Venture Capital, Diversity in Startups and Raising Money from Home
Episode 57
Frankie’s guest today is Yvonne Bajela, a founding member and principal at Impact X, an investment fund which unlocks capital for underrepresented entrepreneurs across Europe. Recognised by Forbes 30 under 30 in 2020, Yvonne was the youngest investment manager at Mitsui & Co. and led over $200 million in investments.
In this episode, Yvonne tells us how she began her career in venture capital, networking consistently for two years to land a senior position, and how she managed imposter syndrome to work to her advantage. They talk about the systemic bias within the venture capital ecosystem and how Impact X challenges that by bridging the gap between capital and diverse talent.
Yvonne tells us the differences between raising venture capital and angel investment, and shares her advice on how to find an angel investor that suits your business through online networking. Despite the pandemic, there is still opportunity for your business to get invested.
And finally, Yvonne shares her 2020 mantra – to feel the fear and do it anyway.
This conversation was recorded on 22nd October 2020. We hope you enjoy listening.
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Episode Chapters
00:00 Chapter 1: Breaking into the industry
02:43 Chapter 2: Overcoming imposter syndrome
05:33 Chapter 3: Impact X’s mission & bias in the venture capital ecosystem
10:30 Chapter 4: What makes a good startup founder?
13:28 Chapter 5: Market timing and unit economics – why things can go wrong
16:24 Chapter 6: The Covid impact, innovation and e-Commerce
21:13 Chapter 7: Venture capital vs. Angel investment
23:14 Chapter 8: How to seek out angel investors
25:11 Chapter 9: WFH Networking
28:03 Chapter 10: Providing value and taking risks – what have you got to lose?
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This episode was sound edited by Beth Davison https://www.bethdavison.com/. Women On Top is a Let’s Be Frank production. https://letsbefrank.co
EPISODE 57 TRANSCRIPT
Frankie Cotton Yvonne, welcome to Women on Top.
Yvonne Bajela Thank you for having me.
Frankie Cotton Firstly, how are you?
Yvonne Bajela I'm very well, thank you. It's been a busy week, but all very good.
Frankie Cotton Yeah, good. Busy is good these days, right? That's what we're aiming for.
Yvonne Bajela I just find that everyone seems to be busy in this pandemic world that we're living in.
Frankie Cotton Yeah. That's very true. So, Yvonne, I wonder if we could start, actually – can you tell us about your career in venture capital? So how did it start?
Yvonne Bajela Yeah. So from a very young age, I knew that I wanted to go into finance, unlike other children, when they were playing out on weekends, when I was younger, my father used to actually make me sit in on Saturdays and read the Financial Times with him. And so I have a very early exposure to the financial markets, I guess, and that really sparked my interest. So when I went to university, I studied economics and finance and it was always known that I wanted to go into finance but didn't quite know exactly what. But I did break into investment banking, so that was the initial finance role that I had. And, you know, that was a great experience. However, I knew that it wasn't where I want to be long term. So I actually spent the summer of 2013 in Ghana where I was providing pro bono advisory support for various early-stage companies, and that's where I really thought, ok, I really love working with earlier stage companies, providing advice and so on. So when I came back to London, I started to pursue the path of becoming a venture capitalist and trying to break into the industry, I was networking at every single event, and that's kind of how I broke into the industry.
Frankie Cotton Yeah. Great. And that sounds very straightforward in the way that you've sort of described it so succinctly. But I imagine it wasn't that easy. I mean, what was that experience like, trying to get a foot in the door?
Yvonne Bajela Yeah, it definitely wasn't easy. So the venture capital industry is notoriously known for being very network-driven, oftentimes jobs don't get advertised, and so it took me actually about two years on my return from getting back to Ghana to find that first venture capital roll. And When I say I was networking consistently, I was literally at every single event that you could, any start-up even – I was there. And so I spent a lot of time just connecting people in the industry, and I was very fortunate to have a family friend of mine, actually. And she was an adviser for Mitsui, the Japanese investment company. And she highlighted that they were looking for someone to come on board and head up investments in Africa. And given that I had spent the previous summers in Ghana, working with start-ups, it was really aligned they thought, and so, I took up the opportunity and it was quite a senior role that I was bought to do, so I was initially doubting myself, saying, you know, how can I go in having never done investments before to do this really senior role – but it paid off, it worked out. And I think that having taken that risk, it was definitely worth it.
Frankie Cotton Starting that role, as you say in quite a senior position, did that feel like a huge responsibility, you know, taking other people's money and making decisions about where you're going to invest it, and how you're going to generate a return? How how did that feel for you?
Yvonne Bajela It was daunting. I mean, not only was I, you know, investing, but at the same time I was having to manage a team in Germany. And so I was having to almost battle within myself, how can I exert my authority with the team when I was still learning myself. So that was definitely a steep learning curve. So I was coming in and I was working very late nights, almost every single day, really just trying to get up to speed and ensure that I was doing the role to the best of my ability. However, it really did pay off because within a year of being there I was promoted from, you know, just overlooking investments in Africa, to looking at investments in Europe, Middle East and Africa, and it led to me, you know, being able to spend a lot of time living and working in Israel, Kenya and several other countries, including Japan. So it was an incredible experience, but it did mean that I was definitely out of my comfort zone and I think that coming back to my earlier point for me, I've found that it's often during those periods where I'm not in my comfort zone, where I'm really stretching myself and I learn the most, and that was probably one of the most pivotal moments of my career.
Frankie Cotton And I always find that really interesting, the kind of dynamic that is, you know, at what point is imposter syndrome or feelings like that, or what point is it valid, i.e., yes, you don't have enough experience and maybe you shouldn't be doing that thing, versus at what point is it is it actually sort of a good nervous energy? And actually that being aware of your own blind spots and being cautious can actually be a great thing because it makes sure that you do your research and you know what it is you're doing. I mean, was that quite easy for you to know where on that scale you were, you were sitting?
Yvonne Bajela Yeah, I think you actually mentioned such an important point. It's really about being self-aware, understanding what your strengths and weaknesses are. That's the only way that you can really figure out what you need to improve on. And I was very open about that. So I made it very clear to the team, you know, where the gaps were in my knowledge and I had almost like a guardian angel, so there was a woman in the New York office and she was doing exactly the same role as me, but of course, focussing on the American region. And she would make sure that any question I had, she'll be very responsive, she literally would take me through it. So just being vulnerable, I guess, in that I shared with her, you know what my struggles were, the areas that I was really, you know, requiring support with. And because of that, she was really open to helping me. Had I just pretended that I knew it all, that would have put me in a worse position because then I wouldn't of got the support that I needed.
Frankie Cotton Yeah, great lesson there. And I wonder, can you tell us about Impact X and your mission as a business?
Yvonne Bajela Yeah. So Impact X, UK based Venture Capital Fund. So we focus on underrepresented entrepreneurs. So we spend a lot of time with black entrepreneurs, female entrepreneurs, and so on. And I guess, you know the reason why we exist, if you look at the world of venture capital over the last decade, it has accelerated really, really well. So over 1.5 Trillion dollars has gone into venture capital deals. However, again, if you look at the data in the last year, 2019, only 0.5 per cent of that, less than 0.5 per cent of that went to black founders, for example. And we've all seen, you know, less than two billion dollars went to female founders in the last year alone. So in my view, what that really highlights is there is clearly a systemic issue with the venture capital ecosystem as it exists today. And so our mission is to really bridge that gap in funding because there is no shortage of incredible female founders, for example. But what is needed is more access to capital.
Frankie Cotton Yeah. And I wonder on that point. I mean, this I'm sort of asking you the the million dollar question here, the Holy Grail, which nobody really has one, there's no one answer to it. But what do you see as the real barriers for underrepresented founders getting V.C invested? I mean, is it a case that they're not in the room pitching or is it that investors are simply putting their money elsewhere?
Yvonne Bajela We can attribute it to both, actually, because, I mean, if you think about the venture capital ecosystem, it's very biased. I mean, just generally there's data that suggests that, you know, a woman is more than two times more likely to invest in a female founder. So where the industry is dominated by many white males, they're obviously going to invest in entrepreneurs that reflect and are fully represented of their selves and tapping into networks that they've known because obviously there's pattern recognition and so on. So I think that's part of the issue, in that in some respects, they're just not getting a seat at the table, really. And so that's what we're really trying to change, cause there's no pipeline issue. Every day I meet incredible female founders, black founders. And so that's what we're really trying to bridge and highlight because, you know, I've been very fortunate to invest in some really, really incredible founders over the years.
Frankie Cotton And I wonder specifically this year. So obviously, we've had I mean, a lot of challenging times this year, to say the least – what with the pandemic, global politics. But then at the same time, you know, we've also seen movements where we're perhaps just being more human and more connected, as we saw with Black Lives Matter. And I wonder, in your industry, in the investment industry, how has that landed? Are participants in the industry actually really looking around and thinking, okay, what is the systemic problems within our industry and how can we tackle them? Is it having a positive impact? Do you think? And will that last?
Yvonne Bajela Yeah, you know it's been a crazy year. It's one thing after another really, but what I would say is that it's definitely brought it to the forefront, and so there's a lot more conversations happening, you know, the V.Cs I have conversations we've had have made an effort to be a bit more proactive because I think it's when you think about it, a lot of V.C. firms, they have less than 10 people so they don't really have a HR person to think about that side of things, you know, partners, they're very time-stretched. And so do they usually have time to think about, you know, how they can maybe try and rein in those biases and, you know, try and go out there and get more diverse pipeline? Maybe not. So what this year has really done is brought that to the attention of many. And I've definitely noticed more proactiveness, which is great, because I think that's the first step, really, really understanding that, you know, some entrepreneurs do face these bias. And then the next step is what can we do to reduce that bias as well?
Frankie Cotton Yeah, definitely. And actually on that point. So I know that you have been recently hosting a podcast of your own; Represented. And I wonder if you could tell us a little bit about that and what that was like?
Yvonne Bajela Yeah. So it was run by Secret Leaders, Dan Murray – he's incredible, and essentially in the aftermath of, you know, Black Lives Matter, he decided to put on this podcast where it was really just showcasing black entrepreneurs, showing that there is no pipeline problem, and then the hope was to get them funded. So really, really incredible in terms of, you know, impact. Two of the entrepreneurs that came on were funded off the back of the podcast.
Frankie Cotton That's great!
Yvonne Bajela Yeah, it's fantastic! I was really pleased about that. And hopefully there's more to come because I know there are more conversations still taking place.
Frankie Cotton Yeah, amazing. You yourself have invested over 200 million in start-ups across, as you said, Europe, the Middle East and Africa. And from that experience, what do you think makes a great start-up founder?
Yvonne Bajela Yeah. Oh, many things. I'd say the key thing is, one thing that always sparks my interest whenever I'm meeting an entrepreneur is really seeing that passion come through almost like an obsession that they are the ones to solve this problem. So what is it that gives gives them a competitive edge to make them successful in the space? So a great example is, I recently met with a founder who is running a supply chain tech company and, you know, no discredit but supply chain technology is not the most sexiest of areas. However, he was so passionate to the point where after I left the meeting, I found myself researching supply chain technologies for like two hours. Now, that just shows you how his passion came across so much it got me so excited about the opportunity. So I went off and just researched, just wanting to learn more about it. And so for me, it's really about that passion and that resilience, because let's face it, building a company is not easy. And so without that passion, without that real edge, you know, it's gonna be difficult, so that's one of the things I always look for. Aside from that, it's really, does this entrepreneur have domain knowledge? What is it that's that's really going to help them get ahead? And also, what's the differentiation? And that could be differentiation through many things that could be priced differentiation, you know, doing things more at a more reasonable cost. It could be, you know, product differentiation, feature differentiation. There's many ways to differentiate and get ahead of others in the market because it's not always about reinventing the wheel.
Frankie Cotton And yeah, that's a very important thing to mention, definitely. And at Impact X, I know that you guys have a real social impact focus, and I wonder how you define a social impact company, right? That is rooted in real change and progression and not just using words and language to make it seem like they could be.
Yvonne Bajela Yeah. So one thing that's really really important to us, and I guess me personally is diversity of thought because we really do believe, and there is data that suggests that diverse teams do achieve better results. And so one of the things that we look for is, you know, how can we ensure that the companies that we're investing in are bringing on diverse talent, and not only bringing them on, but also retaining them. And we do also believe that the more diverse teams are, they'll go on to hire a more diverse team, essentially. And so that helps the job creation and the knock-on effects are, you know, go so forth. So that that's how we see impact.
Frankie Cotton Now, I'm sure you've also seen, as well as the successes, your fair share of businesses, which for one reason or another don't flourish as everyone had envisioned. And I wonder in those cases, what do you think has gone wrong? Are there trends and behaviours that you can kind of pick up on and you can look back and sort of reflect and say, okay, yeah, that was probably why.
Yvonne Bajela Yeah. So I would say that, you know, a few things. One of the things is that the value proposition is not compelling enough. There's this saying around, you know, you often hear people talk about whether a product is a vitamin, a nice-to-have, or an aspirin, a must-have. And many times people let themselves go based on the sexiness of an idea instead of actually realising whether people need it and have gone and validated the product or service that has been offered. Another issue, I would say, is around market timing. You could just be in the wrong time. And a great example of that is before we had Facebook, there were various other social networks, six degrees, for example, which no one probably knows of. However, the timing was just wrong, so Facebook has gone on and built this fully fledged social network, the largest in the world today, and that was done a few years later. So, again, market timing is another issue. And obvious reasons like running out of cash, I mean, obviously, cash shouldn't be the ultimate goal but at the end of day, like they say, cash is king because without being able to fund the business and fund the team and so on. It's tough. But again, that does tie in with the value proposition, because I always do believe that if you are providing something of value, then the money will follow. The final thing I would say actually is around unit economics, particularly for, you know, at the early stage, many companies are not thinking about unit economics, which, as you know, it's arguable, it's debateable whether companies should be focussing on that. However, I do believe that if you want a sustainable business in the future, thinking about those unit economics are very, very key, particularly in an environment like this where investors are generally more cautious, you know, the risk appetite is maybe not as high as it was before before the pandemic. I think it's important that you do have a handle on the numbers and they're able to demonstrate some sort of sustainability within the business model.
Frankie Cotton Yeah, and for somebody perhaps who's listening and isn't quite sure what you mean by unit economics, can you give us a bit of an overview?
Yvonne Bajela Yeah. So unit economics is really around, you know what are your margins. So how much money are you bringing in? How much does it cost per user? If you're paying, say, you know, 10 pounds to acquire a user but they are only bringing in four pounds, then that's clearly a loss making business model. That's fine in the early days. But you need to start thinking about how are we going to make sure that this business model will make sense for over the long term?
Frankie Cotton And I'm interested to pick up on what you were just saying around sort of market timing? As we were saying just before, is with the pandemic this year, everything has changed, and with that brings you know, opportunity. And I wonder, are you seeing a real change amongst founders and the ideas that are coming through to you? Are you already seeing that? And looking at the future?
Yvonne Bajela Yeah. I mean, one thing I'd say that we're, I hate saying this word, but we are in unprecedented times. And one thing I'll say is that a lot of the most successful companies that we know of emerged were built during the midst of financial crisis, economic crisis. And the reason being is, you know, when we're in periods of crisis, new opportunities emerge, and it's a great opportunity for entrepreneurs to identify what those gaps are in the market and really tackle those. So if you think back to 2007, 2008, where we had the financial crisis, we had companies like Airbnb that were created, WhatsApp, Uber, Instagram. So I'm really excited about the companies that are currently tackling the issues of today. I'm actually just about to close on an angel investment actually in the e-commerce space, e-commerce and somewhere is an industry that's really, really grown as a result of a pandemic. Because let's face it, like my mom never used to shop online, she was totally against it. But because of the pandemic, she's now shifted to shopping online, which is great because they say it takes 90 days to build a habit, and now she's been doing it for this period of time. So many people have said, you know, is this a short term shift or this is just a shift because of the pandemic? Or are these habits going to be long term shifts in people's behaviours? And so e-commerce is one of the things that I believe is going to be a long term shift, even post-pandemic. So that's one of the areas I see a massive opportunity, particularly for companies that are providing infrastructure. I mentioned supply chain earlier around the company that I met. And again, supply chain is a really, really interesting area simply because one thing the pandemic did was really expose a lot of companies that had supply chain risk, because when we had closed and shut down in February, a number of companies that realised that their suppliers were in Wuhan and they were left with massive supply chain risk. And so that's some other interesting area. Finally, I would say one other area that I'm really excited about is subscription services. So we are very familiar with subscription services. I mean, most people have a Netflix account, right? But actually, what we're seeing is subscription opportunities when it comes to consumer products as well. So whether that's hair shampoo. And I believe that that's going to be a way of the future. So really, really interested in seeing companies offer subscription services.
Frankie Cotton Yeah, I agree. And, you know, there is such an opportunity in e-commerce. And what I find so fascinating about that world is how there are so many great brands and great online marketplaces and brilliant products. And it still seems like a lot of the basic factors aren't there, so the stuff that Amazon has taught us should be standard, like, extremely fast delivery, ideally next day delivery, ease of returns is something that ASOS, for example, has just totally nailed. And it does make you think sort of why some brands and marketplaces are really struggling to kind of keep up. I mean, what do you think about that?
Yvonne Bajela This is exactly it. I think the companies that don't innovate during this period are not going to survive. I mean, if you look at our high street, the companies that have really shifted to online, such as H&M, for example, they're doing relatively well with their online sales, whereas companies that are really focussed on the whole high street model are doing pretty badly whenever we see the results, they're very dire. So I think that, you know, it's those companies that do look ahead and look at the companies such as Amazon and think, ok, because right now everything that I order, I always check, whether it's on Prime, cause I'm like ok, if I can get it next day, why not? So that e-commerce company that I mentioned, I recently invested in, they do fulfilment services and they're looking to do online delivery for smaller brands, and at the moment, that's not a possibility. If you look at the likes of all the delivery services, they're not able to offer same-day delivery but I feel as if consumers are with Amazon Prime, for example, sometimes you can even get same day delivery. And so these businesses need to innovate and find a way to really cater to the way in which consumers demands have changed. And those that do are going to really benefit from that.
Frankie Cotton Yeah, definitely. Yvonne, I'm really interested, so you wear two investor hats, you have a V.C investor hat and you have, as you mentioned before, an angel investing hat. And I wonder, what are the differences between the two? What shifts in your mind when you are looking at an angel investment versus when you're being your V.C?
Yvonne Bajela Yeah, I would say that there's quite a lot of similarities. So when I'm looking at an Angel deal or Venture Capital, I'm really interested in knowing, you know, can this company grow on? Does this company have enough money to make it to the next milestone in order to raise another round? The key difference is the amount. So when I am angel investing, it's a much smaller cheque.
Frankie Cotton For now!
Yvonne Bajela Yes. Most venture capital investors will invest a minimum of £250k. I don't have £250k to put into various companies, myself, so that that's one of the key differences. And also, I think that when it comes to angel investing, venture capitalists are very much looking at those companies that are going to scale and grow to like 10x, you know, are they going to return 10x of the money that's invested? Whereas, you know, if you look at the typical angel returns like 2.5 times money, obviously companies like Uber have delivered astronomical returns. But I'll definitely say that, return requirements for me, when I'm looking at angel investments are slightly different. I'm very much looking at the potential – I'll be happy to have a 5X return, whereas for a venture capital fund, targeting that 10X is really important because of the overall way in which Venture Capital funds are structured and the return requirement. And the fact that, you know, most investments, you know, they say the majority of companies, start ups do go on to fail and so when venture capital funds are invested, that's why they focus on the really high returns, because they want to ensure that they're able to return the entire funds money.
Frankie Cotton Yeah, absolutely. And I wonder for somebody who's perhaps listening to this podcast, who is looking at getting angel investment, how can they find (and I don't mean give us your e-mail address!) but I mean, how can people find angels and, you know, where should they be looking? And really what's the right approach that works?
Yvonne Bajela Yeah, I would say that you just have to hustle hard [1.8s] in that, [00:23:41]if you operate in a particular industry, the best way to find angels, I believe, is to find individuals who are senior within that industry. They're likely to have a lot more disposable income, and as well, they're going to bring value to the table because they have that industry insight and they probably will have a network that will come along with it, so I think that's a great place to start. Another great way is sometimes to just look at other companies that have been funded within the same industry, see who their angel investors were and see whether that that you could tap potentially tap into their angel investors. LinkedIn's there, I always say, never be afraid to send the cold message on LinkedIn, never be afraid to send the cold – I even get messages on Instagram.
Frankie Cotton A good old DM.
Yvonne Bajela Yes, I really do. So just go for it! And I think in terms of building that relationship or when you are sending out cold e-mails, don't just say, hey, I need money for my company. Like, be really strategic about it. I always like the e-mails that are really specific and tailored to me personally. So a great example is, you know, someone recently messaged me and said, hey, I saw that you invested in this company, my company operates in a similar space I'd love to get your advice. And so I was really intrigued by that, I was like, oh ok, they operate in the same space I'd love to just, you know, have a chat with them, giving them advice and what I know about the industry. And that's a great way to build a relationship with an investor – ask them for advice, and don't wait until the point in which you're raising money to speak to investors. Do it way earlier than that.
Frankie Cotton Well, yeah. And have you seen a shift in, you know, since Covid and since we're all working from home or wherever we are in the world, sort of trying our best. Has that changed the way that investors and entrepreneurs network? And are there some positive changes there that you think might last.
Yvonne Bajela Yeah, interesting question. I think that one of the things that we have seen is to some extent, you could say that it's levelled the playing field because before it was very much you know, I know this investor, I'll introduce you to them and then you'll probably go to dinners with investors, get to know each other. Whereas now everyone's working from home. Everyone's connected with companies via Zoom. So it's more accessible to some extent. And I think that's one of the benefits of it all. And also, entrepreneurs' passion just generally comes through, I know. I know it's difficult to pitch on Zoom, but where, you know, entrepreneurs have really mission driven companies, for example, that that really does shine through over Zoom. So that's one of the great things. And I would say one of the other things is everyone's at home. So I'm finding that I'm receiving a lot more messages on LinkedIn and so on and a lot more open to having conversations, even if it's a quick 15 minute conversation. I have more time to do that because I'm no longer commuting and so on so people are just generally more accessible, so definitely leverage that!
Frankie Cotton Yeah, I see that. I sense that, yeah, people are more accessible and open. I wonder, was it weird when you sort of signed your first big deal, having not met the person on the other side? Was this a strange experience?
Yvonne Bajela It hasn't been strange actually, I've found that I adjusted very quickly. I haven't found any issues with it yet, I think the only difference is, is that I'm doing more reference checks. So whereas before I would spend a lot of time with the entrepreneurs in person, now I would just say I would love to hear from someone else that knows you very well, what their thoughts are, how they've worked with you, so that's the key difference.
Frankie Cotton Great.
Yvonne Bajela But we've had to make it work.
Frankie Cotton Well, that's it, right? And I think it's what's interesting about these unprecedented times is, is that we're doing things that we would never have thought possible before. You know, we never would have thought you could bring an angel investor on board having never met them or, you know, sort of strange things that are happening there. In some ways it does challenge things that we do and the things that we never thought were possible.
Yvonne Bajela Yeah, I mean, look at the amount of companies that have said their employees don't have to come back to the office ever or those that have said, you know, 2022. You know, when we immediately went into lockdown, I think a number of companies were saying, ok, we're not going to do any deals until we come out of this but they don't have that option now because we just don't know how long it's going to last for so we've have to adapt.
Frankie Cotton Yeah. Yeah, definitely. Well, Yvonne, thank you so much for telling us all about your world and what it is that you do. I just wonder, I'd like to give you some space really, is there anything that we've not touched on that you would like to pass on to the listeners?
Yvonne Bajela I mean, I always suggest that, you know, if you are sitting on an idea, just go for it because you have nothing to lose – my whole mantra this year has been like, feel the fear and do it anyway! At the end of the day, like, if it doesn't work out, you'll learn from it. If it does, then, you know, you're in a really good place. And as long as you're creating something of value, that should really be your focus, creating something of value for your customers or end users, you're gonna do okay, you're going to be able to raise money, and focus on that, as opposed to focussing on raising money because the money will come once you create something of value.
Frankie Cotton Amazing. Well, thank you so much, Yvonne. It's been lovely to chat with you.
Yvonne Bajela Thank you for having me. It's been great speaking to you, too.
Frankie Cotton It's a pleasure.
Frankie Cotton Yvonne, welcome to Women on Top.
Yvonne Bajela Thank you for having me.
Frankie Cotton Firstly, how are you?
Yvonne Bajela I'm very well, thank you. It's been a busy week, but all very good.
Frankie Cotton Yeah, good. Busy is good these days, right? That's what we're aiming for.
Yvonne Bajela I just find that everyone seems to be busy in this pandemic world that we're living in.
Frankie Cotton Yeah. That's very true. So, Yvonne, I wonder if we could start, actually – can you tell us about your career in venture capital? So how did it start?
Yvonne Bajela Yeah. So from a very young age, I knew that I wanted to go into finance, unlike other children, when they were playing out on weekends, when I was younger, my father used to actually make me sit in on Saturdays and read the Financial Times with him. And so I have a very early exposure to the financial markets, I guess, and that really sparked my interest. So when I went to university, I studied economics and finance and it was always known that I wanted to go into finance but didn't quite know exactly what. But I did break into investment banking, so that was the initial finance role that I had. And, you know, that was a great experience. However, I knew that it wasn't where I want to be long term. So I actually spent the summer of 2013 in Ghana where I was providing pro bono advisory support for various early-stage companies, and that's where I really thought, ok, I really love working with earlier stage companies, providing advice and so on. So when I came back to London, I started to pursue the path of becoming a venture capitalist and trying to break into the industry, I was networking at every single event, and that's kind of how I broke into the industry.
Frankie Cotton Yeah. Great. And that sounds very straightforward in the way that you've sort of described it so succinctly. But I imagine it wasn't that easy. I mean, what was that experience like, trying to get a foot in the door?
Yvonne Bajela Yeah, it definitely wasn't easy. So the venture capital industry is notoriously known for being very network-driven, oftentimes jobs don't get advertised, and so it took me actually about two years on my return from getting back to Ghana to find that first venture capital roll. And When I say I was networking consistently, I was literally at every single event that you could, any start-up even – I was there. And so I spent a lot of time just connecting people in the industry, and I was very fortunate to have a family friend of mine, actually. And she was an adviser for Mitsui, the Japanese investment company. And she highlighted that they were looking for someone to come on board and head up investments in Africa. And given that I had spent the previous summers in Ghana, working with start-ups, it was really aligned they thought, and so, I took up the opportunity and it was quite a senior role that I was bought to do, so I was initially doubting myself, saying, you know, how can I go in having never done investments before to do this really senior role – but it paid off, it worked out. And I think that having taken that risk, it was definitely worth it.
Frankie Cotton Starting that role, as you say in quite a senior position, did that feel like a huge responsibility, you know, taking other people's money and making decisions about where you're going to invest it, and how you're going to generate a return? How how did that feel for you?
Yvonne Bajela It was daunting. I mean, not only was I, you know, investing, but at the same time I was having to manage a team in Germany. And so I was having to almost battle within myself, how can I exert my authority with the team when I was still learning myself. So that was definitely a steep learning curve. So I was coming in and I was working very late nights, almost every single day, really just trying to get up to speed and ensure that I was doing the role to the best of my ability. However, it really did pay off because within a year of being there I was promoted from, you know, just overlooking investments in Africa, to looking at investments in Europe, Middle East and Africa, and it led to me, you know, being able to spend a lot of time living and working in Israel, Kenya and several other countries, including Japan. So it was an incredible experience, but it did mean that I was definitely out of my comfort zone and I think that coming back to my earlier point for me, I've found that it's often during those periods where I'm not in my comfort zone, where I'm really stretching myself and I learn the most, and that was probably one of the most pivotal moments of my career.
Frankie Cotton And I always find that really interesting, the kind of dynamic that is, you know, at what point is imposter syndrome or feelings like that, or what point is it valid, i.e., yes, you don't have enough experience and maybe you shouldn't be doing that thing, versus at what point is it is it actually sort of a good nervous energy? And actually that being aware of your own blind spots and being cautious can actually be a great thing because it makes sure that you do your research and you know what it is you're doing. I mean, was that quite easy for you to know where on that scale you were, you were sitting?
Yvonne Bajela Yeah, I think you actually mentioned such an important point. It's really about being self-aware, understanding what your strengths and weaknesses are. That's the only way that you can really figure out what you need to improve on. And I was very open about that. So I made it very clear to the team, you know, where the gaps were in my knowledge and I had almost like a guardian angel, so there was a woman in the New York office and she was doing exactly the same role as me, but of course, focussing on the American region. And she would make sure that any question I had, she'll be very responsive, she literally would take me through it. So just being vulnerable, I guess, in that I shared with her, you know what my struggles were, the areas that I was really, you know, requiring support with. And because of that, she was really open to helping me. Had I just pretended that I knew it all, that would have put me in a worse position because then I wouldn't of got the support that I needed.
Frankie Cotton Yeah, great lesson there. And I wonder, can you tell us about Impact X and your mission as a business?
Yvonne Bajela Yeah. So Impact X, UK based Venture Capital Fund. So we focus on underrepresented entrepreneurs. So we spend a lot of time with black entrepreneurs, female entrepreneurs, and so on. And I guess, you know the reason why we exist, if you look at the world of venture capital over the last decade, it has accelerated really, really well. So over 1.5 Trillion dollars has gone into venture capital deals. However, again, if you look at the data in the last year, 2019, only 0.5 per cent of that, less than 0.5 per cent of that went to black founders, for example. And we've all seen, you know, less than two billion dollars went to female founders in the last year alone. So in my view, what that really highlights is there is clearly a systemic issue with the venture capital ecosystem as it exists today. And so our mission is to really bridge that gap in funding because there is no shortage of incredible female founders, for example. But what is needed is more access to capital.
Frankie Cotton Yeah. And I wonder on that point. I mean, this I'm sort of asking you the the million dollar question here, the Holy Grail, which nobody really has one, there's no one answer to it. But what do you see as the real barriers for underrepresented founders getting V.C invested? I mean, is it a case that they're not in the room pitching or is it that investors are simply putting their money elsewhere?
Yvonne Bajela We can attribute it to both, actually, because, I mean, if you think about the venture capital ecosystem, it's very biased. I mean, just generally there's data that suggests that, you know, a woman is more than two times more likely to invest in a female founder. So where the industry is dominated by many white males, they're obviously going to invest in entrepreneurs that reflect and are fully represented of their selves and tapping into networks that they've known because obviously there's pattern recognition and so on. So I think that's part of the issue, in that in some respects, they're just not getting a seat at the table, really. And so that's what we're really trying to change, cause there's no pipeline issue. Every day I meet incredible female founders, black founders. And so that's what we're really trying to bridge and highlight because, you know, I've been very fortunate to invest in some really, really incredible founders over the years.
Frankie Cotton And I wonder specifically this year. So obviously, we've had I mean, a lot of challenging times this year, to say the least – what with the pandemic, global politics. But then at the same time, you know, we've also seen movements where we're perhaps just being more human and more connected, as we saw with Black Lives Matter. And I wonder, in your industry, in the investment industry, how has that landed? Are participants in the industry actually really looking around and thinking, okay, what is the systemic problems within our industry and how can we tackle them? Is it having a positive impact? Do you think? And will that last?
Yvonne Bajela Yeah, you know it's been a crazy year. It's one thing after another really, but what I would say is that it's definitely brought it to the forefront, and so there's a lot more conversations happening, you know, the V.Cs I have conversations we've had have made an effort to be a bit more proactive because I think it's when you think about it, a lot of V.C. firms, they have less than 10 people so they don't really have a HR person to think about that side of things, you know, partners, they're very time-stretched. And so do they usually have time to think about, you know, how they can maybe try and rein in those biases and, you know, try and go out there and get more diverse pipeline? Maybe not. So what this year has really done is brought that to the attention of many. And I've definitely noticed more proactiveness, which is great, because I think that's the first step, really, really understanding that, you know, some entrepreneurs do face these bias. And then the next step is what can we do to reduce that bias as well?
Frankie Cotton Yeah, definitely. And actually on that point. So I know that you have been recently hosting a podcast of your own; Represented. And I wonder if you could tell us a little bit about that and what that was like?
Yvonne Bajela Yeah. So it was run by Secret Leaders, Dan Murray – he's incredible, and essentially in the aftermath of, you know, Black Lives Matter, he decided to put on this podcast where it was really just showcasing black entrepreneurs, showing that there is no pipeline problem, and then the hope was to get them funded. So really, really incredible in terms of, you know, impact. Two of the entrepreneurs that came on were funded off the back of the podcast.
Frankie Cotton That's great!
Yvonne Bajela Yeah, it's fantastic! I was really pleased about that. And hopefully there's more to come because I know there are more conversations still taking place.
Frankie Cotton Yeah, amazing. You yourself have invested over 200 million in start-ups across, as you said, Europe, the Middle East and Africa. And from that experience, what do you think makes a great start-up founder?
Yvonne Bajela Yeah. Oh, many things. I'd say the key thing is, one thing that always sparks my interest whenever I'm meeting an entrepreneur is really seeing that passion come through almost like an obsession that they are the ones to solve this problem. So what is it that gives gives them a competitive edge to make them successful in the space? So a great example is, I recently met with a founder who is running a supply chain tech company and, you know, no discredit but supply chain technology is not the most sexiest of areas. However, he was so passionate to the point where after I left the meeting, I found myself researching supply chain technologies for like two hours. Now, that just shows you how his passion came across so much it got me so excited about the opportunity. So I went off and just researched, just wanting to learn more about it. And so for me, it's really about that passion and that resilience, because let's face it, building a company is not easy. And so without that passion, without that real edge, you know, it's gonna be difficult, so that's one of the things I always look for. Aside from that, it's really, does this entrepreneur have domain knowledge? What is it that's that's really going to help them get ahead? And also, what's the differentiation? And that could be differentiation through many things that could be priced differentiation, you know, doing things more at a more reasonable cost. It could be, you know, product differentiation, feature differentiation. There's many ways to differentiate and get ahead of others in the market because it's not always about reinventing the wheel.
Frankie Cotton And yeah, that's a very important thing to mention, definitely. And at Impact X, I know that you guys have a real social impact focus, and I wonder how you define a social impact company, right? That is rooted in real change and progression and not just using words and language to make it seem like they could be.
Yvonne Bajela Yeah. So one thing that's really really important to us, and I guess me personally is diversity of thought because we really do believe, and there is data that suggests that diverse teams do achieve better results. And so one of the things that we look for is, you know, how can we ensure that the companies that we're investing in are bringing on diverse talent, and not only bringing them on, but also retaining them. And we do also believe that the more diverse teams are, they'll go on to hire a more diverse team, essentially. And so that helps the job creation and the knock-on effects are, you know, go so forth. So that that's how we see impact.
Frankie Cotton Now, I'm sure you've also seen, as well as the successes, your fair share of businesses, which for one reason or another don't flourish as everyone had envisioned. And I wonder in those cases, what do you think has gone wrong? Are there trends and behaviours that you can kind of pick up on and you can look back and sort of reflect and say, okay, yeah, that was probably why.
Yvonne Bajela Yeah. So I would say that, you know, a few things. One of the things is that the value proposition is not compelling enough. There's this saying around, you know, you often hear people talk about whether a product is a vitamin, a nice-to-have, or an aspirin, a must-have. And many times people let themselves go based on the sexiness of an idea instead of actually realising whether people need it and have gone and validated the product or service that has been offered. Another issue, I would say, is around market timing. You could just be in the wrong time. And a great example of that is before we had Facebook, there were various other social networks, six degrees, for example, which no one probably knows of. However, the timing was just wrong, so Facebook has gone on and built this fully fledged social network, the largest in the world today, and that was done a few years later. So, again, market timing is another issue. And obvious reasons like running out of cash, I mean, obviously, cash shouldn't be the ultimate goal but at the end of day, like they say, cash is king because without being able to fund the business and fund the team and so on. It's tough. But again, that does tie in with the value proposition, because I always do believe that if you are providing something of value, then the money will follow. The final thing I would say actually is around unit economics, particularly for, you know, at the early stage, many companies are not thinking about unit economics, which, as you know, it's arguable, it's debateable whether companies should be focussing on that. However, I do believe that if you want a sustainable business in the future, thinking about those unit economics are very, very key, particularly in an environment like this where investors are generally more cautious, you know, the risk appetite is maybe not as high as it was before before the pandemic. I think it's important that you do have a handle on the numbers and they're able to demonstrate some sort of sustainability within the business model.
Frankie Cotton Yeah, and for somebody perhaps who's listening and isn't quite sure what you mean by unit economics, can you give us a bit of an overview?
Yvonne Bajela Yeah. So unit economics is really around, you know what are your margins. So how much money are you bringing in? How much does it cost per user? If you're paying, say, you know, 10 pounds to acquire a user but they are only bringing in four pounds, then that's clearly a loss making business model. That's fine in the early days. But you need to start thinking about how are we going to make sure that this business model will make sense for over the long term?
Frankie Cotton And I'm interested to pick up on what you were just saying around sort of market timing? As we were saying just before, is with the pandemic this year, everything has changed, and with that brings you know, opportunity. And I wonder, are you seeing a real change amongst founders and the ideas that are coming through to you? Are you already seeing that? And looking at the future?
Yvonne Bajela Yeah. I mean, one thing I'd say that we're, I hate saying this word, but we are in unprecedented times. And one thing I'll say is that a lot of the most successful companies that we know of emerged were built during the midst of financial crisis, economic crisis. And the reason being is, you know, when we're in periods of crisis, new opportunities emerge, and it's a great opportunity for entrepreneurs to identify what those gaps are in the market and really tackle those. So if you think back to 2007, 2008, where we had the financial crisis, we had companies like Airbnb that were created, WhatsApp, Uber, Instagram. So I'm really excited about the companies that are currently tackling the issues of today. I'm actually just about to close on an angel investment actually in the e-commerce space, e-commerce and somewhere is an industry that's really, really grown as a result of a pandemic. Because let's face it, like my mom never used to shop online, she was totally against it. But because of the pandemic, she's now shifted to shopping online, which is great because they say it takes 90 days to build a habit, and now she's been doing it for this period of time. So many people have said, you know, is this a short term shift or this is just a shift because of the pandemic? Or are these habits going to be long term shifts in people's behaviours? And so e-commerce is one of the things that I believe is going to be a long term shift, even post-pandemic. So that's one of the areas I see a massive opportunity, particularly for companies that are providing infrastructure. I mentioned supply chain earlier around the company that I met. And again, supply chain is a really, really interesting area simply because one thing the pandemic did was really expose a lot of companies that had supply chain risk, because when we had closed and shut down in February, a number of companies that realised that their suppliers were in Wuhan and they were left with massive supply chain risk. And so that's some other interesting area. Finally, I would say one other area that I'm really excited about is subscription services. So we are very familiar with subscription services. I mean, most people have a Netflix account, right? But actually, what we're seeing is subscription opportunities when it comes to consumer products as well. So whether that's hair shampoo. And I believe that that's going to be a way of the future. So really, really interested in seeing companies offer subscription services.
Frankie Cotton Yeah, I agree. And, you know, there is such an opportunity in e-commerce. And what I find so fascinating about that world is how there are so many great brands and great online marketplaces and brilliant products. And it still seems like a lot of the basic factors aren't there, so the stuff that Amazon has taught us should be standard, like, extremely fast delivery, ideally next day delivery, ease of returns is something that ASOS, for example, has just totally nailed. And it does make you think sort of why some brands and marketplaces are really struggling to kind of keep up. I mean, what do you think about that?
Yvonne Bajela This is exactly it. I think the companies that don't innovate during this period are not going to survive. I mean, if you look at our high street, the companies that have really shifted to online, such as H&M, for example, they're doing relatively well with their online sales, whereas companies that are really focussed on the whole high street model are doing pretty badly whenever we see the results, they're very dire. So I think that, you know, it's those companies that do look ahead and look at the companies such as Amazon and think, ok, because right now everything that I order, I always check, whether it's on Prime, cause I'm like ok, if I can get it next day, why not? So that e-commerce company that I mentioned, I recently invested in, they do fulfilment services and they're looking to do online delivery for smaller brands, and at the moment, that's not a possibility. If you look at the likes of all the delivery services, they're not able to offer same-day delivery but I feel as if consumers are with Amazon Prime, for example, sometimes you can even get same day delivery. And so these businesses need to innovate and find a way to really cater to the way in which consumers demands have changed. And those that do are going to really benefit from that.
Frankie Cotton Yeah, definitely. Yvonne, I'm really interested, so you wear two investor hats, you have a V.C investor hat and you have, as you mentioned before, an angel investing hat. And I wonder, what are the differences between the two? What shifts in your mind when you are looking at an angel investment versus when you're being your V.C?
Yvonne Bajela Yeah, I would say that there's quite a lot of similarities. So when I'm looking at an Angel deal or Venture Capital, I'm really interested in knowing, you know, can this company grow on? Does this company have enough money to make it to the next milestone in order to raise another round? The key difference is the amount. So when I am angel investing, it's a much smaller cheque.
Frankie Cotton For now!
Yvonne Bajela Yes. Most venture capital investors will invest a minimum of £250k. I don't have £250k to put into various companies, myself, so that that's one of the key differences. And also, I think that when it comes to angel investing, venture capitalists are very much looking at those companies that are going to scale and grow to like 10x, you know, are they going to return 10x of the money that's invested? Whereas, you know, if you look at the typical angel returns like 2.5 times money, obviously companies like Uber have delivered astronomical returns. But I'll definitely say that, return requirements for me, when I'm looking at angel investments are slightly different. I'm very much looking at the potential – I'll be happy to have a 5X return, whereas for a venture capital fund, targeting that 10X is really important because of the overall way in which Venture Capital funds are structured and the return requirement. And the fact that, you know, most investments, you know, they say the majority of companies, start ups do go on to fail and so when venture capital funds are invested, that's why they focus on the really high returns, because they want to ensure that they're able to return the entire funds money.
Frankie Cotton Yeah, absolutely. And I wonder for somebody who's perhaps listening to this podcast, who is looking at getting angel investment, how can they find (and I don't mean give us your e-mail address!) but I mean, how can people find angels and, you know, where should they be looking? And really what's the right approach that works?
Yvonne Bajela Yeah, I would say that you just have to hustle hard [1.8s] in that, [00:23:41]if you operate in a particular industry, the best way to find angels, I believe, is to find individuals who are senior within that industry. They're likely to have a lot more disposable income, and as well, they're going to bring value to the table because they have that industry insight and they probably will have a network that will come along with it, so I think that's a great place to start. Another great way is sometimes to just look at other companies that have been funded within the same industry, see who their angel investors were and see whether that that you could tap potentially tap into their angel investors. LinkedIn's there, I always say, never be afraid to send the cold message on LinkedIn, never be afraid to send the cold – I even get messages on Instagram.
Frankie Cotton A good old DM.
Yvonne Bajela Yes, I really do. So just go for it! And I think in terms of building that relationship or when you are sending out cold e-mails, don't just say, hey, I need money for my company. Like, be really strategic about it. I always like the e-mails that are really specific and tailored to me personally. So a great example is, you know, someone recently messaged me and said, hey, I saw that you invested in this company, my company operates in a similar space I'd love to get your advice. And so I was really intrigued by that, I was like, oh ok, they operate in the same space I'd love to just, you know, have a chat with them, giving them advice and what I know about the industry. And that's a great way to build a relationship with an investor – ask them for advice, and don't wait until the point in which you're raising money to speak to investors. Do it way earlier than that.
Frankie Cotton Well, yeah. And have you seen a shift in, you know, since Covid and since we're all working from home or wherever we are in the world, sort of trying our best. Has that changed the way that investors and entrepreneurs network? And are there some positive changes there that you think might last.
Yvonne Bajela Yeah, interesting question. I think that one of the things that we have seen is to some extent, you could say that it's levelled the playing field because before it was very much you know, I know this investor, I'll introduce you to them and then you'll probably go to dinners with investors, get to know each other. Whereas now everyone's working from home. Everyone's connected with companies via Zoom. So it's more accessible to some extent. And I think that's one of the benefits of it all. And also, entrepreneurs' passion just generally comes through, I know. I know it's difficult to pitch on Zoom, but where, you know, entrepreneurs have really mission driven companies, for example, that that really does shine through over Zoom. So that's one of the great things. And I would say one of the other things is everyone's at home. So I'm finding that I'm receiving a lot more messages on LinkedIn and so on and a lot more open to having conversations, even if it's a quick 15 minute conversation. I have more time to do that because I'm no longer commuting and so on so people are just generally more accessible, so definitely leverage that!
Frankie Cotton Yeah, I see that. I sense that, yeah, people are more accessible and open. I wonder, was it weird when you sort of signed your first big deal, having not met the person on the other side? Was this a strange experience?
Yvonne Bajela It hasn't been strange actually, I've found that I adjusted very quickly. I haven't found any issues with it yet, I think the only difference is, is that I'm doing more reference checks. So whereas before I would spend a lot of time with the entrepreneurs in person, now I would just say I would love to hear from someone else that knows you very well, what their thoughts are, how they've worked with you, so that's the key difference.
Frankie Cotton Great.
Yvonne Bajela But we've had to make it work.
Frankie Cotton Well, that's it, right? And I think it's what's interesting about these unprecedented times is, is that we're doing things that we would never have thought possible before. You know, we never would have thought you could bring an angel investor on board having never met them or, you know, sort of strange things that are happening there. In some ways it does challenge things that we do and the things that we never thought were possible.
Yvonne Bajela Yeah, I mean, look at the amount of companies that have said their employees don't have to come back to the office ever or those that have said, you know, 2022. You know, when we immediately went into lockdown, I think a number of companies were saying, ok, we're not going to do any deals until we come out of this but they don't have that option now because we just don't know how long it's going to last for so we've have to adapt.
Frankie Cotton Yeah. Yeah, definitely. Well, Yvonne, thank you so much for telling us all about your world and what it is that you do. I just wonder, I'd like to give you some space really, is there anything that we've not touched on that you would like to pass on to the listeners?
Yvonne Bajela I mean, I always suggest that, you know, if you are sitting on an idea, just go for it because you have nothing to lose – my whole mantra this year has been like, feel the fear and do it anyway! At the end of the day, like, if it doesn't work out, you'll learn from it. If it does, then, you know, you're in a really good place. And as long as you're creating something of value, that should really be your focus, creating something of value for your customers or end users, you're gonna do okay, you're going to be able to raise money, and focus on that, as opposed to focussing on raising money because the money will come once you create something of value.
Frankie Cotton Amazing. Well, thank you so much, Yvonne. It's been lovely to chat with you.
Yvonne Bajela Thank you for having me. It's been great speaking to you, too.
Frankie Cotton It's a pleasure.
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