From expectation management to stakeholder theory, Jeff Cherry has lessons to share that are relevant to founders at every stage.
Jeff Cherry, founder of Conscious Venture Lab, is invested in supporting early stage founders on their entrepreneurial journeys.
From expectation management to stakeholder theory, Jeff has lessons to share that are relevant to founders at every stage.
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Scott Case 0:00
Welcome to Founders Focus, a podcast made for founders by founders. I'm Scott Case, CEO and co-founder of Upside. And we created Founders Focus to share free resources and actionable advice. Together, we're building a community for business leaders, entrepreneurs and founders to come together to tackle today's challenges. This podcast is powered by the awesome team at Upside.
Scott Case 0:20
I'm excited to be joined today by Jeff Cherry who is the founder of Conscious Venture Lab. And we're going to talk a little bit about accelerators and different kinds of programs that startups go through. And in particular, we're gonna focus on some of the successes that Jeff has been a part of as one of the founders of the Conscious Venture Lab. And with that, I'd love Jeffrey to introduce yourself, and then just tell a little bit about your journey. Like, how'd you end up doing this?
Jeff Cherry 0:48
Yeah. Well, Scott, it's great to see you again, thanks for having me. I appreciate being on today. As you said, founder, Executive Director of the Conscious Venture Lab, which is an accelerator, we're based in Baltimore, and we're focused on sort of two really important things at the moment. One is working with entrepreneurs who want to think differently about the purpose of capitalism. So you might remember I was involved with work with Raj Sisodia and John Mackey as a consultant on writing their book Conscious Capitalism. And prior to that a book called Firms of Endearment with rise. So we've been on this sort of stakeholder capitalism journey for a long time. '
Jeff Cherry 1:35
And then the other thing that we work on is that we are really focused on supporting entrepreneurs that other people are ignoring for whatever reason. So we're looking at black and brown founders, minority female founders, and companies that are using innovation to break down barriers to access. So that's sort of the Conscious Venture Lab.
Jeff Cherry 1:56
And so how would I get there? It's a long and winding story. So I know we don't have a lot of time so I want to tell you the whole thing. But quickly, I have pretty varied background. I'm an architect by training, I started an architectural firm when I graduated from Catholic U in DC in the mid 80s. And over the course of about 20 years running that fund, we turned it into more of a management consulting company, for lots of different reasons, we were looking at how to use a physical environment, the technological and the cultural environment to drive performance, that led us to really sort of understanding the emergence of this idea of conscious capitalism or stakeholder capitalism. And I've been excited about it and seeing how the companies that we were working with in the consulting practice were outperforming. Ended up selling that practice in 2006, I moved back to New York, with a couple of partners, started the hedge fund to invest in stakeholder focused companies. Did that for about six years, and had been having a continuing conversation inside the firm about how do we make this the norm and not the exception to the rule. And we came to the conclusion that one of the things that was missing was a early stage startup program focus purely on supporting companies that wanted to practice a conscious capitalism stakeholder model. So I started to think about that, and around 2012, or contacted a good friend of mine here in the Baltimore area, a woman by the name of Julie Linzer, who was working for Ken Alman at the time. And long story short, Ken Alman loved what we were doing gave us a grant, we launched in Howard County, the accelerator, we matched that grant with investment capital. And off we went. And so now we're about to start our seventh cohort here on Monday. As fate would have it, we've invested in about 42 or 43 companies. We just did another round. We have a small fund that we launched in 2018, and just launched the fundraising for a much larger fund about March of this year.
Scott Case 4:19
That's awesome. You've obviously accomplished a lot on that journey. And I'm curious, you know, lots of founders are aware of various types of accelerators. And while Conscious Venture Labs is focused on that stakeholder case, the programmatic element of Hey, I'm going to commit myself and to go through this process, whatever that process is, there's always a question of like, well, what are the outcomes? Like, how does it work and from a stakeholder standpoint, especially, it's hard enough to just create a company where your focus is generating some kind of return or an income stream or something thing, or even just building something that allows you to sustain yourself, let alone measuring yourself against other standards, whether it's other stakeholders or other outcomes that you're driving.
Scott Case 5:11
So I'm curious, can you give us one or two examples of companies, maybe from your early cohorts, you said you had about 40? Now you have the problem, you started a hedge fund, now you have a track record. So now you really have to talk about like, not just what's possible, but what happened. Tell us a few stories about what happened.
Jeff Cherry 5:28
Yeah, it's a great question, Scott, because I think that the outcome thing for us is, you know, like you say, our program is relatively similar to lots of others. But we also have that added piece of this that we want to train entrepreneurs to think about a stakeholder model. So oftentimes entrepreneurs come to us and they're asking the same question, what do I get out of this? One thing that we tell them, yes, we make investments through the program, but if you're here just looking for the money we might not be the right place for you. Because we actually do believe, although we know money's important, we believe that all the other things we provide – the networks, the training, the curriculum, the connections to potential customers – are just as important. So it's an important question.
Jeff Cherry 6:19
To the point of a couple of case studies, I think one of our most successful companies was in either first or second cohort, a company that many listening to the podcast may or may know, a company called Hungry Harvest. Evan Lutz was the University of Maryland grad, he was in their Social Innovation Fellows Program, and I spoke to the program. And Evan must have gotten excited by something I said, because he called me like every week for about six months, it was actually the first cohort because it leading into the first cohort I finally got to meet him. And their business for those who don't know, is they're in the ugly fruit business, right? So they work with local distributors and local farmers, they are buying a produce that normally would be thrown away, because of supply chain efficiencies or aesthetics, and they put that in the tech enabled CSA, and you and I can go on and order boxes of produce, we can customize those. And then for every box that we buy, it's not quite like a TOMS Shoes model. It's sort of for every box that we buy, they work with local nonprofits to teach them how to get food deeper into food deserts. So if you think about the outcome, we started with Hungry Harvest, they were doing maybe $30,000 in revenue, they had a team of three or four. They went through our program, which is 16 weeks. Lots of anecdotes about what happened there, I'm going to tell you the end first. I mean, they came in 2014. So they just did a series a, raised $17 million at a medium to high eight figure valuation, they'll probably do 30 million in revenue this year. And looking at a couple of acquisitions, they're in, I think 10 or 12 different cities now from Miami all the way to Richmond and now to Detroit. I think they're looking at now Philadelphia. So they're definitely one of our success stories. And I think that two things that happen throughout the program with Evan. One – at some point along the way, they were losing a lot of fruit. And they were saying, you know, we're thinking about getting into the juice business. And I said, Well, it seems reasonable to me, you get all this produce, and some of it is going bad, you could do something else with it. But what I know about the juice business could roll around the thimble for a month, however, Seth Goldman's one of our mentors, so why don't you go down to Bethesda and talk to Seth. Two hours later, they came back, they said, Yeah, we're not gonna do juice business. But that two hour drive and 45 or an hour with Seth probably saved them $3 million worth of investment and going down a rabbit hole. So it's those sorts of things that I think that companies that come through our program get. I think another example is a company called R3 Score.
Scott Case 9:28
Before you go to the next example, can you just tell for those who don't know who Seth is why Seth would be a good person to talk to?
Jeff Cherry 9:35
Yeah. So Seth Goldman was the founder of Honest Tea. So he had built that, you know, which everyone knows and amazingly successful business, which got an investment from Coke, I think, a couple of years ago, and then recently, he stepped away and is now the executive chairman of beyond meat.
Scott Case 9:58
He might know a couple things about the beverage business, which is one of the things that accelerators bring to the table. Experts, the domain experts or people with experience that can help steer you into things or steer you away from things. So I just wanted to cover off up on that. So go to your next example.
Jeff Cherry 10:19
Yeah, no, it's a much more succinct and elegant way to put it, Scott.
Jeff Cherry 10:25
I think that the next example is another example of something similar. A company called R3 Score, a woman and daughter team, Teresa Hodge and Laurin Leonard. The mother, Teresa, had gone to prison for white collar crime and did her time and came out and wanted to get reintegrated in society, black woman in Baltimore, and found out that her worst day was going to follow her for the rest of her life. And she said, I'm not sure that that's fair and that's not what we're trying to do here as a society. So they've created a product, essentially, or an R3 Score, which is like a credit score for returning citizens. And essentially, using all the data we use now for sentencing, wrapping that in context, and giving hiring managers and bankers an ability to understand the risks of working with returning citizens. 70 million Americans will have a record by the end of 2030. And 60% of those who come out reoffend. And what we believe is that some of them, a good number of them end up reoffending, because they can't really get their life back together. Because if you have a felony, it's hard to get a job, it's hard to get a loan. So they've created a really amazing business, actually have just gone public through a reverse merger in the last month and a half. Everyone recognizes it's a huge problem, the banks are leaving billions of dollars on the table. And we want to take advantage of this talent, if we can understand the risk of working with them. So one of those other things about connecting people with networks. Steve Bisciotti, the owner of the Baltimore Ravens is one of our investors in our fund. And the NFL and the teams really do care about this issue of the relationship between African American and minority communities and the justice system. So trying to figure out, how can they be supportive, we've ended up connecting Teresa with the general counsel of the Ravens, who's looking at helping her fund some of their pilot projects, because the product is so like a black box, right? They do an analysis on a cohort of returning citizens, they use that analysis to give them a score, then they use that score to go to banks and say you can make a loan, but you have to know at the end whether those loans were successful or not. So we're trying to get pilots. So that's another really great example of what you say what we bring to the table I think as accelerators.
Scott Case 13:18
Those are awesome examples. And I'm curious, maybe give us the two minute story of what didn't work and a company that may have not not made it?
Jeff Cherry 13:29
I think that in general what we see that doesn't work, or it's not that what we see doesn't work. We think that we're very, very early stage investors, right, we're very early stage, we're usually the first professional money into these companies. And the first professional for lots of companies who haven't had friends and family dollars. So I think that getting those companies at particularly at the very earliest stage to where they need to be over 16 weeks and with $125,000 it's challenging. Some companies just need more time, and, frankly, may need more money to get to that next step, because our cohorts of companies coming from underrepresented communities, they're generally starting a little bit further back down the line than you'd see in a lot of accelerators. So, we see some great entrepreneurs who come in with ideas that we just don't have either enough time or enough money to move them forward. Or the idea is not so great, but they're great entrepreneurs, and we're hoping they'll pivot, and sometimes they will, and sometimes they won't. So an example is a guy actually I just talked to a couple of weeks ago, who started a company called going green today and he was trying to figure out how to work with municipalities to incentivize customers to live a more green life, something that we cared about but we eventually just decided that he was probably trying to sell this in the wrong way, that bge didn't want to buy that. So we tried to sort of figure out where this thing would go. So oftentimes, things fail, because we're like, Look, we love this as an idea, we're just not sure it's a business. And that was one of them. And we expect those things to happen. But we try to minimize it. But we know, in the early stage game, that's gonna happen.
Scott Case 15:44
Absolutely. Yeah, I talk to a lot of entrepreneurs. And one of the things I notice is, you know, you have two buckets usually. One is I got this solution, and I'm looking for a problem, because they think they have a problem. It's like, well, who has that problem? Well, I don't know. I mean, have you talked to anybody? Not really. Okay, so there's that one. Then there's those that have a feature and you're trying to figure out how to get it made into a product, and then maybe they have a product then you got to figure out to make it a company. And that's a lot of what kind of the accelerator process is, I got this thing, but building a company is a different game than building a feature or building a product itself. You need them all, but it's a different kind of challenge.
Scott Case 16:24
If you look at the stakeholder side of the equation, there's been a lot of data about the performance of companies of all types that prioritize a broader sense of I'll call it social responsibility, in addition to the financial return component of it. Do you see as you look out over the next few years, especially maybe coming out of the pandemic, that being more oriented, more companies, more startups, more opportunities for that to become adopted by companies of all different types? Has they gotten better as it gotten worse? Is it about the same? What's your take on the role that those additional stakeholders play into the general form of creating companies?
Jeff Cherry 17:12
It's such a great question, Scott. And I think that we're going to see more of the stakeholder model adopted. The Business Roundtable in August of last year came out with a statement saying, we're revising what they thought about the purpose of business. So you're also getting some pushback from that from regular Wall Street. And we've expected that to happen. But I think that the thing that we're seeing is that we look around coming out of the year of COVID and the summer of George Floyd, and we were trying to figure out, how do we connect these pieces together as a society? So I worked on hospitality industry, COVID shut us down, I had nowhere to go, I didn't get unemployment, because I was a server. So now those people are thinking differently about what do they do. Some people will say, well, hospitality industry can't find employees, because of the welfare and the payouts were getting. That may be some of it. Some of it is also I got burnt in that business last time. And I don't know if I want to do that again. So I think that as business people, we're recognizing that writ large to say, if we want to be the employer of choice, I think that the best talent is going to be asking questions about what happens in the next crisis. If I'm under your care and your employee in the next crisis, how did you treat people the last time? And if you didn't do it all right, how are you gonna do it the next time? So I think that we're seeing an uptick of people interested in thinking differently about business. We're trying to tell people because of that that the whole stakeholder model for us is how well do you treat employees? How well do you treat suppliers? What kind of neighbor are you? And do you care about your customers as ends to themselves and not just for fodder for shareholders? So if you take care of those four stakeholders, guess what, they will take care of your shareholders, right? So we're telling people, we think that if you follow our model, you actually become a better managed company. And then you will attract that great talent, suppliers will bring you innovations, communities will welcome you in, customers will give you the benefit of the doubt when things go wrong. And those things will accrue to financial returns. So I'm hopeful that we're going to see more of this.
Scott Case 19:55
That's awesome. Well piling on to that. When you look out five years from now, so you'll be celebrating your 13th anniversary of Conscious Venture Lab, what do you think that business looks like? What's different or maybe what's changed?
Jeff Cherry 20:11
I think that, with any luck, we'll have more capital deployed. And I also think that we'll be in more geographies. We'll be doing things in other places like we took the program online because of COVID. It used to be typical coworking space accelerator. We'll probably go back to that. But we're getting a lot of inbound interest from places like Trenton and Detroit, Cleveland and Columbus, we've had some successes now, that are seeing what we're doing, particularly around this idea, can we support underrepresented entrepreneurs, black and brown founders, folks that other people aren't looking at. So I think that that's taking off from even your, you know, I've been on the rise of the rest bus with your namesake a few times with Steve. And even if you look at the way that they're doing the rise of the rest now, they're sort of shifting to think about underrepresented founders, used to be underrepresented only in terms of geography. Now, even the rise of the rest model is shifting to think about underrepresented founders, geography, color, gender, all those sorts of things. So I think that we will certainly be five years from now in a few other jurisdictions doing the same thing. And we're not sure what that looks like yet. But that's what I suspect.
Scott Case 21:40
Awesome. I have one more question for you, which is my selfish question for the day. As a leader, you're leading a team, obviously you've got entrepreneurs all over the place. What are your plans for traveling for work, your business travel plans over the next six to 12 months? How do you think about kind of getting out and meeting people and engaging in farther away places?
Jeff Cherry 22:04
Yeah, we're slowly getting back into the travel thing. Not full on like we were beforehand. But almost everyone on our team is vaccinated. So we're feeling pretty good about that. And so we're slowly getting back into the mix. It's interesting, because we did the program online, the last one, and we're doing this one online virtual, it's easy for us to stand up a program somewhere else and not necessarily have to have a physical space. I think that's kind of changed. I think it'll be hybrid. Because frankly, I think we've cracked the code a little bit on how to run these things. Virtual people are used to them. So I think that we're probably moving to a hybrid model. But I think that over the next 12 months, we'll probably you know, sort of, it won't be full on travel like it used to be. But we'll make a couple of forays into some local we got some things brewing with Trenton and we're talking to Johnson and Johnson about some stuff. So Trenton, Princeton, you know between here and New York, I think I'll get down the 95 corridor a little bit.
Scott Case 23:21
That sounds awesome. Well, thank you, Jeff, so much for being here.
Scott Case 23:24
Thanks for tuning into this episode of Founders Focus. We love getting feedback. So if you've got a topic for us that you want us to discuss or you've got a founder you want to hear from hit me up on LinkedIn at T Scott Case, or you can always grab one on one time with me at foundersfocus.com. Stay awesome.