July 9, 2023
Special Edition: Recapping the Capital Innovation Summit
Happy Sunday, friends. Last week, on June 26-27, the Capital Innovation Summit brought together about 100 capital entrepreneurs and innovators at the Kauffman Foundation in Kansas City to connect, collaborate, learn from one another, and explore ways to improve capital access for entrepreneurs around the world. It was a great event, and I had the opportunity to meet dozens of capital providers and allocators I hadn’t met before. It was also a great opportunity to reconnect with folks who came to the Alternative Capital Summit events in 2018 in Denver and Kansas City in 2020, and to talk in person with dozens of people I’d interviewed on the RBFN Speaker Series and RBFN Podcast. I thought I’d share some of what I took note of, and a few observations and thoughts about the future. Off we go.
Progress Has Been Incredible
Today, hundreds of millions of dollars have been raised and deployed, which barely existed 5 years ago. The cohort of capital providers who launched all around the same time (Jamie Finney at GCVF, Kim Folsom at Founders First, Melissa Withers at RevUp, Melissa Bradley at 1863 Ventures, us at Novel Capital have successfully gone from upstarts to institutionalized and scaling. It was really humbling to hear how these platforms have grown and become more sophisticated.
Moreover, a fresh wave of capital entrepreneurs, like Will Stringer at Chisos, Jewel Burks Solomon at Collab Capital, and others, who has launched during the COVID era are increasing the pace and scope of innovation in the market. For example, Will at Chisos has devised a totally unique solution for funding early-stage businesses, artists, and athletes using a Convertible Income Share Agreement—an approach that solves the problem that no one is tackling or even thinking about. You can hear more about Chisos by checking out our Speaker Series from 2021 here, and we’ll release a new podcast episode with Will soon as well.
What’s more, there are tools now launching aimed at helping capital providers scale. Gone are the days of building your own back office for your nichey financial product. Companies like Ned and Loanwell are helping lenders get to market more quickly. This is a huge development for our market; the infrastructure isn’t necessarily a barrier to entry anymore. You can hear more about this development in our podcast episode with Dave Silverstein at Ned, who is leading the charge in the market.
Capital Allocators Are Looking for Opportunity
Family offices, foundations and institutional allocators came to learn about investing in alternative capital platforms.
Kauffman Foundation leads the way here. They brought in MacArthur, Known Holdings, JP Morgan, and several other allocators who are either making investments now, or actively evaluating this space. Old friends and OG allocators like Jacob Haar from CIM shared their invaluable experiences in a closed-door session with allocators newer to the space.
Being a Capital Entrepreneur is Hard (but it is worth it)
I was on a panel with Melissa Withers and Jacob Haar that I thoroughly enjoyed. Melissa and I riffed on the themes of how difficult it is to build a platform to fund entrepreneurs at any kind of scale, and about how keeping your mission and your overall goals aligned with your company are absolutely essential (otherwise it’s too hard!).
The Need for Innovative Capital Tools
Despite significant strides in the industry, there remains an ample white space for innovation in financial products and structures. This not only applies to the dollars deployed to entrepreneurs but also to how the vehicles we investors raise are structured. There’s less innovation here than I thought — it’s a lot of incremental changes to existing structures like GP/LP. This is an area where someone can build an important and massive differentiated business, I think.
Government Programs Can Help
Deputy Director Alejandro Castillo from the Department of Treasury shed light on various programs that can help capital providers. They’ve allocated an impressive $10 billion to initiatives like the State Small Business Credit Initiative (SSBCI) and "Tech Hubs”, that support the build-out of localized “ecosystems of expertise”. The Kauffman Foundation offers a Federal matching grant program to further assist as well.
Impact Investing is Any Investing At All
People wondered why impact investing hadn’t really changed the world. Melissa Withers suggested it was because the most used tool for impact investing is VC, and that because of its very nature, it can’t be a useful tool for impact investing. I totally agree, and this is an area where there’s tons of room for innovation.
I think anytime someone deploys capital to a business that is, in fact, impact investing. Generally, dollars deployed allow a business to hire, survive, expand, etc. That means jobs, supplier growth, etc., which to me is “impact”.
Final Thoughts
Philip Gaskin at Kauffman suggested that we need to listen to entrepreneurs more to really understand what they need. He also suggested that we should be viewing entrepreneurs as collaborators rather than mere consumers. Clever structures are not, strictly speaking, useful to entrepreneurs just because they are clever. He’s right on both points. There’s a lot of innovation for innovation’s sake in the financial market today. Aligning your work with the need of the market is critical. I invite you to see my series on developing financial products for more on this.
That’s the summary of the notes that I took. I hope that’s helpful to you all!