Business as Usual: 412 Venture Fund's Ilana Diamond

 

Transcription: 

So good afternoon, everyone. This is Audrey Russo, President and CEO of the Pittsburgh Technology Council, very thrilled to kick the week off with Ilana Diamond. I'll introduce her in a moment. But before we get started, I want to give some shout outs to Huntington bank who's been with us right from the onset of this journey of COVID. It's hard to believe that it's November 2, but we're still at it. And we have a great lineup for this coming week. So in addition to today, let's see Jonathan, jump the list for who's who is going to be with us this week.

Got a great list of folks happening with us, Audrey, it's like a packed week on the show. So tomorrow, we have Duolingo, stopping by to talk about the new mural they just put up and their commitment to the arts in Pittsburgh, that can be so much fun tomorrow, can't wait for it.

And then we also have others, but you probably you don't see that.

I will pull them up if you would. So like because the list keeps growing?

Well, I will Um, I'll check back with you.

On the show. We'll give the whole schedule out.

Okay, good. Okay, so thanks to Huntington bank, we've put everyone on mute, except for a lot of myself and Jonathan. And that's just to be considered to be considerate. Then the other thing is we have a chat, and the chat will be monitored by Jonathan and the chat is not for you to sell. That's not what this is about. This is just about to have a conversation with Ilana today. And we really appreciate you honoring that. So I'm going to jump in, I'm pretty thrilled to have a conversation with Ilana because I've considered her a colleague and a friend. And even our mothers were friends when my mother moved to Pittsburgh. So it's a very bittersweet connection, we both lost our mothers almost around the same time. And as a result, we are to, you know, to interesting women who are trying to build the future of Pittsburgh, but I would tell you, that a lot of really takes the cake right now, because she just recently left innovation works. And she started a new venture, no pun intended, but she'll talk a little bit about that in a moment. But before we start, I think it's really important for you to understand who is a lot of diamond and what is her journey? What is her journey been to date, and then I think that you will see why her new role, so nicely rolls up into her professional life. So Ilana, welcome. Thank you for being here. Thank you for taking the time. And thank you for, for your commitment to making Pittsburgh and beyond even better, particularly when it comes to the tech economy and ecosystem. So thanks for joining us.

Thank you. Thank you, Audrey. It's great to be here. And as you know, you're one of my go to people for advice. So

this is very exciting. So let Give, give a little bit of your background. So talk about your background, because I think that's something really important for people to understand. And I mean, you can start wherever you think makes sense.

Okay, thank you. Well, I'm actually really an entrepreneur at heart. I spent 15 years building and growing an international consumer electronics firm right here in Pittsburgh, where we designed and developed our products, but we manufactured and sold all over the world. And my first experience with investors and venture capital was when our company developed this first commercial product. And after investing a lot of money in it, our board said, You know what, that's really a whole different business, we need to spin that off as a separate company. And I went to innovation works. That's how I met them, because I heard they invest it. And they were the first money into a company called meta secure solutions, which was a commercial alerting product, which was a spin out of our first alert brand, if you've heard of First Alert emergency alerting products. That was one of our brands. And you know, we, we hired a CEO, we spun the company out, we raised additional capital i w stuck with us through it. And then about five to eight years later, actually sold both companies within a 12 month period. And I had been doing some mentoring for innovation works. But at that point, I had a conversation with rich Lou neck, the CEO over there, and they were going to be forming a new idea, a hardware accelerator and I was lucky enough to have the opportunity to found that with them and help run it and then eventually become a managing director in their venture fund Riverfront ventures. And it was really, really exciting work. But like I said, I'm really an entrepreneur at heart. And so when 412 venture fund they'd been investing together as angels when they decided, Andy Raven, Lloyd Myers, and Evan Segal all really successful entrepreneurs. They wanted to actually create a fund instead of just doing angel investing and they offered me this chance, the managing partner. It was just a Too good an opportunity to turn down. So

well, you know, it's interesting, your expertise at alpha lab year actually lined up nicely with your previous companies, right? Because you really were a product and hardware. Yes. And I think that they were very lucky to have someone, it wasn't like just software, it was really making stuff and getting stuff to market. So that's, that's a lot of your expertise. Can you just talk a little bit about that, because we used to do a lot of rapid innovation in that company.

Yeah, that's, that's actually true. And in fact, I think that's why I got the opportunity. Consumer Electronics is a really, really fast moving industry, and about 75% of our sales every year came from products that were less than five years old, which meant that you had to find a way to, you know, innovate, and iterate on innovation, and you have a process for it. And you know, our customers were Best Buy and Walmart and Target and Amazon and all these big companies that to be completely honest, after a couple years, they would send our products overseas and try to knock them off, right. So we had to be proving our worth every single year. And in the end, the company that acquired us acquired us for that they wanted to have that new product capability, because that's where the profits are in consumer electronics. And they acquired us for our process and our ability to iterate and constantly creating new products, get them into the market, get them sold, make them profitable, have a good business model. And honestly, that's what we do in Flm. Here, too, right?

Well, I remember long ago used to say, by the time your product was actually quote, unquote, on a shelf, you were way, you were already iterating, you know, five x, that product? And, you know, that's certainly way ahead of the times. And that's certainly not the way people were building products. Right. So we were lucky to have you at innovation works.

Thank you. Yeah, I feel like it was a really good fit. And people would always say to us, well, do you protect your products with patents, and we would say, we can just so we can put patent applied for on the packaging, by the time the patent issues, we're on to the next product, the next version. So

it takes a certain kind of leader to be able to work in that environment as well. So you probably had a chance to just mentor and coach a whole lot of people that are in that hardware space. But if you flip now to 412, this new venture, can you talk about? What can you say about this new venture? What can you tell all of us give us your sales pitch?

No. Right? Well, I guess what I'd say is that Pittsburgh, has been attracting major tech companies and top tier VCs from outside the region, right, because we have all this great technology universities and folks, but the pool of local capital is really, really low. And it's a great thing that outside investors see the potential of Pittsburgh, you know, and and want to come here and invest. But the reality is that when all these out of town folks invest here, and our companies are successful, because they have been, if you had, you know, several unicorn exits, and a lot of close to unicorn exits, including Lloyd and Andy's company and Evans company, you know, but where does that money go? When the investors come here, put their money in our company succeeds, it goes back home, to their LPs into their investors into their fund, as it should, they're the ones who took the risk. But it isn't really being reinvested here to enrich our our economy and our region. And we really want to be farmers, not miners, we say that all the time. You know, the idea is that if you look at the really top successful entrepreneurial communities, what happened there just organically?

Well, they were successful, and then they reinvested the money, and the next generation of entrepreneurs benefited from that. And that's what we want to be for Pittsburgh, so true, because actually, and for those of you who don't know this, but 70% of the venture capital that's actually committed to Pittsburgh comes from outside the region. So to Atlanta's point, what, you know, which is the inverse of a place like Austin, or Chicago and Silicon Valley, and even New York.

And what people may not know is that in the last few years, we've had over $3 billion in disclosed exits, that doesn't include the people like Amazon and Facebook who don't disclose when they buy a company. And you know, the majority of that money went back outside our region. It didn't stay here to build the next generation.

Right, right. So that's what you're trying to disrupt now trying to disrupt. And so are there any other commitments Do you have to talk about the Fundy doesn't have to be a Pittsburgh based company You know, are there sweet spots that you're looking for? Is there anything that you can talk about so that our listeners can just get a little bit of a glimpse into what you're focusing on.

So, you know, we're defining our Pittsburgh, we definitely have a Pittsburgh focus. But we're defining that focus very broadly, it's not just companies that are located in Pittsburgh, today, we're looking to invest in companies that have a bridge or a tie here. So when they succeed, there's that opportunity to enrich the region, it might be a founder that's from here, or they develop their technology to university here, or maybe a company that's not from here, but it's a really good fit for Pittsburgh. So for example, we've looked at companies that are based currently in Israel or India, that are in an area AI, machine learning autonomous navigation robotics, where it makes sense for them to be located in Pittsburgh. And you know, they're open to that. And so by investing in them, we can create that bridge. So and the other thing I'd say is, we're a very data driven team. And based on all the data, diverse teams outperform less diverse teams, you know, sometimes by more than 30%. And our partners all really share a strong belief that investing in female and black and Latinos and LGBTQ founders, and other underrepresented founders is one of the biggest untapped opportunities in our region and in probably in the world. So we have a diverse population, both consumers and b2b products need to serve a diverse customer base, and diverse teams are more likely to avoid that groupthink. So we want to be we want to be sensitive to that and have a wide lens on that.

And is there. And I think there's a couple of questions, Jonathan, if you want to jump in, there's a couple of questions here. Yeah,

let's jump into it. So first off, wants to know, um, do you consider investments outside the Pittsburgh area? Have somebody here from the Chester County PA Area that would like to know that?

Yeah.

So I think like I said, we we define it broadly, you know, we would want to look at the company and make sure it makes sense. But you know, what we're trying to do is build bridges and connections. And, you know, we would certainly want to talk to you. And you know, what, if we can't help, you know, when it really comes back to our roots, we're a group of successful entrepreneurs who built our companies here, and we relied on people here to help us, we're happy to connect you to people who would be a better fit if, if we're not the right fit. So I think we're all very well connected. Lots of right now.

Very cool. And what about a person? What's your preferred size of investment?

That's a really good question, too. We see ourselves as late seed early series A investors. And so we're in at the very, you know, at the very beginning, and we're probably starting with smaller cheque sizes in the 50 to $250,000 range, but we could go up to a million dollars, you know, in follow on as the company grows. So that's where we see ourselves,

you know, and then there's another one here, do you require a lead investor? Before consideration is giving?

So no, I would say it really, you know, we could lead, I think in the, you know, in the size check we're in, you know, sometimes we won't be leaving. So we're okay following too. And we're really flexible with that. But we could, we could potentially leave for the right deals.

So if you look at it, think about this, a lot of you and I have talked about this, and I think it might be nice to talk about this out loud. If you when you think about like the recipe, I always look at things in terms of a recipe, the ingredients for success, and over the last eight years, you've had an upfront view, you weren't you've been inside, you know, looking at the nascent technologies that are inside the universities, in particular, Carnegie Mellon, you've had like, the hardware cup that's been all around the world. So you've seen all these different applications. You've seen people have applied to alpha lab gear from all over? What do you come up with, like a hypothesis of what you think, really are some of the right ingredients for building a company of scale?

Last week, speak for myself. And you know, my partners might have slightly different approaches to this. But so I personally look for someone who's focused on solving a big problem that they're passionate about. And I want to see that the founder or team is thinking beyond just the technology, that they've taken time to really understand their customers, that they're open minded about customer feedback. So they're focused on the problem, not just their solution, that they're listening to customers, and they're making sure that their solution is one that target customers are going to be willing to pay for early stage investors. So we don't expect every I dotted or every t crossed. Maybe the business model is still being tuned and that's fine, because that's something that you know, We're all operators that we can help with. But in my experience, one of the really key things to see is that a successful founder knows what they're good at, and what their strengths are and knows where they need help, and is open to learning and isn't afraid to say, I don't know, you know, we're all going to have weaknesses, but the key to not letting it take your business is being aware of your weakness and being, you know, getting help, whether that help is employees that you surround yourself with, mentors, investors, however it is, you know, where you need help, and you're willing to get it. So that's what I'm looking for.

So that's what you're looking for. And so, you know, very often the founders are not necessarily the CEOs, right? Mm hmm. And so that, you know, that's something that all of us see, right. So you know, your heart is so close to the work, but very often, they're not the person that's going to take it to the next level, what many times people have ideas that aren't necessarily going to be unicorns? But they're, you know, they're probably really still really good ideas, and really good businesses, where do you fit? And in terms of those kind of companies? Are you interested in that?

So really, really good question. And I guess, you know, what we would want to see is maybe the first thing that we're looking at is return to our investors, right? We're a for profit fund. And we have to make a return to our investors. And that's what we're focused on. But there are a lot of people that we see and that I met through F lab garren innovation works and Riverfront ventures, where they have an initial idea. And maybe they see it is this size idea. But with you know, help. And with thinking more broadly about the business model, and with all the great connections that are here in Pittsburgh, from people who've built businesses, hey, maybe there's a bigger a bigger play there. And so we are certainly open to those kinds of ideas where, you know, we're going to, in fact, we might even like them better, you're going to start here, you're going to prove it out, you're going to make your mistakes here, while it's small, because every company makes mistakes in the beginning. And then there is a bigger vision for the future. And so we're certainly open to those folks. And one of the things we're really open to is talking to people and helping them see how this could be a bigger business. Yeah.

Which is, which is really cool that giving them that perspective. So I would imagine that you're going to spend a lot of time just meeting lots and lots of people who have lots of ideas. And so how you mentioned something about Israel, is there anything about a relationship with Israel and back? Because I mean, the amount of proliferation of ideas and innovation that comes out of Israel is quite large per capita. Right, in terms of a small company, but they need the market. Right now what startup nation, right, right, we're startups per capita than anywhere else in the world. Right. I think you know, Audrey, there's a new initiative here in Pittsburgh.

You're on our advisory board.

We recently hired an executive director and the whole goal of 412 by 972. And just so for people who know 412 is Pittsburgh, obviously, but 972 is the country code in Israel. The whole idea there is to build bridges between the tech communities in Pittsburgh and in Israel. And the reason why, in all the people on our advisory board have different versions of this story. But I did a sabbatical in Israel, about two years ago. And everywhere I go, I say, you know, I'm from Pittsburgh, and they say, where's Pittsburgh? And I say, Pennsylvania, are you near Philadelphia? But if I said, it's where Carnegie Mellon and Pienaar, they say, Oh,

so

there was a lot of knowledge about our universities and our technology, but no one knew about Pittsburgh. And when these founders were going to start, you know, their new their new office in the United States, they thought about two places, if they were FinTech, they thought about New York, maybe if they were biotech, they thought about also Boston. And if they were anything else, they thought about Silicon Valley. And, you know, it occurred to all of us on this advisory board it you know, if you're in autonomous navigation, or you're in robotics, or you're in AI and machine learning, Pittsburgh is a great place to found your business. And we just wanted to get the word out in 412 by 972 is all about that. And they've already identified some companies that are looking in the autonomy area to establish a headquarters in the US and that would be something that we could invest in. They're sort of series a kind of companies looking to establish their footprint here. And we're excited about that. And the same, I just want to say is to have India.

Oh, okay, that's, that makes sense. So, so do you have a lot of relationships In India are working on accelerating them.

So I'm also on the board of Thai, the Indian entrepreneurship Group here in Pittsburgh. And there are deep deep relations between Pittsburgh and India and it, you know, a lot of it started it. Even if you go back to the 70s. The reason that there's one of the largest temples here in Pittsburgh and Monroeville Indian temples is because there were so many Indian engineers here. And then, you know, a lot of folks at CMU as well come from India to be educated here. So there are deep ties, and tie his tie is taking advantage of that as well, the Indian entrepreneurship group

now, that's perfect. And we have had some wealth created by people who have been founders in Pittsburgh, the tie initiative as well.

Absolutely. suneel.

Yes, a huge exit sit there. And they've invested for years as angel investors in Pittsburgh companies, they certainly have. So you know, what you talk about the diversity, but I'd like to just peel that back a little bit. When we talk about diversity, we talk about the fact that people of color women and Latina x, etc, have not been at the table in terms of building their ideas, right? And what are you going to do differently? How are you? How do you think you can play a role in trying to extract this bunch of talent that just hasn't been accessed and hasn't been invested in? Do you have some thoughts about that,

too? And it's such a good question. And, you know, it's something we've given a lot of thought to, in particularly one of our partners, Evan Segal has given a ton of thought to that, and has done a lot of research and has looked all over the country at funds that do invest entirely or primarily in women, and black and Latina x, and LGBTQ founders. And, you know, it really comes down to a couple of things. One is, you know, I think that, for many years, venture capital worked by sort of pattern recognition. So people said, you know, what patterns have I seen in my investments that I can replicate? And you know, anybody who knows anything about machine learning, or AI, you know, it's all it's not always clear, what's correlation? And what's causation, right. And it could be correlated with being a young white guy from an Ivy League college. But that doesn't mean that's what caused it. And I think the second piece is having people to advise you who are from the communities that you're trying to invest in. So you know, I can tell you having been the only woman in the room in tech companies for many, many, many years, you know, we would have a female founder pitch us about a problem that was primarily a problem for women, and they'd walk out and the number one response people would have is definitely a problem. I don't think that's really a problem. And I'd say, I think that's a problem. I can speak, you know, as a woman, but I'm not the only woman and I can't speak as a black person or Latina x person, LGBTQ person. Well, we have to do is get those people in the room advising us, we have to train VCs, you know, from other communities, and we have to be open to hearing other opinions, because those are the folks who are going to educate us. And that's what we plan to do. That's great.

There's a question there from Leslie. Jonathan.

Great question. I'm glad you brought that one up. Audrey. Leslie wants to know, do you see any need for market research or awareness, building freelance assistance to founders seeking to validate and tweak their offerings to better meet target needs?

Is there an opportunity there?

Yeah. So I just want to make sure you sort of faded out there for a minute. Jonathan, do you see a need for market research for founders is that was the question.

Yes. And you're using freelancers freelancers to do that out? Those are market opportunity for for that kind of work?

Yes, I think there is a market opportunity for that kind of work, especially with technical founders. So here's what I'll say everybody recognizes that if you don't have some experience writing code, you probably shouldn't be writing code, right? You should probably get someone who knows what they're doing. And I and I say this, again, and again, to founders. It looks like sometimes people think that they can just they can do marketing, because everybody knows how to speak into write and write. But it's not the same and everybody knows how to ask questions. But there really is a skill to asking the right questions in the right order in the right way. And I would say if you have that experience, great. But if you don't have this experience, get help. And whether that's a freelancer or a co founder, going to a place like alpha lab or alpha lab gear or if you're an alum of one of the universities they all have, you know groups that will help you with that. Get out.

I think that's that's really important. I think that people have to understand that even If they have a great idea in the solving the hard problem, they cannot do it alone. They count one,

and that there's wide variety of skills. And you know, sometimes it's hard to see if you don't have the experience in that area that it is also a trained skill, just like coding, or engineering.

So what are you excited about right now? Like, are there things like there are a couple of things I'm I'm excited about and anxious about in terms of disruptive technology. What are you excited about?

I want to hear what you're excited about.

First, I can tell you that I am very interested in ag agricultural tech. I think I've mentioned that to you. I know I've talked to Brian Kennedy about that who's on the call. I am I think there there's a lot there. And some of that's tied to legalization of marijuana, some of that's tied to medical usage of, of any kind of herbs, etc. I think there's a big movement towards that. I'm also very bullish on sustainability. And as wide as sort of like a closed loop, we actually had someone on from, I believe it was from covestro, talking about the circular economy. And I think there's just a lot of opportunities there that are misunderstood. And it actually helped me understand. Having him on the show actually helped me understand the circular economy even more. So I, I'm excited about that. And I'm also excited about life, some life sciences. And I feel like Pittsburgh has has a tremendous amount of assets and life sciences and we've not scaled, we've just not really delivered. So and I don't and those that's hard to invest in. And I know that and I might not be a focus of 412. So what about you?

So I want to totally agree with you about cannabis. I think it's like being in the liquor business the year after prohibition, and not just about cannabis production, but also about technologies that support production, and that support the marketing and that support the whole industry. I agree with everything you said. I mean, everybody's heard robotics and autonomous navigation. But I guess I would expand that also to not just autonomous navigation, but industries or companies that support autonomous navigation, including navigation in water and in the air. And one area that I don't think you hear as much about when people talk about Pittsburgh, but I think we have some really great companies is advanced materials. There's some amazing Advanced Materials companies. And you know, I think that's something else to look at. And I agree with you about life science, I think, you know, you have to, you have to know what you're doing there. But I think there's some amazing opportunities, especially in health IT connected devices, telemedicine. You know, that's all in its infancy.

And also anything contact less. And oh, yes. Right. Absolutely. I think there's, there's there's big opportunity in that in that arena. So someone's asking, like, they have a great idea. How do they get how do they How do they pitch to you?

Oh, it's the process

like, the first thing

I want to say before we run out of time is that you can always email me on I diamond at 412, venture fund.com or my personal email, which might be easier for some people because it's Ilana, my first name dot diamond, my last name@outlook.com. You can also tweet at me at at Ilana diamond. So here's what I say, send me a little bit of information, I'll set up a time to chat. And we'll take it from there. And we are absolutely right now looking at new investments. So please do reach out and tell us about what you're thinking about. And if we can't help, you know, I personally see it as a mission. And I know, you know, Andy Raven, Lloyd Meyer, and Evan Segal also see it as personal missions to connect you to people who can help if we can't,

and even even people who already have investments already and might be looking for additional investments that might be out of your scope. Would that be appropriate?

Absolutely. We're happy to do that. In fact, my last call right or actually my second to last call right before this one was with a large investment fund national, they invest in Pittsburgh, but elsewhere, and we literally discussed exactly that we share deal flow. They see people who are too early for them. You know, we see people who maybe need our later stage and beyond

us and we share that. That's great. That's awesome. And then if people want to know more about just the fund in general, I think you have a website that's up and I think that we put that out there There, if not, it's just you can definitely Google form to venture.

It's 412 venture fund calm.

So really, really easy. So I, we've we've run out of time, a lot of we have lots to continue to talk about, you're not going to be outside of our, of our sphere, we need you. And we need your leadership and really appreciate all that you've stepped into. And thank you for just being candid with us today. This is really your first week on the job officially. And we have to so I'm very thrilled that we could have you right out of the gate. And we will continue to stay in touch. So thank you so much a lot of diamond for your leadership, all that you've done for the community, and all that you are going to be doing for the community.

So you watch me We really appreciate I really appreciate for me and our other partners. I appreciate the opportunity to be here and we appreciate your support and your mentorship. And you're always being willing to take a walk and

answer questions and give advice. Yes, exam, and we're going to follow up on that walking thing too. So, Jonathan, who else is on for this week

or earlier, we have Duolingo starting by talking about the mural project, and then we have a high marks talking by talking about supplier diversity on Wednesday. And then Thursday is Justin Mandela, who's chairperson of the Lebanese Angel fund. And we're going to wrap the week up with the one and only Rich Fitzgerald Allegheny County executive. He is a repeat offender here on business as usual. We love having him stop by vendor. And we have

folks I think booked for next week as well. But you know, look forward to seeing all of you. Again, if you want to reach out to a lot of diamond. You know where to find it. We put the information out on chat. I want to thank all of you for being here today. Stay safe, and we'll see you tomorrow.

stuff. Thank you, Audrey.

Transcribed by https://otter.ai