Russ: Welcome back to The BusinessMakers Show, brought to you by Comcast Business, built for business. Coming to you today from TMCX, The Medical Center Accelerator, and I’m very pleased to have as my guest Ross Baird, the Founder and Executive Director of Village Capital; Ross, welcome to The BusinessMakers Show.
Ross: Thank you Russ, very pleased to be here.
Russ: You bet. Tell us about Village Capital.
Ross: So Village Capital finds, trains and funds businesses around the world that are for profit, who are solving major global challenges; health is a big part of what we do and that’s – that’s why we’re here at TCMX. We work with partners like TMCX to build communities of entrepreneurs that, um, increase success through better mentors, better partners, better investors, um, and we have this peer due diligence investment model that we think yields better results for entrepreneurs and better results for investors.
Russ: Okay, so your first point about, you know, finding entrepreneurs that are solving the world’s problems is slightly different than the standard investment venture capitalist that is looking for a return, elaborate on that a bit.
Ross: I think that the average person thinks that business is only for making as much profit as possible and if you care about doing good, you know, go into politic or, you know, start a nonprofit or start a foundation or whatever. And we think that business, we think the free market is the most unstoppable force in society and if business is set in the right direction we can make real progress on problems that we’ve had a very hard time with for a long time. Yeah, I mean all the businesses we work with are – have to have an explicit idea of the positive impact they’re going to have on society. And we think that you have to be a successful business to be able to make that impact, but yeah, we are explicitly focused on businesses that have a core mission beyond just financial returns.
Russ: Okay and you invest your money, the firm’s money, in these businesses right?
Ross: Yeah, we have a fund, it’s over $10 million, it’s, uh, managed capital from investors and we invest in these companies usually very early stage; 95% of the time we’re the first outside money in and we think that if you’re solving a huge problem in society your success can be disproportionate if you get it right.
Russ: Describe your investors for us.
Ross: So investors are institutions, foundations and people who, um, want to align their money with the things that they value. So the reason why we’re in Houston actually is there’s a firm called Chilton Capital that’s an amazing group of people here in Houston, uh, that has some people in the firm who are very, very excited about making an impact with their dollars in a – in a business way. So Chilton has been really on the cutting edge in the world of investment strategies that are financially successful and values-aligned and they were – they were an anchor investor in our fund and they kept saying you’ve got to come to Houston, you’ve got to come to Houston. There’s no better place in the world to align what you care about and being successful than Houston. And I finally came down to Houston and after working in Houston for a couple years I believe them it’s an amazing place.
Russ: Really cool. So have you been doing this long enough to know if it works?
Ross: Yeah. So over the last 5 years we’ve worked with 500 businesses through our programs, our fund’s invested in over 40 companies; 93% of our companies are surviving and still in business. Companies have created 7,000 jobs, we’ve served over 10 million customers, we’ve put 2 million into businesses up front and about 100 million in follow in investment has gone to those companies, so there’s some real, real traction that we’re seeing.
Russ: Okay, describe this thing, you called it your peer to peer selection process.
Ross: Yeah, so this may be a bit crazy, but bear with me for a second. Um, your average fund has an investment committee and entrepreneurs come and they pitch and people either read or don’t read the documents and ask questions and they sit and they decide. And we think that the guy sitting across the table who just met you 2 hours ago is not the best judge of your character or ability to execute; it’s the person sitting next to you who knows you well. So we organize these programs, me and you and 10 other entrepreneurs like us will spend 4 months together, we’ll know everything we can about each other and we’re working in the same house so we know each other’s market. At the end we rank each other, we score each other and our fund at Village Capital pre-commits real investment to the top-ranked companies by their peers; so it’s entrepreneurs actually picking which ones will get investment.
Russ: My goodness, it’s kind of the reverse of Survivor isn’t it, where you get voted off the island.
Ross: Yeah, it’s like you get lifted up to king of the island or something.
Russ: Right. Wow, so, uh, I mean does politics end up entering the picture too?
Ross: So we’ve run 35 of these programs and some of them have been absolute failures like, like people shouting at each other. Most of them have been successful, if they were all failures we wouldn’t be around anymore but we’ve learned some things over they way. Like we learned that all the voting has to be public and transparent because in a secret ballot people tend to game the system a little more but if it’s transparent also the feedback is better and the businesses get better. I learned that Russ doesn’t really like my product because I see it up on the screen when we released the vote so I go have a conversation with you and you shoot me straight; you can’t hide because you’ve got the number right up there. So making the process incredibly transparent and structuring it in a thoughtful way has really yielded a result we’re really proud of.
Russ: Impressive. So the winners actually get a check?
Ross: Yeah, so the two – we’ve got 9 companies we’re going to be pitching today, 2 companies are going to get 50,000 each; half of that will come from our fund, half of that will come from TMCX so they get strategic aligned investment capital
Russ: Okay, and so they take that capital to go out and raise more capital?
Ross: We’ve invested in over 40 companies and 95% of our companies we’ve been the first outside money in, but 90% of the companies have gone on in the next 6 months to raise 250,000 or more. So usually the investment world is – most investors don’t want to be the first in but when they see somebody go in and then the psychology flips so we really want to be the first step into the water for a lot of these companies.
Russ: Okay so the 8 companies, or 9 or however many don’t win Village Capital capital, do they go on still too?
Ross: Yeah and that’s part of the – that’s part of the value of a great partner like TMCX. You know, the Texas Medical Center is – and I didn’t know this before coming to Houston – the largest medical center in the world and they’ve got doctors, they’ve got CEOs, they’ve got supply chains; like they are the customer for these companies. And TMCX is building out a series of really great initiatives like a – like an accelerator program that our companies will be eligible for, so we, you know, 93% of the companies we work with are still in business because we find that with great partners like TMCX, even if you don’t get the cash there’s a lot more money in the world than $50,000.00 and you might find an investor or customer or board member that can help you carry the next – next wave.
Russ: That makes sense. So we’ve got 9 companies here tonight that have been together already for a while?
Ross: They’ve known each other since December, we’ve, this is kind of a – it’s kind of like an Executive MBA so they’re from all over the country and we think TMCX is really building a global center of excellence in health. They’ve come here for three 4 day sessions, they go back home and work on their company but they’ve been together since December.
Russ: Cool, well I really appreciate, uh, you sharing your story with us and I wish you good luck Ross.
Ross: Thank you so much Russ, really appreciate it.
Russ: You bet, you bet. And that wraps up my discussion with Ross Baird, the Founder and Executive Director of Village Capital. And this is The BusinessMakers Show, brought to you by Comcast Business, built for business.
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