ACT #195 Check Warner, Ada Ventures

0:04Welcome to the next episode of At The Cat Table Podcast. In today's episode, we are speaking with a remarkable individual who needs no introduction. Her name is Cech Warner, a prominent figure in the venture capital industry in the UK. Cech is the co-founder of Ada Ventures, an inclusive venture firm. Ada Ventures finds and funds extraordinary talent, building breakthrough ideas for the hardest problems we face. Czech invests£250 ,000 to£1 million in UK technology companies across climate, economic empowerment, ageing and healthcare. One of Czech's notable contributions to the venture capital industry has been pioneering initiatives like Diversity VC and Future VC.

0:52These initiatives aim to drive positive change and foster inclusivity within the industry. Cech has also received an MBE for services to diversity and inclusion in the venture capital industry for her work with Ada Ventures and Diversity VC in the King's New Year's Honours in 2022. In this episode of At the Cap Table, we explore Cech's journey into venture capital and what makes her excited about the current state of entrepreneurship in the UK and the opportunities it presents. We will discuss the origins of Diversity VC and Future VC and explore the impact they have had on creating a much more diverse and equitable ecosystem.

1:33We'll also hear about Cech's work with Ada Ventures, a venture capital firm she's dedicated to right now. And finally, raising a fund and the topic that surrounds it can be complex and an opaque process. So we'll hear from Cech's experience in starting a fund and gaining and maintaining the trust of limited partners. She'll also share key learnings from her years in the VC industry and highlight common mistakes that investors make when embarking on the fundraising journey, amongst many other topics. Get ready for an engaging and thought-provoking conversation with Cech as she shares her experiences, wisdom and aspirations.

2:11So let's jump right in. And now some words from our beloved sponsors. Tactic is the leading forecasting and scenario planning software for venture capital funds. Tactic combines portfolio construction, portfolio management, forecasting and reporting into a unified platform. Investors are empowered with data-driven insights on fund strategy, reserve allocation, exit planning and fund performance. Tactic was built using quantitative techniques researched from hundreds of data-driven fund managers and is trusted by over 250 funds globally today. Tactic is a proud sponsor of the first season of the At The Cat Table podcast series.

2:51If you'd like to learn more, please check out tactic.io. T-A-C-T-Y-C dot I-O.

3:04Check. Welcome and thank you very much for joining us. It is great to have you all on. I'm excited to speak to you today. We are camping out at your beautiful offices in Notting Hill this sunny morning. So thank you very much for having us. No, it's wonderful to have you guys here. Brilliant. So in a lot of different ways, Chek needs no introduction. I've actually recently returned to London from Berlin and really observed how prominent you are in the venture ecosystem for all of the right reasons, of course. I think for those listening, Chek is general partner at Ada Ventures, co-founder of Diversity VC and Future VC, and a recent recipient of an MBE for services to equality and diversity in the venture capital sector.

3:50To start off, let's go back to the beginning of your career. At the time, I heard you speak of your non-traditional background. So I don't think that you came from a finance or consulting background moving into venture. You were different to the kind of historical profile of a venture capitalist. But maybe you could speak to your experience of making that move into the venture capital industry? Yeah, sure. So growing up, I was really into theatre and acting and I really wanted to be an actress. But I got to university and realised that there were loads better actors and actresses than I was. So I kind of pivoted then into directing and got really into directing plays.

4:28But after university, went into the advertising industry because I felt like it was a really great combination of something creative with something commercial but whilst there I realized that technology was just going to be this change that was going to affect absolutely everything and I wanted to get into technology and it was through that that I discovered this industry on Twitter actually which was venture capital I started following all these VCs like Fred Wilson and diving into blogs and reading their tweets and just thought what a fascinating job it is about predicting the future it's about giving entrepreneurs that start to create these incredible ideas that are going to change the world.

5:07And so I decided, right, I want to get into venture capital, but obviously had absolutely no background that was relevant for VC. And I spoke to lots of recruiters who kind of laughed me out of the room, basically, and said, you know where you'll ever get a job at VC. Luckily, I had a mentor who had met a VC the previous week. And he said, why don't you come along and meet this VC? Because I'm meeting him again. And so I printed out my CV. And I kind of crashed their meeting and I pushed my CV across the table unannounced and said please hire me into this fund and that at the time was a fund for Downing Ventures that was my partner and my now partner in Ada, Matt and I spent six months convincing him to take a bet on me and to bring me in as his first hire and my pitch was I could help the companies operationally I can do sales and marketing for companies but you have to teach me everything about being an investor and I tell this story because I think it's really important that we have different perspectives in the industry.

6:05We have people from different backgrounds and there are a bunch of VCs out there who've had journalism backgrounds, who've had marketing backgrounds, who've done all these different things. And there is no one profile that makes for an amazing VC. Brilliant. I think a great example of hustle on that from despite VC being an incredibly competitive and traditionally difficult place to make a move into. I think you need to look to your creative skill sets to try I guess switching gears a little bit, I guess the notion of Mark Fair in the venture capital industry, capital is not being allocated to all parts of the industry.

6:43I want to really speak to you about two very brilliant initiatives that you found, Diversity VC and Future VC, two initiatives that were kind of front and center when I was trying to make the move into VC. So we've got to hear your calls about the origins of that. And second, what the impact of that has really been. So really, this came out of joining an industry where I'd come from advertising, which actually in many ways was much more inclusive, much more diverse. And getting into venture and just looking around. And not only was everyone the same gender, everyone had been to the same school and the same college.

7:19Very much privately educated, very much kind of from elite backgrounds, wealthy, etc. And it just horrified me that these were the people making the decisions to allocate capital to decide who got to build companies in the future. So I started just taking screenshots of team pages of all these funds. And I was just building a PowerPoint. And just with all these team pages, all of which were the same. It was white men, white men. Originally, the idea was called the Pattern Project. Because one of the things that struck me about VC was that everyone was talking about pattern matching and pattern matching.

7:51But the pattern matches were pattern matching to themselves. And that's what gave me this massive fire that, oh, my goodness, we need to change the decision makers in this industry. We're going to give ourselves a chance at building the innovations of the future that are going to serve everybody. so I went to two other associates in the industry Travis and Lillian and said we need to do something about this and for some reason they decided to jump on board and get involved with this non-profit started with a non-profit and our first objective was we went to the BVCA the British Venture Capital Association and said well how many women work in the industry surely that's a thing that you know and they said no we don't so we said right we've got to find out and that was the first project that we did in 2016 we used a website scraping tool and we pulled all the names of the VCs and we used a sort of gender disaggregator to figure out how many women worked in the industry but the objective of the organization is much bigger than that it's about making the industry more inclusive and more diverse across every dimension and future VC was one of the other ways that we wanted to do this because as we talked about just now it's very hard to get intervention there's no milk round there's no graduate programs and so a lot of the pushback we found from funds was we don't have time to run an internship program we don't have time to recruit people we don't have time to train them so we said what we will do all of that for you and actually it was an idea that came from a fund that was doing in the US and it was something that Harry Briggs he's one of our advisors had actually seen and he gave us this idea that what if we could train all the interns centrally what if we could recruit more centrally and then place them in funds and the impact that that's had we've had over 5 000 applicants we've now had 163 interns working in the industry we now have 65 people working full-time at vc who have come through that program people from all kinds of different backgrounds dentists working parents who are doing a career switch later in life people who are software engineers people who wouldn't typically be thought of as the profile for a vc so proud of what the whole team has achieved and it's now gone on to have new people in it.

10:06We've gone global, we're in South America, we're in Iberia, we're in the US in a big way. And I think there's lots more that we need to do with diversity VC. Yeah, I think the impact of it has been quite remarkable. It removes the neptistic and homogeneous element to some parts of VC. I still think that we're at the beginning of the journey though. So let's dive into eight adventures a little more. Can you speak to us about the investment focus on philosophy there. Really, what sets you apart from the others? And I think in many different ways, you guys are super differentiated. So I'd love to hear more.

10:44Yeah. So the concept behind ADA came out of the work of DiversityBC. So because I had been pretty close to looking at the industry and observing some of the structural problems as I saw them, Myself and Matt decided to start a fund and actually look at boiling everything back to first principles. What if we could design a fund which had inclusion at its core? That applies to pipeline. How do we find companies? Picking, how do we select them? People, how do we support the founders? And then purpose, what are the underlying companies actually building and who are they building the products and services for?

11:21And we call this end to end the infrastructure of inclusion. And so we have built a fund that does things very differently all across that entire end-to-end flow. And what that's resulted in is an incredibly diverse portfolio of founders. We don't have an explicit mandate just to invest in diverse founders, but that is the output of all of the aspects of the infrastructure of inclusion. So we are a pre-seed and seed fund. We now have over 100 million assets under management. We're investing out of our second fund. And we have shown that we can find founders in different places, which means we have a really diverse set of founders to pick from where we select.

12:02We can select in an objective way. And that has led to a portfolio that's 15 times more diverse than the average UK venture fund, about 60 % female CEOs, female founders, very diverse across the rest of the spectrum. And excitingly, the products and services that are being built by these founders are targeting underserved or unserved groups. And when we think that that's a really strong financial case for that, because those customers, there's fewer competitors, they're not buying things from other places. When they find those products, they love them, they buy more. And yeah, that's a sort of accelerating impact to investing in those types of companies that we think will drive fantastic financial returns for our investors.

12:44I'd love to double click on something that you mentioned there. So the Scout program that Ada runs, I think I recall you mentioning that you have up to 90 people that are part of the Scout program. We'd love to hear a little bit more about how that operates and how that kind of affects the pipeline of investment opportunities and how much has that grown. Yeah, this actually was designed into the fund right at the very start. So back in 2018, when we started Ada, we were really thinking again about the first principles, how do we design a fund with inclusion? And one of the stats that we had come up with in Diverse TVC was that you're 13 times more likely to get investment if you have a warm introduction, i.e.

13:23you know someone who knows someone in BC. And so we decided we need to flip the warm introduction thing on its head. So we need to build roots into diverse underrepresented communities within tech and BC and actually create those warm introduction pathways. So that's what we did. We started with 13 of these scouts. They are leaders of underrepresented diverse communities. And what we do with them is we have a model where if they bring us a company that we end up investing in, we pay them an upfront cash fee and also a share of carry. That network is completely free to join. So anyone can apply.

13:59And we've recruited now about a third of those scouts just through our website. And there's now nearly 100, as you say. And we've actually sourced a third of fund one companies through that network. So it's been an incredibly successful sourcing channel for us. But also we did a study last year with UCL where we looked at, does that network actually drive a more diverse set of founders? And it does. It drives three times more female founders. It drives six times more all black teens. And so we're really kind of doubling down and investing in it even more because we think it's a really scalable way to influence the pipeline of founders that we see.

14:38And it's also really equitable because we now pay£45 ,000 of scalp fees to those groups and they can use that money to grow their networks even more and reach more people in their communities. So switching topics again. Yeah, I guess many of our listeners will have read and heard about the fundraising privilege topic that you've commented on. And linking to, I guess, raising the funds, I think generally speaking, the process is quite opaque. Raising a fund, you don't really hear that many women raising funds across Europe. I hope that is changing. But there will be many people listening in that may be considering a starting one.

15:18We'd love to hear your own personal experience of starting that fund. When did you decide to start it and how did you go about doing it? Yeah, it is something I probably never thought I would be doing, to be completely honest. It came about through a sort of random series of events that then led to us realising that, myself and Matt, that we had an opportunity to start a fund that was filling a real gap around this inclusion piece and around pre-seed and seed in the UK where there really wasn't very much institutional capital and so I think the first thing to say is it's really important to have a really strong theory of why you need to exist it's a bit like what you said about podcasts like you know do we need another podcast to exist yes if there's a really clear mandate and it doesn't exist elsewhere so the first thing was that we knew that there was nothing like ADA out there and so we had a real opportunity to start a fund around that the problem we had was we knew zero LPs so we were starting from absolute scratch and we'd never done it before and I think it's really important to talk about what it actually takes to start a fund specifically the financial resources you need you know there's huge fixed costs so there's your fca regulation there's legal fees there's actually just paying your own expenses as you go around trying to raise the fund even kind of small things like you have to have a url i think we spent two thousand pounds on aidaventures.com right in the early days and it was incredibly painful to make that decision of should we spend that money and so what happens is the people who have been able to raise funds typically come from family money.

17:01And you also have a GP commit, which is this amount of money that LPs expect the people raising the fund to put forward, typically about 1 % of the fund, that you just have to find from somewhere. We were very lucky and fortunate that we were in a position to find those savings. I went to live at home with my parents. They live in London. I had a lot of the kind of privileges as I wrote about to actually be in a position to do this. But it makes me incredibly angry that we aren't able to offer that opportunity more broadly because it should not be something that is only available to people who have wealth.

17:43And I think if we're going to really make a change in the industry, we absolutely need to tackle this problem that both founders and VCs come from privilege. And until we do that, I don't think we're really making a dent in the diversity and inclusion topic. so yeah it was a tough process spent 18 months going around the world we went we took something like 50 flights we did 120 versions of our pitch deck this is pre-covid as you can tell and we ended up with about 30 lps and hugely supported by british business bank which we were incredibly kind of fortunate to get onto their program called the ecf program but i think for anyone else thinking about doing it i would strongly encourage you to think about the team think about the partnership think about cultivating relationships with limited partners the extent that you can find them early so that when you go out you don't do what we did which is just we don't know any lps can we meet them and yeah i really hope there's far less friction in the process in the coming years than there was for us just kind of cherry picking something that you mentioned there engaging with lps pretty early on and could you speak a little bit about actually how you gained and maintained the trust of LPs, especially being particularly relevant in today's fundraising climate.

19:03One of the things we did was we just showed up. Every single time we had an opportunity, we went and we physically showed up. And again, this was expensive. I remember we spent something in the region of thousands of pounds to fly to Louisville, Kentucky. On a whim, we had one Zoom call with this family office. And the next day, there was a slot where we could meet them. They ended up actually picking us up from the airport. We spent a whole day with them. We went for lunch with them. And off the back of that, they committed. And I think that was really important. Show up, understand, be prepared and understand what they're looking for and do your research.

19:40You can do so much now with LinkedIn. But that, I think, gained trust, actually caring about being there. We also wrote a monthly newsletter for the entire 18-month process of our fundraise, which included a deal flow we were seeing, So we talked about companies that we liked. We talked about what we were reading. We included sort of slightly lame photos in there, but we just wanted to bring to life for people what it would be like if they had already invested. And we even kind of ran an AGM before we closed the fund, because one of the things that was a sort of mantra for us while we were fundraising was act as if.

20:15So act as if we already had a fund. So we did weekly deal flow meetings. We actually invested through SPVs. We did 2.5 million in SPVs over the course of our fundraise so that we could demonstrate that we could access and find and win companies. So those were all the things I think brought to life for the LPs that actually we could do this if they entrusted their money with us. Brilliant. And I guess reflecting back on that 18 months fundraising process, are there any key learnings from that that you would like to impart for those that might be considering this? I think staying power, patience, you know, understandably, LPs are committing their money for 10 years, and they want to get to know you.

20:57And I think I've met a few people who've wanted to raise funds and said, you know, I wanted to get it done in six months. And I just think it's not that realistic. I think you do need to budget a significant amount of time, because, you know, LPs just want to really gain that trust, which does take just time. The second thing is just having a really good bench around you to keep you positive I mean you get so many rejections you get so many no's for all sorts of different reasons and if you don't have that psychological support it's really tough and I remember between me and Matt we always had moments where I was really down and depressed and then he would actually be quite up so he would sort of bring me up and then there were other times where he was finding it really tough and I would sort of be able to give him a bit of positivity so that's another thing is like really think about can you build a team around you who is going to give you that positivity and allow you to stay in the game for the time it's going to take you to raise this fund moving on to a slightly different topic that relates it i think the representation of women at a senior level in the industry isn't as high as it should be i think extraordinarily low 15 % of women GPs in Europe, I think is the current figure.

22:13Once you kind of get your thoughts on how you see how we can best level the playing fields for not only those that are in kind of like more junior levels, but also those that are on the cusp of considering moving into more GP roles. There's a lot to say on this topic. I mean, I think it was Monique Woodard who said, you know, make the hire, send the wire. you know just hire people and invest in people you know hire female people into your team and invest in female founders those two things are going to be the biggest drivers that you can do all the mentoring programs and all the everything else you want but make the hire and send the wire but I think more broadly tackling some of these structural issues around making it easier to raise a fund is going to be a big driver what I'm seeing unfortunately is that a lot of phenomenally talented women in the industry are not getting the opportunities that they absolutely deserve because of the fact that the partnerships are kind of not giving them the chance to step into partnership roles and not believing in them and so what they're then left to do is set out to raise their own funds but it's difficult at the moment especially often you're thinking about doing it between the ages of 30 and 40 that's often the time you're thinking about having a family it's there's a lot of risk to it so I think what we need to do is remove the GP commit or at least reduce it or at least find creative ways we can pay it out of salary or other ways to show your commitment to make it easier to start funds I think we need to help financially with backstopping those people if they want to start funds and make it easier and then I think what we need to do is recruit diverse candidates in a partner level as well because I think future VC has been amazing for bolstering the more junior levels of the industry but really what we need to do is also bring in operating partners but bring in full-time partners who are exceptional operators who can come in and you know start investing because actually VC lends itself to being a really great industry for people to balance work and family life.

24:17And there's absolutely no reason why there shouldn't be more women at senior levels. I spoke to Rana Yard recently. She mentioned the rocket mafia. I think there's a few other mafias out there. But I guess the notion of people funding, people that they know that they have worked with in the past, I think that flywheel effect, do you see that happening with women in Europe? No, and it really frustrates me. And there is a little bit, there are pockets, there are definitely some amazing people, but not at the scale that it needs to be. And I think the PayPal Laffier is the sort of archetypal example.

24:53And because there's not the scale of investment in female-led businesses, then there's not the scale of wealth generation in those female-led businesses. Then there's not the scale of angel investment and VCs and all of the other sort of productivity that comes from that. And actually something that I've been working with a group of women in the US is how can we create the equivalent of the PayPal mafia for female-led companies? How can we get kind of massive scale of funding to those unicorn founders or future unicorn founders so that we can create that generational wealth back into the industry?

25:26The problem is it's not happening fast enough. And I think we cannot rely on that. We need this to be everyone's issue. It doesn't matter what your gender is. It doesn't matter what your background is everyone should have an interest in funding more diverse founders. And that's the thing I'm really passionate about, making a change of and making happen. Awesome. Check, we'd love to end the episode with a final question. What advice would you give your younger self? I wish I'd been less nervous about starting something. I think when, again, I was at university, I was thinking about entrepreneurship as well.

26:03And I just never saw myself doing it. And I think I was just nervous about taking that first step. I remember going on to Entrepreneur First's first ever recruitment session in Cambridge and sort of sitting in the front row, but actually just not having that self-belief. And I think when I started Diverse TVC, what made it easier was it was a side project. It was on the side of the desk and it started in a small way. And I think speaking to people today, I just say, just start something. Just put one foot in front of the other and take a really small step towards entrepreneurial endeavours. And that will lead you to having the confidence to ultimately go and do something yourself.

26:43Thank you so much for joining us today. Thank you so much for having me. It's great to see you. Thank you for listening to this special episode on the European VC. If you love our show, join our community by subscribing at eu.vc. And now, some words from our beloved sponsors. Tactic is the leading forecasting and scenario planning software for venture capital funds. Tactic combines portfolio construction, portfolio management, forecasting, and reporting into a unified platform. Investors are empowered with data-driven insights on fund strategy, reserve allocation, exit planning, and fund performance.

27:22Tactic was built using quantitative techniques researched from hundreds of data-driven fund managers. and is trusted by over 250 funds globally today. Tactic is a proud sponsor of the first season of the At The Cat Table podcast series. If you'd like to learn more, please check out tactic.io. T-A-C-T-Y-C dot I-O.