Partners at LOUD Capital Nishad Parmar and Navin Goyal have elevated the current conversation about diversity on Wall Street.
LOUD Capital is a venture capital and alternative asset management firm. Founded in 2015, LOUD started investing in early-stage technology companies and has since grown to include several other investment offerings and lines of business.
The Venture for People model LOUD has developed focuses on three core tenets: (1) the belief that venture capital can create a positive impact on society; (2) the pursuit of ethical for-profit investing in both diverse and underserved communities; and (3) the responsibility to educate and inspire the next generation of entrepreneurs to embrace the mindset.
From their headquarters in Columbus, Ohio, and offices in Beijing, Chicago, New York, and Raleigh, North Carolina, LOUD has built a unique platform geared toward investing dollars that push society forward and educate people about investing. In their view, investing is empowering.
Mueller: Thank you Nishad and Navin for agreeing to share your insights with the Alternatives Watch community.
Given that you have been investing in diverse founders since LOUD’s inception in 2015, but there is currently an increased interest in diversity across asset management (in both LP and GP fund communities) as a result of recent events, please speak to how the conversation has evolved in the past few months.
And how has sentiment and interest changed since 2015, when you opened your doors?
Parmar: Thank you, Beth.
Sentiment around and interest in diverse founder investments like the ones that LOUD makes has certainly ticked up markedly in recent months, but has been gaining traction for many years due to shifting political winds in the U.S. in particular.
For us, given that LOUD’s model is impact driven around diversity, and developing entrepreneurs is our forte, having engaged with initiatives like the 1871 Chicago accelerator in the past, newer interest is met with an established unique approach to engaging change that under the LOUD umbrella has been in motion for many years now.
Goyal: Thank you, Beth. Adding to what Nishad has said, having built a purpose-driven organization that speaks to the increased interest of the investing community is a great boon. We are focused on impacting lasting change.
Mueller: As you are industry agnostic but are currently finding compelling early-stage deals, please speak to these opportunities.
Parmar: More than 30% of our portfolio is in professional services. We don’t have a fund that specializes in, just, say, SaaS companies. Our main differentiator is our high-level vision — how can we do things better in general? We keep in close, high-touch communication with our existing investors, and drive for educational outreach to help us find and cultivate the best early-stage ideas. Cleantech, including energy, is a passion of mine and the firm’s; I’m also seeing compelling opportunities in biotech and healthcare.
Goyal: I’m very interested in technology and wi-fi investments right now. Many wealthy people assume that internet connectivity is ubiquitous, but it’s not and the technology already exists for implementation in poorer communities to facilitate say, higher learning at a time when schools are closed and students in underserved communities are falling behind more than others. To Nishad’s point about educational outreach, we regularly hold panels here in Columbus to benefit and reach out to the local entrepreneurial community.
Mueller: As you focus in part on investments in diverse professional services businesses, and I am a (diverse) partner at one such business (a private fund administrator), please speak to the opportunities you’re seeing in that sector at this time.
Parmar: What we tend to find appealing about empowering women-owned/minority-founded businesses with investment dollars is the truly amazing extremely high-level talent we discover that is hungry and eager to put their skills to work. Nearly half (45%) of our portfolio is devoted to women-owned/minority-founded businesses. Investing in such businesses isn’t about giving handouts. It’s about making money as much as it is about doing good, as such entrepreneurs are so driven and often come up with novel or unique solutions. Funding them is like facilitating a dam break, not at all like cutting a welfare check or providing a subsidized loan.
I’ll let Navin address the professional services piece of the question.
Goyal: To echo what you’ve said about your approach at Socium, Beth, what we look for when investing in professional services firms is a high-level vision. Are the founders innovating and creating a better experience? And like you with your fund clients, Beth, we are providing a high touch bit of education and mentorship to our portfolio companies, incubator style and certainly ensconced in the broader LOUD community, so the initial innovations that attracted us to a company almost surely will evolve.
We are big on mentorship opportunities within the community we’ve established as feedback from different kinds of professionals can make for a greater whole and smarter strategies.
Mueller: You mentioned that you have engaged many people who didn’t think of themselves as angel investors. How do you approach the education process with those that have never dabbled in the early-stage venture capital investing sphere before?
Parmar: Generally speaking, when we communicate our vision around the investing platform we’ve built, people want to get involved. They don’t tend to just write a check, walk away and analyze the line item each quarter, although that is certainly an option. And we only get paid when investments perform, so there is an alignment of interests. We plow the profits back into our portfolio companies, but tend to invest in firms with a five-year time horizon to exit vs. the seven- to nine-year (or more) runway that is typical of the venture universe that we play in. The shorter time window appeals to our investor base as does the lower risk profile we angle toward, in contrast to the high-risk, high-reward portfolios found in early-stage VC.
Goyal: Given that I was a physician in my prior life, I have engaged many physicians as investors in LOUD, among other types of high-net-worth individuals. Certainly, I speak their language and some of the more healthcare and biotech focused deals we approach are of particular interest to them.
But beyond a particular type of investor, what we present is a forum in which investors and portfolio company founders alike can share resources, ideas, grow and learn from each other. The possibility for fuller engagement exists through LOUD initiatives; what we’ve built here is an entrepreneurship platform.
Mueller: Tell us more about your venture competition and partnership with the Chicago Bulls.
Parmar: The first-ever Chicago Bulls Venture Competition (CBVC) provided a platform for startup entrepreneurs to prove the validity and worth of their business ideas. The winner won $50,000 and legal and other support from the LOUD platform. It was an amazing example of the kind of community engagement we strive for at LOUD.
Goyal: We didn’t just get amazing feedback from the Chicagoland community but also, keeping in our commitment to funding and supporting diverse founders, we were able to reach so many groups and demographics in the city. Out of the 20 semifinalists, eight had at least one minority founder, and six had at least one female founder.
Mueller: How do you see the coronavirus crisis and the ensuing unrest that has followed impacting the diversity conversation in asset management in the long run?
Parmar: The COVID pandemic has been a disruption, to be sure. It’s been a reality check and to put it lightly, I’ve been a busy, busy person over the past month or two as I delve into more private market opportunities.
Goyal: Agreed. This being said, we’ve had diversity investing at the core of our philosophy from the start and that’s something we don’t plan on changing. Holding true to our guiding principles has gotten us through the past five years and is something that will keep us steady now and as we continue to grow.
It is our hope that in the long run, the asset management world we inhabit changes into a more diverse playing field for all; perhaps this is the beginning of the broader true shift we’ve been working toward.