In this episode of The Angel Next Door Podcast, Lorine Pendleton, a venture capitalist and founder of 125 Ventures, shares her inspiring journey from angel investor to founding a fund focused on underrepresented founders and impactful startups. She discusses the importance of diversity in venture capital, the potential for financial success in investing in underrepresented founders, and the intersection of technology, sports, and media in the entrepreneurial landscape. Lorine's impactful story and insightful commentary make this episode a compelling exploration of the transformative power of diversity in the world of angel investing and venture capital, making it a must-listen for aspiring entrepreneurs and investors seeking deeper insights into the entrepreneurial ecosystem.
In this episode of The Angel Next Door Podcast, Lorine Pendleton, a venture capitalist and founder of 125 Ventures, shares her inspiring journey from angel investor to founding a fund focused on underrepresented founders and impactful startups. She discusses the importance of diversity in venture capital, the potential for financial success in investing in underrepresented founders, and the intersection of technology, sports, and media in the entrepreneurial landscape. Lorine's impactful story and insightful commentary make this episode a compelling exploration of the transformative power of diversity in the world of angel investing and venture capital, making it a must-listen for aspiring entrepreneurs and investors seeking deeper insights into the entrepreneurial ecosystem.
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Marcia Dawood
Well, hi, Lorine, welcome to the show.
Lorine Pendleton
Hey, Marcia.
Marcia Dawood
So great to see you. We go way back into the days of the ACA board and things with portfolio. So I'm really excited to have you on the show today. We'd love to have you tell us how you even learned about angel investing and how you got started.
Lorine Pendleton
Great. Yeah. So to be here. So I got started in angel investing. Actually, I'll give you a little bit of a backstory. When I heard that this was eleven years ago, that less than 1% of VC dollars went to black founders and less than 2% went to women founders. And I had worked at a number of startups, which we can get into later, and they were all venture back to how to exits. And I knew the importance of having funding as you're growing and scaling your business.
Lorine Pendleton
And so I said I wanted to change that. Great. Didn't know how to. I'd never invested in private companies. I invested in public companies with my investment funds, but I never invested in private companies. So I say the universe conspires, because literally a couple of weeks later, after I heard about this, I received a newsletter that was featuring this woman who had a program called Pipeline Angels, which trains women to become angel investors. And I was like, wow, this is awesome. I want to become an angel investor. And so I applied to the program, I got in, and that kind of launched my investing career, initially as an angel investor, now as a VC.
Marcia Dawood
That's amazing. So tell us how that then led to you being part of the rising America funds at portfolio.
Lorine Pendleton
Sure. So I started investing as an angel investor, made a number of investments, and then quickly realized, in order for you to have returns like anything else, you have to have portfolio diversification. You need to invest in about 20 to 30 companies, and that gets to be pretty pricey once you're making direct investments. And so I had heard through a friend about Portfolio, which is a really interesting company, founded by Trish Costello, who launched and ran the preeminent training program, Kaufman Fellows for venture capitalists. And she created this new company, portfolio, to get more women who are accredited investors to invest in early stage companies that they want to see in the world for impact and returns, and then also providing a platform for emerging managers like myself, who wanted to start and launch funds, invest in great companies, and learn how to become a great venture capitalist. And so I initially invested just as someone who wanted to invest in different companies through a fund. And so she had a fund you can invest in about the fund would invest, you invest in the fund, as we call limited partner. And then the fund would then invest in various companies, about ten companies per fund.
Lorine Pendleton
So I invested in the first two funds. But the great thing about portfolio was that it actually had this education component where all the investors could get to see the pitches as they were pitching the lead partners or lead investors, and we could actually raise our hand and say, hey, we want to be part of due diligence team. So it was really great monthly pitch meetings. I was on a couple of due diligence teams, and I just said to her, hey, you know what? You have these different funds that are focused on different industry sectors. What about doing a diversity fund or a fund that invests in underrepresented founders? And so she thought about and said, yeah, why don't we do this? So I put together kind of the fund thesis. She helped recruit what we call lead investors like myself, alongside of me. And so she brought in, actually, they were all Kaufman fellows, and we were a team of five of us. All of us are black and latina women.
Lorine Pendleton
Our first fund, rising America fund one was the most successful, is the most successful portfolio fund, which now has 16 funds across all the different funds. And by the way, portfolio was the first to do a femtech focus on women's health, the first fund in the country to do that. And now there's a lot of funds that are focused on women's health, which doesn't get a lot of funding, and investing in great companies that are dealing with various issues that women have related to health.
Marcia Dawood
I love that. In fact, we just had Dr. Brittany Barretto on the show recently talking about Femtech and how important it is. So the fact that portfolio was just on the cutting edge years ago, putting a femtech fund together, and now I think they're on Femtech three, right?
Lorine Pendleton
Yeah, they launched Femtech three. I think they already made a few investments. So, yeah, just chugging away.
Marcia Dawood
Yeah. As you know, I'm a huge fan of funds, because funds are how you can diversify your portfolio. As you were saying, you can take a small amount of money and be able to get access to multiple companies without having to invest in every single company and having to do all the diligence and things like that. You actually get the people who are the lead investors or venture partners or general partners, as we call them, in VC World, to be able to do so. Yeah. Along the way, you've invested in a couple of really cool companies. So before we hit record, we were talking about Canela. So maybe tell us a little bit about that company and how they've been doing.
Lorine Pendleton
Yeah. So Canela Media is really an amazing company. We invested out of rising America fund one, and then we also have a fund two, and it's a streaming service targeting the latin market or spanish speakers. The founder, Isabel Rafferty, just really incredible. This wasn't her first rodeo. She had worked at startups, had exit, and so focus on, she was doing mobile and ad tech. And then she herself is a mexican immigrant who immigrated from Mexico to the United States. And one of the things she was noticing is that there was a lack of really good programming in really, you know, good programming from films to television shows.
Lorine Pendleton
And so she decided to start a streaming service, but unlike other services, which charges subscription fees. So think of Netflix, Amazon Prime, Hulu. This was actually ad supported, meaning it was free service. And how they make money is through, you know, they have advertisers like Express, you know, a lot of big advertisers. And so we invested now, I think it was four years ago, and when she pitched us, we really got it right away. Before she pitched us, she had actually pitched about over a hundred vcs, traditional vcs, so think know, in Silicon Valley and New York, big vcs, and no one was interested. And in fact, they know this isn't really a market if latino spanish speakers can go watch these programs on Netflix and Amazon prime. The problem, though, is, and we knew immediately, we can talk a bit about another company to perfola Mochafi, which is a digital bank for the under and unbanked.
Lorine Pendleton
I led that deal. That was actually our very first investment out of our rising America fund. One, in doing the due diligence on that, we learned that about 70 million people in the United States are either unbanked or underbanked, meaning they don't have access to banking, they don't have a bank account, they don't have a credit card. And of those, 50% are black and Latino. And so when I realized she's creating an ad supported streaming service, made sense, because if there's a lot of people under unbanked Latinos, so they can't get on Netflix, they can't get on Amazon prime. And so we immediately understood the market. It was an unaddressed market, and we ultimately invested. And she is just doing incredibly, just, just really well.
Lorine Pendleton
And so she launched initially in the United States. She's expanded to Mexico, Colombia, and she's launching in other countries. She now has an office in Mexico City. And one of the things about that, the only vcs who invested in her were women or diverse led vcs. And she's gone on when she raised her series a, I guess now about three years ago or two and a half years ago, she had a pick of vc firms who wanted to do well with her. She has really great revenue and she has expanded. And so I think kind of the moral of that story is this is the importance of having vcs that are people like me who are diverse, who are women, who don't have a blind spot we're in and of these communities and we know certain problems exist and we are looking for really great, innovative solutions to solve those.
Marcia Dawood
Oh, that's incredible. And wasn't she the number one downloaded app in Mexico when they launched behind.
Lorine Pendleton
When they launched exactly in front of Disney plus the streaming service for the first month? Absolutely. Which is incredible. And so she's a startup and obviously Disney is a big behemoth of a company. And so startup, small startup, beating out most downloaded apps the first month is pretty incredible.
Marcia Dawood
That is incredible. So then all of this led you to start 125 ventures. So tell us all about that.
Lorine Pendleton
Yeah, so I launched 125 ventures a few months ago and it's kind of going back to my roots. I was a former media and entertainment lawyer and so I've been noticing a lot of disruption is happening in sports media entertainment. So I'm kind of going back to my roots. And so my fund is going to be focused on investing in sports media entertainment companies at the intersection of tech. So that is comprised of think about wearables, think about AI. If you look at, I don't know about you, but I kind of cut the cable cord. I only have Internet, and so I subscribe to Netflix, Amazon, YouTube, tv and a couple of other streaming services. So the way people consume content has changed.
If you look at they actually, a lot of them don't even watch broadcast television. They are getting their content, whether it's maybe bad, but they're getting their content, even their news, from short form content. Think of TikTok. You have the emergence of content creators who are now celebrities, who are now look at Mr. Beast. He has a massive following. I think I was reading something like he gets something like a billion streams on his YouTube channel, like the number one streamer on YouTube. And now he's created all kinds of businesses and he's incredibly wealthy.
And so there's a lot of disruption happening in the know and sports too. Think about it. Sports is really interesting, but sports, media, entertainment all intertwine. And so I am going to be investing in the best companies, the best founders that are using technology around those industry sectors.
Marcia Dawood
That is very cool. So the whole piece about AI, because I feel like artificial intelligence and machine learning, it's moving so fast and it's really hard to tell kind of where to go. I feel like Chat GPT kind of kicked us off in November 2022, and then for the last year, it's just been this massive amount of this kind of AI and this kind of AI and this IAI can do this and all that. What are some of your thoughts on just the industry as a whole, and then how does that relate to sports and media?
Lorine Pendleton
Yeah, I mean, definitely there's been a lot of investment in artificial intelligence, a lot of discussion about artificial intelligence. We'll see what happens. There's been a lot of investment flowing into companies that have AI. I think what we're going to see, I think there's going to be a bit of an AI hangover in terms of investments and that kind of thing. Companies are going to have to show how they apply the AI, artificial intelligence, and that's going to be, in terms of startup world, that's going to be really important, but it's here to stay. It creates efficiency, increases productivity, and I think it's going to be a matter of time. We see how things are going to go, the big large language models and how companies going to use data and figure out how to synthesize data or use data to make their decisions, quicker decisions, that kind of thing. So it's here to stay and we'll see.
It's exciting, but there's also ethical issues around that, and ethics is a big thing. And we'll see with some of these big players how they're going to address those issues, are they going to address them? And hopefully they'll have people seat at the table who come from different backgrounds so they avoid blind spots. And then with regards to sports, media, entertainment, data, data is queen, king, whatever you want to call it, that's going to continue. And I think particularly, like in sports, all of us, media, entertainment, it's all about data. And so using AI, applying, utilizing AI to help with data, if you think about sports, a lot of it is data driven decisions that are made on the field. They look at a lot of data, and so that's only going to increase. And so I think there are going to be some interesting companies that are going to be focusing on AI and using data in those sectors.
Marcia Dawood
Yeah, I totally agree. So if there are entrepreneurs out there who are working on media or sports tech companies, can they go to the 125 Ventures website to make sure that you know about them?
Lorine Pendleton
Yeah, or they can reach out to me directly on LinkedIn. We are basically launching the website shortly, so we have a landing page. But yeah, I think there's an info. You can send an email there or you can go to find me on LinkedIn as well.
Marcia Dawood
Oh, great. We'll put your LinkedIn information in the show notes. And so, last question. So being a media and entertainment attorney in the past, having that as your background, I would imagine that that has helped you so much in all of this kind of navigating through venture world, because I know I'm not a lawyer, and I found it very challenging to have to be able to go through documents or understand what is important to look at, what isn't important to look at. So I would imagine this has been pretty helpful in your journey.
Lorine Pendleton
Yeah, absolutely. Having that legal background has helped me in various ways. I rely on attorneys because I wasn't doing, I mean, I wasn't a venture capital attorney. I wasn't, you know, fund formation attorney. So I, you know, I have attorneys, but no having an understanding of agreements and how those work. But they're experts in the area that they practice in. And so, like a doctor, they're experts. So not every doctor, if you have a heart issue, you go to cardiologist or a heart doctor.
Marcia Dawood
Right.
Lorine Pendleton
But no, I think at fundamental level, having that training is helpful. Absolutely. What I would say is when I'm looking at due diligence on companies, and I remember the first day of law school, our professor told us, he said, the way you think about things is going to change, being a lawyer and going through law school. And so we all laugh and we're like, okay, whatever. But he was right, because I think the training of law, we are trained to identify and spot issues and risk. And in some ways, that's probably not always a good thing to be someone who's entrepreneurial, because in some ways, being an entrepreneur, you want to kind of just have this big vision of things and not let anything get in the way. And so I've had to kind of type her that down a little bit. But I do think it helps when I'm looking at companies to kind of identify what are the risks, what could go wrong, what are the risk.
And so that's been really helpful. And I spot things that maybe other investors, because of my legal background, may not have picked up on. And so it's a balance, but definitely the whole thing about venture capital, we are taking a risk. You want to mitigate your risk, you do that by performing diligence. And what that means is basically looking at the company's financial model, looking at how big the market is. The founders themselves, are they subject matter experts? Do they have good advisors if they're not? So all these things, you look at it to basically reduce the risk of making this investment. And at the end of the day, these are early stage companies. So most early stage companies don't succeed, but usually an investor, you want your fund.
So the 80 20 rule. So 20% of those companies that you invest in are going to outperform and return the fund, plus more generate outsized returns to make up for the 80 that fail or don't do well. And so having that background, the legal background, being trained to spot issues and risk, I think, has helped me.
Marcia Dawood
Yeah, I could totally see that. I mean, you're right, this is definitely a risky asset class, but we're not going to see the changes that we want to see in the world. And especially with the things like you're talking about where there are blind spots and we need to get more capital into the hands of founders of color, female founders, disabled founders, you name it. Any of the underrepresented classes out there, because that is when we're going to start to see significant change in the world.
Lorine Pendleton
Yeah. And I think there's this for some people, obviously not you, but there's some people have this misconception that if you invest in women, if you invest in people of color, people who have a disability, veterans, like underrepresented founders, basically it's charity or you're going to reduce your returns. And that's absolutely not the case. And I've seen it because firsthand with portfolio, rising America portfolio has a number of other funds. We're the best performing fund. And because we said, and we've invested all kinds of sectors, but one of the founders had to be an underrepresented person. But what we're finding with these companies, they saw something, a problem or an issue, and they came up with a really innovative solution to solve it. And these are big markets, and traditional vcs have overlooked them, or they have a blind spot.
They're not, maybe not intentional, but they don't even know, like, this problem exists. And Canela is an example. She was turned down by over 100 vcs because they said Latinos can just watch Amazon, Netflix. They can if they don't have a credit card. And she knew that, and we knew that. Because we knew that that was an issue in the latino and black community of not having banking services. And so I just wanted to kind of just emphasize that. And she's doing incredibly well.
It's a business case first. It's like you can do well and make money. And I'm a venture capitalist. I'm not a philanthropist. I'm not running a nonprofit. And there's nothing wrong with that. But I just want to emphasize that you can make money by investing in these kind of founders.
Marcia Dawood
That's right. It is definitely not charity. And you can do good and invest in the types of things you want to see in the world and make a financial return.
Lorine Pendleton
Awesome. Absolutely.
Marcia Dawood
Well, Lorne, thank you so much for being on the show today. I appreciate it. And I will look forward to seeing all the great things that 125 ventures does.
Lorine Pendleton
Great. Thank you for having me. Bye.