The Changing Face of UK VC 2020: Check Warner, founding partner at Ada Ventures

We spoke to Check Warner earlier this year about her experience raising her own fund, Ada Ventures, to invest in underserved markets and founders in the video below. What follows is a lightly edited transcript of that conversation.

Scott Carey, editor at Techworld: I'm joined today by Check Warner, one of the founding partners at Ada ventures. We sat down and spoke last year for this same series about the work that you were doing at Diversity VC. Since then you've gone off and you've founded your own fund. How was that process for you?

Check Warner, founding partner at Ada Ventures: Yeah, it probably seems like it was a faster process from your perspective but when we did last speak, I was in the midst of our fundraise. So it was about a 17-month process and it was really about coming up with a strategy around why investing in overlooked founders and overlooked markets was going to generate fantastic financial returns. Then it was shoe leather, it was just meeting hundreds and hundreds of investors, going round the world and ultimately we ended up with a $34 million fund. We've got investors from several continents and we're really delighted to be starting to invest in January of this year.

SC: So the way I understand it is a lot of the work you did with Diversity VC was really focused on shining a light on the issues in the industry, where there is not enough diversity and inclusion on the VC side. But what that obviously showed you was on the founders side as well, there was this funding gap, and what you wanted to do, I guess, is come in and and fill that gap. Is that broadly correct?

CW: Yeah, I mean, when you kind of post-rationalise it like that it sounds a little bit more strategic and like it was all planned out, but it really wasn't.

I think it was a real gut feel that myself, Lillian [Li] and Travis [Winstanley], and all of us at Diversity VC had around something needing to be done to try to make this problem go away, or address this problem in some way. Also I was lucky enough when I was working at my last fund to invest in quite a few companies that were led by diverse founders and in many cases, I saw their experience in terms of their fundraises and how much more difficult it was for them than it was for the typical founder. So it was a combination of both things and then it was a shared passion for this topic that I had with my co-founder, Matt [Pennycard], as well.

You talked about the experience of going out there and raising your first fund. A lot of shoe leather, a lot of meetings. Can you talk a little bit about that process?

Yeah, it was incredibly expensive, is one thing, which I think people don't necessarily know about. One aspect of that is the GP commit, which is the amount of money you have to put up if you're raising a fund, which is typically 1% of the fund. So for us it was £300,000 that we had to somehow come up with. Whenever we went to speak to our first prospective investor, that was a question they would ask. Plus, it was all the expenses of 17 months of living without an income. Plus it was the flights, it was the regulation, it was the legal work, it was everything that goes into raising a fund. So that was really eye opening.

I think another part that is kind of the same as what founders experience when they're fundraising is that it's so reliant on networks and who you know. We didn't really know very many people, it turned out, we thought we maybe knew more than we did. We had to do everything from scratch.

We came across a whole range of different characters in that fundraising process, some of whom didn't really believe in diversity and inclusion, or that it would make any money, or that women could make money. We really heard everything you can imagine, in terms of types of no and in fact, from a lot of people, we just had nothing. So from hundreds of people that we spoke to just never ever got back to us.

So we made a film about it, because we wanted to share our experiences and make that more open and transparent so that other people could hopefully learn from it. We're also about to write a blog and publish it on what our learnings have been so future people don't have to go through it. It's a cliche, but it has given us a huge amount of empathy for what founders experienced.

Did the work that you've done with Diversity VC help put you on the radar of some of these people? Did that open any doors?

Yeah, absolutely, it's been a phenomenal platform to get to know the industry, be more visible in the industry and that's a huge part of building any kind of personal brand. So I'm grateful to the opportunity that I've had with Diversity VC to get exposure to people I wouldn't otherwise be in rooms with. I think there's not that much overlap in terms of the limited partner community to what we're doing with Diversity VC, but I hope there will be more in the future.

Hopefully the experience with Ada has opened my eyes to how much more work needs to be done around enabling people who come from diverse backgrounds to be able to raise funds.

So for example, the financial support with GP commit, or getting some kind of stipend to cover living expenses, because another thing that was really visible when we were raising our fund was how few fund managers are women or people of colour or have any kind of diversity. I think until that changes, it's going to be really difficult to change it lower down the stack.

What does your future involvement with Diversity VC look like? It's obviously a massive passion project for you, but it sounds like you've got other pulls on your time.

It's sort of always been that way in that myself, Lillian and Travis and Ben [Goldsmith] and Seb [Butt] and everyone else who works on Diversity VC do it voluntarily alongside day jobs.

So that is just continuing as it's always been. We are really excited because we've just hired someone on Diversity VC, so we've got more support than we've ever had before. So I hope that's going to mean that we can move forward more quickly and that we don't become the roadblocks to progress.

Let's talk about Ada Ventures. You mentioned the experience that you've had in terms of finding underrepresented founders and I know you've got a fairly unique approach to unearthing those gems. That's always been something I've been interested in is: it's a great idea in theory, but how do you actually find these people?

Yeah and that's also what we thought: it was a great idea in theory, and is it going to work?

When we first started doing it we were quite pleasantly surprised because what we've seen over the course of the last 17 months – because while we were fundraising we also were making investments through these special purpose vehicles, and we were using this sourcing model to make those investments – is that we saw about 20% of our deal flow come from this network. Even better than that, we've actually made two investments now that have come from introductions from that network.

So I mean, we find people through lots of different methods, some of them introduce others. So if you run a community that's focused on LGBT tech founders in North Wales, you might know someone else who's running a community who's looking at mothers in technology based in Edinburgh, you know? So sometimes there's sort of peer to peer introductions.

Sometimes it's people that we meet through everyday. Sometimes it's people who come inbound and contact us and say: 'can we work in this way with you?' So it really varies. But it's exciting because we've got 45 of these communities now that give us this huge reach into something like 10,000 entrepreneurs. So it really leverages our time as investors.

One of the things we talked about last year was making things more transparent. How much of your time goes into teaching these founders how to play the game a little bit? How much of it is an education piece as well?

Yeah, I think it's a huge part and I think it's something that we're already finding and it's super early days, we've been actually investing for about three weeks.

But one of the things we're seeing is that we are ending up spending quite a lot of our time doing things like giving talks, or being part of podcasts, or video series, or things that make venture capital and the whole fund raising process more transparent. I don't think that's sustainable, so we're trying to find hacks or ways to better leverage our time.

One of the things that we've done is published our investment decision making framework, which has been great. Already we've seen that founders have taken that and actually written investment papers based on their company and sent them to us. That's the kind of thing that really validates that approach of: if you put stuff out there, founders will take it and they will pay it back to you and that makes your life easier, because you've got it in the format you want it.

Your investment strategy is on overlooked founders. Is there any particular kinds of companies that you're really interested in?

Yeah, so it's both overlooked founders but also overlooked markets. So for us at the moment, the overlooked markets we are really interested in are: women and non-heteronormative populations, which are not well represented, as we know, in VC and tech.

So we think there are lots of underestimated problems that those populations face that haven't had venture backed products and services addressed to them. So fertility for example, is one big area. I think Femtech in general is another one. We are also really interested in the ageing population as an overlooked market. So we are looking at future of work solutions in that space. Then finally, customers under the age of 23, which is a slightly different one. But, again, because that population isn't represented within venture, we think they face more challenges to the specific products and services targeted to them than other markets.

In your day to day work at Ada, how much of the best practice you learned at Diversity VC do you bring to your work at the fund and also to founders, to help them build that diversity into their companies from day one?

Yeah, I think lots and that's the huge opportunity I think we've got, not just our investment strategy, but the end to end of: How do you do diversity and inclusion well throughout both us operating as a fund, but also the companies that we fund? To give you a real example, we've got built into our term sheets that the company has to have a diversity and inclusion policy that we have to review and check and get comfortable with within six months of us investing.

In terms of our process, we're slightly obsessed with decision making and how you can make really good, high quality decisions. So we've thought a lot and researched a lot into how do you make those decisions objective and using things like scores so you can compare across using characteristics around what founders' qualities are versus where they went to school. So we started on all of that, but I think that there's like a lot more to come

How quickly do you see the broader landscape changing? It's been a few years now of you being really focused on getting more diversity and inclusion into the industry as a whole, and we've often talked about the pace of change being a little bit too slow for our appetite. Have you seen any drastic changes there or does the work keep going?

I don't know if drastic would be the right word to use, I think the level of engagement is certainly higher than it's ever been.

I think something that's really encouraging is that we're seeing the Treasury and Government and the British Business Bank and big institutions coming in and actually putting real policy in place around this – even Goldman Sachs, exactly, so what next?

I think there is still a long way to go and I think the issue, as it's always been with venture, is it's such a small industry that when your hires are being made at a pace of one a year, or even less especially at partner level, it just ends up being really difficult to see rapid change.

That awareness level is certainly changing. But taking the actual practical steps, as your last report showed, there's been a little bit of a slowness or reticence to put those actual hard policies in. So you can only keep doing what you're doing and keep advocating for it and hope that that change happens, I guess?

Yeah, and we've actually got some really exciting work in the pipeline that will be announced later on this year that's around trying to make that best practice policy really tangible and really easy for those funds to put in place. Because I think that there's definitely buy in, but there's less good understanding of what that actually means.

Read next: The Changing Face of UK Venture Capital 2020

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