Hello Alice CEO on Funding and Growing Small Businesses | builders podcast

0:00How do we unblock, you know, and open up those doors so that all the things that are happening for small companies when it's relevant.

0:17Today I speak with the CEO of Hello Alice, Carolyn Rods, on supporting and growing small businesses. We talk about why so-called SMBs are so important to our economy, the disparity that Black, Latino, and women founders have in receiving more funding, and a whole bunch of other really important topics about our economy. It's a great conversation, and for those looking forward to my weekly check-in with Editor-in-Chief Marty Beckerman, he's on assignment this week and he'll be back next episode.

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1:48Hi, Carolyn. How are you? Good to see you. Doing great. Thanks. Thanks for being on the podcast today. So we're going to talk about small businesses and small business growth today. And before we get into what your company does, let's set the stage by talking about small business. How do you define that term? Like, what's the size of a small business in your mind? And then also, if you can provide like some general kind of state of state of the union, how many of them are in the US, the importance to our economy, how many how many start every year, etc. Yeah, it's a great question because there's a lot of debate around what is a small business owner.

2:26Typically, when the government is talking about small business, they're referencing companies with 500 or less employees. For us at Hello Alice, we really focus on the majority of small businesses who sit in that 10 employee and under. The micro businesses and micropreneurs that are really the backbone of our economy. Small businesses in general are creating nearly 99 % of jobs. They're generating 44 % of U.S. economic activity. They're really the essence of the entrepreneurial spirit in the American dream. When we think about new job creation, they're creating two-thirds of new jobs. They're driving innovation.

3:12They're doing so many pieces that are so critical to all of our communities. And I think oftentimes we sort of think of small businesses as sort of this, you know, it's a small piece of the economy. The reality is it's really the core of our economy. You know, I was going to ask this a little bit later, but I think I'm going to segue to it now. Like the characterization of small business sometimes is like a mom and pop store, brick and mortar, kind of characterized as like this coffee shop down the street. And when you say it's most new jobs, 40 % of economic activity, I feel like it's really underrepresented in the narrative that I hear about small business.

4:01Yeah, it's interesting. I mean, I think we often think about this antiquated view of what a small business owner is today. And it's shifted so much. I mean, even since the pandemic, when we look at what these companies are doing, they're majority tech enabled. They have websites, they're using new technologies. They have connected teams. They're working, you know, many are working remotely. Many are dealing with international clientele. And so they really are, they're thinking much bigger. And I think there's a lot you can do with a really small team and the ability for them to innovate, adopt new technologies, be at the forefront of industries.

4:40Frankly, in many cases, they're the ones that are carving out a lot of the kind of mass adoption of a lot of these bigger products and services that we see from all of the large corporations. Yeah, what you just said made me think of some of the small business owners that have been on this podcast. One of the very first ones was I talked to one of the founders of Beanbox and they do direct-to-consumer coffee subscriptions, but it's a very technology-centric company. They have their own proprietary machinery for separating the beans and bagging them. And it's all like, I sound very Luddite when I say very technology forward, but it's a really innovative company.

5:25And maybe there are 10 folks that are there. And that's probably what's happening across the country. at scale. Yeah. And today, I mean, you think about a small business owner that they may have a small piece of the operations within their company, but they're working with, you know, they're working with dropshippers, they're working with mass marketing technologies. And so their reach is so much bigger, but they're able to do that with a really small team. And I think particularly, again, this is sort of the silver lining of the pandemic is it felt like the world finally recognized the value of small business.

6:03And a lot of these enterprise softwares and technologies that we had seen that were extremely expensive and available to big companies suddenly became available to really small businesses, which, you know, these software companies realized this is a massive market that we haven't reached. And we're finally able to reach them at scale. It kind of opened the floodgates for the power of a single entrepreneur. Yeah. Yeah. And whether it's a giant tech company like Intuit, so much of their client base and their share value and everything else is dependent on small businesses buying their products and services.

6:42So small businesses are vital to large businesses, in a sense, from a B2B standpoint. And not just as clients, right? I mean, you think about supply chains and how things are operating. So many of these large companies are acquiring these small companies for their innovation and for the things that they're pushing forward. We run a lot of programs at Hello Alice with large corporations that are really centered around trying to find the best innovation in industries so that they can ultimately acquire those companies or they can partner with those companies or they can work with those companies to drive their businesses forward.

7:17Totally. So I want to shift gears a little bit to something that I was shocked and dismayed to see on your LinkedIn feed. And that's that Black and Latino founders received less than 1.5 % of venture capital funding. And I assume you're talking about small business. I guess it's got to be a small business if it's being funded by a VC. I'm curious if there's got to be lots of reasons. There can't just be one reason. But if there's a pie chart of all the reasons that contributed to this, what do you think would be the biggest slice? Oh, I mean, it's so multifaceted is the reality. But at its core, I mean, I think we talk a lot about the systemic disparity.

8:04And it starts many, many years before these companies are erasing capital. When we look at a Black or Latino founder, they're starting with half the capital as their white counterparts. And so you imagine that if two companies are starting on day one and one has half the capital, all of a sudden that white-owned business is able to hire an employee faster. They're able to invest in technologies earlier. They're able to get traction in those early days that the Black and Latino founder frankly can't afford to invest in. And so the gap widens just a little bit. It doesn't widen a ton. But then that white business owner is able to go tap into their network.

8:42They're able to go call their peers. They're able to call on friends and family who also have more capital. Now they have investment. Now that gap widens a little bit more. And so over time, you start to see the gap for these businesses actually widen. There's a huge drop off in terms of funding that happens at that seed stage that when you get to the Series C, Series D, you go further down the line, it's pretty massive. And we see the same with women-owned businesses. It really is kind of where the money sits. When we look at who these venture capitalists are, it's not the women or the blacks or the Latinos.

9:18It is predominantly white and male. And that's not to say, look, the path is very difficult for many white males as well. I mean, you think about where you grew up in the community network, it may be identical to that of a Black or Latino or female founder. But in general, we speak holistically about where the money sits at a macro level. It sits predominantly in a male and white community. What percentage of new businesses are being started by Black and Latino owners? Do you know that? They're the fastest growing segments of entrepreneurs, particularly with a black female entrepreneurs. It's the fastest growing group.

9:58I'd have to check on the exact percentages of what that is on the overall mix. But when you think about where the innovation is coming from, there's a lot happening across the board. And then when you start to look at the shift in funding, it's pretty significant. So we think about programs now that are largely under question in terms of where can capital flow, what freedoms does a private sector have to target capital for blacks or for Latinos or for any demographic? You start to wonder if those programs go away, how do we ever close that gap? There's a ton of research that shows that without dedicated programs that are earmarked for certain groups, we're never going to close the path because the gap is actually widening versus closing.

10:49If we loop back to what we said at the beginning, that small business growth is vital to the economy, vital to every company's growth, then it's incumbent upon everyone to make sure the fastest growing segment of that small business is successful. In small business, it's the most trusted voice in America. It's one of the very few bipartisan issues remaining in the world because everybody recognizes that when small business succeeds, communities succeed. Nobody wants crime. Nobody wants homelessness. Nobody wants depression and mental health. Nobody wants these things. The reality is we all want the same things at the end of the day.

11:33That depends on healthy communities. And healthy communities depend on healthy small businesses. So we spend a lot of time just trying to help all companies say, these are the elements of what it means to be a healthy business. Here's what's required from the ecosystem to enable healthy businesses. And how do we pull those things together in a really scalable and effective way to drive more healthy businesses? Because it's in all of our best interests. Absolutely. And, Carolyn, you're not just passionate about this. You're also a founder and CEO of Hello Alice. And so maybe tell the listeners the mission of the organization, what you do, and then a little bit of an origin story for how it all got started.

12:17Sure. So Hello Alice is a digital platform. It's free for all business owners to tap into. We support about 1.5 million small business owners today. and largely with the mission of helping them measure and improve the health of their business. They come in, they get a score, tells them how healthy their business is. And based on that, they're given a path to improvement. That includes challenges that they can take. It includes accelerators. It includes communities that they can be supported with. We've deployed nearly$40 million in grants to small business owners. We have a lending marketplace, a credit card that helps open opportunities, all with the goal of saying the harder you work to build a healthy business, we're going to go out there and advocate across the ecosystem to open doors to opportunities.

13:09Because we know healthier businesses get more access to capital, to connections, and to opportunities. And this is a really simple platform to aggregate that effort. Yeah, that makes sense. knowing a little bit about venture funding, you know, some types of funding, you know, companies' metrics are put into kind of like a formula. And so I imagine I was going to ask about the financial assessment that happens on, that anyone can do on Hello Alice, but is it designed to sort of help someone understand where they are on target to get, you know, to get help or to get outside resources? Exactly. And sometimes it's really basic things, right?

13:49It's helping them figure out, you know, I always think it's interesting when we talk about who's going to get funding or who's going to get a bank loan or who's going to get venture capital. Everyone's, you know, we kind of say these blanket statements like to get venture capital, you need to show hockey stick growth. What does hockey stick growth even mean? Like, what does that mean for my business? What does that mean for my path to grow? And so our goal is to say, look, these are the practices that help you get there. These are the practices that actually help you get hockey stick growth. These are the practices to efficient operations, to understanding your, it's not just, you need to understand your finances.

14:20You need to present your finances. It's really, what does that mean? You need to review your budget, you know, at least quarterly. You need to make sure that you're setting measurable goals. You need to make sure that you're, you know, that you have organized financial statements and your business finances are separated between your personal finances and your business finances. It's really simple practices at the end of the day, but healthy entrepreneurs take these actions and take these steps. The reality is 50 % of businesses are financially unhealthy. And so they don't have a chance of getting a loan.

14:50They're often, for many of them, they don't even qualify for a credit card. They certainly don't qualify for venture capital. So we're trying to close those gaps to say, let's at least help you get your first credit card. It's a really important step. So you have a little bit of working capital and you have a little bit of a buffer on cashflow. Once you get that, okay, now let's, you need to grow, you need to hire. Here's how to go get a loan. So you can get that traction when you don't have the network, You can't call up your friend and say, come invest$500 ,000 in my business. These are steps that everyday businesses can take to push them over those hurdles and obstacles.

15:27And the reality is it works. We see it working. We see stories every day of companies who are taking the steps to build healthy businesses. They're opening doors to press coverage. They're opening doors to getting better talent in the door. They're opening doors to accelerator programs and all kinds of things that are really moving the needle for their company. Reflecting back on the pandemic and the loans that were provided or offered to small businesses, looking back on that, what went well and what didn't go so well? It was interesting. I think we've kind of been shouting from the rooftops about the value of small business for many years.

16:07And I always laugh because I often hear from people, they're like, oh, you're just in the right place at the right time to grow your company. I'm like, We've always been here. We've been here at the wrong time. We've been here at the right time. We've always been here. But the pandemic highlighted how many inefficiencies exist in this ecosystem. You asked earlier about our origin story. It was really where necessity intersected with innovation. I was a small business owner. You know, starting my first company after leaving investment banking, and I saw the difference between the investment banking clients we served and the service they got and the access they got and the access that I was now receiving as a small business owner, as a solopreneur at the time, it was night and day.

16:49I would call my banker and they didn't give me any information. They didn't, you know, they look at a chart. They didn't know anything about my business. I got no guidance. I didn't have access to the networks and communities. I mean, I'm now a member of YPO. A solopreneur can't have access to that. Like it doesn't, you don't qualify for it. The reality is most of my connections and network comes through that organization. It comes through the circles that I operate in. And it's very different today versus when I started. And so my goal was always, how do we unblock and open up those doors so that all the things that are happening for these big companies are also happening for small companies when it's relevant, right?

17:32Not everything's relevant to everybody. It's not the same resources necessarily that they need, but we need to start breaking down some of those barriers. You know, and when we look at the pandemic specifically, like the PPP program was a great example of large companies that still sort of technically fit into the small business category. Or many that even didn't. Getting early access to those resources before small business owners did. I was talking to my husband who at the time was working for a very large company in their financial department. He knew about PPP before we did. And so his banker had called him.

18:10He had access to the application. So I was taking everything I was hearing from him. I'm like, I've got to translate this for our community and make sure that our community knows about this. You know, you think about a big company who's taken out a big loan, who has mass deposits in a bank. Of course, their banker is going to have a stronger relationship with them and take more time for that company than a micro business that has$150 ,000 in the bank. It's a very different experience. And so I think that's where we started to see that the things that didn't work well, there is a difference in the treatment.

18:42And so it's up to business owners to say, OK, here are the things you can do to take the time to build a relationship with your banker. Here are the things you can do to take the time to protect yourself in the case of an emergency before it happens. Because you need the buffer. You don't have the same resources. You need to act differently. You need to be prepared for these things. Yeah, because a large business is going to have a risk department, a finance department. They're going to sort of like take care of all these things because they've been hired to deal with it. And a solopreneur is kind of responsible for doing all of that stuff.

19:17if it wants to be a successful Bible. Lawsuit or a hurricane or, I mean, whatever it is, even an employee, like employee turnover, those things impact a small business in such a different way. And so the more that we can help people prepare for that, the more resilient they are. So I'm curious, what are you focused on this year, 2024? What constitutes success or the next milestone for Hello Alice? Well, I think I have the best job on the planet because I think it's fully aligned with our mission. And so I think so many companies are like, here's the impact we want to have and the difference we want to make.

19:53At the end of the day, if small business owners don't succeed, we don't succeed as a business. It's not just a mission and a nice to have, it's a must have. And it's woven into the fabric of everything we do at Hello Alice. So success for us looks like the improvement in the business health of small business owners. And we track that every day. It's what we're holding our team accountable to when they're successful. It ultimately supports our bottom line and it supports their bottom line. And it supports the bottom line of the enterprise partners we work with. So it's a win-win. It's what everybody needs, what everybody is working towards.

20:29And then the other piece is, you know, I'm really excited to think about and we're spending a lot of time thinking through just the future of technology. I think AI has impacted everybody. We're certainly very focused on it. not only for us as a business, but what does that mean for our small business owners and how they're operating, preparing for the future. And so a lot of it is around thinking of what tools are out there, just understanding the landscape and how quickly it's changing, identifying gaps and working with partners to build tools that can fill those gaps, and then making updates for our platform to make it as user-friendly and efficient and effective as possible.

21:11If a small business is listening and wants to get involved with Hello Alice, how should they do it? And then if someone's in the position to be a funding source for small businesses and is listening to this, what should they do? For small business owners, just go to HelloAlice.com and you'll be taken through an onboarding experience and invited in the platform. It's totally free, no commitment. We don't ask anything of you. For partners who are interested in getting involved, you can just email info at helloalice.com and we'll have our team follow up as relevant or you can also just email me. It's carolyn at helloalice.com.

21:59And we'll put some of that information in the show notes too, not your personal email. We'll have to listen for that. Yeah. So on your site, you spotlight some of the business owners that you work with. Is there any specific success story that comes to mind that you want to share with the listeners? So many. I mean, the businesses that really inspire me are ones that I think, and maybe it's from my own background too, I think ones that really leave impact into the essence of what they do. Um, you know, I think companies like, uh, rising tide is a car wash in Parkland, Florida. They're, they hire employees with, with autism.

22:43It's, I had the opportunity to go visit them. And I think it's one of those companies that has the absolute best service to go. When you think about getting your car washed and it's not a task that many of us look forward to, but their clients do. I mean, these employees genuinely love what they're doing. It's the best service. You get so many smiles while you're getting your car wash. You also get the best car wash that I've seen. It's a beautiful facility. It's, I think those experiences where small business can, and it transforms a community, right? So you've got community who feels good about going to buy a service.

23:15They're actually willing to pay a premium because they feel like they're having a good impact on the community. They will take those funds, support a great community of employees. and it does something really good for Parkland as a whole.

23:33Another company that I love is Huckleberry Square and it's a diner that's in Washington and they have a wall where customers can go in and buy a meal for a homeless person. So they have a wall up on the thing where there's receipts and a homeless person can come in and pick their meal based on what's been purchased and get a good meal for the night. Again, people are able to go there. They feel good about what they're doing. It's a really integral part of the community. They're helping to solve homelessness issues in their community, which makes it a better environment for everybody. And so I think those companies that are, they're driving business through innovative ways to solve major problems that we have that you think about.

24:17Certainly there's government solutions. There's great nonprofits that are tackling these things. But when it's collaborated with small business, you can really see the needle move on multiple fronts. Yeah, it does feel like small businesses connect with people in their community in ways that no other business does. And I keep putting you on the spot, asking for examples of small businesses. I'll give you one that I'll give a shout out to. You can shout out any others that you want. But this one, anyone in the U.S. can buy. And it's a T-shirt company called Pickled Eggs. And what they do are T-shirts of just like bars that have closed in Seattle and a couple of other cities.

25:03They're just the logos. And, you know, it's something that, you know, I'm not in my 20s anymore. You know, a place I might have gone to in my 20s. Yeah, just a really cool, really cool idea. and that's just the type of stuff that I want and speaks to me. Any others that come to mind for you that anyone can buy, e-com or anything like that? Dr. Squatch is a great one. The soaps, I think they're super creative with their marketing. It's a great example of how to take a simple product like soap. There's a million soap competitors out there. They've done this great job of scaling their business in a really innovative way.