In conversation with… Mac Conwell

Mac Conwellknown on Twitter as Mac the VC, is the managing director and founder of Rarebreed Ventures, a pre-seed fund that looks outside of the major tech hubs to back exceptional founders. 
 

With its nine-point manifesto outlining its mission, Rarebreed clearly states that polished founders don’t interest them – amazing ideas do.

Mac’s career has spanned from engineering to entrepreneurship to raising their first fund, largely via Twitter. Lara Pawade sat down with Mac to discuss why they write larger cheques earlier, typical EDI issues in the ecosystem, and why they’re fed up with being pigeonholed. 

Please can you tell us about your career journey to date?

 

I started my career as a software engineer working for the department of defence in the United States with a top-secret clearance. I learned lots of cool technical things: from hardware simulation to reverse engineering, database administration, website building to app building. 

At that time, my friend (CTO at a VPN Start-up – Disconnect) was obsessed with being the Black Mark Zuckerberg. For context, after the iPhone came out in 2007, he built his first iPhone app in a week – he’s that guy! 

He was the first of my friends to quit his job and build something. The language didn’t exist yet for what he’d done.

In 2010, my two best friends and I decided that we would build a website to make money while we slept and that ended up being my first start-up.  We ran that company for four and a half years, and when we started, we didn’t know anything. Start-up, venture capital (VC), networking: we didn’t know what they were. We were just three engineers. 

I ended up as CEO because I was the only person on the team who didn’t mind talking to anybody. Over four and a half years, we went through two accelerators, had a pivot, and eventually sold the IP to a division of a Fortune 100 company – that was awesome!

We learned everything the hard way. We started another company after that. We raised some money, hired a new team and ran to another accelerator. But, that company ultimately failed!

I came back to Baltimore and got a job at a marketing firm in the technical team. They had a client I didn’t agree with so I quit on principle. I didn’t know what I was going to do next, I just knew I couldn’t work there anymore.

A few days later, I got a community-wide e-mail from the investment arm of the state of Maryland – The Maryland Technology Development Corporation – the largest investor in early-stage companies in the area. They were looking for a new fund manager.

Even though I didn’t have a college degree or a finance background, I was arrogant enough to believe I could get the job. It’s literally the only job I have ever applied for – I had no clue or understanding of how prestigious a job it was, how hard it was to get a job in this industry or any of that. All I knew was I was going to get it.

Four and a half months later, they told me I was not qualified for the position but they willingly created a junior position to bring me on to their staff. And that’s how I broke into venture, making the least amount of money I’ve ever made in my professional career.

I started at TEDCO, doing early-stage seed investing of $100-$200k investments in companies based out of the state of Maryland. But in late 2016, when they hired me, they had been struggling to invest in Black-led companies. 

A recurring issue was a lack of access to friends and family capital to help these founders compete for seed funding. Less than a few months on the job, I came up with a proposal for a pre-seed fund, to invest in these entrepreneurs much earlier than anybody else. We could help propel them to our seed fund and so we secured a Black-owned bank in Baltimore, Harvard Bank of Maryland, to put forward the money for the first year.

In that first year, we made nine investments and in the second year, we increased our designation to women and all minority groups.

In 2019, my team and I were before the Governor of State legislators and encouraged them to put a million dollars into an annual budget to create a long term fund with the state. At the time, it was the first state-backed pre-seed fund for women and minorities in the country. 

After that, I found myself getting pigeonholed as the Black guy that invested in Black and Brown companies. I just wanted to be known as a good investor, investing in good companies. 

In September 2020, I left that job to start Rarebreed Ventures, a pre-seed to seed venture fund in Baltimore, Maryland.  

At Rarebreed, what are your values and how are they reflected in the investments that you make?

 

That is all included in The RareBreed Manifesto: the basis of who we are as a firm and how we think about investing.

You can find amazing start-ups anywhere in the world. There are amazing entrepreneurs everywhere, with great ideas, building dope companies. At Rarebreed, we invest primarily outside of the major tech hubs (Silicon Valley, New York and Massachusetts).

Some of these entrepreneurs are building products and serving communities that many traditional VCs don’t understand and aren’t willing to understand, leading to many missed opportunities to fund great companies. Looking for these hidden gems who are building products in industries that you may not typically think of as venture-backable or startup types. For example, we’re investing in a company that makes wig dryers, because there is no such thing!

Many VCs focus so much on getting deal flow from traditional sources that they don’t take the time to look beyond their networks. This also leads to missed opportunities. When we’re talking about underestimated founders who come from different economic statuses and backgrounds, they’re not part of these networks!

Investing in pre-seed stage companies is a skill and requires a lot of conviction. You can’t use the traditional methods to evaluate a company or more importantly, the founders themselves. 

As a pre-seed to seed fund, we invest in a very wide range of stages of companies including pre-product and pre-revenue companies. It’s a very unique type of investing. There aren’t as many data points; you’re making a true bet on the founder, market, market dynamics and timing. That’s a skill set that comes with time and work. 

Number five of our manifesto reads: Sometimes, founders at the pre-seed stage aren’t as polished, don’t know all the VC lingo, don’t have an amazing network, or don’t know how to construct a pitch. 

Giving founders the grace to let them stumble through and not know all those things means listening to the business fundamentals behind what they’re doing.

Fifty thousand dollars is enough to get founders started, but not enough to fully execute to get to the next level. They still need to pitch to angel investors, go to pitch competitions, join accelerators and do anything and everything they can to get additional funding along the way. 

When you’re looking at pre-seed, I truly believe in writing larger cheques earlier, to really catalyse companies and give them a real chance to get to the next stage of funding. Little $25k – 50k cheques lead to a cycle of founders having to do extra work to get moving. 

Do you coach your founders to get into the next rounds of funding? 

 

Absolutely! You know that when you meet me, I don’t need you to have all that stuff polished and ready to go. 

Amazing entrepreneurs with truly original and unique products, in industries that haven’t had innovation in years do exist! For example, wig dryers – there hasn’t been any innovation in the wig space in my lifetime! 

There are two types of founders that get us excited: those who think about executing customer acquisition and those building products in markets that are often overlooked. 

These founders are off-the-bat thinkers, which is critical to success. I really care a lot about customer acquisition. You can have the world’s most amazing product but that doesn’t mean anyone is going to buy it! You’ve got to figure out how to get it into peoples hands. 

On the flip side, sometimes some things are so unique and amazing that you’ve just got to give them a shot. Like the company Rebundle, which makes plant-based bio-degradable braiding hair. Synthetic hair made out of plants? You’ve got to give that one a shot, right? 

Yeah. Newton’s mission is to get more people into venture capital, sure. But for me, it’s far bigger than that. It’s about allowing venture capital to catalyse solutions for those not currently being served by VC, which can empower consumers. Wig dryers, for example. I live in a very multicultural area, yet the big Boots (UK health and beauty retailer) on the main road, sells no hair care products for non-caucasion hair. And it can feel like you’re being told “You don’t belong here”. Whereas seeing products that are made for you, it’s acceptance. And that part of our mission is very often overlooked.
 

That’s exactly what it is. 

What do you say to those who want to diversify their deal flow?

 

Deal flow is different at every stage. If you’re a series B fund tech investor, there are hundreds of companies to watch. Pre-seed investing – that’s like a million companies! 

For the early stage, I believe it’s a combination of taking inbound from your network and being open to outbound. Get out of your comfort zone, and go to places. I speak at a lot of accelerators! Maybe one or two a week. I can put two to three hours on my calendar and have sixty-nine, twenty-minute meetings. So that’s sixty-nine companies I now have a touchpoint with. Be open to taking the cold emails, the DMs, and the LinkedIn messages. 

What are some of the major issues around diversity, inclusion and equity in venture today? And how, in your perspective, can we tackle these? 

 

Having more diverse people at the table.

People ask me all the time: “How is your portfolio so diverse?”. I don’t know, it’s just my network. There’s nothing prescriptive about it. It’s just how I move and where I find companies and who sends me companies. 

On the other side, there’s a lot that still needs to be done education-wise. The number of founders I meet early on don’t have a true understanding of how venture works or how funding works. 

There are nuances to this, funding isn’t always about business! When you see a founder raise money pre-product pre-revenue, nine times out of ten, it has nothing to do with their business and everything to do with their network. 

But, if you’re an underrepresented founder and you’re just breaking into this industry, there’s no way for you to know that. It becomes really easy to think the whole industry is racist and that others are getting tons of money for doing no work. Just so you know, there is some racism in there! But generally speaking, if you don’t have a network of people who are just willing to give you all that money because they know you, then you have to build a business that’s worth somebody giving money to. But, when you’re being bombarded with information, that’s to the contrary and it’s hard to make that distinction. 

It took me two and a half years to learn how any of this stuff works. 

At what point in your career did you feel confident in your convictions? 

 

Really early on.

Really?

 

Yeah (laughs). The very first company I ever sourced, back in 2016, was acquired last year. 

When I met the company it was a no brainer to me. I remember bringing it to my team and having to debate it. I was looking around the table like: “What’s wrong with you all? Of course, we’re doing this investment. None of that matters, this is a great company!”

What is that instinct? Where does it come from?

 

Amazing people doing amazing things. The company is called Oasis, they help medical students prepare for class and tests. At the time, they had a partnership with Wikipedia, so when you looked up certain terms on Wikipedia, it was their videos! There was another medical training team so this guy hired the entire team. He was also getting a medical degree from Johns Hopkins and an MBA from Stanford, at the same time. He was just incredible! 

Or, I know a founder who became a surrogate mother to get access to capital to start building her prototype.

Woah!

 

The only way she could see herself getting access to capital was to literally sell her body. First of all, it’s heart-breaking, but, show me another founder with more grit than that! You can’t. 

What would your advice be for anyone who wants to break into VC? 

 

It’s going to take time and trust in the process. Start networking with other VCs, at all stages, and make sure you’re taking notes on what they invest in. Start meeting companies and evaluating companies, and when you find the company that makes sense, start triaging and making introductions. 

You’ve done a couple of formal VC training programs, similar to Newton. What have you found was the benefit of those?

 

Personally, the last one was very validating. I didn’t have a college degree or finance background, so I wanted to get some formal training. But, I got there and realised I knew all this stuff.

The biggest thing was the network. Our WhatsApp group for our class is active to this day. 

Kauffman is similar, but it’s also about becoming a better leader and becoming a better person and having a real network of confidants that you can go to at any time for literally anything.

You have a massive Twitter following (to date: @MacConwell has 68.2k followers). What role does social media play in your investment career?

 

Twitter changed my life. 

When I decided to raise my fund, I recognised really quickly that I didn’t have a network of LPs (limited partners). At the time, June 2020, I had 2.5k followers on Twitter. Fast forward to February 2022 – I have around sixty-four thousand followers. 

I was just trying to learn how to raise a fund, and then someone would start committing money into my fund, so I made that my strategy. 

So from mid-June 2020 to mid-September 2020, I had over 1,100 meetings! I had 1,128 meetings in my calendar and that’s not including impromptu calls etc. That helped me source $2 million of my fund one. As my Twitter following grew, more and more opportunities came my way, which really changed my life. 

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