Author: Hana Yang, Business Banker, First Republic Bank
In its first year alone, the small team at Cross Culture Ventures is already helping to move the needle for its portfolio of startups. The firm was founded by Troy Carter, renowned music manager who transitioned his eye for talent to tech investing, and Marlon Nichols and Trevor Thomas, both veteran VC investors and Kauffman fellows.
The trio has focused on cultural investing: looking for seismic cultural shifts and then supporting early-stage startups working within those spaces. While the average investment size is about $500,000, the network and resources that Cross Culture brings via its partnership with Carter’s talent management and entertainment company, Atom Factory, make the investment that much more valuable. Through this partnership, Cross Culture startups have access to a network that includes big brands and stars, from Adele to Beyoncé. We caught up with the trio behind Cross Culture to learn more about the fund’s unique investing ethos, its focus on culture and what they look for in founders.
Cross Culture focuses on cultural investing. Can you explain what that means and what it looks like in practice?
Trevor: We’ve identified key cultural shifts that we think are relevant, and we invest in companies that work in these spaces. So, for example, there’s a demographic shift happening in the U.S. and abroad as the population becomes increasingly diverse. In the U.S. alone, by 2040, the minority will be the majority – and that’s creating interesting opportunities for founders. Another shift is the democratization of health and wellness.
Marlon: Yes, more Americans than ever before are being health conscious, and it’s not just people living in affluent neighborhoods. More ethnic groups are focused on eating better, and so are lower income families. One of our first investments was in Thrive Market, a grocery delivery startup that makes healthy food affordable to everyone.
The firm also looks for diverse founders. Why is this important, and do you think there are opportunities being missed by other VCs?
Marlon: We started out doing a fund on diversity, but we didn’t want to do diversity for diversity’s sake. Instead, we believe diverse teams create better outcomes. When it comes to founders, we’re looking in some of the usual places that VCs look, but we’re also looking in some unique places. We hit colleges in the South and Southeast that many people don’t think of and we explore other regions of the world. For example, we were one of the first institutional investors in a Nairobi-based company, mSurvey, that’s now making some serious noise. This is an interesting time we’re in. We’re excited to move the current conversation past race and to culture.
Trevor: Additionally, we’ve found that diverse communities are more inclined to be early adopters of tech and consumer products. That’s not even considering the demographic shift we talked about. These groups are growing, and they have a lot of challenges that have gone unaddressed. So now, entrepreneurs are coming out of these groups with new solutions.
For example, we also invested in a company called Mayvenn, which is a mobile platform aimed at black stylists and salon owners. The platform allows stylists to sell hair and hair extensions without carrying inventory. This is definitely an underserved community, and the founder saw a need.
You all have experience investing as angels or with other VC firms. What makes Cross Culture different?
Troy: We have a lot of diversity in our professional backgrounds. For me, coming from the music industry, I’m looking through the lens of branding, marketing and fan acquisition. That gives us a different approach than a lot of other firms. Also, after 20 years in the music industry, we’ve partnered with soft drink, apparel and retail companies – and these connections can be extremely complementary for the startups in our portfolio. It’s definitely resonating with founders; we’ve had founders fight for us to be in their rounds and carve out allocations for Cross Culture.
Marlon: I’d add that we focus on seed-stage companies. And the platforms we work with –Atom Factory and Smashd – allow us to connect them to services and potential clients that they wouldn’t otherwise be able to access. Most of our founders take advantage of it.
Atom Factory definitely serves as a bridge between your startups and the entertainment world. Do you have an example of how that works?
Troy: One of things we’ve put in place is that we have our startups sit down with the key folks from Atom Factory, so that they can figure out the best way to help. For instance, one of our startups, Sidestep, is using software to make purchasing merchandise at live events easier and to help entertainers analyze and maximize their merchandise revenue. Because of Atom Factory, we’ve been able to introduce the company to some of their biggest clients such as Adele and Beyoncé.
What do you look for in promising entrepreneurs?
Trevor: We look for scrappiness. We think the ability for a founder to roll up his or her sleeves and just hustle is a huge differentiator – and a huge barometer for success. Starting a business is extraordinarily challenging and you have to have that level of fight.
Marlon: Also, we don’t do random very well. We want to know:
What makes you qualified? How are you capable of building this solution for this market? And we want the best and most qualified person to pull it off.
Lastly, what advice do you have for founders who are readying to meet with investors?
Marlon: Do your research. We skew heavily on the consumer side, so the investments that work best for us are startups with consumer-based products. It helps to understand our fund – or any fund you’ll be pitching to – before you go in.
Trevor: I think that I’d give entrepreneurs more cautionary advice: to really think about whether they should be doing this. It’s a highly risky endeavor to start a company. You need to be able to offer a product that doesn’t exist, and you need to be able to run for a long time, through failure, brick walls, adversity and unfairness. Some people enter the startup landscape and they don’t appreciate how much of a slog it can be. It’s a beautiful struggle, but I always implore entrepreneurs to keep in mind that you need to be ready for battle.
The information in this article is presented as-is.
© First Republic Bank 2016