Shane Dunn:
My name is Shane Dunn. I'm senior director of development and alumni relations at Brandeis International Business School. We're really glad to have you with us today. First off and importantly again, really glad to have you with us today, even if you likely have other important things on your mind or concerns about friends, family, colleagues, and neighbors.
Shane Dunn:
Our thoughts are certainly with everyone, including here in the United States, as we face a range of challenges and in rust regarding racial justice. And then of course around the world with this current global pandemic. We're really glad we're able to move forward with this discussion today. We think it's timely and relevant on a number of levels. We do remain in the middle of a pandemic here in the United States, and we have seen how the economy has been significantly affected.
Shane Dunn:
Small businesses have been especially in hard hit. And we are fortunate enough today to have two experts from Brandeis speak to us about how COVID-19 has affected small businesses. Before we get started, just a couple of quick housekeeping items. This is a webinar for folks who want to ask a question later on, I will queue up questions, but the best function to use here is the Q and A function, which you should see at the bottom of your screen.
Shane Dunn:
We're not going to do a poll of this session which we've done at previous events but we would love to know where folks are today. So if you can use the chat function just to briefly say hello to us and let us know your city, state country that you are at today, that would be really helpful to all of us, especially as we are a global business school and global university.
Shane Dunn:
If you have any question We're excited to engage with you, but it will be best later on which I will cue up around 1240 or 1245. We'll see how things go along. In the meantime I'm going to turn it over now. First we have professor Debarshi Nandy who's a professor of finance and the Rosenberg chair and co-director of the Rosenberg Institute for Global Finance at Brandeis International Business School.
Shane Dunn:
He's going to engage in conversation with Barbara Clarke, an early graduate of our pioneering program at the Business School at the Lambert Program. Barbara is a graduate of the Class of 1991 with an MA in international economics and finance, and has had a tremendous career and most recently on the investment side and has done a lot of work investing in minority owned and led businesses as well as a range of other experiences that she has to bring to this topic. So without further ado, I am going to turn this over to Debarshi to kick things off. Debarshi?
Debarshi Nandy:
Thank you, Shane, and welcome everybody. It's a great pleasure to be here with Barbara today. Barbara, welcome, and thank you for joining us in this discussion. So we will be speaking in general about the impact of COVID-19 with a particular reference to small businesses and high growth startups. So just to set the tone for that, a little bit of this, we are going to separate between what we refer to as high growth startups.
Debarshi Nandy:
Which are typically what are funded by venture capitalists, angel investors versus small businesses, which comprise the majority of the businesses in the US a lot of which are actually minority owned, particularly in the industries that are heavily impacted by COVID-19. So welcome everybody. And to start off, Barbara, what do you think the overall situation is at this point in time?
Barbara Clarke:
Well, firstly it's a total shit show. Right? This is setting the tone for our conversation. We'll be Frank and just acknowledge what a mess, everything really is. And especially combining with the pandemic and now all of the protests. And then we have what I see as an organized crime element happening under the cover hiding behind these peaceful protesters.
Barbara Clarke:
It's a very big challenge for businesses. How should we pick this apart today? I've been doing as well as this to say. So in my background, I'm a traditional venture capitalist and also an angel investor. And then I have other kinds of private equity investments that I do especially in areas around revenue based financing. And then as a community member, I live in Boston in the South end, which is populated by lots of small businesses.
Barbara Clarke:
I've also been focusing a lot on what are the needs, in particular the capital needs, of small businesses that they're sort of like the main street. I'm sure we'll get to this topic too, but I feel like everything is like a small business when it's maybe, perhaps not. So anyway.
Debarshi Nandy:
Thank you, Barbara. Perhaps we could start off with me sharing some of the data that I put together. Let me share my screen quickly with you then we could go into a discussion, Barbara on some of these issues that are effecting our community today. I hope that everybody can see this screen right now. There are obviously a huge amount of effort that has been taken by the government as well to combat COVID-19 and particularly to address issues that have also effected small businesses.
Debarshi Nandy:
In the last series of this webinar Professor Cecchetti talked about all the monetary policy measures that have been taken by the federal reserve which I borrowed some of this from his earlier discussion. Two of these things were which are of particular relevance today to our discussion of the last two points, which are the main street loan programs and the Patriot protection program, and also the enhancement, a recent announcement to the paycheck protection program that has their response a week earlier by Congress.
Debarshi Nandy:
Most of all of you probably know how this works, but essentially these are two different programs. This is mostly a loan program and there are three different ways in which these loans are made to small businesses. These are targeted toward small and medium sized businesses up to 15,000 workers, which is quite large actually. And these are loans. These are not forgivable loans under this program.
Debarshi Nandy:
And then as opposed to this, there is the PPP. And then the PPP flexibility act, which essentially extends the PPP dollars. These are more targeted towards small businesses and the whole idea behind these loans is to provide support towards extending the payroll and employee benefits. And if these businesses can meet certain criteria, for example, if they spend 75% of the PPP to watch payroll, maintaining payroll and employment, then these loans would be forgiven by the government. So these are mostly the two different main support programs totaling about 1.2 billion, a trillion dollars actually that I've been enacted. And so jumping into the PPP...
Barbara Clarke:
Oh my God, look at that chart!
Debarshi Nandy:
So this is a chart from the US Census Bureau actually. What they have done tremendously is keep a bounce on small businesses and look at where businesses that are applying for these loans. If you look on the vertical axis, that is, applications and on the horizontal axis is how they have been impacted by COVID-19. So revenue losses. If you are in this top right quadrant you've been heavily impacted.
Debarshi Nandy:
For example, New York heavily impacted, and also a lot of people there have applied for assistance. Whereas if you look down here, New Orleans, Providence, Miami, heavily impacted, but PPP applications haven't really been that high. And on the other hand, not so heavily impacted but a high PPP applications.And you can see that there is a lot of heterogeneity here. Similarly, this kind of spills over.
Debarshi Nandy:
This is the small business pulse data as well. This is current as of May 23rd and looks at how the country has been affected. You can see from this, the overall impact is all across the country. Darker shades of blue mean a higher impact. This was the same thing across different industries. The national average being 45% of small businesses have been impacted dramatically of which certain sectors such as accommodation and food services. This is social health impact, this is education, All of these have been impacted dramatically. So why don't I stop here and hand it over to you, Barbara, if you have any thoughts on any of these.
Barbara Clarke:
Well, we can keep up your beautiful slides if you wanted to. I think there's a couple of important distinctions. One was, I feel like the PPP program, So the paycheck protection- I actually would be interested if folks wanted to put in the chat if their business has applied for the PPP. I feel like that was a real policy failure at the end of the day. It has injected a lot of money into the economy, but it was just so badly done.
Barbara Clarke:
And if you think about it, this issue of paying companies to keep employing their workers, does it work? That formula, which was, they would forgive the loan if 70 something percent went to payroll and then they could use the remaining amount to go for other costs. That math does not work for most of the companies that have been deeply impacted. And there's a couple of things going on. One is, fixed costs.
Barbara Clarke:
That's not helping. Companies can lay off people and then they're in the unemployment system and then they can preserve their cash for fixed costs. And that's a big deal.We've done some surveys here in Boston of that. The other issue is, will businesses be able to bring back enough people? And I'm thinking, the restaurant industry is the classic example.
Barbara Clarke:
If you're talking about having... first of all, most of them aren't even open, or they're open for takeout. Their employment numbers are dramatically dropped. They're not even going to get up to all of the requirements for the certain level of employment that they need to have yet they have again all these fixed costs and increased costs. Because they all have to now provide PPE, not to be confused with PPP, but they also have to provide the preventative protective equipment. They have to do substantially more cleaning.
Barbara Clarke:
And so they have all these increased costs. So the math just doesn't work out for these companies. And so we've seen a lot of what I would call, as we know, larger companies.They're just taking this as just another source of cash and that's fine for them. And then of course we did see 149 publicly traded companies take this money, which was meant for small businesses, because there was a loophole because of the number of employees they have.
Barbara Clarke:
The whole point was, it was supposed to be an alternative form of cash. And then the other thing about PPP was using the mechanism of banks. I'm sure you've looked in from your research, that since 2008, the largest banks have all exited the small business market. Small businesses don't usually get their banking.
Barbara Clarke:
They're not getting their banking services from large banks. They're getting it from community lenders. We did a survey where small businesses in the Boston, the South end area, there were like a hundred of them. None of them got this PPP funding from banks that they didn't already have an existing relationship with. So...
Debarshi Nandy:
That is very true, actually. some of our students recently worked with a Northern bank and trust company here, which is, again, one of the banks in Burlington. writing actually goes through here. And they have been handling a ton of PPP applications from the local area, essentially.
Barbara Clarke:
Yeah. And particularly in the second wave, the first wave, it was big banks giving out large checks. the average size check was hundreds of thousands of dollars. And if you look at your average small business, the amount of money they were able to apply for was in the tens of thousands of dollars. so I think that that policy, as a result, there's going to be a huge ripple effect because it's too little too late for so many small businesses.
Barbara Clarke:
And these are the small businesses that make communities what they are. they're the smaller shops that we enjoy going to, and of course the restaurant industry, it's just devastating. some of the best things in life or going to a restaurant you like, and maybe sitting in at their cap, sitting at the bar, sitting outside and enjoying it. It's just going to be devastating. It's still happening, so,
Debarshi Nandy:
Right. You mentioned two things which I think are critical and, as luck would have it, and I stride, this is not rehearsed by the way between Barbara and me. I found some data on it from the census thing. So one of it which you brought up is the cash that at times, which I think is critical, as you mentioned, in terms of in terms of how small businesses can survive. and this is current again up to May 23rd. And the interesting finding, and this is a survey, this is called the small business pulse...
Barbara Clarke:
I've got to put my glasses on to check this one out, right?
Debarshi Nandy:
It's called the small business pulse survey that is conducted by the US Census Bureau. the interesting thing of the US Census Bureau is that they have data on almost every single registered business in the United States, their micro data. So, they have a very good pulse. And this is amazing that they have been able to do this at almost real time. If you look at this number, the highlight of this is that cash on hand for small businesses of greater than three months is 25% of businesses.
Debarshi Nandy:
Which basically means that if by August we do not get back to where we were, 75% of small businesses are essentially either going to close, or are going to be in very serious trouble. And you can also see this data in these graphs. And let me just quickly explain what this is. This is a graph that is sourced from something called foot traffic data. Essentially it's a representative sample of data collected from consumers across the United States.
Debarshi Nandy:
Representative sample across the United States, who provide their geolocation through their cell phones to two different providers. It's anonymized and then collected and aggregated. And this is the foot traffic as of May 31st into bars. If you look at restaurant industries and the blue line is this year, the orange line on top is what it was same time last year.
Debarshi Nandy:
And you could see that this is a normalized data. The difference between these two is huge. It's a major effect and the same thing, instead of bars, if you look at coffee shops, quick service restaurants, which are the small ones that serve customers, a lot of these, which are minority owned in many cases have a huge impact. This is going to be devastating as Barbara was saying.
Barbara Clarke:
Yeah. The real challenge for small businesses is where they have fixed costs. It's such a difference. For example, small, it doesn't have to just be re retail like a restaurants and bars and things like that. But you think about small food manufacturers where they have a pretty small footprint, so as a result, now they're supposed to go back to business with their staff and they have to keep social distancing.
Barbara Clarke:
They've had to reconfigure how they do all of their work. There's so much less flexibility built into their business model. if you're manufacturing food, you can't just all of a sudden decide to like move to a bigger warehouse or something like that, that just isn't practical. And it's such a contrast to what I'm seeing in the high growth companies where our mantra, of course, obviously this mantra is cashless king.
Barbara Clarke:
But our mantra is like, do you have your run rate to get to the end of 2021? That's been our goal in all the conversations that I've had with all my portfolio companies. And you could just see how much more nimble they can be because even the companies that manufacture because they're high growth, they have much more flexibility built into their system than other kinds of companies.
Barbara Clarke:
One other thing I wanted to go back to like with the other policy. So the public policy coming out it's not going to work, or it's not working. But the other program that you mentioned, which was the main street lending program. and this is also a misnomer because the wall street journal did a really good, quick, easy write up about it. And basically you have to have about a million dollars in EBITDA, which it's funny.
Barbara Clarke:
I know I could be on this webinar and actually use that and not have to explain what that is. And so you have to have about a million dollars in that before you could even apply because the minimum amount that you can apply for is a million dollar loan and it has to be a multiple of your profits. So you actually also have to be profitable. So it's like all of this stuff, and it's a great deal.
Barbara Clarke:
And so I see there's a lot of liquidity that's going to go into corporate America, but it's definitely not going to the companies that have the most pain. And one thing just talking about disparities too, that I know we talked about, which was in the PPP program. It was these bigger banks basically facilitating these loans that turn into grants, facilitate them for their largest clients.
Barbara Clarke:
And that was just not where communities of color were banking. But the other interesting thing was we surveyed when we worked with a lot of Latin ex business owners and a lot of them were very distrustful of this concept of borrow, and then it'll be forgiven. They didn't believe that it would actually happen. And I know that a lot of businesses are concerned that they're not going to get the forgiveness. So they didn't even apply in the first round because they didn't trust that it's what's going to happen. So, there were lots of reasons for the disparities that happened in who got funding.
Debarshi Nandy:
Right. You can see it, the heterogeneity of it in that application data that we saw earlier. there is huge heterogeneity across the different cities on that. On going back to your earlier comment about the main street loan programs, those are bigger loans. There are three different programs there, all which are targeted towards our medium sized companies and those loans are not to be forgiven. Those are mostly...
Barbara Clarke:
It's a great source of liquidity, it's a great source of capital for those companies, but by calling it the main street lending program. I don't have a problem with the program as it is that like, "this is what it's doing," because it is a good way to get capital up there, but they call it a main street lending program is just bullshit. If that's not who these companies are, they're not on anyone's main street.
Debarshi Nandy:
They're much bigger companies absolutely.
Barbara Clarke:
And a lot of them actually absolutely need this money.
Debarshi Nandy:
So, definitely they're gonna be benefiting, but like to just put some numbers into perspective here, if you are really thinking about small businesses. 80% of these small businesses have 20 or fewer employees. The SBA definition of a small business mostly is around 500 or fewer employees.
Debarshi Nandy:
The main street loan program is targeted towards businesses that are 15,000 or less employees. So even if you think about from the perspective of the SBA definition, it is like multitudes more than what it is. I agree with you, there is a little bit of a misnomer there in the sense that the idea that main street conveys to you in a local coffee shop, or the local small general merchandise store, or other business a lot of which again is minority owned, is not what this program is targeted towards.
Barbara Clarke:
And also the nature of it which was first come, first serve. And of course you had the large applications going through first, and taking most of the money. That doesn't favor small businesses for whom filling out the application was daunting. I will say I was very pleased with how some of the payroll providers like Gusto, and I presume ADP did the same thing, that they had ready click buttons. Like, "here you'd want to know how to calculate what you're eligible for, click this button." because they had your data and they could do it for you. It just showed like how technology companies can just innovate on a dime to do that. And so that was pretty cool.
Debarshi Nandy:
That's amazing. That's very nice.
Barbara Clarke:
And now they're helping too with like the followup and making sure that it's there so that companies can comply.
Debarshi Nandy:
Changing gears a little bit more towards angel investing and venture capital investing and that world. Over the last several years, there has been the huge soaring private valuations in that market. What is your opinion about how COVID-19 might impact that issue in those private markets?
Barbara Clarke:
Experienced VCs were all instantly like, "okay, this is a downturn. They're going to be some haircuts." And demanding it across the board which in some cases, a deal that you might have turned down because it was too pricey in December. If they still hadn't closed their fundraising, they probably made some adjustments when you wanted to look at it in March and April.
Barbara Clarke:
So it's always good to take a little bit of the froth out of the market. I also feel as though what we were seeing now that we're focused on this crisis, what we've taken our eye off. One of the other big stories of the past, like 12 months, which was just the implosion of a lot of these heavily funded venture backed companies. Whether it's we work, Uber is just a rolling fireball.
Barbara Clarke:
Showing that there is a limit to the appetite of private equity to fund some of these things. but now we're in this new era. Most investors, the first thing we did was, we take a quick look at what our existing portfolio is. Especially since I invest pretty early seed A. I do have some B's and C's, but it's because I invested at the seed. They were looking to see what does the companies need in my portfolio? what do those companies need? And now that's work is over finding out all of the entrepreneurs sent out there.
Barbara Clarke:
This is how we're managing during this time. And now we're looking at whether they need companies need to pivot, what are new opportunities? the mantra is, it's not just that because of the prices have come down, but it's also that, during times of crisis, just like it was in 2008, you make great deals and companies focus on really more important or more valuable innovations. You're going to see a lot of companies won't be able to get capital because what they're working on, it's not having as big an impact. It's not going to be as impactful.
Debarshi Nandy:
Right. So, sometimes what you're saying is that the threshold of investing might change on the threshold on the quality front, and also many of these the evaluations would be more attractive to investors than what it was before. And we already see some evidence of that actually. So in the first quarter ending this year, I'm just going to show one quick, last slide. First quarter ending this year we have... This is the average investment by, in seed round, by angel investors.
Debarshi Nandy:
This was from quarter four 2019 to end of quarter one. So, that's end of March when the impact of COVID-19 hadn't really still hit hard but you could already see that there was a dip that was coming in that at that time. And if anything, I don't have the latest numbers, but at the end of the second quarter, that might probably be intensified a little bit more.
Debarshi Nandy:
The other issue in this market, as you mentioned, obviously, is the recovery part, or thinking about the recovery part when you you're investing in a downmarket. In a pandemic situation, historically, the recovery has been solid over the next decade or so in terms of higher growth in wage rates, growth in employment. Hopefully, there is a lot to look forward to as well. As we get out of this, though our focus might be on different industries than what it was prior to COVID-19 coming in.
Barbara Clarke:
Yeah. One of the things I talk a lot about is we don't even know yet, how fundamentally consumer behaviors are going to change as a result of this. We're seeing the obvious things. You don't go to a restaurant, but are you gonna want to go to a restaurant? And how's that going to change? Housing is going to be hugely disrupted because first of all, we saw a lot of people fleeing large cities when they had perhaps smaller apartments that they realized they were not going to survive quarantine isolation in their apartment with their bother roommate or however their life was structured.
Barbara Clarke:
So we saw a lot of that. I think we're going to continue to see a lot of disruption. And then of course the acceleration of things like, telemedicine. The technology has been there for a long time and now this acceleration of the adoption. I think in working from home, all those jobs that people said they couldn't do from home, guess what, you can do pretty much almost every job, or lots of things you can do in a totally different way. but just that disruption in like what consumers are gonna want, it hasn't shaken out yet. We still don't know. And I think that makes it interesting.
Debarshi Nandy:
Shall we open up for some questions, perhaps Shane at this point and then continue our discussion?
Shane Dunn:
Sure. And just a reminder to folks, if you have a question, please ask it. The Q&A function should work. If not, go for the chat. We're following that. The first question is something you said earlier, Barbara. You said in your portfolio companies, they need cash to run until the end of 2021. Does this mean not to expect VC or angels to fund startups until then? And what does the startup scene look like in the next one to two years in your mind?
Barbara Clarke:
My crystal ball. We want them to have cash because it's not so much that you need to have cash to get to the end of 2021 And then you raise. It's that you do not have that pressure that you have to raise because raising money when you're desperate for cash is just a recipe for disaster. So I would say the big change is right now from an investor perspective. There were a lot of questions in that.
Barbara Clarke:
That was like a giant sandwich of questions that you just asked. But I'm definitely seeing individual investors exiting. They've got their own personal stuff to deal with. Because I know there's a chat, there is also advice for founders. I would really steer clear of individual investors for the most part, unless they're actively writing checks. The whole point of like of a fund, VC funds, institutional investors. You don't make money by having your money on the sidelines. You have to deploy your money to make money.
Barbara Clarke:
And so they are actively looking for deals. And we're looking to make sure that what we're investing in is relevant. We're not going to invest in things that are what I call... I know folks remember like the Y2K problem. There was this mad rush for companies to solve the fact that we were going to have need for digits in our years in computer code. And that was a real fad. That's not lasting. There are immediate needs around our pandemic. But what are the things that are actually going to be lasting effects? what other questions did I not answer in all of those questions you asked me?
Shane Dunn:
I think you answered it, but do you have a sense of the startup scene in the next one to three years? That's your crystal ball? And I think you've answered it.
Barbara Clarke:
It's going to be really interesting to see how companies like the startup scene will no longer be a scene. But we're still doing things like, a lot of conferences and things that used to be in person are now remotely. It's going to be different connecting, like how do we connect amongst- normally there's a life science conference that I go to for a couple of days. And I literally like meet a new company every half hour and sit down and talk to them and now we're doing it virtually.
Barbara Clarke:
And so we'll see how well that goes. I've done a lot of my investing virtually. I do a lot of my investor meetings via zoom. And then just depending on how much capital people want to deploy, institutions like I said, they have to deploy the capital or they don't make returns. And they all know that 2008 vintage investments were some of the best.
Debarshi Nandy:
Absolutely. the valuations of companies might take a hit for no reason, no dirt, the fabric of their own, which is because just the whole economy is...
Barbara Clarke:
Yeah, I'm a little concerned about that for certain demographics of founders, because we know that particularly for women and women of color, the valuations are already pressured downward. And whereas I think there was a lot of froth in the market for a lot of, especially these overpriced late stage things that I love to rail against. Because I just don't think they're useful innovations.
Barbara Clarke:
It's not fair if we just have that haircut approach where everything gets lopped off by 25%. I'm actually working on a deal right now where, because I want to support the entrepreneur, I want to make sure that the valuation is as high as it makes sense to be. I'm not going to be taking advantage of this economy to do this, to push it down.
Debarshi Nandy:
In your earlier comment on having cash in hand, I think is all the more reason in periods where you can avoid raising a down round in a lower valuation period if you have that cash in hand. So, in your own portfolio of companies, has any of your companies received any of the PPP funding or any of the other levels?
Barbara Clarke:
Sure. Since they're all startups and none of them were profitable, none of them were getting that loan battle. Some of them are going to apply to that disaster that whatever that is another alphabet soup. But most of them have applied and gotten the PPP. They were all pretty on it. It was really interesting. Silicon Valley banks, just to name shame maybe, there were a lot of- I think Silicon Valley bank, they sent out a note saying they weren't even going to participate.
Barbara Clarke:
And here it is, you had all of these companies that like, "Oh, they banked with them." And you're like, "wait, you're not participating?" They changed their tune after a while, but a lot of companies were scrambling and it just caused so much stress and especially this is for entrepreneurs who are used to fundraising. So they're used to raising money and that now when they actually look at how much time and stress did it cost me to get this funding.
Barbara Clarke:
And now I'm concerned that I might not get it totally forgiven. Plenty of my companies have laid people off, lots of people off, canceled leases, canceled deals, and that's one of the interesting things to see high growth companies, they operate at such a faster rate than a lot of our local small businesses, even though they're both small businesses, but it's just that speed of adaption. It's been pretty interesting to watch.
Shane Dunn:
Barbara, you alluded to it earlier, but we have two questions around what are the opportunities here to found or start a new company? Brad here says, "what advice do you have for founders who are seeking seed capital in this environment?" And then another person just is curious, "do you think it'd be much harder to kind of go out and talk to prospects, investors, clients through an online environment versus, you know, going into an office or a coffee shop, whatever to make the pitch?"
Barbara Clarke:
I'm a little different than other people anyway. I prefer to meet online because I literally only have to commit half an hour. I don't have to commit to driving somewhere and meeting and waiting and whatever. And it's awkward to have like a really short in person meeting. So I think it'll work well, but again, as I said, individual investors are not where it's going to be right now.
Barbara Clarke:
They are going to follow other more angel groups, but even an angel groups, that's basically a collection of individuals. So I'd say small micro VC funds, you'll have individuals following them. And so that's where I would focus on. And you should be able to get in front of them because there's less friction, because they can't meet you in person.
Barbara Clarke:
But you have to make sure that, have you fully taken into account what this new world is going to be like, as best as you possibly can? are you working on something that's really important? Has it become more important? Because I can tell you there's entire categories of things that I'm really not interested in. I'm not really interested in a lot of consumer direct to consumer because I see the disruption in brands is really huge. I'm also not a huge consumer investor.
Barbara Clarke:
I do prefer B2B type things. So, it's not impossible. I'm investing. I've been quarantined since March 15th, I'm trying to think how many new investments I've made. I definitely made one new investment and I'm pretty close to making a second one and that's brand new to me. And then of course I've made some follow on investments with some of my existing company. Investors, they're definitely out there, you just have to know, do you really fit what they're looking for?
Debarshi Nandy:
So Barbara, picking up on something that you said that you prefer B2B kind of a place rather than B2C. I mean that is almost generalizable to the East coast, I would think. Or definitely to Boston, as opposed to San Francisco where a lot more B2C play happening.
Barbara Clarke:
They say that, but I find that's not true. I find that there's- you think about, where you have Way fair, you've had a lot of direct to consumer, B2C companies come out of the East coast. So...
Debarshi Nandy:
One big success toast is probably B2B.
Barbara Clarke:
That's B2B. But I actually feel like some of the monster B2B's are from the West coast as well. So maybe it's just a magnitude.
Shane Dunn:
I'm going to ask two final questions and then I think we're going to turn it over to our closing remarks. Barbara, just to go on this question as well, in light of all that's going on and what not, I'm also curious from your lens, this new online environment, or just how things have changed even in the VC world.
Shane Dunn:
Do you see options for more equity now with things going online or just kind of taking away some of the other factors that may have led to discrimination, a lack of financing and, companies led by or founded by people of color or women. I'm just curious your lens on that. That's question one, question two is different, but I think it's best to ask it now. Our CDFIs are community development, financial institutions, and nonprofits providing interest free loans, meeting the needs of small businesses. So I'll let you go with that. And Debarshi jump in as well before we close up.
Barbara Clarke:
On that last one, CDFIs weren't even included as being one of the providers of PPP. So they were shut out. That's what CDFIs do. They provide very low interest rates for lending. And so they're continuing to do it. Most people don't understand that the CDFI are a very safe source of money in both directions. So I'm an investor in a company called CNote which provides additional capital to CDFIs because they're always looking for alternative sources of capital so they can lend out.
Barbara Clarke:
And CNote has been tracking the profitability and the safety of CDFIs for a long time. So that's great. Nonprofits, I see foundations are definitely in the game and they know it. They know they have to lean in, they understand this is their mission in times of prices. They need to lean in. they're still, I don't know if they're necessarily supporting directly, they're not supporting directly businesses, but they're providing support services. That's definitely true.
Barbara Clarke:
And then of course you also have a lot of nonprofits who were in a lot of trouble because of the work that they're doing and the funding that's been disrupted, particularly those that were very focused on fundraising, via events, which by the way, I would love to have the end of like big fundraising events. Cause I never want to go. I never go. I think it's not the right way to be raising money. I think that's a whole separate thing. And what was the first part? The first question?
Shane Dunn:
The first question was more on the equity part. you talk about a little bit and this could be a future opportunity, but again, this changing way of how we're raising money, how we're pitching people, are there equity opportunities here that weren't before?
Barbara Clarke:
I've been doing this for a long time and I don't know now. I think people are more aware of it and people are more comfortable calling out investors who are investing in monocultural model culture team. I tend to follow a Money ball, a quantitative approach, and I know that diverse teams outperform. So, that's sort of my philosophy and that's why I've always supported diverse teams.
Barbara Clarke:
I'd like to say that I'm all picked up optimistic. I am seeing institutions. So whether it's a strategic investor, so like a corporate VC. Corporate VCs have always had better records in being more equitable in their investing. And now you're seeing family offices, foundations, and progressive high net worth individuals getting more into the game earlier. because the problem is with big foundations, they tend to want to invest at a later stage, but you can't harvest something that was never planted.
Barbara Clarke:
So, that's been one of the issues. And so now they're more willing to come in at earlier stages, but I just see angel investing in particular because it's a personal decision by individual investors. I see that the bias is going to continue. I just see it everyday. I'm going to end on a downer there. I'm sorry.
Debarshi Nandy:
Yeah, I'm sorry but unfortunately I also agree with you because this is, if anything, for example, corporate VCs are getting severely curtailed in this. As when you are in a recession, that is one area close to discretionary spending that you can easily cut off and they do. going back to the earlier issue on the CDFIs and the foundation. So I just want to mention the Kauffman Foundation, which I think has been doing a lot of work focused towards small businesses during this time. In fact in also supporting providing grants and funds to many. they are localized...
Barbara Clarke:
Well, Kauffman supports entrepreneurship. So they tend to be supporting the ecosystem and not companies directly and they don't have a great track record on diversity for the record.
Debarshi Nandy:
I unfortunately do not know enough on that but they have been supporting the CDFIs actually. that's one of the things that came out. they've started a new fund, two funds that I am aware of. One in Birmingham and one in Kansas city itself that they have started during the COVID-19.
Barbara Clarke:
CDFI's are a weird vehicle because I get the impression that no two are the same. That's been the interesting thing with CNote is that, because they are connecting with the CDFIs and collecting data they're actually able to understand that ecosystem pretty well. And so that's been really interesting for me to learn more about that because it is a weird system.
Shane Dunn:
Alright, well, I'm sorry to stop conversation there, but thank you to Barbara for joining us today. Thank you to Debarshi for joining us today and to all of you, regardless of where you are. I think we had a good mix of alumni, faculty, staff, maybe some other friends or parents of the university. Really grateful to have you join us today. It's been a lot of interesting fun to have all these events that we've had online these last three months.
Shane Dunn:
So this was a nice position to the suite of programming we can provide at Brandeis International Business School to that point. Our next event that we're involved with at the business school is next Thursday, June 11th, at 7:00 PM, Eastern on the business of climate change, featuring Ben Gomes-Casseres, and a couple of distinguished alumni of the business school and Brandeis undergrads, as well as Brandeis International Business School.
Shane Dunn:
So keep an eye out for that in case you haven't heard about it, it should be really great event. I'm going to close and pass it on to an alumni of Brandeis to talk about the Brandeis Women's Network, but I thank you all again for joining and Talee Potter is here to close things up. Talee?
Talee Potter:
Thank you, Shane. Thank you for our wonderful speakers and everyone who joined us. on behalf of the International Business School and the Brandeis Women's Network. And thank you to our sponsor, The Rosenberg Institute of Global Finance at the International Business School. as Shane noted, I'm Talee Potter, and I'm one of the co-founders of the Brandeis Women's Network that was founded about a year ago.
Talee Potter:
It's a forum for women who are Brandeis alumni to come together and leverage the dynamic Brandeis community for networking and various social connections. We've held, prior to Covid, in person events in New York. But now we transitioned online to Zoom events. We're holding professionally oriented events, like a LinkedIn personal branding event.
Talee Potter:
That's coming up this coming Monday as well as social events, cooking classes, physical wellness classes even a book club. So look for us on Facebook. It's BrandeisWomen, enjoying the over 700 Brandeis alumni women who are already a part of our very little group. And thank you everyone. Please be on the lookout for many other events from the Brandeis alumni association partners and whatever time is on your end be well and take care.
Barbara Clarke:
Thanks for inviting me.
Shane Dunn:
Thanks everyone. Bye.