Ed shares an investment insight about seeing what you look for.
In this Ed Talk, Edward Dugger III reflects on seeing untapped opportunity existing in plain sight. Ed is the President of Reinventure Capital and an impact investing pioneer.
Bob Baldwin, CEO of Morgan Stanley, sat uncomfortably in my office taking in the modest surroundings, and me. He looked a bit drained. Bob had flown up to Boston from New York that morning to personally deliver a message. We sat there awkwardly for a moment while he gathered his thoughts.
Bob was there as a founder and director of the firm I had joined a little more than two years prior. The firm, UNC Ventures (then known as Urban National Corporation), was one of the earliest impact venture funds; he had helped raise capital to launch it. Along with Ralph Leach, Chairman of the Executive Committee of JP Morgan, and other corporate luminaries on the UNC board, Bob had determined that access to risk capital by entrepreneurs of color was grossly inequitable. A brief survey of the management teams of the growing number of venture capital firms and the entrepreneurs in their portfolios quickly confirmed this fact. The UNC fund was created to address this inequity by targeting founders of color.
The firm had launched under the initial leadership of a “grey hair” alumnus of American Research and Development. His successor, Tull Gerreald, a brilliant white guy, Harvard MBA and a founder of the firm, had recently accepted an offer to become head of strategic planning at a Fortune 500 company. Bob had come to Boston to deliver the decision the board had made regarding Tull’s successor. For him it was so important that he had volunteered to deliver the decision himself.
Bob had just had lunch with the heir apparent, the firm’s EVP and general counsel, and delivered him the bad news.
Now he found himself sitting in front of me, a young African-American professional, without an MBA, with a two year tenure as an investment officer and limited management experience. A newcomer to the industry who had somehow managed to advance from low man on the totem pole to Vice President and Treasurer of the firm. No wonder Bob was perplexed that Tull had designated me to succeed him as President.
In our quiet moment, Bob appeared to be searching for a handle that would connect the dots. His world was one in which the dots were always connected — elite families connected to elite schools connected to elite jobs at elite institutions. Yet as a founder of this firm, he had taken on the challenge of finding new ways to connect the dots, and so he searched.
Bob broke the silence. “How old are you?” “I’m 27,” I replied firmly, hoping Bob did not decide to get up and leave. Instead he said to me, “Its a damn good thing you’re a Princeton man!” Bob and I at least shared this in common. Tull’s confident assessment of my character traits, leadership qualities and rapid acquisition of skills had fallen slightly short of convincing Bob that naming me President was not a “bridge too far.” My Princeton degree provided the assurance Bob needed that he had not totally abandoned the traditional “lens” used to confirm talent and leadership qualities.
Yet Bob also knew a new lens was needed. The old one simply perpetuated inequity of opportunity and privilege. A new one would reveal the unseen talent proliferating in plain sight. And Bob was betting that someone with my untraditional background could craft and apply this new lens in a way that brought the untapped potential of founders of color into full view. Bob took a deep breath, congratulated me, and wished me success in my new role as President of UNC Ventures.
For the next twenty years my team at UNC Ventures diligently crafted and refined our new lens with demonstrable success. It allowed us to remove filters intended to exclude rather than include. It allowed us to make judgements about character rather than connections and ingenuity rather than identity.
Our non-traditional lens made it possible for us to see through the staid, quiet demeanor and corporate lawyer facade of Ragan Henry to the entrepreneur he was determined to become. Son of a Kentucky tobacco sharecropper, Ragan founded one of the first radio broadcast groups controlled by an entrepreneur of color. Then he was the first to acquired a network-affiliated TV station. After selling both, he went on to found two more radio groups that acquired over 60 stations. UNC backed Ragan each time. A pioneer by any measure, Ragan distinguished himself as a Harvard-educated lawyer, cutting-edge broadcaster, mentor and philanthropist.
Our investment lens made it possible to look beyond the circuitous background of Chester Davenport and share his vision for a cutting edge environmental company. Chester, a graduate of Morehouse College (an historically black college) and the University of Georgia Law School, was an unlikely candidate to build a $100 million company in three years and then take it public. His early career as a senate legislative assistant and tax attorney at the Justice Department did not point to a later career as an extraordinary entrepreneur. Yet when he was Assistant Secretary for Transportation, he became convinced that changes in federal regulations resulting from clean air legislation created a unique business opportunity. We backed him to form Envirotest Systems Corp. and acquire a small division of United Technology building and managing stand-alone vehicle emissions testing facilities. Chester built it from there through acquisition, organic growth and efficient use of capital to become one of the first public companies with an African American founder and CEO. He went on to form Georgetown Partners, a private equity firm, and a $3.2 billion joint venture with GTE Consumer Services.
Our lens allowed us to connect the dots in a different way and believe that Don Cornwell could become a pioneering leader in a completely different industry. A rare African American investment banker at Goldman Sachs, he was COO of Corporate Finance, yet dreamed of becoming an entrepreneur in the broadcast industry. Most were highly skeptical that he could successfully shed the trappings of Wall St. Yet his rise from modest beginnings in Cushing, OK and Tacoma WA, steady advancement from Occidental College to an MBA at Harvard to ever more competitive positions on Wall Street suggested to us his readiness to play on a bigger stage. UNC backed Don to form Granite Broadcasting Company and acquire his first two network affiliated TV stations in Duluth and Peoria. From there Don grew the company into a diverse station group operating and providing services to 23 TV channels in 9 markets and reaching more that 6% of US television households. In the process, Granite became one of the first public companies controlled by an African American founder and CEO and one of the 25 largest television station groups in the United States.
Ragan, Chester and Don were extraordinary but not unusual. What enabled each of them to achieve such remarkable success is that they were seen through a different lens. They were supported to seize great opportunities they recognized, and given access to the capital to translate those opportunities into scalable businesses. They were tapped from the ever-growing pool of innovative entrepreneurs who are of color and women existing in plain sight, yet are generally overlooked by mainstream investors.
At Reinventure Capital, we see this untapped pool. We aim to provide talented but overlooked entrepreneurs with growth capital to build scalable businesses addressing challenging social and environmental issues. We believe in doing so, we will produce strong returns for shareholders and intentional benefits for stakeholders. We know it can be done, because we’ve done it before.
Are you looking for a new lens to see opportunity and create value? Please join us in reinventing investing.