Some see diversity as adding a token minority to the lineup, but not adding much to the storyline.
For Tracey G. Riese, a New York-based angel investor, meaningful diversity is what she looks for when investing in companies.
Riese is the Managing Director of Golden Seeds, an early-stage angel investment firm that funds women-led ventures.
During a recent Communitech HYPERDRIVE trip to New York City, she gave the companies insight into New York’s investor landscape.
Before becoming an angel investor, she worked in large companies like RJR Nabisco and Revlon, and in 1994 went on to found her consultancy firm, T.G. Riese & Associates.
Riese chatted with Communitech News about Golden Seeds’ investment strategy, Canadian startups and what she thinks of Waterloo.
Q – Golden Seeds doesn’t fund women entrepreneurs per se, but rather diverse management teams. What are diverse management teams, and why is this a strategy?
A – What we’ve observed and what we believe – and there’s a lot of data to support the fact – is that diverse management teams produce better business results and returns for investors.
Diverse management teams – we’re talking gender diverse, but it really applies across the board – include women and men in the leadership and ownership positions of the company.
So when we look at companies, we want to see at least one woman at a C-level position, leaning towards ownership of the company.
Q – What results have you seen by taking this strategy?
A – What’s interesting about it is, as an angel group, we’re relatively young, and most angel groups are young, so I don’t know if we have had enough exits to be able to tell.
What I can tell you is that the majority of our businesses are still operating; are moving in a healthy direction toward their exits.
I think what’s important about diverse management teams is that you do get people with different perspectives working on the business problem.
Q – You have had quite a career. Which job helped you most in developing good instincts for investing in companies?
A – I think there are two parts to that answer. I have an entire lifetime of business experience, and even though I have been working in very big companies, it has given me a very broad perspective of good practices; how you approach the market.
Working in big companies gives you sense of a professional way of going about addressing the market, and I think that has been very helpful.
The flipside of that is I have had my own business for the last 20 years, and so I have some good understanding of what it takes to operate a small business. And that’s an important part of my business model, because I want to align myself with my clients’ interests.
I often take compensation in the form of equity or business performance. So I agree that instead of being simply compensated for my time as a consultant, I will say to the CEO that I will work on the same basis that you work on. Whatever the metrics are that you’re looking to achieve, I’ll accept my compensation based on those same outcomes, and I often take it in the form of equity rather than cash. So it has forced me to assess the business prospects of my clients.
Obviously, you want to make that offer when you believe the management team will be able to work with the ideas that you present, and the business itself has the strength and opportunity to produce returns that will compensate me for my time.
Over the 20 years of evaluating whether I should accept compensation on that basis, I think it has helped me as an investor looking at companies and assessing both the business idea and the management team.
Q – In your spare time, you invest in art market technologies. Why do you think it’s important to invest in art?
A – Well, the reason that I do this is because my husband and I are very active in the contemporary art scene, and so we’re very interested in understanding how these markets are going to emerge over time, and one of the ways to stay abreast of the marketplace is to invest in it.
Right now, the art market is extremely inefficient, and in many ways, hard to scale. So it’s an ideal market ripe for technological disruption, and there are a lot of people working on very different theories and a wide variety of business models at all different levels of the art market.
Q – What advice do you have for Canadian startups seeking U.S. investment?
A – For Golden Seeds, I would say that Canadian companies need to be able to do what any other company does. You have to prove that you’re targeting a really compelling pain point, with a great solution that works, with a smart plan of how to go to market with it, and with a management team that’s passionate, flexible and resourceful. And that the market that you’re going after is big enough.
If you can do those things, certainly for Golden Seeds we find Canadian companies every bit as compelling as other companies from the U.S.
Q – You visited Waterloo Region for Communitech’s Techtoberfest in mid-October. What observations did you make during your visit?
A – It looked like an extremely vibrant place, with many of the best ingredients for a technology innovation hub. You have a great university, you have a terrific lifestyle, people obviously really love living there.
I think Communitech forms a wonderful community for innovators who are trying to get their products to market and perfect their idea.
It looked like a really exciting startup for startups, and it reminded me of Boulder (Colorado) very much. It’s just this up-and-coming and rather hot community in the same way, with the young, energetic, lifestyle-driven people. There’s lots of educated people, strong tech presence, access to other kinds services being not that far from Toronto, so you’re not that far from the advertising hub in Canada.
I thought it seemed very exciting.
Q – Do you have any other thoughts?
A – I realize that sometimes, Canadian companies feel that they’re at a disadvantage when they compare themselves to U.S.-based companies.
But I think that in today’s world, the idea, and the quality of the execution of the idea, trumps location.
Technology is changing the balance of power and moving it to the most creative solutions, and I think that Canada should not have any sense of disadvantage or inferiority in comparison to U.S companies.
