Social Impact Investors: How Ali Diallo of United Ventures Is Helping To Create Companies That Address Complex Sustainability Challenges on a Global Scale
…Unique Selling Proposition: There needs to be a clear product differentiation and the founding team should be able to articulate the value proposition in clear and simple terms. One of my venture partners encourages entrepreneurs to use the following formula: We help (X) solve for (Y problem) by doing (Z) uniquely well.
I had the pleasure of interviewing “Tonton” Ali Diallo, co-founder and managing partner of United Ventures, a new Washington D.C.-based impact firm with a global footprint that invests, builds, and scales mission-driven companies and initiatives. He is a Presidential Innovation Fellow, an award-winning entrepreneur and a member of the MIT community who served as the head of global programs at the MIT Legatum Center, a judge of the MIT Covid-19 Challenge and an Africa advisor to the MIT Inclusive Innovation Challenge.
Thank you so much for doing this with us! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a story about what made you decide to become an angel or VC?
I have always been fascinated by the magic that happens at the intersection of impact, entrepreneurship, and investment. But it’s only when I came across an article by angel investor Nova Spivack that I decided to seriously consider building a venture firm.
It was back in 2014, I was running an advertising technology startup in Manhattan at that time and I had just finished launching a new marketing campaign for a Fortune 500 client. I started reading Nova’s article and I was blown away by the investment model he was describing. He was using a venture production model that was cleverly combining the strength of a venture firm with that of an operator. That model deeply resonated with me and I immediately felt inspired to walk in his footsteps and to become an angel investor with a hands-on approach.
I ended up cold emailing Nova to ask him to serve as a mentor and a board advisor at my company. That was 7 years ago, and we have been friends and business partners ever since. One of the best pieces of advice he gave me was to document and write about my own venture production model, which I did. This work helped strengthen the case for venture builders and startup studios thanks to the media coverage it generated.
What you are doing is not very common. Was there an “Aha Moment” that made you decide that you were going to focus on social impact investing in particular? Can you share the story with us?
My family lived in seven countries including Senegal (in West Africa) where I spent most of my teenage years before relocating to the US at 17. Growing up in the developing world gave me a special appreciation for social impact and this experience has fueled my drive to make a difference for others. I actually considered running my company as a traditional VC firm when I first launched it. Funnily enough, it was on my way to visit two VC friends in California that I decided to focus on impact investing. I was meeting with Andrew Lampert from Hunt Equity and Robert Smith from IECP Ventures and we planned to discuss a collaboration around a new venture studio company. Seeing all the homeless people on my way to the hotel had a profound effect on me and it strengthened my desire to do more than simply writing cheques.
A few years later, I joined the Massachusetts Institute of Technology (MIT) to head the global programs of the Legatum Center, MIT’s hub for entrepreneurship and social impact. It was very inspiring to be constantly surrounded by amazing students and entrepreneurs who were on a mission to solve society’s biggest challenges. These entrepreneurs played a big role in shaping up my path to impact investing.
Are you able to identify a “tipping point” in your career when you started to see success? Did you start doing anything different? Are there takeaways or lessons that others can learn from that?
The tipping point for me was inventing a new venture production model and deploying it at my company using a mix of first principles thinking, contrarian innovation and network economics. The model helps companies leverage three types of capital on top of financial capital: relational, intellectual, and experiential. Before using this model, my partners and I noticed that many of our portfolio ventures were stalling after some initial traction. Even with the right amount of capital injection, there were always some missing elements that would cause them to hit a roadblock. For some of these companies, it was not having the right type of access to get in front of a large customer and pitch a solution. For others, it was not having enough local expertise to scale in a new international market.
The model I built solves these very issues and enables venture firms to scale exponentially in a short amount of time and with the least amount of resources through first principles thinking. The first principles thinking approach is a method that was used by Aristotle and that was more recently advocated by Elon Musk. It breaks down a problem, challenge, or complex idea to its most fundamental blocks to generate a simpler and more effective solution. This approach, coupled with the venture studio model, has enabled my partners and I to better support our portfolio companies. For instance, we are able to build, fund and scale a company with 1/10th of the capital that a traditional VC firm would need to achieve a similar impact.
The big takeaway here is that the first principles thinking approach is a life hack that can and should be applied to any situation, not just impact investing or VC. By reverse-engineering complex challenges, one may find faster and more efficient pathways to success.
None of us are able to achieve success without some help along the way. Is there a particular person or mentor to whom you are grateful who helped get you to where you are? Can you share a story about that?
I am blessed to have an incredible team of co-founders and venture partners who have stood by me and who believe in the mission and values our company thrives by. I remember when I left my comfortable corporate job at Gannett to become an entrepreneur, I was a one-man show, running between Silicon Valley, Manhattan and Las Vegas where I had a cheap place to crash (my place was a perfect alternative to the Bay Area’s skyrocketing rent despite the 4-hour commute). I ended up pitching my startup to one of my more recent partners who was an angel investor back then. The pitch lasted two hours and concluded with a handshake and a seed investment offer. I had a similar experience with my two other co-founders who were also angel investors. These three partners believed in the mission from the very beginning and they wanted to be part of it. They have been instrumental in taking the company to new heights.
I am also grateful for the powerful advice I received early on in my career from great leaders such as Nova Spivack, and Mark Peter Davis, two very interesting investors. Nova took a company public and is now on a mission to create repositories of human knowledge around the Solar System; and Mark is a VC who runs New York-based Interplay Ventures, a firm that also uses a hybrid venture studio model. I remember when I first met Mark about 7 years ago, I was working on scaling a new portfolio company in Africa of all places when I received an email from him asking me to come to his office in Manhattan. He wanted to meet in person and discuss a partner role he had in mind. I replied “yeah, sure”, not realizing that I was thousands of miles away. The next day, I booked a ticket and flew 4,000 miles to meet up with him in New York for 30 minutes and then I flew back to Africa on the same day. It was exhausting to say the least. On the plane back, I couldn’t help but reflect on Reid Hoffman’s words: “Starting a company is like jumping off a cliff and assembling a plane on the way down.” My round trip journey certainly felt this way, but I was grateful for the opportunity to meet Mark as he shared some hard-hitting advice and recommendations that still inform my decision making process when collaborating with VCs.
You have been blessed with great success in a career path that many have attempted, but eventually gave up on. Do you have any words of advice for others who may want to embark on this career path but are afraid of the prospect of failure?
Growing up as an ADHD kid, I had my share of failures, but I quickly recognized that obstacles are nothing but opportunities in disguise. I also recognized that instead of headbutting a wall with my company, I needed to focus on finding complementary resources that balanced out my many weaknesses, which I did by using the first principles approach. I now study my failures and my weaknesses almost religiously because they hold the key to my success. After launching my first venture firm, I quickly realized that I needed partners with more traditional investment banking backgrounds and with great operational management skills to complement the vision I had set forth for the company. So my advice to all those who are afraid to fail is simple: learn to embrace your failures and focus on your weakness, not your skills, in order to break them down to the fundamentals and work your way back up with simple and concrete solutions.
Ok, thank you for that. Let’s now jump to the main part of our discussion. The United States is currently facing a very important self-reckoning about race, diversity, equality and inclusion. This is of course a huge topic. But briefly, can you share a few things that need to be done on a broader societal level to expand VC opportunities for women, minorities, and people of color?
I recently wrote about this critical topic. Female founders receive less than 3% of VC funding and Black founders only 1%. I believe that there needs to be a collective consciousness that fuels a paradigm shift. Impact investors Mitch and Freada Kapor said a few years ago that recognizing the biases in the room is the first step to overcoming them. Investors need to realize that there is a profound structural problem with being in denial and that diversity is good for business. For instance, the African American market share grew faster than the white market share in the last decade and black buying power jumped from $961bn in 2010 to $1.3tn in 2018.
If you look at the recent influx of news about investors and brands launching initiatives that foster inclusion, you would think that they finally realized the importance of being inclusive. However, the risk here is that many of these companies may be motivated by a self-serving bias rooted in brand activism. They need to ensure their commitments to build equal opportunities for women and minorities translate into a complete overhaul of their business strategies from HR to their investment thesis. They also need to engage in meaningful conversations with other communities as venture capital firms Base10 and Brooklyn Bridge Ventures have demonstrated. Base10’s founders have pledged to make a time commitment to get to know underrepresented communities on top of their usual financial support to organizations fighting inequality. And Brooklyn Bridge Ventures founder Charlie O’Donnell has built a community engagement platform around weekly lunches and Twitter to build meaningful relationships with minorities and the broader tech community.
Investors also need to make bigger funding commitments to female entrepreneurs and to minorities. Andreessen Horowitz’s $2.2m Talent x Opportunity donor-advised investment vehicle for underserved founders is a great start but it’s certainly not enough to tip the scale. And sadly, the problem is even more profound than that: the VCs themselves often struggle to find Limited Partners that are willing to support their inclusive investment theses. There needs to be a systems change approach that starts with institutional investors and that unlocks more capital for diversity-focused VCs. And for this to happen, we need more authoritative voices to amplify this message; this is why the work of such investors as Backstage Capital, BLCK VC, Change Catalyst, BUILDUP.vc, Lightship Capital and Harlem Capital is so important as their credibility bears witness to the fact that inclusion is a sound financial strategy. As Backstage Capital founder Arlan Hamilton once said, “they used to call me crazy, now they just call me”.
You are a VC who is focused on investments that are making a positive social impact. Can you share with us a bit about the projects and companies you have focused on, and look to focus on in the future?
My venture firm is called United Ventures (also known as United Global Alliance or simply UNITED) and we are an impact venture firm with a global footprint and a collaborative approach to tackling sustainability challenges. We use a venture studio model that is a bit similar to IdeaLab in California or Rocket Internet in Germany in the sense that we fund and build early-stage companies internally. We also operate a consortium of growth companies that aim to solve larger and more complex sustainability challenges on a global scale. Currently our portfolio includes about 20 mission-driven companies including Unicom, a provider of mobile financial services and value added services for telecom operators; Blutel, a provider of low-cost and 5G-ready broadband services that solves last-mile connectivity challenges; Yamoney, a remittance company and mobile money solution; United Health Solutions, a global distributor of Personal Protective Equipment; and Infiniti, a digital finance company that drives financial inclusion among vulnerable communities.
More recently, I have joined the board of Fidelitel, an upcoming American wireless carrier targeting Afro communities; I also partnered with a team of amazing gaming executives from California to build Gaming For Good, an eSports company that combines the power of mobile gaming with impact investing to address global sustainable challenges and social causes.
With the pandemic becoming an urgent priority, my partners and I recently launched a global and collaborative response initiative called PRISM (Pandemic Response through Innovation & Scientific Methodology) to assist underserved communities in the US and across Africa. Our flagship program is the United Impact Fund, a Donor-Advised Fund sponsored by the UN Impact Fund which also sponsors the official SDG Impact Fund. So far, our emergency relief fund has donated over 40,000 masks to Black and Hispanic communities through donations to community organizations, hospitals and clinics such as Ole Health (a Community Clinic Consortium member), the California Health Medical Reserve Corps and Dakar Network Angels. We also donated masks and gloves to homeless communities and minority students. This is an initiative we are very proud of as it was spontaneously built from the ground up in a matter of weeks using our venture studio model. We have been fortunate to have great leaders and partners join this initiative.
In general, which business sectors excite you most and which sectors do you look to invest in?
I am very bullish on the TMT sector (Technology, Media, and Telecom) as this is a sector that speaks to my experience as an entrepreneur. This sector enables investors and entrepreneurs to solve such global challenges as connectivity and the digital divide, financial inclusion, technology access and the future of work.
Can you share a story with us about your most successful Angel or VC investment? Or an investment that you are most proud of? What was its lesson?
Earlier this year, my partners and I were faced with a critical dilemma: to pause our venture operations and reengage once the pandemic ends or to regroup and find a way to solve some of the new challenges created by the pandemic. We ended up choosing the latter and we started funding and scaling two companies in the healthcare and telecom sectors in a matter of months. The healthcare company initially faced serious challenges due to the market volatility created by the global Personal Protective Equipment (PPE) shortage but it was able to withstand the crisis and it has now directly impacted over 50,000 people through the distribution of PPE items. We are now working on obtaining FDA approval for a testing kit we plan to distribute in North America through a partnership with a Singapore-based research lab.
As for the telecom company, it was able to not only weather the impact of the pandemic but also acquire paying customers. With digital transformation and connectivity being more essential than ever, this company is now on track to acquire over 2 million subscribers and to bring Internet access to hundreds of thousands of young people in vulnerable neighborhoods and communities. This company perfectly embodies the double bottom line strategy we set forth as it is on track to generate both profit and social benefit. Our next phase is to work with the US government and to provide cost-effective alternative solutions to rural ISPs that need to replace their Huawei equipment.
I am also immensely proud of BRT Energy, our newest portfolio company that was founded by Marly Diallo, an international female entrepreneur who coincidentally bears the same last name as me. The company leverages renewable energy technology to help organizations reduce their carbon footprint and Marly managed to assemble a team of seasoned leaders to scale the operations in two countries. The company just completed a proof of concept with one of the world’s leading telecom operators and it also acquired its first paying customers. Marly fought hard to build her company in a heavily male-dominated environment, and I have been amazed by her dedication and perseverance.
Can you share a story of an Angel or VC funding failure of yours? What was its lesson?
Last year my partners and I invested in a data analytics startup that was using AI to solve complex challenges in the financial services sector such as fraud and financial inclusion. We loved the concept and the solution, however, the company did not live up to our expectations as many of its corporate clients ended up facing financial hardship due to the pandemic. Because the company was one-dimensional, it was not able to pivot as successfully as we would have hoped. My partners and I learned a lot through this experience, and it helped us shape a better business strategy that is more aligned with the expectations of a post-pandemic world.
Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that story?
A few years ago, I had the opportunity to support a company called Optimize. I ended up passing on this opportunity as the timing wasn’t right for me. It is one of my biggest regrets as the company ended up fundraising with a European VC and now has over 50 large corporate customers, including one of Europe’s leading Internet Service Providers. Despite the missed opportunity, the founders are now great friends of mine and we are working on a new collaboration. This experience is a great reminder that there is value in building relationships with founders and companies even when the timing of an investment is not ideal.
Super. Here is the main question of this interview. What are your “5 things I need to see before making a VC investment” and why? Please share a story or example for each.
- Team: VCs invest in people, not in pitch decks. I want to see a strong management team made up of principled leaders with a genuine desire to make a difference. I didn’t have a product when I launched my first startup. Instead, I spent the first 6 months of operations focusing on building the perfect team and nurturing my relational ecosystem. Human capital and network economics are probably two of the most important components of a startup.
- Unique Selling Proposition: There needs to be a clear product differentiation and the founding team should be able to articulate the value proposition in clear and simple terms. One of my venture partners encourages entrepreneurs to use the following formula: We help (X) solve for (Y problem) by doing (Z) uniquely well.
- Double Bottom Line: The biggest potential for impact lies at the intersection of wealth creation and social benefit. Founders need to demonstrate a clear path to revenue while contributing to the betterment of society. All the companies my venture firm supports have this double commitment. For instance, Gaming For Good, an upcoming mobile gaming company, capitalizes on the growing eSports opportunity by building an impact fund that will invest a portion of the company revenue in social causes gamers believe in.
- Diversity Lens: Founders need to highlight how they are (or plan to) incorporate a diversity angle in their corporate strategy and culture, whether it is targeting minorities as customers or hiring female team members and employees.
- Go-To-Market (GTM): Ideas are cheap. Execution is everything. Founders need to demonstrate a clear path to customer acquisition and sustainability through an evidence-based approach and an effective mix of experiential capital. I call this strategy the company’s unique scaling proposition. Scalability should be inherently connected to an innovation-driven entrepreneurship model which MIT defines as a strategy to scale a business exponentially and to build up its high growth potential. Because we live in unprecedented times, the GTM should also include a resilience path. The pandemic showed us that companies need to be prepared to overcome the unexpected. Founders should demonstrate that they have a flexible and agile way of thinking outside the box when faced with unforeseen challenges.
You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
My partners and I actually started a movement called UNITED+ that inspires entrepreneurs, investors, and ecosystem stakeholders to join forces and to drive systems change through collective impact. Our eponymous venture firm started as a small startup and we were able to scale it by combining our strengths and resources and by building up our relational, intellectual, financial and experiential capital together. Today, the movement has over 150 global members, 50 advisors and 20 venture partners, and we are present in 10 countries. I strongly believe that the way to drive impact is through an intelligent unification of resources.
If you could tell other young people one thing about why they should consider making a positive impact on our environment or society, like you, what would you tell them?
The world is at a turning point in history with a series of profound social, economic, environmental and ideological changes that have the potential to drastically reshape our society. Young people need to make their voices count to shape the new world that will emerge according to the values they believe in.
We are very blessed that a lot of amazing founders and social impact organizations read this column. Is there a person in the world with whom you’d like to have a private breakfast or lunch with, and why? He or she might just see this. :-)
I always wanted to chat with Shark Tank investor Daymond John over lunch. His personal story deeply resonated with me when I was growing up and I am amazed by all the challenges he overcame.
How can our readers further follow your work online?
Thank you so much for this. This was very inspirational, and we wish you only continued success!
About the Interviewer: Jilea Hemmings is a staunch believer in the power of entrepreneurship. A successful career revamping Fortune 500 companies was not enough for her entrepreneurial spirit, so Jilea began focusing her passion in startups. She has successfully built 6 startups to date. Her passion for entrepreneurship continues to ﬂourish with the development of Stretchy Hair Care, focusing on relieving the pain associated with detangling and styling natural black hair. For far too long, people with tender heads have suffered in pain. Until now.