Alex Pomeroy invests in making a difference.
Pomeroy co-founded venture capital fund AGO Partners in 2013 with a mission to “invest in technology companies that offer sustainable, socially conscious solutions.”
Pomeroy has put in $60 million of his own capital in the fund’s portfolio, which has invested in companies including Blue Apron, Postmates and Bright Funds. AGO Partners was an early investor in Aspiration, a neobank that aims to offset climate change by planting a tree with every purchase.
With AGO Partners among the early adopters of investing in ESG companies (environmental, social and corporate governance), Pomeroy believes you don’t have to sacrifice return on investment to enhance the greater good.
“If you pick the right companies with the right leadership that deeply care about ESG,” says Pomeroy, “you can make a lot of money and build great brands that have an impact.”
In this exclusive interview, Pomeroy and I discuss his criteria for investing in a company, why some founders fail and advice he could offer to budding entrepreneurs.
This interview has been edited for clarity and content.
Karl Kaufman: What are you looking for in the companies you choose to invest in?
Alex Pomeroy: Market size is a big thing for us. We look at companies that have a massive addressable market because that de-risks the investment. If you’re investing early on, a company that’s in only a $20 million addressable market could be risky if the company doesn’t take the whole market.
If you look at big themes like food, financial services or pets — these are massive markets. One of our companies, Embark, does DNA testing for pets.
Besides market size, we want founders who are obsessive about their company and want to run it forever.
We don’t want to invest in companies that are just trying to make a pop and sell out. That’s not our approach. We want to get to know our founders and work closely with them. That’s how the relationship is with Aspiration.
As a young investor, having some entrepreneurial experience is important. My mentor told me that being a great investor requires a mindset about being a good entrepreneur. You have to understand how a company needs to be built and how you can scale it and ultimately sell it one day to make your investors money.
Kaufman: What do you think is the biggest obstacle to entrepreneurs not making it?
Pomeroy: There are many great ideas out there, but execution is what’s most important. If the founders can’t execute, then it doesn’t really matter how good the ideas are.
A founder needs to be able to multitask. Unless the founder has unlimited resources, they’ll need to raise capital. They’ll have to find talent and build a team. The team has to like them and want to interact with them and build something great with them.
It’s about the progression from the idea to the team to the execution. The companies that haven’t done as well for us had a missing link in that chain.
It’s hard, though, for a founder. They’re trying to run the company as the CEO while spending a lot of time raising capital. That is a tough, tough game.
The best thing investors can do to support their companies is help them in raising capital. Suppose you can provide some help with investor relations and make introductions, allowing the CEO to focus on running the business. If they’re only spending time raising capital, the company might suffer.
That’s why, generally, we like to invest in companies with two founders. One can focus on operating the business, and the other can focus on raising capital.
Kaufman: What advice would you give to a budding entrepreneur?
Pomeroy: You have to have something you’re passionate about, that you love doing.
I love investing. I love meeting entrepreneurs. I love to help build great companies that create a positive impact and lead to change and disruption.
Focus on something you love and understand. Don’t do something just to do it. My friends in business who have done things for the wrong reasons, they’re not happy.
I’ve been able to build a business with AGO Partners that allowed me to blend things I care about. That’s unique, and I’m extremely fortunate.
It’s one thing to have the passion, but again, I’ll touch on market size. You could have a niche passion and not go anywhere.
I’m sure some niches have been executed very well, but it makes it a lot harder. There’s so much competition now and so many bright people out there that you really have to build something and understand how you can execute.
Kaufman: Who has been your biggest inspiration?
Pomeroy: My great-grandfather hitchhiked from Maine to Alaska during the gold rush, struck a goldmine and used those proceeds to build a construction company. One of his major projects was the Golden Gate Bridge.
He was able to leave something behind that is an iconic American image. Now, I’m not going to build bridges, but I want to build great companies that leave something behind for future generations.