MFV PARTNERS Interview Series: Portfolia

Brendan Mathews:

Hello, and welcome to Motley Fool Ventures PARTNERS Interview Series, Brendan Mathews, here. Motley Fool Ventures has been making limited partner investments in other venture funds, and we're excited to highlight these rising star VCs and their investing strategy. I'm here today with Lorine Pendleton, venture partner at the Portfolia Rising America Fund. Lorine, thanks for joining me today.

Lorine Pendleton:

Thanks for having me.

Brendan Mathews:

Let's just kick it off with a basic intro of Portfolia, and then also the Rising America Fund.

Lorine Pendleton:

Sure. Portfolia is really interesting. It basically pulls together limited partners who are credit investors who invest in various of our funds around a theme. Actually, what's interesting is most of our limited partners are women, and then most of our fund managers are women, as well. Really, Portfolia was founded by Trish Costello to disrupt VC. VC tends not to have a lot of women, not a lot of people of color. She ran the Kauffman Fellows program for about 20 years, and she saw that there was still this issue of diversity in the VC industry, and she wanted to change that.

Brendan Mathews:

I think we at the Fool love disrupting VC. We love diversity. What is the thesis of the Rising America Fund?

Lorine Pendleton:

Sure. We invest in companies where there's at least one founder is diverse, and/or LGBTQ. Or we also invest in the companies where the founders aren't necessarily diverse, but they have products and services in the marketplace that really have a positive impact on those communities, either LGBTQ community or communities of color.

Brendan Mathews:

That's great. Could you tell me just a little bit about your journey to becoming a venture capitalist?

Lorine Pendleton:

Sure. It wasn't the traditional journey. Actually, I've had a very interesting background. I started out as a lawyer. I worked as an attorney, and then I went to join a couple of internet startups, so definitely have the operator experience. I worked at three companies, and then two of those companies, the last two startups I worked at, actually had exits. They were all VC backed, had exits. So, I saw the importance of having capital and investors to invest in your company as you're growing. And then being an operator, I headed up business development for these companies. One was a B2C, one of the first social networking companies, and then the other was a B2B play. Working at both of those was a really great experience, just how to take a company as it's starting out, and to really grow it, and then ultimately having it exit.

So, went back to law firm life. Really, what got me into investing is when I heard that only 1% of African-American founders ever get some form of VC funding. When I heard that, I just was really shocked by it and thought that was pretty abysmal. Again, I'd worked at startups, I knew the importance of getting funding. And I said, "I'm going to change that. I'm going to start investing my own money in founders of color and women founders." That was great. I put that out in the universe. Unfortunately, I didn't have an investment background or a financial background.

I say the universe conspired, because literally a few weeks later, I subscribed to this newsletter for women in finance. They talked about this program called Pipeline Angels, which trains women to become angel investors. By doing that, hopefully more women entrepreneurs would get funding. I applied to the program. I got in. That was nearly eight years ago, and that launched my angel investing career, started investing in companies.

Then interestingly, I heard about Portfolia through one of the women who was in my cohort at Pipeline. And she said, "There's this great new model where you can invest as an accredited investor in a fund, and the fund will invest in 10 different companies, so you're spreading out diversifying your angel investing risk." I thought that was great. So, I invested in very first fund that Portfolia had, and that fund actually had an exit. And I invested in their B2B software fund, which also had an exit.

I was writing checks. I wanted to make more of an impact. I really love the Portfolia model, and Trish, the founder, said, "Why don't you create this diversity fund using Portfolia. You've seen what we've done. It's a really great model." So, I agreed to launch my very first VC fund on the, on the platform, which I thought was really great. Then we helped recruit the partners that I have. It's five of us, we're all black or Latino women. We believe we're the first fund in the country that is run by a team of all black and Latino women.

Brendan Mathews:

That's amazing. What stage are you guys focused on, in terms of your investing?

Lorine Pendleton:

Yeah, we're a bit stage agnostic, so we've invested seed and actually, most recently through series F. That's been really purposeful. We wanted to diversify our portfolio in terms of not only the companies we're investing in, but the stage. With the investors who've invested in us, we really want to have some exits so that we can return capital. But I would say, we've got two later stage deals. Really, a sweet spot is seed stage and series A.

Brendan Mathews:

Mm-hmm (affirmative). How many investments have you made so far?

Lorine Pendleton:

We have made eight investments so far.

Brendan Mathews:

Can you tell me about a few of the companies you've invested in?

Lorine Pendleton:

Yeah, sure. Our very first investment, which we really, really like a lot, is called MoCaFi. It stands for Mobility Capital Finance. The founder, who was a JP Morgan Chase executive managing director, had been in banking his entire career. He saw that there was a pain point, in terms of there are communities that are under-banked or unbanked, which actually 50% are black or Latinx. Think about, you don't have a bank account. So, you got that stimulus check, or any check, and you're not able to cash it. Or you have to go to a check cashing place which is pretty predatory, they take 20, 25% of the check. So he said, "Why don't I create a mobile-first?" All you need is your cell phone, you download the app, you can actually deposit checks by taking a picture. It's deposited into your account. He also issues a debit card that you can use to buy things.

So, he launched his mobile-first banking for the under and unbanked. Which was really unique to him is that he was entering to get customers through partnerships with cities and municipalities. He has a partnership with the city of Los Angeles, where actually all of their residents are getting this digital card. They're actually using disbursements for people who get public aid, they're able to have this card loaded. He's actually signed up Chicago, he signed up the city of Honolulu and LA. He's doing really well, which is great. So, that's one company.

We also invested in a company called Canela Media. It's basically a streaming service for the Latino community. It's free streaming. They make their money in advertising revenue. The founder, she had worked at several previous advertising companies that are online advertising catering to Latinx market. She was ready to go out on her own, an expert in advertising. She has been able to quickly ramp up. She lodged in March of last year, of 2020. She's already the number four media platform in the Latinx community. So, we're really happy that we got into that round. She licenses content so people can stream, and we really love what she's doing. It's both in Spanish, as well as English. Really that was a great company.

Another company I invested in is in Cantos, we call it an edutainment company. They basically provide books, and they have characters, and also an app to teach kids to be bilingual, so Spanish and English. It's a founder team. It's two married couples who are a founder team, so four people. They each have different backgrounds, tech background, content background. The Latino market is one of the fastest growing markets, and this is catering to that market. Think of Dora the Explorer, but Dora the Explorer being bilingual and teaching kids to be bilingual. So, not only just the Latinx market, but any child or parent who wants their kids to become bilingual. Spanish is a great language to learn, particularly now with the fast growing Latinx community.

So, those are a bit of the companies we've invested in. What I would say is really what we're looking for are companies that are disrupting or solving a problem that's needed. Those are the type of companies we invest in.

Brendan Mathews:

That's awesome. One of the things, I think, that's also really cool about Portfolia is actually earlier today, I was able to sit in on the pitch meeting with MoCaFi because you actually invite your LPs to actually join your pitch meetings, and you've got your materials there. I think that's so awesome.

Lorine Pendleton:

Yeah. Portfolia really wanted to get more women involved in this asset class. Only half of 1% of women and credit investors invest in early stage companies versus men, 30% of credit investors. Part of our mission is to bring women in. There are a lot of women who are affluent, they'll write a check for philanthropy. But they feel like investing in early stage companies, it's really complicated. So, we're demystifying that. Very few venture firms will open up the curtain and say, "This is how we pitch companies." They can see companies pitching us, we're asking them questions. They can get involved in the due diligence process if they want. We, ultimately, make the decision, but someone may have domain expertise in an area, and we invite them to be part of the due diligence team. It's really a very unique model.

Also, once we make the investment, our limited partners really want to provide not only the financial capital, but social capital. They'll open up doors in their network for the companies. We ask our entrepreneurs, "What do you need from us?" and we'll go out to our community to help them. So, we're really financially invested in making these companies successful, but also what we say is, "We invest in the companies we want to see in the world," and that's what we're doing.

Brendan Mathews:

I think that that sense of community totally vibes with what we're trying to do. I'm so glad we're investors in your fund. I want to end with a fun question. Some of your legal experience was in the entertainment world, right?

Lorine Pendleton:

Yes, yes.

Brendan Mathews:

Who are tougher negotiators, tech founders or the entertainment world?

Lorine Pendleton:

I would say the entertainment world. Yeah, yeah. No, when I was an entertainment attorney, we represented Prince, Chaka Khan, Stevie Wonder, some pretty big artists who I grew up listening to. Artists are always interesting, and then also just negotiating with people who want their services. So, that was a lot of fun. But I think the tech companies, the main point is how much equity are you going to get? What's their evaluation? Those are the points that you focus on, and I think as long as people are reasonable. But certainly when I was a lawyer, there were definitely some outrageous requests, in terms of negotiating.

Brendan Mathews:

So, you've swam with the sharks before, so you can handle them.

Lorine Pendleton:

Yes, I have. I have, certainly.

Brendan Mathews:

Cool.

Lorine Pendleton:

I just want to thank Motley Fool Ventures for investing in us. We view you as great partners, and you've been amazing.

Brendan Mathews:

Cool, thank you. That'll do it for this partner fund interview. Thanks for being here, Lorine.

Lorine Pendleton:

Thank you.

Brendan Mathews:

For more information about Portfolia and the Rising America Fund, you can go to portfolia.co. You can also follow Lorine on Twitter, her handle is @LorinePendleton. There are more interviews like this available at FoolVentures.com. Thanks for listening, and fool on.