To build a rocket ship, you need capital.
Raising capital is difficult for everyone, but especially for Black or brown founders. For Lisnr founder Rodney Williams, the vision for his successful rocket ship came together at SXSW a few years ago.
Earlier this month, Williams got back on the stage at SXSW and told an audience of mostly students from historically Black colleges and universities about some of his benchmarks on his path to raising capital.
“When I decided to go off and do this, there’s a couple of key things that I wanted to make me prove a point,” Williams said during a panel discussion at South By Southwest 2018. “The first thing I wanted (was for) a stranger to give me a dollar.”
The panel, entitled “Building Rocketships,” was held at HBCU@SXSW, founded by Rodney Sampson, CEO of Atlanta’s Opportunity Hub. Opportunity Hub is the largest multi-campus entrepreneurship center and tech hub in the U.S. focused on diversity and inclusion as a business thesis.
Sampson created HBCU@SXSW three years ago to recruit minority students who major in tech and computer science (African American and LatinX) to attend the tech portion of SXSW.
Now in its third year, HBCU@SXSW had 1,000 student applicants, and 125 students from 60 schools attended March 9-12. The event gives them access through an immersive weekend of SX panels, one-on-ones with tech companies, investors and influencers.
The panel for Building Rocketships included moderator Jarmarlin Martin, founder and CEO, Moguldom; Williams, founder of Lisnr; Brian Brackeen, founder of Kairos; Sheena Allen, co-founder and CEO of CapWay; and Dave Parker, founder of 6 Month Startup.
Here’s an excerpt from the panel discussion:
Jarmarlin Martin: Brian, how could innovation around the blockchain resolve fair capital distribution, particularly for students here today?
Brian Brackeen: We did something called an ICO recently. A little history: It’s really really hard to raise capital, for everyone but for people of color (it’s harder). I’ve pitched our company to about 1,000 investors and I’ve been told “no” about 880 times. One of the structural issues in our world is big San Francisco VC firms require eight, nine sometimes 12 people to vote “yes” on an investment. What happens is there’s one person that just can’t get comfortable with the African American guy. He doesn’t know why. In the ICO world, everyone’s making individual decisions to invest — a crowd-source approach — so you’re able to raise $10-, $20-, $50 million from individuals.
Jarmarlin Martin: For my grandmother out in Watts, California, swing the blockchain.
Brian Brackeen: It’s a ledger that’s unhackable, and it’s public, and everyone can see it. It’s fully transparent and it’s a really powerful idea that plenty of new businesses are designing on.
Jarmarlin Martin: Sheena, you have a fintech company that’s leveraging the blockchain. Can you talk about your path to creating your company and how you’re leveraging the blockchain?
Sheena Allen: I’m from Mississippi, I have a country accent. There was only one bank where I grew up so the whole town uses one bank. It’s called a bank desert. I noticed people in my community (were subject) to predatory funding — payday lending, check cashing, title loans. When I was in Silicon Valley, there was a bank on every corner, but that’s not the case in a lot of (rural) areas. So inner cities, red lining; rural areas, there’s not a bank on every corner. There’s probably a payday lender on every corner. So for me, it (was about) how can I use technology to disrupt an industry that the larger financial institutions have always tried to get into, but they want to get into for the wrong reasons. Financial inclusion or the financially-underserved market is a half-a-trillion-dollar industry. I understood the people with the problem — not just the problem itself. What blockchain allowed us to do is to (start an) untraditional financial ecosystem. The reason I say untraditional is we’ve been told to use traditional banking — or bank black — for the last 400 years but the truth is it hasn’t worked. Clearly the traditional way of banking has not worked whereas for us the blockchain … is different from anything that’s ever been done before.
Jamarlin Martin: Dave, you had the benefit of scaling three companies. You have three exits, you sold three businesses and you became a venture capitalist. What’s the most common mistake founders make when they go pitch a VC?
Dave Parker: One of the big things is not being ready to go pitch — (not) having the data that goes with what you need to go pitch. The need for money and the ability to raise capital are two different things. I’ve raised a lot of money from VCs before and the same is true. They have opinions and a checkbook. But if you have opinions and data, because you know the customers and you know the market better, you’ve done better research and you’ve talked to 100 potential customers, then all of a sudden their opinions pale compared to your opinions because you have the data. Ultimately, that data is what you need to really win in venture capital. Growing up in a small town, I didn’t know what a VC was. I didn’t know what an investment banker was. It’s really important knowing who you’re talking to and what their investment profile is.
Jamarlin Martin: Rodney, your vision for your successful rocket ship, Lisnr, started right here at South By (SXSW). Walk the audience through how your vision got off the ground right here in Austin.
Rodney Williams: Six years ago, 2012, I had the idea of using sound as a continuum for device-to-device connectivity. I wanted to understand the sounds that are around you, and maybe I could use that data as a way to understand that you were there. Think of like audience measurement data. We actually thought that we were going to do this within music and I had the idea. I told my best friend at the time. He said, ‘We’ve got to do this thing called the startup bus.” This was a bus on the way down to SXSW where you got to pitch your idea. I got on the bus. I then met my other four co-founders on the bus, and ended up winning that bus. The investor that took us to dinner that night was the investor that gave us our first $100,000 and became the lead investor in our seed round. Three months later, I was full time being Lisnr.
Jamarlin Martin: You have some great names in your cap table. Intel invested in you. Tell us about some of the interesting names that have backed you and why you were successful when so many others are not in terms of your individual alpha versus your product.
Rodney Williams: I don’t think you should try to duplicate or even understand my story or any story on stage. I think as a founder you have to figure it out. Every founder’s story is completely different. Things lined up in a certain scenario that worked out. Our investors include financial institutions, banks, Roc Nation, celebrities, athletes. When I decided to go off and do this, there’s a couple of key things that I wanted to make me prove a point. The first thing: I wanted a stranger to give me a dollar. None of my family has invested in Lisnr. I wanted a stranger to give me a dollar and then I wanted a stranger to be on my founding team. I just thought if I could pitch a stranger to work for me for free, I could convince someone to give me a dollar. That all happened in that sequence and I kept holding true to that. At every level of money that we raised, it helped me also craft a product. I didn’t necessarily know I was building Lisnr six years ago. I think the conversations with developers and engineers and investors thinking about what we could do with sound, and then thinking, “You know I think this crazy kid could actually go and pull it off.” Helping them believe that is really important. The final point that’s really important for everyone in this room: If you walk into a room, you should believe in yourself way before anyone else. It’s not their job to believe in you. You’ve already been doing this. If someone gives me a dollar, I’m like, “Wow, you figured it out. Good for you.”
Jamarlin Martin: Brian, you have an FU attitude to Silicon Valley. You’re doing your thing without them. You’ve raised a lot of capital. Can you explain your experience in moving to Miami, running a tech business and scaling it in Miami?
Brian Brackeen: The data is in. I’ve lived in Silicon Valley, lived in San Francisco, worked for Apple, and if you look at the numbers, the level of investment into Black and brown founders in San Francisco is low and getting lower. Why (do) we think we should go there and try and make it work and struggle when there are other cities — Miami, Atlanta, Philadelphia, Austin — that have a much better track record of investing in Black and brown founders? Capital is like the oxygen. A company needs to survive, so the key is to just have enough oxygen to figure it out. Why would you go somewhere that’s obviously not interested and make that investment when you can go other places that want you to be there?