May 19, 2021

Investing in impact startups: Claudine Emeott Discusses Salesforce Impact Fund

Investing in impact startups: Claudine Emeott Discusses Salesforce Impact Fund

Claudine Emeott, Senior Director at Salesforce Impact Fund talks about investing in impact startups and what qualifies one. We narrow in on what founders of impact startups should and shouldn’t do to benefit the most from their unique position.


Claudine's LinkedIn: https://www.linkedin.com/in/claudineemeott/

An article that Claudine Emeott co-authored with a few other impact investors: Corporate Impact Investing in Innovation

Salesforce Impact Fund: https://www.salesforce.com/company/ventures/impact/

Preethy Padman, Impact investor talks about who qualifies as an impact startup, what the major benefits of that status are, and how to reach out to impact investors: https://www.fundraisingradio.com/Preethy-Padman/

Transcript

And today is a guest speaker. We'll have senior director at sales force, impact, fund and this happens that we'll talk about this fund. What do they invest in and more. Importantly, we'll talk about. Feedback starts. What qualifies as an impact.

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How would you get to that field who should try to get there and other questions on that topic? So clotting, let's kick it off by giving us some background on yourself and on Salesforce Ventures.

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Well, thanks, so much team for having me today. I'm really thrilled to be joining your podcast, and I'm happy to start with a brief overview of Salesforce Ventures and the impact fund and specific.

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And I'll start with the broader Salesforce Ventures Ventures as a core mission to create the world's largest ecosystem of enterprise cloud companies.

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And help accelerate their growth and since 2009, the Ventures arm has invested in more than 400 enterprise cloud startups across the globe, including well, known companies like snowflake doc, you sign in female Twilio and zoom.

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Filter centers of the world class portfolio to date 22 companies we invest in have gone public and more than 95 of our public companies have been acquired by a number of different companies around the world filters,

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interest,

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revised capital and and beyond that expertise to accelerate growth.

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Including access to Salesforce executive customer introductions, go to market alignment and innovation days and as 1 of the fastest growing enterprise companies in the world, we at Salesforce have.

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Both the invite and expertise to help determine where that market is going. And this is a huge reason. My companies come to us interested in investment from us, because they know that the value we bring goes well, above and beyond the capital.

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We're always looking to the future to our society business and Salesforce are headed in the next 3 to 5 years, and we're closely following customer demand and focusing on what makes them most successful. So we see products that have early and robust adoption.

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And that are actively addressing prevailing market needs so that Salesforce Ventures.

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Broadly, I, as you mentioned team, lead the Salesforce and Pac fund, which is part of the buyer Salesforce Ventures program.

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We invest similarly in the most innovative cloud companies around the world, but we also bring an intentional lens around impact and mission.

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So we're looking to invest in companies that are not only growing big businesses but that also have measurable social or environmental impact.

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And in 2017, we introduced the 1st 3Million dollar Salesforce Ventures and Pac fund to support a new generation of startups that are focused on driving, positive, social and environmental change.

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In October of last year we followed up with the 2nd impact fund of 100Million dollars to continue our corporate venture capital investments in this next generation of innovative companies that are driving.

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Positive and measurable change to build a more resilient and a more inclusive economy and healthier planet as well.

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I'll pause there and see. Do you have any initial questions you want to jump in with, or I can keep going yeah, I mean, the sales force is a huge organizations.

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You are fun invested in so many app excerpts you could keep going on for the entire day. So I appreciate you pausing and asking for my question.

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So let's just jump straight into the discussion of the startup and what qualifies as an investor. So you've mentioned already.

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I think 2 metrics, which is impact on environment and the 2nd, 1 I already forgot. So, can we go over the qualifications often?

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Impacts our once again are there any like, is there any strict rules or is it more of a big definition?

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We're very intentional about the companies that we're looking to invest in and because we're a strategic investor, we have focused on verticals that are aligned with our own product areas that also have an impact lens.

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So we're investing in education, workforce development. These are companies that are enabling equal access to high quality education. They're rescaling and preparing workers for the jobs for the future.

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We're also investing is accountability in companies that are creating better access to clean energy or improving resource efficiency as just a couple examples. We're investing in financial inclusion.

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So, companies that are developing tools and platforms that are promoting equal opportunity as well as economic empowerment for groups.

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That have been historically underserved, we're investing in digital health and solutions that are creating better access to health services again for underrepresented underserved populations in the US in particular.

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And we've also invested a number of companies and what we call social sector tech. So these are companies that are serving customers that are nonprofit, or are present philanthropies. And, you know, these companies are essentially.

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Making social sector tech,

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more efficient,

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more transparent,

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and helping get more dollars into the hands of organizations that are doing really good work around the world and all of these areas again,

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they tie back to our core product areas that that also have direct impact on,

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on communities and on the planet.

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Perfect love it and yeah, I love it when it's not too broad, but speaking of being the and a little bit broad, I mean, pretty much every single serve says that they're trying to make a world a better place.

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You know, every single online bank says that we're trying to improve the financial inclusion all over all over the world whereas that we're aligned where you can say is just.

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You're just saying it, because it's a side product, it's a byproduct of what you're doing and it doesn't really qualify and I know that these other start, they're actually focused on this. So Where's that? We're aligned? Is there is it visible or is it just purely case by case.

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It's a great question and I appreciate that many companies are out there saying they're want to change the world and I think many do.

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Without having necessarily, you know, really careful intention around around impact for us. We do, we do varying.

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Rigorous due diligence on a company's existing impact and a potential for impact at the time of our of our investment diligence and we need to feel really confident.

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After completing that diligence that the company.

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Is really oriented towards positive impact.

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And our diligence looks at a number of dimensions of their model,

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and the market that they're playing in to understand,

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you know,

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both the depth and breadth of their solution and the ultimate outcomes that we think that they can reasonably achieve,

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we rely on externally accepted and well,

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agreed upon frameworks and metrics that.

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Most impact investors are coalescing around so we use, for example, the impact manager and project 5 dimensions of impact to guide our diligence process. This helps us understand.

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What is the problem that the company is solving? Who is the population that the company is serving again? What is their solution doing in terms of moving the needle on that problem?

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And what do we think it can actually achieve in terms of number of people affected and what is a result of that? And so you mentioned financial inclusion as an example.

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I think this is, this is a great there's a great example of of the space where.

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Many solutions, I think, can be called financial inclusion, but if you dig deeper and you kind of peel back the onion layers, what we are going to understand is, okay, who is the population that this platform is actually serving? What are their demographics?

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Are they are they women are they historically underrepresented minorities?

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Where do they fall in the social economic band and how have they been excluded from other maybe more traditional financial products in the past and what is this doing differently?

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That other solutions out there haven't done successfully to move the needle for their financial health, for example, is building new assets as again. None of that. What does a specific Delta.

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This product the solution is going to have is going to improve their lives and so we, we really do dig deep to understand the, the market problem.

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The size of it and how the company's specific solution can.

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Actually, make measurable change at the end user level and this is something that is informed by both our dust due diligence, but also by the company and the founding team, and we really.

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We really love to work with companies and founders that come to the table and lean into the impact narrative. They've already given this. A lot of thought they may not have figured out the perfect way to measure their impact yet. And that's okay.

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And that's 1 of the areas where we can partner with companies and provide a lot of value is rolling up our sleeves and figuring out how to get at some of these answers together.

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But we want to see that they're at least rustling with them, and that they're motivated to solve these problems and that they've really thought about the end user in these ways. And.

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A lot of the founders we talk with too. They, they come to.

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These ideas, because their own lived experience, and they've experienced this 1st hand.

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Maybe, it's at the teacher in a classroom and seeing education gaps, for example but most of the founders we talk to are really inspired, because of some personal experience they've had with the problem that they're trying to solve.

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And I think that that also goes a long way in terms of establishing a company's mission.

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Right perfect, very onpoint love the specificity. I'm not sure if that word exists, but let's pretend it does and you mentioned the due diligence. So let's talk a little more about that.

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When you get the pitch deck from a founder, what are the major 3 things that you look at? 1st.

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So, stepping back with every investment that we make, we are looking to solve for 3 things we are looking to achieve.

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Financial return within the most sense we're looking to establish.

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A strategic partnership with the companies, and we're looking to see the monster, both social and environmental.

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Impact from their solution and so those are sort of the.

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3 broad lenses that we are evaluating each investment on and then, of course, in a more detailed fashion, we're digging deep into the business model. You know, what is their go to market strategy?

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What is their product? What is the competitive landscape? What a, what are their historical financials and what is their.

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What does their projection growth look? Like do we feel confident about how they have modeled that growth? Does it seem? Does it seem rational? Unreasonable?

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And on the strategic side, trying to understand how the solution could fit with the most relevant product area in the Salesforce ecosystem and really trying to understand what a shared go to market strategy could be.

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If we invest and work with a company to help inform. And build a product integration that we can take to market together.

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And then,

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finally,

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again,

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the impact side,

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I've already walked you through much of our analysis,

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but really,

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as I noted,

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kind of going deep to understand the potential for impact and figuring out how we can continue to work with them on methods for measurement and management of them.

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Right. I'm back in. Can you hear me? Yes, I can hear you.

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My bet that that was my Internet just disconnected so I was off for about 30 seconds. What happened there.

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I think I walked you through our 3 lenses by which we are evaluating companies broadly. So, did you catch any of that?

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I personally did not. I'm not 100%. Sure. I'm pretty sure the record should have caught it.

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And then I'm not sure about that. 1st of all. Let me make sure I put that we need to cut out this moment. If it helps, I could still hear it in the Webex. I'm not sure if that's.

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Helpful not hiring procedure I think I think it'd be Webex does so it's it's not my computer that does recording.

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It's just within yeah, I think I think it should be good even if not 10 seconds of cut out of the end of the sentence should be fine. I'm pretty sure it will bear with us there. All right.

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Cool, where are we going next right now that will cover all that? Let's talk more about the founder perspective and specifically the difference between the normal start, and the impact start.

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What are the major differences for the founder in terms of presenting the start to investors? Should it be like, somewhere in front of a pitch deck? No criminal. We're APAC start.

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Here's what would you or should be more you know, here's why we're good from the financial perspective, but also, we are very good for the environments. So, how would you recommend those founders who are running impact serves present there?

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The fact that there is an impact start.

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I think my advice is to lead with both of those stories,

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as I noted,

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when we're evaluating companies,

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we're looking for free things,

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financial return,

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strategic integration,

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opportunity,

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and impact strategic integration piece that can sort of be teased out in conversation together.

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A lot of times companies.

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Benefit from us explaining how we work as a strategic investor, and, and we can work through what that what that narrative would look like, and how our products could work together based on feedback.

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We get from our product teams and other folks, internal Salesforce, but specifically on the business opportunity and the.

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Impact opportunity I think companies should lean hard into both of those stories and have the metrics to back them up.

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And so they talk only about the problem from an impact standpoint, and they're silly from impact standpoint, but don't explain how this also can translate into a big enough business that.

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Make sense to pour venture dollars into. Then I think they're missing a piece. Of course, since we're looking for financial return with all our investments but certainly, if they're talking about the business that they're building and, you know, they're.

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Faster revenue growth and strong financial metrics without.

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Having a really thoughtful message.

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And not just message, but, you know, the metrics to back it up around the impact piece as well and that also falls flat. And so businesses we're looking for.

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They're essentially tracking together business growth with.

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With impact growth, right? Like, the more users are surveying to solve this problem.

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Ultimately translates to more revenue and moving that needle in terms of addressing the challenge at hand,

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whether it's removing greenhouse gas emissions from the environment or educating more students or creating more jobs that should all also track with with revenue growth.

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And so we want to see a company pitch both of those stories, and I'm aligned way.

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Perfect love it and yeah, great. Great. We respond to that question and moving on to the next question is just the differences between the normal start and the impact serve. So I I bet.

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Quite a few of our listeners are listening to this right now. They're like, okay, I think I might have an impact start, but I'm not 100% sure about that. What are the major things that they should look at?

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You know, to understand if their company is an actual bicarb, or is kind of an indexer, but not quite there. So, what are the major things that they should check on your staff? That's the case.

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Let me go in our portfolio I mentioned this earlier, but our founders are really coming to this problem because of something that they've experienced.

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In their in their own real lives and their own lived experience and.

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If they're not sure about whether the problem they're solving kind of fits in an impact investment narrative.

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Then I would wager, it might be a little bit on the edge.

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It's usually, it's usually quite clear that the, that the problem that they're solving is 1 that resonates with with an investor who has an impact focus.

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And this is sorry company. This is a little bit hard hard for me to answer and I get what you're asking, but I'm not, I'm not going to I'm not answering this. Well, so maybe we can adopt this 1. no worries.

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I think the answer was actually good if you can say, what exactly your your impact is right off the bat and chances are you're just not an index that did not 9 star, but no worries.

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I'll cut out. I'll leave that answer.

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And out the rest of it, let me make sure to live. No, it's otherwise I'll forget that. Okay. Perfect. Got that part. And.

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All right Yep. Perfect response. I mean, if you can't tell what exactly your serve does in terms of the impact that has and most likely.

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Just is just not an impact. Sorry that's that's it. There are no other metrics. Really? So, let's, let's just go backwards to the presentation because again, most of our listeners are in their preceed and and those stages.

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The presentation is the most important part of fundraising. Really? You don't have much data to back up your idea and.

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The way you tell your story is, how is going to go? No so let's talk a little more about that. What do you think is the key important?

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I mean, the most important part about the presentation, especially now, you know, during the cobit, what are the most important steps that the founder has to take to perform? Well, especially on the very 1st meeting with an investor.

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So, I think for 1st, meeting with an investor, I think, you know, consider this like, this is certainly your opportunity to make make a 1st, great impression. And.

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It doesn't need to be long.

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I think a 30 minute introductory conversation is a great way to to start keeping in mind that investors are meeting with potentially dozens of companies and certainly in a month

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of not in any given week and and so.

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Start with a 30 minute conversation, have your deck ready for the investor to start. How would you like to use this time happy to walk through the deck or share a few key sides or keep it conversational?

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If I don't have any context to accompany, I usually will say, yes, I'd actually love for you to reference the deck because that helps orient me a visual learner myself. And so.

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Benefit from being able to see some slides some screenshots of the product, some numbers and to see the narrative. But I think keep it.

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At 1st, pretty high level, you know, describe the problem that you're solving, describe your solution to that problem. Explain why you are uniquely suited against other income solutions, or other new players in the market to attack it.

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Explain the.

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Impact social, and or environmental that you're going to have, and then walk me through, you know, why this fundraise at this time and your plan for it. And, and I think.

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As a strategic investor is also really helpful, the company can at least begin to articulate why they're interested in Salesforce what values they see. So, 1st, bringing to the table I want to make sure that if we're.

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Going to consider an investment in a company that we can be a really valuable value, add partner. And I'll have ideas about how we can do that. Of course.

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But it's also useful of a company comes to the table with a perspective on what they're looking for in a strategic investor. Like like us.

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Nice great answer. Good advice. Definitely take your time to prepare. You know, the answer to how Salesforce specifically can be helpful to you because that's that's just what.

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Strategic investors do they, would they want to see the the future partnership and how they are going to collaborate in the future? Exactly. Right yeah.

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Most of my listeners know how much I like to talk about is, but you might not.

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So I love talking about mistakes specifically that founders make really often on those 1st means because I've personally seen a lot of them most of our our 1st, time Square. So, they are prone to making those same mistakes. So, let's talk about that.

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From your perspective what are the major mistakes that founders make on that? 1st, or maybe even 2nd meeting was it do see some specific Pi or something? That's a lot of them. Do.

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Well, you know.

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Thankfully, most of the companies that I get connected to.

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Do come prepared with both the, the business case as well as the impact case and so.

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I rarely leave a meeting thinking oh, this company's probably just not a fit from an impact standpoint, or they didn't articulate that at all or sufficiently.

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But I just will reiterate that is important to any impact investor out there come come with a thoughtful narrative around the impact you're having in addition to hire going to build a big business.

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I think.

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The content at balls I see are.

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Especially for a particularly early stage company, you know, when it comes to financial productions, for example, sometimes you see numbers that reflect really, really ambitious goals and aren't necessarily.

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Rooted in in reality and I think if I see projections on a slide, that look really ambitious and don't maybe fit the history of a company.

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I will I will definitely 0 in on that and really want to understand what's driving this growth and walk me through. How you how you are projecting.

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You know, our revenue multiple that that seems maybe maybe a little bit a little bit.

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Ambitious or a lot of ambitious, and just be very prepared to talk about your historical performance to date and.

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How you are modeling growth in the future I think also.

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Sometimes enters fall flat around competitive landscape questions and, of course, a founder should put their best foot forward and and have a really strong.

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Concise answer about why they're differentiated.

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From the competition and why they're the ones who are going to win it, but I want specifics on that.

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And sometimes sometimes I can get answers that's been just that they're the only player out there and that's really the case these days even if it's incumbent solutions.

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There's still are usually something else in the market and so I want I want to be trust that the company has done their own due diligence on what the competitive landscape looks like to understand what they're going up against.

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Whether it's an incumbent or it's other new players and.

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I think that that's another area where sometimes, especially earlier stage companies can can sometimes.

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Kind of look a little bit look a little bit ambitious. I think just being rooted in reality. I appreciate I appreciate when companies when a company is just honest about, like, this is landscape.

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This is, this is how we're different and why we're going to win.

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Yep, definitely on the same page here with you. I mean, every time founder says, oh, we don't have compares. I'm like, okay. Yeah, sure sure. You think that.

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So, we can definitely definitely make your due diligence most likely, even if it's not a direct compare or is at least 510 in direct compares to your solution. So, yeah, if you feel like, you don't have competitors most likely, you're just.

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Not doing the enough research yeah. To go to the do the thing right now while you're doing that we're moving on to the last 2 questions after these episodes after we talked about a little bit of mistakes that founders make. Let's talk about the positive stuff.

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So quality, and can you tell us more about, you know, maybe a few examples of impact and investments that you've recently recently performed really well from the financial perspective and from the impact perspective.

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Absolutely, well, I'm really excited about a company called unite us that I, that we 1st invested in back in.

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2019,

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and recently invested again in their series raised,

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which was announced last month alongside news that they had achieved evaluation well,

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over a 1Billion dollars.

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And this company is so exciting to me both because of the problem they're tackling.

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But also,

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the opportunity to to build a big business alongside growing their impact,

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the United works in a space called the social determinants of health,

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which is widely recognized as sorry.

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My daughter just walked in and interrupted my train of thought the challenge. So, quarantine.

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So, apologies, I'll make them feel sorry, I need you to go downstairs. I have to concentrate apologies.

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Okay, so we can just remove that and notice there. I will go back to you go back to United so you nice works in this space called social determinants of health.

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Which have been widely recognized in recent years as key.

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Key players, and ultimately, in individuals, health outcomes that are outside of a clinical setting.

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So,

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social determinants refers to everything from your access to healthy food,

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to your access to transportation,

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to get to and from medical appointments to your access to quality housing essentially all the social services that an individual might benefit from.

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That aren't actually.

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Provided by a doctor in a clinical setting, but that have an outside impact on their actual physical and mental health and it's.

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A massive problem in terms of coordinating these services.

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And United set out to create a platform that would put the patient in the center and enable positions and other medical providers as well sure.

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To able to appropriately route social services to the patient and close the loop.

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On what happens that patient after they say, get access to delivery or get access to transportation to get to their appointments. Are we seeing that patients therefore.

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Up here in the emergency room left that yes. Usually happens. And that of course, translates to a lower cost to actually serve this patient.

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And so you're providing the patient with better more holistic care for the whole person also driving down the medical cost to serve them.

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And so insurers and medical providers are motivated to those, both for budgetary impacts, but also really importantly.

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They're, they're creating better outcomes for people and United is a platform that unites essentially the pairs and providers on 1 side with all the social service providers on the other in a really elegant way, to connect them to the services that they need.

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That can make their lives better and just really excited about the work that they're doing, especially in a year 2020 when we, when we saw how a pandemic laid bare.

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So much of the structural equities and our health system as well as in our economy, and that, they're not, they're not totally separate right?

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And that we have to think about the whole person, and not just the patient in the medical settings.

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Absolutely 100% and prompts to unite us for reaching out to encouraged us and for you for investing in them. That's just great. And it seems like they're actually doing something. Really cool.

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So again prompts number 33 prompts and just 1 company to work on these positive. No, we're moving on to the very last question today's episode, which is a call to action. So clotting what do you want to do? Right after the app is over.

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I'd love to point listeners to a recent article that I Co, authored with other corporate impact investors that I.

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Really respect and enjoy collaborating alongside. We publish an article and the Stanford social innovation review on corporate impact, investing and for anyone who's interested in understanding more about this, new and growing build.

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I think it's a great primer for how corporate are thinking differently about deploying capital.

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And impact focused companies, and bringing their corporate and strategic resources to bear as an investor lays out some definition.

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But as well, as some examples of other corporate that are doing great work in the space, we're certainly not alone and would love to see other corporate follow suit in launching and patch funds.

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Perfect great cultivation. Absolutely. Love it.

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Not sure if there are a lot of corporate things you're listening to this right now,

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but if there are definitely considered,

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I mean,

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it could be also just say it's a good resource for companies too that are trying to understand how they could interact with corporate current venture arms that have an impact focus.

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Um, so to understand what they're looking for, and how they can add value.

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100%, so that's going to be a great call Tyson. Mike alterations me. Very similar check out those trips in this episode. There's going to be the link to the article. There is also going to be a link to linked in there as can be a link to sales force impact fund.

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And also there's going to be a link to another episode of fundraising redo about impact investing.

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So, if you're trying to understand if you're sort of lose my with you, if your impacts start after this episode, you're like, yes, I'm an impact start. I understand this now. Definitely check out another episode.

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It's going to be about specifically working with the impact investors who are not corporate funds. So if you're interested in that, definitely check out those, a lot of useful stuff is going to be there.

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And as you usually have a good day.