Inclusive Capital: Edward Dugger III of Reinventure Capital

Speaker A: We've got an extra special episode for you today. Not just because we're speaking with an extraordinary guest, but because we've partnered with Junction Strategy to produce a three part series profiling the celebrated annual Social Venture Institute. SVI is now a 31 year tradition that has supported thousands of social entrepreneurs through learning, enterprise development, peer support and incredible network that reaches across North America and around the globe. This year's SVI will run September 23 to 27 and will as always be hosted at Hollyhock on breathtaking Cortez Island, British Columbia. One of the speakers at SVI will be Edward Duggar iii, founder and Managing partner of Reinventure Capital. The Boston based impact venture capital firm invests in in black indigenous people of color and women founders who are building profitable mission aligned businesses. It has a powerful and inspirational story and we'll hear it next. Welcome to in the Business of Change where we speak with social entrepreneurs impacting their communities and the world. I'm your host, Elisa Berenbaum, publisher and editor in chief of SeaChange magazine. On today's episode, I'm excited to have a co host, Mike Rowlands, partner and CEO of Junction Strategy, sponsor of our three part series celebrating the Social Venture Institute. Mike and I will be chatting with Ed Duggar iii, founding partner and president of Reinventure Capital and an early pioneer of impact investing, well before that trendy term even took root. In our conversation, we'll discuss Ed's circuitous career trajectory and what brought him full circle to founding a venture capital firm that focuses on overlooked founders historically excluded by traditional investors. Ed discusses the firm's unique strategy, the entrepreneurs they support and the challenges he faces each day. He then shares how his family history are what he refers to as knowing the shoulders upon which he stands informs and inspires his vision of what's possible.

Speaker B: Well, thank you so much everyone for joining us today. Uh, we have a wonderful guest and a great conversation ahead. I am positive about that. I am delighted to have as a co host today Mike Rowlands from Junction Strategy. Uh, we have a wonderful partnership. We will be hosting this conversation together. Mike, why don't you start us off and tell us bit about Junction Strategy and the Social Venture Institute before we jump into the questions.

Speaker C: Sure thing. It's fun to be in conversation with you again, Elisa. I've been looking forward to this conversation with you, Ed. Um, so Junction Strategy provides fractional strategy advisory support to purpose led boards and CEOs and other leaders. We've worked with over 600 clients on five continents working, uh, to integrate purpose and sustainability, to cultivate courageous leadership, and of course, to, uh, ensure meaningful stakeholder engagement across all those organizations. But one of the things that I've been doing as well for the last 15 years is helping to produce the Social Venture Institute conference. SVI has had a really meaningful influence on my career and on our business. Um, and it's actually a series of annual convenings. Um, it's dedicated to supporting social entrepreneurs as they develop and grow their ventures. And our flagship event is held every September at Hollyhock, a retreat center on the west coast of Canada that, uh, exists to nurture inspired leadership through collective and immersive experiences. Uh, and we're really grateful that our guest today, Ed Duggar iii, will be speaking as a true confession speaker at Social Venture Institute this year. An invitation to share some of his backstory and some of the trials and tribulations that, uh, are always on the way to the road to success. Um, so I've been looking forward to this sort of preview conversation today, and of course, we'll look forward to welcoming him again to Hollyhock later in the year.

Speaker B: Wonderful. Thank you, Mike, for that. Ed, I would love to ask you about your career trajectory. I, I hear it's, it's, it's a, it's a good one and it's an interesting one. I know that you joined and A little different. That's what I love about it. And you, you were part of venture capital very early in your career.

Speaker D: Well, my career has been on a sort of circuitous trajectory, if you will, because, um, I never expected I would be doing what I'm doing today. In fact, just a little bit of a story. My, my life, in fact, has been colored, uh, if you will, by folks seeing in me something I didn't see in myself. And, uh, as an example, first one was, I was in high school. I was a football player, by the way. I grew up in a. All black community, middle class. All of us were housed in homes that were three bedrooms, a bath. They all looked the same. And it was a very supportive community. All of my, um, grade school, high school were black teachers, black students and black coaches. All right, so there's the setting, um, against that. I was, um, very good student. I, um, was also a very good football player. But yet it surprised me when I was offered a full athletic scholarship in football to Ohio State that I didn't see coming.

Speaker C: Amazing.

Speaker D: Yeah. Following that first semester of my senior year, I was invited, uh, to the principal's office. And because I Was good student, good athlete. Didn't know why I was being called, but when Principal Phillips invited me into his office, he said to me, I want to introduce you to Pete Hart. And Pete Hart, uh, is a volunteer recruiter from Harvard. And he said, I'll let you two talk. And he left the office. Wow. So, uh, Pete went on to say that he was. He was about in his late 20s. He was doing this on a volunteer basis. And he said, I have come here unintroduced and uninvited. I decided today as a recruiter that I would come to a black high school, of which there were three in my hometown of Dayton. And, uh, I understand that you are number three in your. In terms of academics, in your class. Um, and what I'd like to do is to invite you to come to a citywide reception with your parents. Uh, I don't live here, but I'll come back for it. Which he did. My father and I went. We're the only black folks in the room. Pete made sure that we felt comfortable. And then he encouraged me to apply. Uh, but my world was not that world. No one in my high school had ever gone to an Ivy League school. Uh, and so we were reluctant at best because we didn't want to have high hopes. Too high. But any event, I did apply. I was admitted. But the significant thing about that was that I don't know if Pete Hart ever did that again, or whether it was something he did on a regular basis or whatever. But he changed my life because he changed the. My perspective on how big my world could be. And so I could give you a number of examples like that, where someone saw something in me that said I could do more than I'm doing. I could aspire to more. Uh, and that was. That was, um. That's been a theme, if you will, through my life. Now, in terms of the rest of the, um, entry into venture capital, that was also a little strange. I graduated from Princeton with a degree in urban planning and public administration. I joined a family office in the Midwest, uh, afterwards, doing real estate development, development of a new town, which was, uh, starting from scratch. Uh, a couple of years into that, I got a call from a friend who had said to me, graduating Harvard Business School, he said, look, I've just interviewed at this venture capital fund. Uh, they didn't take me, but I think you should check it out. I said, why would I do that? I have no experience in finance. That would just be embarrassing. But I did it anyway. I was invited to Boston they did offer me the job as a little person on the totem pole. Uh, and that was another example of, in this case, the CEO, who was white, looked beyond my resume to see something that said to him, he can do this job and he can do it well. And so again, other examples I could point to, but that's a characteristic of, and something that I have embraced. I tend to look through, uh, even once I was at, uh, UNC Ventures, and eventually when I became head of IT at 27. They look beyond the, um, recruits, uh, to see what else that brought them, that made them align well with the mission and the, um, capabilities, uh, that were required.

Speaker B: Love that.

Speaker D: Remarkable.

Speaker C: What an incredible story. I'm always fascinated with those human interactions that just feel like a conversation and a little out of the ordinary in the moment, but that actually shifts the trajectory of a life. Right?

Speaker D: Yes.

Speaker C: Um, I mean, I've had a few similar ones. I remember, uh, speaking of high school, uh, phys ed coach in high school when I was running track, who just believed I could do it faster than I was. And sure enough, there I was in the, uh, provincial championships in my grade 11 or grade 12 year. I didn't think I was going to get there, but I did. My, uh, first boss was an amazing mentor who saw something in me and recruited me out of another job. And then, um, I think you know, Joel Solomon, who has been an incredible mentor to me for, for well over a decade. Um, and it was, uh, Joel's influence that got me so involved with Hollyhock and so involved with Social Venture Institute. So I owe a lot to him.

Speaker D: Indeed.

Speaker C: Indeed.

Speaker D: Yes.

Speaker C: So it's, it's amazing to me to go from urban planning to venture capital. That feels like a big leap. And then you mentioned Newtown, a whole new town, which strikes me as very similar to a startup or an early venture. Um, but you have a deep and meaningful focus on black, indigenous and other entrepreneurs of color. I wonder if you could talk to us a little bit about the importance of the work of what you're doing now with Reinventure.

Speaker D: Yes, um, my 30 year sort of career in venture capital has always had a focus on founders of color, uh, in particular and more recently women as well. So as a venture capital fund, we always had the, uh, objective of having market returns, no concessions, uh, in terms of return, uh, and the belief that there was an inequity in the allocation of risk capital to founders of color and women that we could address by being an example of how you can invest, uh, and be successful. In that way. And so that sort of speaks to how we did it differently. Because unlike venture funds today, which aspire to having unicorns.

Speaker B: Mhm.

Speaker D: Uh, maybe one out of ten that does extraordinarily well. It provides the return that folks are looking for and then triage the rest. Because we're mission driven. Uh, our mission was to create as many successes as we could through, through our investing, which meant that we weren't looking for unicorns. We were looking for one success after another. Some which would have their high returns, some of which would have moderate returns and some even lower returns. Okay. Um, and so because of that, one of the ways in which we're different is we spend a lot of time with our portfolio companies. We won't, we will not have 20 or 30 companies in our portfolio. In our current fund, for instance, we have 13.

Speaker B: Wow.

Speaker D: We have 13 intentionally because we don't want to have more than four, uh, portfolio companies assigned to each of the partners so that we can, uh, provide this sort of expertise and partnership that they need to, you know, go from seeing the potential that we saw them to actually realizing that potential and scaling. Um, and uh, we meet with our portfolio companies, for instance, um, one to 50 times a year.

Speaker A: Wow.

Speaker D: So once it could be weekly. A week.

Speaker C: Yeah.

Speaker D: And it's, and it's not because they're troubled. Uh, it's because we want to help them look around the corner, give them a perspective that they often don't have the time or take the time in the course of their busy days to do so we think really that's sort of our secret sauce. Um, but again, it's sort of mission, uh, driven. We used to just, we describe before it was called impact and investing, we actually called it making a profit while making a difference. So those things were equal. It wasn't one or the other or some concession on one or the other. But we believe we could do both and we think we've lived up to that, quite frankly.

Speaker C: Uh, that's amazing.

Speaker D: Yeah.

Speaker C: That's incredible. The idea of meeting weekly with an entrepreneur, like to have that support alongside with the capital to help me launch and grow an enterprise. That's pretty remarkable.

Speaker D: From time to time we ask our founders, well, okay, we've been meeting week to week for a year. Do you want to cut it back? And invariably they say no, because they value that. I mean, we're become an extension of them. Um, in a real sense.

Speaker B: How fortunate are they? That's wonderful. That's really wonderful. Yeah.

Speaker C: I was going to ask a question that's just go down a little bit of a rabbit hole here. I spent about five years as an entrepreneur in residence with an accelerator here in Vancouver in one of the universities. So we supported about 75, 78 entrepreneurs. And one of the things that I found, and I'm just really curious if you see this as well. One of the things I found was that um, many of those first time entrepreneurs discovered partway through the program that they were not only building a business but learning how to be an entrepreneur. So it ended up being a lot of sort of coaching and personal confidence support as well as the nuts and bolts of the business support. I'm wondering if you have a similar experience, if that's been your experience as well.

Speaker D: Uh, it has and it has shaped our investment strategy. Our founders tend to be older. Oh our average in founder uh, is 47.

Speaker C: Wow.

Speaker D: Range in age from 35 to 60. Right.

Speaker B: Loving that.

Speaker D: Typically have anywhere from uh, a minimum of 10 years and more like 15 to 20 of um, real world experience inside of um, mainstream businesses.

Speaker B: Right.

Speaker D: So they have gathered their, their thoughts, they have gathered their uh, the begin to define what their entrepreneurial interest is. That way they have a network.

Speaker B: Right.

Speaker D: Have, have a, they're in a different point in their life. The children aren't quite so young.

Speaker C: Right.

Speaker D: And they have a, actually a stronger know how in terms of how to get what they want to get done done. And so that for us from a financial point of view is a mitigation.

Speaker C: Yes.

Speaker D: Uh, because uh, they're more likely to be successful at the age of 45 than at 25m.

Speaker C: Right.

Speaker D: So the learning process for us is not so much that they are wet behind the ears, but much more so that they're just not uh, great fundraisers.

Speaker C: Right.

Speaker D: We did a survey of our founders and when we do it regularly, what, how can we be the most helpful? And invariably the top answer by uh, by a lot is help us figure out how to raise money that doesn't take six months and 80% of my time to do. Right. So we've set up something called the co pilot program that we share with our management team which gets them started well earlier than they will need to go to market to prepare themselves for what's involved. And uh, our experience has been we can cut down by at least half the amount of time that they spend on fundraising, um, by letting us uh, give them our experience in, in doing that as well.

Speaker B: Mike, I'm going to jump in here because I want, I just realized we didn't go we didn't get like the backdrop to, to reinventure yet. So when did reinventure start and what,

Speaker A: what was the why behind it?

Speaker B: Why was it so important to you?

Speaker D: Well, it was important me. For me it was a full circle kind of experience because I had been doing venture capital for 25 years, uh, under the name of UNC Ventures. Uh, and uh, the, the last of that sort of grouping of funds was um, I harvested it, um, made the distributions, provided good returns and it was. I, uh, reached a point in my career where I had said, look, I have spent all my time on the elite, and I would like to spend some time with, helping to build everyday black controlled businesses in my own backyard. So very quickly I formed, with the help of Marsh Carter, who at the time was CEO of uh, State street, something called the Business Collaborative. And the Business Collaborative was a business community initiative in the Boston area that was designed to bring the major corporations into a grouping of about 20, as it turned out, and for them to do business with companies, uh, like this in their own backyard. And so we generated tens of millions of dollars that way, working with the, not with the procurement people, but with the C suite to generate ideas. And having done that successfully, uh, I then felt that things were changing in the financial world where larger institutions were beginning to take this issue of the uh, inequity more seriously. And with experience that I had, I said I can bring something to this ecosystem, uh, in terms of experience, et cetera. So let me jump back in. And so we launched, uh, reinventure in 2020. And we did that with the idea that we would still have a focus on founders of color. We would include women this time around. Um, to answer your question directly, what had started off as a profession had become a passion that now because my work with large corporations, I could bring both financing experience and business development experience to it as well. And so I thought it was time.

Speaker C: So, um, you paint a picture of a really successful firm, lots of great support to some very successful entrepreneurs, but it can't all have been easy. What have been some of the more tricky things, maybe through your career, but particularly through Reinventure. You started the same year we had a global pandemic. I don't imagine that was an easy time to start. But what have been some of the challenges you've overcome in uh, sort of achieving this mission that you're on?

Speaker D: Well, that certainly was a crazy time because we actually launched in March of uh, 2020. And March of 2020 is when the stock market fell apart.

Speaker C: Right.

Speaker D: Covid was declared a worldwide pandemic. There was uncertainty and fear and craziness all around. And so I said to myself, I was in the early stages of raising capital, but I said, you know, I haven't met my minimum, but I need to go to those investors who have already signed subscription agreements and say, we need to close. I need to be able to put up my open for business sign. Will you let me? And they did. So that was a. That was a huge positive thing. Um, and, you know, a couple months later, the killing of George Floyd, there was a lot of stuff going on. But to your point, Mike, the. One of the great difficulties in running a company like ours is that one of the first questions I would get was, are there really entrepreneurs out there that can build scalable companies that can do it profitably? I mean, you know, I just don't know, you know. Right. And the reason they didn't know, of course, is because that wasn't their network. They never made an effort to be part of that network. Uh, and so they had no insight into what the possibilities were. And that's where we were different. I think that's. That's been the major one. And, uh, often I had to just reduce it to the size of our portfolio and say, we're only going to invest in 15 over a four or five year period.

Speaker C: Right.

Speaker D: I think I can find 15 in five years. That, that will work out pretty well. You know, in terms of other challenges, um, there are, there are challenges just in terms of disbelief. Um, there are challenges in terms of actually, to a certain extent, developing relationships with founders because they have become so sort of used to being abused and disregarded, etc. So when we come and say, look, our purpose is create success, often some disbelief in that until we demonstrate that through the way we structure our deals, the way we spend time with them, that they can. The fact that when we say we've got your back, they believe it. So. Right.

Speaker C: Yeah. That's an interesting one to have to try and overcome. M. What an interesting objection to have to navigate when you see, you know, just as others saw something in you, you're looking at these entrepreneurs and seeing potential and opportunity and something fantastic. And they're not believing you.

Speaker D: Right, right, right.

Speaker B: They're not used to it. Yeah.

Speaker C: Or they're not used to it.

Speaker D: They're just. They're just not used to it. And of course, with women, it's an entirely different. I mean, it's not. The distrust is that the abuse has generally been greater as as female entrepreneurs. I mean just to be blunt about

Speaker B: it, you know, so I m can believe that.

Speaker C: Yeah, the fraction of venture capital that goes to women entrepreneurs is astounding.

Speaker D: Yeah, it's, it's less than 2%. And but for founders of color, collectively, I mean black founders, it's more like 1% or less. Um, and uh, which, which makes no sense whatsoever. I mean we describe what we do as, you know, there's the bad news and the good news. The bad news is that there's this inequity that exists and is persistent which we try to hold ourselves as an example, a data point if you will, that says it can be done. Um, and then there's the other side that says that, you know, because of the uh, that the vast majority of the industry ignores this segment. There are also great opportunities.

Speaker C: Sure, right.

Speaker D: The pricing, good opportunity, don't have to fight over things, uh, et cetera, et cetera. So we have an opportunity to get in at a point which tends to be between a Series A and a seed investment in Series A, sort of that sweet spot where we expect that with the Series A they will uh, begin to scale significantly.

Speaker C: So can we break that little bit of jargon down for some of the listeners that are sort of early or first time entrepreneurs? What do we mean by seed financing? What do we mean by Series A or Series B?

Speaker D: Yeah, a seed financing. Typical founder at a seed stage would have less than a million dollars in revenue already. In other words, minimal, um, market traction. Uh, typically they would not have their, a complete management team put together because they're small. Right. And can't afford uh, much more. Um, and so the investor who's looking at a company that will have great potential once those pieces are put in place has to make a leap of faith that they will.

Speaker C: Right.

Speaker D: And so they're funding typically uh, very early stage, most likely funding losses as well. Whereas a, uh, Series A, the characteristics would be million and a half more of uh, revenues, all the key managed people in place. They um, are at a point where many of the losses are behind them. They've learned on someone else's nickel.

Speaker C: Good for them, well done.

Speaker D: And you know, they're, they're ready, they're seeking capital that allows them to scale or grow rapidly. Right. So that's, that's the distinction and what we look for, we often provide a bridge between the seed and the Series A to give them a little longer Runway, uh, to prepare themselves for that, to get the performance up, uh, et cetera.

Speaker C: Yeah, fabulous. Thanks for that.

Speaker B: Thank you. How optimistic are you that your work and the work of allies in venture capital, enterprise development are having any impact on inclusive economic development? Big question.

Speaker D: Yeah, um, I'm optimistic primarily because I have the long view. Uh, you know, if it were, uh, a five year, you know, horizon that I was looking at, then it could be discouraging. But one of the, my benefits really, um, is that I have the privilege of knowing the shoulders upon which I stand. Uh, in other words, I can draw strength and my optimism from the fact that it's been a long climb in terms of my ancestry. Uh, I can. I. I know, for instance, through documented records that Neptune Branch, who was born in 1748 on the plantation of Colonel Branch, a revolutionary militia person, uh, and have been able to track that success of them finding a way to and strength and etc. Through slavery, and then follow the trend of my family and both my mother's and father's side, to see how they have managed to prosper despite the challenges in front of them. To give you an example in that Neptune Branch, he bought himself twice from his slaver. He went to a little bit of the story. His, his master of owner, if you will, as they were heading for the Revolutionary War, uh, Neptune was the body servant of Colonel Branch. He, um, said to Neptune, if we survive this war, I will free you. Well, of course, war came and went. He was not free. So Neptune said, look, if a promise isn't good enough, perhaps cash would be. So he worked out a deal with his owner to buy his freedom for $700 in the mid, the late 1700s. It took him 10 years. He did it. Long story short, when, uh, Colonel Brands died and he was transferred, they were selling his estate. Neptune was asked for his bill of sale. He had no bill of sale because he wasn't given one. And so he was re enslaved.

Speaker C: Oh, uh, wow.

Speaker D: He said, okay. And then he went back to his new master at that point and said, okay, I want to buy myself. And they said $700, which you didn't pay the first time, which he had. And another 600 on top of that. For $1300, you can buy your freedom another 10 years. He did it, and then he bought his wife as well, at 70 years old. So when I say I have a history, um, that I can refer to, I have a strength of ancestry that I can refer to, it's a real source of optimism.

Speaker C: Wow, that's utterly remarkable. And I'm so grateful you shared that. That's incredible.

Speaker B: Yeah, me too. Talk about Longview. That's, that's, that's crazy.

Speaker D: Incredible. Let me just sort of put a final note on that other one. I think, uh, myself and my ancestry is being keepers of the dream. And that dream is not the dream of America, it's the dream, the Martin Luther King version of the dream. And so as I look at my ancestry, I see their desire to keep the dream of freedom, to keep the dream of, uh, equality, to keep the dream of the ability to prosper as a continuum, as a through line, if you will. In terms of that which I share,

Speaker C: that's a remarkable story. 1748.

Speaker D: 1748, yes. Yeah, I've been working on, um, some documentation. At some point it may turn into a book. Um, but it, ah, the title that sort of rings for me is Before America. Because these ancestors were there before we had a country.

Speaker B: Right.

Speaker D: Um, and um, you know, that something, uh, we don't think about if we think about immigrants.

Speaker C: Right.

Speaker D: We've been here for a long time, a very long time. So absolutely.

Speaker B: Um, thank you for sharing all those stories. I, I, I feel kind of speechless. But, um, but um, no, I just, it really added a depth to this conversation which I think was incredibly important and um, will resonate so much stronger with those stories. So, um, and thank you for joining the podcast. Thank you, Mike, for co hosting so well, appreciate it. Mike, is there any last words from you?

Speaker C: Just a deep thanks, Ed. It's lovely to continue to meet you in this way and get to know you a little bit better. I've really enjoyed the conversation. I'm really looking forward to meeting in person later in the year.

Speaker D: Yeah, I do too. Um, Mike, to see you face to face.

Speaker A: Thank you for joining this special episode of in the Business of Change, sponsored by Junction Strategy and co hosted by Junction CEO Mike Rowlands. Stay tuned for the next episode in our special series celebrating the Social Venture Institute. And remember, this year's SVI will run September 23rd to 27th at Hollyhock. To learn more, visit Hollyhock CA SVI.