Marigold Capital is an Impact Investment Strategy & Execution Firm based in Toronto, with a focus on gender, diversity and inclusion investments. In this episode Jonathan Hera, Managing Partner, highlights gender lens investing, using a unique approach of investing in a cluster of companies to drive collective impact.

Investing in solving for underlying problems, market failures and ways of building community, that’s something that we also need to do. so if we continue on the theme of investing in femetech and female reproduction and sexual health, there are many players of companies in this space, and in theory you can invest in them all and not solve problem. There are many problems not just THE problem. If we start thinking about how to build an ecosystem and how people can work together in partnerships to build a more coherent strengthened supply chain, value chain and share resources among each other, all of these sorts of things start to build community, a market and an industry rather than individual competition

Jonathan hera, managing partner

Transcript of Interview with Jonathan Hera

Jenelle:
Hello. Thank you for speaking with us today, Jonathan.

Jonathan Hera:
Yeah, thanks for having me. I’m really excited to be here talking with you.

Jenelle:
Today we have with us Jonathan Hera, Managing Partner of Marigold Capital and you can learn more about Marigold Capital at marigold-capital.com. So, Jonathan, can you tell us a little bit about your organization, its mission, and your role?

Jonathan Hera:
Yeah, absolutely. So, at Marigold capital, we’re based in Toronto, Canada. We have been around for about three years or so, and we’ve been advising, consulting foundations, high net worth individuals, nonprofit organizations, government about impact investing. But more specifically how to devise a thesis based strategy, how to do industry analysis, how to develop a portfolio, how to run diligence opportunities in the impact investing space generally, and then more specifically in gender lens or social equity lens approaches. So, how do we embed different ways of looking at things, managing things, writing things with these gender and social equity lenses. More recently, that’s a three year timeline, we’ve been doing that since we’ve begun three years ago and more recently we’ve started to develop our own fund and we’re actually in fundraising mode right now and that’s an interesting time to be fundraising. I’ll talk to you a little bit about that later.

Jonathan Hera:
I’m the managing partner of the firm. I have a general partner, Abigail Slater who works with me. It’s a small shop. We’ve been able to work with some incredible people, who are doing other things related to our work in the social equity space, the diversity and inclusion space, investees, which I’m happy to tell you about later and other organizations who are also investing in things and people that we’re interested in. But our overall goal is to demystify the impact investing in gender lens investing opportunities to put a spotlight on the fact that many people are overlooked because of where they come from or what they look like. They run business models that are a little bit different than the things that are usually funded and they’re offering products and services that are targeting markets, consumers that are often being underrepresented, overlooked, undervalued and there is a wealth of opportunity from a social economic perspective as well as just from a business financial perspective. These are some of the threads that we leave together here at miracle.

Jenelle:
And this is something you’ve been at for quite some time, certainly have emerged as one of the thought leaders within the space across the country. Your partners at Marigold have facilitated over a hundred million in impact investments. Can you tell us a little bit about a stat or a metric that you believe speaks to the impact this capital has had?

Jonathan Hera:
Yeah, yeah. Good question. Let me give you some of the stuff that I think you’re asking about and then maybe I’ll speak to the things that I’m actually quite proud of. We have had a number of traditional exits with their companies, meaning they’ve done well, they’ve been able to repay us back, they’ve found more consumers, they’re sustainable, all of that kind of stuff. We have 24 of those in our history. In terms of a financial return, we have a near 23% net unrealized IRR, which is really, really good and we have a 10.3% realized IRR. So, from a financial perspective, those numbers are really strong. Maybe more interestingly, we’ve seen most of our companies take on follow on funding where they’ve needed it, not all of them need it, of course. And most of the times that follow on funding is coming through syndication meaning, we’ve brought other partners or other investors along to the table and they’ve come along for the ride. Those are kind of some of the standard things that we’re really proud of, the standard metrics or stats.

Jonathan Hera:
Some of the things that I really liked that we don’t normally talk about is the fact that, because Abigail and I have been early to this, we’ve been able to bring other organizations and people into the mix. We’ve been involved in many investment committees or advisory boards that have seen a number of organizations really get off the ground. Most of my track record, as an example, and much of Abby’s track record has come from Grand Challenges Canada, The Royal Bank of Canada, SheEO, Serona Asset Management, which are all really well known firms in the Canadian landscape or global landscape and there are many others. For example, Abby and I first met, and we’re working from home, so that was one of my daughters. I apologize for that. We first met at, good cause we’re probably gonna see more of it or hear more of it in a second. We met at an organization called YSI, Youth Social Innovation Capital Fund, which is being run by Jory Cohen at the time. And Jory Cohen remains a good friend of ours and he’s now at the in spirit foundation and my point here is to say, we had a number of people who came through that organization, who have since gone on to do bigger and better things and so Jory is one of them.

Jonathan Hera:
A young woman named Matoo and a young woman named Syeda were both working at purpose capital, which was now called Rally Assets. Both of them were working with us volunteering at the time and they’ve gone on to do other work in the space. I actually had the chance to hire Syeda at Grand Challenges Canada, for example. A woman named Leatt was on our investment committee. I had a chance to bring her over to Grand Challenges Canada, as well. And these are a few examples. My point here is we’ve been able to grow the space by working with a few key individuals and organizations and that’s not something that is directly related to us. The people are amazing onto themselves, It’s not as though we single handedly grew the space, i’m not trying to say that, but what I really like is sharing these kinds of stories that it really is a tight knit community and it’s really hard to sort of speak to this metric or stat of building a community from its early days, but I think it’s really important especially to our work. I want it to maybe speak to that a little bit before we go further, even though it’s not the super tangible thing that you’d expect me to say.

Jenelle:
No, I think it’s great. I mean, there’s nothing more powerful as we continuously see, even in data, than the collective action of impact and organizations collaborating or working towards specific outcomes together. Whether that’s in the finance space or on the programming side or the company side. I think it’s certainly something to be really proud of and be in, having been at the beginning of pulling together a lot of collaboration across those companies. Oftentimes we will talk about stats and metrics, but understand that the stories or anecdotes can be a lot more powerful. Can you tell us some stories or anecdotes that you believe highlights the impact that Marigold has had?

Jonathan Hera:
Yeah. At Marigold, we’ve been able to work with a few key foundations. Family offices where we help them devise their investment thesis and also help them run due diligence on opportunities and so that all sounds normal. But as I was saying, when we first began our talk, we truly embed gender and social equity into the entire process. I described very quickly what that means and let me just do it one more time, maybe with a little bit more nuance. We look at what the product and service is and who it’s trying to support. We look at how that product or service is being delivered. Is it being delivered to increase access, deliver more value? Is it cost effective? Is the quality there? Really ensuring that the consumer’s voice, or client’s voice or the user’s voice is fully captured. Meaning it’s not a product that is being developed by someone in an isolated lab and then thrown out into the market, but ensuring that the human centered design of the product or services is fully there and then that the business model then helps it get to that market appropriately.

Jonathan Hera:
I’m saying all of this to say, we also look at the people, of course, who run the organization. Where do they procure from? How do they make decisions? How do they care for their teams? All of these things are embedded in the diligence process that we like to teach and we like to support. Are there other ways of constructing a deal? Meaning, does it always have to be equity or does it always have to be debt? Can it be a bit of both? Are there gendered or social dynamics, biases, inter-sectional elements there that can provide greater value or help mitigate certain risks? And the answer is, of course, yes. The way we speak to people, simply is that, what time we speak to people. You heard one of my daughters screaming. I’m not at an office, i’m at home. There are certain social elements, of course with that, that doesn’t mean I’m a less, or a greater or lesser entrepreneur because of that. If you put all of this together in a cauldron and start, you know sloshing things around creating a stew here, we get to see interesting things come out.

Jonathan Hera:
The point here I’m trying to make is, when we do all of this stuff, we end up looking at things differently and we end up investing in, or providing capital or different kinds of support to different things, to different people, to different markets. The actual punchline is this, I’ve become quite fascinated me, myself, Jonathan with investing in Femtech and sexual reproductive health and rights as a category, which is really under-invested, of course, as you can imagine. And if you think about people who are even more marginalized beyond anyone who’s not CIS male along a gender spectrum, there are also rural populations, there’s also billions of minorities that are left out from being able to access certain things if you think about domestic markets, but if you think about emerging or frontier markets, then there’s also the base of the pyramid issues that you might need to consider.

Jonathan Hera:
All of this to say, we’ve been able to invest in things like an over the counter morning after pill. We’ve been able to invest in many educational programs around sanitary napkins. We’ve been able to invest in numerous producers of sanitary napkins that source ethically from banana fibers or something like that. We’ve been able to invest in screening by providing transportation subsidies or screening subsidies for people who can’t necessarily afford to take the bus or a taxi or whatever it is to get to their antenatal care visits. All of these sorts of things would be normally left off the table from a traditional investment process. A long winded response here, I apologize for that, but the point is if you start putting all of these pieces together around what we do, we end up looking at opportunities differently and there may be in fact more important than some of the other sexy, shiny new products that you’d normally look at and can do just as well financially, if not better than some of the other things that we’re looking at. I apologize for being long winded there, but I kind of got excited and wanted to give you a few examples as we spoke.

Jenelle:
No, that’s really helpful and it, I mean, certainly not only do you have an area that you’re passionate about, but also that you’ve identified is probably quite under or is underfunded and therefore you know, there’s a lot of opportunity to drive impact and make a real difference. I think that’s really great. Is there any other stories about other companies that you wanted to share? Examples of impact versus impact in that 13:21?

Jonathan Hera:
Well, maybe I will say this and It’s very related. Instead of just investing in companies, which is all fine and good, investing and solving for underlying problems, market failures, ways of building community, that’s something that we also need to do. If we continue on the theme of investing in FinTech or sexual reproductive health and rights, there are many, many players in companies in the space and in theory you can invest in them all and not solve the problem. There are many problems, not just the problem, but if we start thinking about how to build an ecosystem, how they can work together in terms of partnerships, in terms of building a more coherent, strengthened supply chain, value chain, how they can share resources among each other, all of these sorts of things starts to build community.

Jonathan Hera:
All of these things start to talk about building a market, an industry as opposed to individual competitors, which is the antithesis generally to most VCs where they’ll say, okay, we see one company in this space doing this thing, we’re going to invest in them and then we’re going to make sure that they beat everybody else who’s doing similar or related things. This is the opposite of that. This is saying maybe the CEO here is really good at X and Y but not at A or B. But this CEO over here is really good at A and B and could really help on these elements and maybe there’s a partnership, so on and so forth. The example here, is we’ve run several events where people come together to talk about their issues and it’s not just to talk about issues, I mean that’s cathartic in and of itself and in these times, mental health breaks is probably a really good thing for all of us. To actually then take away actionable items where you can begin working together is really, really important.

Jonathan Hera:
We’ve run events together where entrepreneurs can share resources and then form partnerships as a result. This costs money. This isn’t directly related to investment. I think it would be difficult to capture the exact value from a dollar figure of some of these things. But if we firmly believe that we would not have the opportunity to have successful businesses that we’ve invested in If we don’t help, you know, build the ecosystem, the community, the infrastructure, whatever you want to call these buzz jargony words, that is around all of these entrepreneurs. And so, that’s just what I want to say, that we’ve run those and I think they really are part and parcel to our overall thesis of community building, even though they’re not direct investments.

Jenelle:
That’s a powerful statement around building up the industry or the cluster, cause then in essence it becomes a holistic approach ensuring the likelihood of success of the companies or the communities that are being invested with the intention of moving the dial, of solving the problem. Recently, Jonathan, you alluded to this at the beginning. Marigold capital began raising some money for a new fund. Can you tell us a little bit about what motivated you to start the fund and what your impact goals are for the coming year for the fund?

Jonathan Hera:
Yea, so this great timing. We’re doing this, if I can say we’re recording this on March 24th, 2020. I’m not sure when this will come up, and it’s a really interesting time to be having this conversation. We were getting very close to reaching our first close. Essentially, if you’re not familiar with the way funds work, you normally will hit a first close that gives you some capital to start running and making investments and then you have a couple of other closes within a year or so, that enable you to raise the rest of the money from other investors and then you go. We didn’t have that first close, we were expecting it in April of this year and we’re now dealing with Covid-19 and obviously, that’s not something that we’re going to do in April. The purpose for the fund was one, Abby and I are better investors than we are at, what do you want to call it, community managers or thought leaders or whatever, I mean, our experience is investing. If we can have anything that we can share with others, happy to do it, but what we’re best at is getting things related to the fund.

Jonathan Hera:
From a personal perspective or professional perspective, that’s why we we work so hard. From a worker perspective, I will say this is both an opportunity and a challenge, is that we’re one of the few teams that have done this stuff before and that list is growing and I’m very happy about that, but they’re really, really necessary work of funding, underfunded sectors, overlooked people, under valued consumers or markets. My goodness, we need a ton of money to go into these spaces and we’re not gonna get there with what we currently have in place. It kind of seems like a challenge, because it’s new and it’s scary to invest in certain things, but it’s also an opportunity, because we’ve done it before and we think we’ll be successful doing it again. The market timing of COVID-19 is the interesting part to be very, very honest.

Jonathan Hera:
Some of the things that we’re trying to tackle with this new fund, you asked me about short term goals and I think staying alive from a health perspective, first and foremost. As a business staying alive, so keeping our doors open, being as responsible as we can as global citizens to help thy neighbor, that’s something that we’re working on right now. We’re not asking anybody for money right now, that would be crazy. No one’s going to be saying, yes, let’s make some investments. As you’ll see in the market, if you’re not already seeing it now, the public markets are drying up. There’s some movement there. People are investing commodities, that’s to be expected. But we’re also seeing a lot of movement in the later stages of the private markets and who knows what we’ll see a week from now, two weeks from now. But it would be very foolish and callous of us, if that’s the word to be saying, Hey, we said we’re going to close, you said you’re in, let’s invest, let’s go. That’s just not really who we are and I think it smells off. What happens in the next 12 months is, let’s stay alive. Let’s keep the business afloat by doing some of the consulting work if necessary.

Jonathan Hera:
Let’s keep nurturing all these relationships as best we can and let’s see where things go. I think honestly, it’s too early to tell. Surround ourselves with good people, with family. Be the best we can with others and we’ll get there. Beyond that, that’s not really what you’re interested in, or maybe you are, who knows? But beyond that, some of the things that we’re really looking at, in terms of indicators, measures, determinants, you kind of track these out into four areas for the fund. Health education and advocacy, economic development and safety and rights. Those four buckets of course all align to various SDGs. We’re really looking at morbidity, mortality rates. We’re looking at completion of training programs, university and salary and title advancements. We’re looking at overall household wealth and who and how household spending is controlled. We’re looking at number of minorities experiencing abuse, assault, gender based violence. Guess what, as we’re all being good citizens and isolating at home, there are spikes in domestic violence.

Jonathan Hera:
We are already seeing reports from China that, whether because the offices were closed or whether because people can’t stand each other when they’re around each other too much, there are spikes in filing for divorce. That’s something that we’re after. We’re looking at safe screening for reproductive health for mental illness using technology. It’s going to be a massive, massive opportunity as we get out of COVID-19 situations. There’s many other things around safety, around discrimination, harassment, worker representation, all of these things, labor force participation. That’s generally what we’re after.

Jonathan Hera:
And I think the importance of our thesis of our fund has doubled, has tripled, maybe even beyond that with COVID-19 and as we’re looking to build new communities and we’re looking to come out of things, it’s clearly not going to be business as usual when we come out of this and the opportunity to revisit traditional venture capital models, traditional investment models, traditional sectors, and whatever we’re looking at, that’s gonna change. I’m not saying we’re in the perfect position, that sounds horrible, but I do think we’re thinking about things and talking to people in order to sort of get there. That might be favorable for us all. Maybe not the answer you were expecting, but that’s kind of where we’re at. Really early days of this situation.

Jenelle:
And that was a very heartfelt and genuine answer. Very much appreciate you still going into the details of all the very specific things that you will be tracking and are looking for to track that’s important to you and your partner at Marigold Capital. And just recognizing the reality of what it takes to be able to invest and impact in the different environmental and social challenges that will impact how we even go about raising those funds, so I think it was all really insightful and interesting. Thank you so much, Jonathan, for speaking with us and our audience today. It’s been a pleasure.

Jonathan Hera:
Yeah, thank you so much for the opportunity. It’s been fun. Thank you.

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