Xconomy Bookclub: Village Capital CEO Tackles Innovation’s “Blind Spot”

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employment and economic growth. Looking for the next Mark Zuckerberg might seem like a good idea, he says, but that strategy blinds you from seeing the other innovators who are tackling problems that someone like the Facebook founder might not see.

Baird illustrates this bias by comparing the stories of two founders: Elizabeth Holmes and Lula Luu. Holmes, the founder and CEO of Theranos, the blood testing company that, despite drawing early accolades, comparisons of Holmes to Steve Jobs, and a $9 billion-dollar valuation, never turned out to be a revolutionary game-changer. Instead, it declined under a barrage of lawsuits after its testing technology came under question in 2015.

Pattern recognition—Holmes moved in powerful circles, with people like Henry Kissinger and Oracle founder Larry Ellison on her board, and attended Stanford University—helped foster investors’ eagerness to make Holmes one of the youngest self-made millionaires in the world.

In the meantime, entrepreneurs like Luu, a Vietnamese immigrant, struggle. After earning a PhD at the University of Kentucky, Luu and her partner studied the effects of extreme poverty on rural populations. Their conversations with fisherman led to the idea for Fin Gourmet, a business that puts underemployed fishermen to work catching Asian carp, and hires rural employees to process the fish and sell it to mainstream markets. Baird writes that Fin Gourmet was profitable, grossing $1.5 million in 2015. (Village Capital invested $50,000 in Fin Gourmet.)

“Despite impressive revenue growth, they have struggled to get more resources,” Baird writes.

An interesting wrinkle that Baird notes is that crowdfunding, which operates outside of a traditional angel/VC-type funding system, shows a different demographic pattern among the entrepreneurs who receive investments. Half of founders receiving investments through crowdfunding platforms are women, at least five times the percentage of women who receive venture funding, he says.

Baird, naturally, talks about the investments Village Capital has made to illustrate the firm’s “one-pocket” approach to investing, meaning you can do well and do good in the same investment. Two-pocket investing is what typically happens, he says, where founders make their money through their companies—one pocket—and then set up foundation or invest in social enterprises from the other, second, pocket.

Like many other impact investing groups, Village Capital makes its funding decisions based on the idea that … Next Page »

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