Footprint: Why We Invested

By Catherine Lien and Priya Parrish

The Packaging sector is the largest user of plastics, producing ~150M tons of plastic packaging waste annually (Citi). In the U.S. alone, 80M tons of packaging waste is produced per year, 40% of which ends up in a landfill (EPA.gov). It is estimated that half of all packaging waste is produced by the food and beverage industry. Single-use plastics are especially problematic because most products cannot be recycled or composted. Additionally, from 2019 through 2050, CO2 emissions from plastic production and incineration could equate to 56 billion tons, or almost 50 times the annual emissions of all of the coal power plants in the U.S. (NPR.org)

Solution

Footprint International Holdco, Inc (“Footprint”) is one of the market leaders in biodegradable, fiber-based food packaging. Its packaging solutions eliminate single-use plastics in the food and beverage sector with products such as protein trays, shelf-stable cups, produce tills, straws, beverage rings and lids, and frozen food packaging. Footprint’s products are oil & water leak proof, freezer & microwave & oven safe, water resistant, and shelf-stable as well as 100% compostable, recyclable and repulpable, biodegradable, and ocean safe.To-date, Footprint has been issued 6 patents and has submitted 18 U.S. and international patents.

Why We Invested

Footprint’s IP-backed solutions demonstrate superior product performance for the most challenging food applications. We believe Footprint is poised to grow as their customer base includes the largest CPG and Food companies who are all large end users of single-use plastic food packaging. Footprint’s leadership team brings a culture of innovation — the Company’s founders Troy Swope and Yoke Chung were previously engineering managers at Intel and its Board of Directors includes leadership with backgrounds from Sproutz, Salesforce, and Intel.

Impact

We believe, based on company-provided information, that Footprint has the ability to make a tremendous positive impact on climate change and the environment by replacing single-use plastics. Since its founding in 2013 through December 31, 2018, Footprint has (i) replaced 50M pounds of plastic, (ii) saved over 38M kilograms of CO2 equivalent emissions, and (iii) saved over 1.4 billion megajoules of energy. Upstream in its supply chain, Footprint obtains its feedstock from sustainable North American fiber sources certified by the Sustainable Forestry Initiative and Forest Steward Council. At the end of life, Footprint’s products are 100% biodegradable, recyclable and repulpable in a modern landfill or water.

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In Defense of Private Equity: Why Our Society Needs Middle Market Investments

By Priya Parrish

The private equity industry is increasingly under scrutiny from policymakers and the public about its negative impact on society. The failed turnaround of Toy ‘R Us, for example, raised questions about whether private equity funds profited on the backs of employees who lost their jobs. Failures and bad apples will exist in any high risk/reward industry, yet the oversimplified narrative about private equity funds using massive amounts of leverage, irrationally cutting jobs, and leading ill-conceived mergers being the only way to turn a profit misses the bigger picture. There are also countless examples of funds helping companies scale business through massive job creation, disruptive innovations, and lower prices. These are positives that are being amplified as intentional impact investors are entering the field.

While venture capital investments are more easily understood as capital to build a new business, private equity funds invest in established companies that need capital to develop new products, expand teams, pursue mergers and acquisitions, and restructure balance sheets. These support a range of outcomes such as revenue growth, improvement of margins or profits, or the turnaround of a distressed business. Companies that nearly failed due to economic recessions, for example, have also successfully been able to save jobs due to private equity investment.

With fewer companies going public, there are approximately 200,000 private middle market companies that, without capital, cannot continue to be the engine that employs approximately 35% of private sector jobs in the U.S. These companies are spread across rural and urban geographies and include every sector from manufacturing to technology and healthcare. Many create goods or sell services that benefit more than just their employees. For example, take Impact Engine’s recent investments: the combined company of Insight Telepsychiatry and Regroup Telehealth provides critical mental health services to the 51% of counties in the U.S. that otherwise lack access due to provider shortages, and Footprint International manufacturers biodegradable packaging that has diverted 60 million pounds of plastic.

None of this means that misalignment of incentives is not a serious issue in the industry that must be addressed. Short time horizons for determining compensation, high management fees on large funds that can create significant wealth without significant returns for investors, and lack of transparency about fund expenses are some of the many reasons investors and the public should continue to demand more from an industry with tremendous power and influence over society. However, I urge policy makers not to throw the baby out with the bathwater. The ability of a large profit incentive to motivate people to fund and partner with businesses that can create high positive impact, and may otherwise not succeed, is a unique differentiator in our economy that must be made better, not taken apart.

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Plum: Why We Invested

By Elizabeth Coston McCluskey and Tasha Seitz

The nature of work is fundamentally changing as technology starts to displace jobs and traditional, linear career paths become a thing of the past. A 2017 McKinsey study estimated that 6 out of 10 occupations had at least 30% of activities that could be automated, and that 400–800 million workers could be displaced between now and 2030. The transition is happening rapidly, which means new tools are needed to effectively hire and manage talent. While education and work experience have historically been the primary indicators of potential success within a job, it is difficult to rely upon them to identify “best fit” jobs outside of traditional career paths, and they are prone to implicit bias.

Diversity matters to performance: another McKinsey study suggests that companies with strong gender diversity are 15% more likely to outperform their peers, and those with strong racial and ethnic diversity are 35% more likely to outperform. However, most companies struggle to increase the diversity of their workforce, and artificial intelligence-based tools that use existing hiring practices and patterns may exacerbate the problem by incorporating humans’ implicit biases into algorithms.

Solution

Plum provides an affordable, scalable technology-based platform to assess the potential of candidates and employees and match them to job opportunities where there is a strong fit, thus improving their likelihood to be successful in the role and increase their potential for future advancement. Unlike alternative solutions that may embed implicit bias into algorithms, Plum’s evidence-based assessment evaluates an individual’s talents based on the Big Five personality traits. Talents are not previously demonstrated skills, but innate strengths, which enable Plum to match individuals to the environments and job roles where those strengths will be highlighted and lead to greater success and realization of that individual’s potential.

In addition, Plum’s platform also enables hiring managers and teams to assess job roles on the platform, defining the types of strengths and talents that the roles require. This is an important element of Plum’s ability to create good matches, by collecting and reflecting the expectations and priorities of the hiring team and enabling the teams to reassess their needs dynamically as roles and business environments evolve. By providing a low-cost platform that can scale to every existing employee and job candidate, Plum has the potential to improve performance and retention as well as drive increasing diversity and open up career advancement opportunities to individuals that might not otherwise be considered.

Why We Invested

The opportunity for talent management is a large one, with the market approaching $8 billion and growing at 18% per year. Plum has proven its value both through validating its assessment tool and through deployment at several dozen employer customers that can point to improvement in retention and diversity. The company has been selected by SAP.io as one of two partners in talent assessment that they will sell through their North American sales channel, and by Deloitte, which will be incorporating Plum’s platform into its emerging leaders program to identify and develop rising talent at client organizations.

In evaluating companies that seek to increase diversity, equity and inclusion in the workplace, we often struggle with the self-selection bias: those companies that care most about DEI are the most likely purchasers, therefore the incremental impact is not as great as for companies that don’t recognize or prioritize the issue. Because Plum leads with with employee performance and retention as a primary business value proposition, we’re excited about their potential to drive increasing diversity at employers that might not otherwise purchase a DEI-specific platform.

Impact

We see two primary drivers of impact:

• Economic empowerment: if individuals are matched with job roles that are best suited to their innate strengths and talents, this should lead to better performance, increased retention and improved career advancement, which should lead to greater earnings over time. As an initial proof point, one customer case study showed annual employee turnover decreased from 30% to 6%, which benefits both employer and employees. In this example, the Plum platform proved to be such a strong predictor that the company decided to eliminate resumes from the hiring process altogether.

• Diversity: if Plum is used at the top of the funnel to identify best-fit candidates, it should reduce the negative impact of implicit bias in the hiring process and lead to an improvement in the diversity of candidate pool. The same is true in identifying and developing emerging, high potential leaders within a company. In another customer case study, the use of Plum in a company in the traditionally male-dominated construction industry led to the percentage of women increasing to 25%, as compared to an industry average of 9%.

11 Tips for Driving Sales: Overheard at the Impact Engine Portfolio Summit

By Chris Wu

Impact Engine convened a group of industry-leading CEOs and sales experts at our 2019 Portfolio Summit and they offered up their pro tips on how to kick your sales into hyperdrive. Our portfolio companies were treated to a master class with some of the best in the business on a wide variety of sales-related topics. Below is a recap of the Portfolio Summit’s key takeaways.

Sales Hiring

During his career at LinkedIn, Mike Gamson (now the CEO of Relativity) had the rare opportunity to build a sales team from zero up to full maturation, which in the case of LinkedIn meant over 6,000 sales employees. Along the way, he learned a lot about how to develop an effective process for hiring salespeople while also creating the right company culture in an organization that began to experience rocket-like growth trajectory.

• Setting the right culture

One of the first things he did after he started running sales at LinkedIn was to put together a list of traits or values that he wanted the first sales team to embody. The list included things like: bring humility to work, no jerks, and be intellectually curious. It’s important to stay true to these core values. Mike referred to one instance where he had hired someone who was productive and brought in deals, but proved to be a poor fit for the team culture. The individual didn’t uphold the team values, and had already violated some of their guidelines. Mike had to make an important decision — was he prepared to hire and fire people for the sake of culture? Ultimately, he decided to put culture first and bet that the big stuff matters, even if it meant he had to take on short-term professional risk in order to fix things. While the company’s short-term production took a hit when that person was fired, the long-term gain in production from that story set the tone for the rest of the team that over time, far surpassed the initial trough in productivity.

• Diversity & Inclusion

When asked to reflect back on his biggest failure during this high-growth phase at LinkedIn, Mike pointed to the topic of diversity and inclusion. He felt that the organization could have recognized the lack of diversity sooner, which would have allowed them to address it earlier on. LinkedIn would go on to spend thousands of hours to make improvements and with the help of a group of senior women at the firm, they successfully devised and implemented a strategic change plan. Now LinkedIn has 50/50 women parity including senior positions. But looking back, Mike said it would have been far less work if he had the correct process in place from the beginning instead of having to fix it later on.

• Be honest with what you have

From a product perspective, Mike believes there are two types of companies: those with differentiated products and those with commoditized products. The type of product you have will dictate the type of salespeople you should be hiring. When you have a differentiated product, you should actively seek out salespeople who are intellectually curious. They need to believe in your product and have a passion for the benefit that accrues for their customers. With a commodity product, it’s a race to the bottom on price. A salesperson better suited to selling differentiated products will not only cost more, but they will also find selling commoditized products uninspiring.

• SaaS: Salesperson as a Scientist

Mike’s background prior to sales was as a product marketer, which may play a role in how he wants his salespeople to operate. He prefers that they take a scientific and thesis-driven approach to their interactions with the customer. Mike refers to this as Salesperson as a Scientist. He encourages them to constantly observe and record data on the customer’s experience with the product and use that information to develop a hypothesis about what changes they should make to the product rather than running to tell the product team every time a customer asks for a new feature.

• Where to hunt for talent

Mike constantly looks at other organizations to try and identify companies that: a) have established a work culture that he admires, b) provide training to new hires that are extremely applicable at his company, and c) produces inquisitive people who ask great questions. Once he identifies these organizations, he systematically farms new hires from them.

How CEO’s can help their Head of Sales

Sam Yagan has been CEO of a slew of extremely successful D2C tech companies including SparkNotes, OKCupid, and the Match Group. But he had no experience with enterprise sales when he became the CEO of ShopRunner. It was a struggle at first to find the right fit for their Head of Sales. He went through multiple people early on that didn’t work out and their headhunter was constantly trying to force him to settle for candidates that didn’t check off all the boxes or weren’t a fit. For example, one candidate had a great rolodex of key players in the industry but was better suited to selling a mature product, which wasn’t ShopRunner’s world. Eventually he was able to land Chris Ladd, who has spent over 20 years working his way up the ranks at various retail companies. He had managed up to $1.4B P&L’s and as many as 4,000 employees. Chris turned out to be a perfect complement to Sam’s strengths and together they have developed a great multi-pronged approach to closing big enterprise deals.

• Multi-threading through the organization is key

At ShopRunner, Chris and Sam are constantly chasing after large deals that have long sales cycles. Their game plan is to take a multi-pronged approach to developing and eventually closing new deals. They refer to this joint approach as multi-threading. Sam’s role is to share the vision, Chris brings the industry knowledge and retailer perspective, while the rep actually has to work out the details with their counterpart to get the deal done. By engaging the customer at multiple points along the org chart in a complementary fashion, they are able to build in redundancy to the sales process and get to a “yes” in a more efficient, effective manner. Multi-threading allows you to keep the deal alive and on track. It also allows the sales teams to leverage the CEO as a facilitator or unlock deals that are stuck. It isn’t necessarily about closing today — it’s about relationship building. It’s the entrepreneur’s responsibility to build trust with the most senior person you can find on the client side, which takes time. As a result, Chris will often coach his sales team to manage expectations around the sales cycle.

• Scarcity is your friend

If you’re selling ahead of a new product, scarcity can be an effective tactic. If I can’t have you, I want you more. Behavioral science backs this up. When you chase after a sale, people become defensive so you need to defuse that tendency. Holding back can oftentimes create demand. Offering only a limited number of slots for the launch can become an advantage and will help manage the timing of onboarding clients.

Sales Tactics

As the CEO of Jellyvision, Amanda Lannert has been at the helm of one of Chicago’s fastest growing tech companies. The company has added about 100 employees a year while remaining cash flow positive during a recent period of rapid expansion. During this growth period, Jellyvision won numerous awards for its outstanding culture. More than 1,500 companies and 18 million employees in total now use Jellyvision’s software, ALEX, to choose the best benefit plan for their needs.

User experience design is the linchpin to everything Jellyvision does. Their journey has led them to believe that there are three fundamental truths of selling: a) everything is marketing, b) show that you listen and care, and c) we are all human.

• Everything is Marketing

Every customer touch point is an opportunity to make an impression and build your brand. Amanda’s email auto-response to me as we were hammering out the details for her presentation at our Portfolio Summit is a wonderful example of making the most of any and every engagement to show off your brand. See the screenshot below:

• Show That You Listen and Care

Build a culture around capturing all the finer details about a client, which Amanda refers to as instances of humanity, and calling on that. Run towards fires and solve problems because they will feel cared for and as a result will become your biggest evangelist. Jellyvision will often perform what Amanda calls “wild acts of romance”. For example, the account management team sends out hand-woven friendship bracelets for customers to thank them for their trust after they send over sensitive employee information. They also deliver Open-Enrollment Survival Kits to clients acknowledging the busiest time of their client’s year.

• We Are All Human

Companies don’t buy from companies, people buy from people. Don’t get hamstrung on titles; you’re selling to risk takers or innovative buyers regardless of rank. Don’t be boring! Amanda cautions against underestimating how bored people are in their everyday lives. Jellyvision often uses humor to break down what can be a pretty stressful topic for their end use. But humor isn’t the only approach that works. The opposite of being boring is not to be funny — it’s to be interesting. Be interesting and you’ll be surprised out how that draws people out. How can you out-teach, out-joke…out-whatever your competition?

• Lessons Learned about Startup Sales

Jellyvision’s best account reps have been the ones that are highly coachable, intrinsically motivated, and detail-oriented. Before you begin ramping up AE’s, Amanda recommends that you prepare first by defining the ideal customer profile, the buyer personas, and the key problems that they are expected to solve. A sales messaging cheat sheet is another great tool to provide. This all requires a relentless focus on process, because persistence pays off. Their data suggests that 80% of deals require at least 5 touches in order to close.

Sales Pitch and Messaging

Craig Wortmann wears many hats, but the common thread that runs through all of them is sales. As the CEO and Founder of Sales Engine, Craig helps companies improve their sales results. Craig Wortmann is a Clinical Professor of Innovation & Entrepreneurship in the Kellogg Innovation and Entrepreneurship Initiative (KIEI) and founder and executive director of the Kellogg Sales Institute. Craig is also an Operating Partner at Pritzker Group Venture Capital, where he advises portfolio companies on sales. Craig gave some expert guidance on how to message effectively and also offered some ways you can step up your networking game.

Our team is very grateful to have a network of subject matter experts who are committed to supporting Impact Engine’s entrepreneurs and their growing companies. We want to thank Craig Wortmann, Mike Gamson, Sam Yagan, Chris Ladd, and Amanda Lannert for generously contributing their time to our Portfolio Summit, and enabling us to share learnings with the greater Impact Engine community.

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KickUp: Why We Invested

By Elizabeth Coston McCluskey

Schools spend 80% of their budgets on staffing and billions of dollars on professional development for teachers, who spend up to 70 hours per year on those development activities. Despite the significant time and resources dedicated to it, the Gates Foundation finds that large majorities of teachers do not believe that professional development is helping them prepare for the changing nature of their jobs. Of top concern is how to use technology and digital learning tools, how to analyze student data to differentiate instruction, and how to implement the Common Core State Standards and other standards.

Solution

KickUp provides a platform consolidating professional development opportunities, tracking usage and feedback from teachers, and providing infrastructure for teacher coaching and feedback on their classroom practices. The platform enables data collection around professional development activities and effectiveness, and over time will enable districts to correlate professional development activities with improvement in teacher growth and student outcomes.

Why We Invested

We have been interested in professional development for some time, given both the size of the opportunity and the potential for impact. We also see tailwinds from the Every Student Succeeds Act, which requires school and district accountability on professional development spend. KickUp is the most compelling company we’ve seen in the space for a number of reasons. We have been impressed by the company’s early revenue traction and their ability to sell into districts; KickUp currently serves over 100,000 teachers. The team is led by Jeremy Rogoff, a former Teach for America corps member and KIPP teacher, who has experienced the problem firsthand.

Impact

Research from The New Teacher Project concludes that high performing teachers generate 5–6 more months of student learning each year than poor performers. Engaged teachers are more likely to adopt best practice instructional strategies, which should lead to better student performance. KickUp helps engage teachers in their professional development, and enables district-wide adoption of research-backed instructional strategies. While it’s still early days, KickUp has shown increases in teacher engagement of up to 70% in some districts. And schools that work with KickUp show a 10x increase in project-based learning instruction.

Climb Credit: Why We Invested

By Elizabeth Coston McCluskey and Sarah McGraw

Robert F. Smith’s recent pledge to pay off the student debt of 2019 graduates from Morehouse College renewed the conversation about the burden of student loan debt. According to the Federal Reserve, over half of young adults who went to college in the U.S. in 2018 took out student loans and will graduate with an average debt balance of $29,800. They join the more than 44 million borrowers who collectively owe an astounding $1.5 trillion in student loans — more than two and a half times what American students owed a decade earlier.

As a result, an entire generation of student borrowers are struggling to make ends meet — and only half say that the lifetime financial benefits of their degree outweigh the cost. Lifetime earning power varies significantly by higher education institution and even by degree program. Alternative pathways, such as Associate’s degrees and certificate programs, often offer a better return on investment — but it is difficult for students to assess the quality of and access financing for programs that do not qualify for Title IV funding (federal loans and grants).

Solution

Enter Climb Credit, a financial technology start-up that offers an alternative approach to financing affordable and compelling professional training programs. This can include anything from getting a commercial truck driving license or a crane operator certification to an Associates degree in nursing from a technical college or a certificate in web development. Founded in 2014, Climb finances alternative education costs for students at hundreds of schools across the country that it has pre-qualified based on a track record of meaningfully improving graduates’ earning potential. Prior to onboarding a school onto its platform, Climb evaluates its ROI potential by analyzing graduation rates, job placement rates, and the increase in pre- vs. post-program salaries, compared to the total cost of education (including loans and lost wages while in school). By vetting schools for quality as well as their ability to deliver results and provide affordable financing for students, Climb Credit enables students to continue their education and transition into better paying jobs.

Why We Invested

Traditional lenders tend to focus on loans for university degrees, rather than professional training, creating a significant gap in the marketplace. Climb Credit not only targets this underserved market, it offers affordable financing to students — targeting a much wider range of credit profiles — because it believes in the wage-increasing potential of the programs it finances. In January, Climb secured $50 million in lending capital from Goldman Sachs Urban Investment Group, further expanding its ability to meet student demand. As it grows, Climb will continue to drive meaningful economic empowerment for its students by helping them identify, evaluate, and finance programs that increase their earning potential.

Climb Credit’s rapid growth has been driven by a talented and dedicated team, led by CEO Angela Galardi Ceresnie. Angela is an impressive leader with a strong grasp of the business, deep industry experience, and a commitment to advancing economic outcomes for underserved students. Prior to Climb, Angela co-founded and served as COO/CFO of Orchard — an investment platform for peer-to-peer and online direct lending that was eventually acquired by Kabbage. Before her time at Orchard, Angela spent nine years running credit risk analytics teams at American Express and Citibank.

Impact

To date, Climb has originated over $100 million worth of loans to over 10,000 students across a variety of programs, including software development, UI/UX design, robotics, welding, nursing, and trucking. The typical loan size is approximately $10,000 with an interest rate of between 8.5 and 9%. On average, Climb’s programs offer a job placement rate of 80% and graduates see a median salary increase of 67%. As CEO Angela Galardi Ceresnie puts it, “By aligning school motivations with student career and salary goals, we open the door for thousands of people who want to change their lives through education.”

Press Highlight

Climb Credit Announces $50 Million in Funding From Goldman Sachs Urban Investment Group