still value in taking a convertible debt note or a SAFE note. SAFE note is Simple Agreement for Future Equity. It's similar to a convertible note, and it's one of the ways that ICA uses when we invest in companies. And I think those are, yeah, I think those are very suitable. You know, SAFE note has no interest and no maturity date. It just becomes equity at the next financing round. So especially for really early-stage companies have a valuation, for instance, that don't have positive cash flow yet, but still have a specific use of proceeds and could do great things with the capital from a return perspective, then a convertible note or a SAFE note makes a lot of sense.

Luis?

And I'll just mention the— ICA runs 2 labs per year and 2 accelerators per year. And so currently, you know, Diana's team is in the middle of the lab and the accelerator, but there will be open enrollment and applications for, you know, the second half of the year for the lab and the second accelerator.

Thanks, John. I was gonna— in the chat, yeah, I saw that in the chat. Yeah, so we finished with our current lab cohort at the end of April and our current accelerator cohort at the end of June. And so we are somewhere between July and August gonna start both cohorts, and we run them simultaneously because we do an application, one application for all of our programs. And the program team, based on application and interview, we then pick where people best fit. Um, and if it's a program that they wanted to be in but we think it's a better fit the other way, we will have that conversation. We just won't be like, you get accepted to this and not that thing. So we'll have that conversation. And we do one pitch event a year, and it's going to be in November this year. So folks who go through our programs have the opportunity to apply to pitch, to be able to pitch in front of investors, and the investment team helps us make sure that we have investors in the room. And it's our 25th year anniversary this year, so it's going to be extra special.

Well, that's very exciting. And Luis, hopefully that answered your— oh yes, you said thanks for clarifying. So thank you so much, John, for adding additional clarity there and for Diana and Willis for mentioning these programs that we have as well. Or that you have as well, so that they have places to turn to for these types of questions, which I think are very overwhelming for founders. They sometimes they overwhelm me and they're, you know, it's not even talking about a company that I have, you know, to talk about these different nuances and how to grow and scale. So we appreciate that clarity. Diana, question to you and then of course to the whole panel. What types of startups or industries would you like to see brought to fruition? So what are you seeing maybe some, industries that you'd like to see grow more, or some new things, new problems you'd like to see addressed in the near future as a call for startups who are in maybe in the audience right now?

I'm super interested in telehealth, especially with everything that started going on with COVID and shelter in place, and telehealth was always a part of the landscape. But what's been happening over the last year is really, really exciting. Because it is still dependent on people and technology. So I'm always really excited about the things that are— the people and technology parts are interrelated, as opposed to just a pure technology where it's, I just want to get to the fastest, biggest company I can with the least amount of labor spend, which is not as exciting for me because people make really great companies. So I'm really excited in telehealth. I would love to see more of that. And B2B services are really amazing. I think people underplay how awesome they can be in, in it. But if you look at some of our, like, the biggest corporations we have in the United States, most of them are B2B. So I like B2B a lot. And it's just like, if it's in a mature industry, is it a product that's changing the way or service that you're changing the delivery of it, or it's reinvigorating a stagnant industry? So those things are always really cool. So like, there's so much coffee, but are you doing something different in coffee? There's so much food. Are you doing something different in the way that you're preparing, say, like your vegan-based meat product? So those are exciting things for me.

I love that. Willis, John, any industries you're super excited about as well?

I mean, I'll just brag on some of the founders and entrepreneurs that we have now. I mean, there's this alternative protein company, it's an insect snack company that Monica Martinez founded called Don Bugito. And it's just fascinating. And it's like pioneering the alternative protein market through insects, cricket flour, and chocolate-covered crickets, and things like this. And it's fascinating to kind of launch a product into a brand new industry and kind of build it from scratch and educate, you know, from scratch, essentially. So that's always, you know, fascinating to me. Something Better Foods is an alternative fried chicken product that uses soy and garbanzo beans, and it's a fascinating product, and it's a recent investment. Again, it's like Impossible Foods and those, it's pioneering a new product into market. Those are always fascinating to me, and we love to see that.

You guys covered all the great ones.

Well, I was just gonna say, I have to give a shout out. Our CEO just met with Madam Vice President VP Harris, and one of our portfolio companies, Red Door Catering, and the founder and CEO of that company, Rain Free, got to speak with Madam Vice President, and it was just a great— this was just last week, she was in Oakland for this. And so if you haven't seen that, maybe you could check it out, but it just goes to kind of the resilience and some of these things that we've been talking about today, as far as the future of investing and the role that CDFIs like us can play with these entrepreneurs.

Man, see, John, you guys, I can't follow up. You guys are coming in strong. I guess I'll throw in two more little darts in there. I'm very passionate about issues that affect underrepresented, underserved communities. So I'm very interested in Education, education tech, you know, what happens to all the little ones that are out of school right now? How do they rebound? What businesses are looking to solve that problem? And then another thing with— we talk about equity, ownership, wealth creation, fintech, unique things in that space, and are interesting to me as well, or maybe not full fintech, but that is included, but also like other things addressing the financial knowledge security of underrepresented underfunded, underserved communities.

Absolutely. And there's so much that's happening in all of these wonderful spaces you mentioned, from telehealth to unique proteins to financial inclusion. And financial inclusion looks like so many different things, actually, at the end of the day. It could be a different group that you're helping bring into the conversation, education you're providing, a service that opens doors. And just thinks about things in a completely different way to this point, right? Like something that exists, you know, doesn't mean there's not room for innovation. And so I think that's awesome. So we have one other, one last question from the chat before we wrap up for today, which is Maya asks, what are you looking for in your investor partnerships? And I think what she's thinking about here is mission alignment, right? So that mission impact alignment, what does that look like? For investor partnerships for ICA? Willis, do you wanna take this one?

Yeah, I'll start it. John is a great person to cover a piece of this as well. But so in our investment partners, of course, here it goes again, mission alignment, committed to closing the racial and gender equity and wealth gap, very important to us. We also consider ourselves to be very patient and kind capital. So we work with you, we have no interest in, you know, making you repay that convertible note or enforcing these wild things, seizing your assets or anything like that. That's just not how we, what we think is right in regards to supporting our companies. So we look for people who feel the same way. We work with a lot of foundations. We do work with a lot of other impact funds and different VCs throughout the Bay Area. And they all kind of feel the same way is that we wanna support the businesses through and through. And sometimes we have to provide advising and resources in addition to capital to help them grow. But we look for companies that are willing to do that same thing and work alongside us in that. John, Diana?

Yeah, I think that's right on, Willis. You know, we have foundations and endowments and family offices that are mission-aligned with us, and they allow us to then fund our entrepreneurs and founders. And then we also— I mean, a big part of what we do is also, if we're funding a company, we help to find other capital sources and other capital partners so that more proceeds can be raised. And I think that's also an important thing to leverage the capital that we provide into other capital sources. And we have a lot of partners that we work with in that regard.

Fantastic. And hopefully that clarifies or answers your question, Maya. And I just want to put one more question out to the panel. We'll start with you, Diana, which is Advice for founders as they're going through your work. You have all worked with founders at so many different stages and so many different, in so many different ways and support them in so many different ways. What is the biggest piece of advice you can give to founders right now regarding, you know, just perseverance, etc., how to keep going, things like that? Diana?

Yeah, for sure. I'm just seeing if my child is going to keep yelling. He stopped so I can answer. Oh no, John's going to go first.

John, any advice for founders as they depart from us today?

Yeah, how long do we have? We have another hour, right?

No, I'm just kidding.

Yeah, in the next minute, you know, I just think keep believing in yourself, you know, keep believing in yourself. I think that's really important. And there's going to be struggles and a lot of along the way, especially, you know, this past year with the COVID crisis. We saw a lot of companies go through a real, real trough and are just coming out of it now. So, you know, just to encourage everyone in that regard.

And I'll add something I'm sure Diana was going to add, which is to tap into your ecosystem, the network around you, and if not, look for resources online that can be helpful in your journey. And, you know, if all else fails, reach out to one of us and we'll definitely try to port point you in the right direction.

The thing I was going to add is never be afraid to ask for help. Always, always, always. You don't have to know everything. Just ask for help. It's totally fine.

That's amazing advice. And that brings us to a close for today. So I want to thank everyone for joining us, for asking questions, being active in the chat. We really appreciate you being here. But most importantly, thank you to this amazing panel we had from ICA, Diana, John, Willis. It has truly been fun hanging out with you and talking about investments in startups today. And I hope everybody has a wonderful rest of their day. Yeah, have a great day, everyone. Take care. Bye.