Podcast: The inspiring story of Hello Alice: From a napkin sketch to a big business

In this episode of Fintech Thought Leaders, QED's Head of Early Stage Investments Bill Cilluffo speaks with Hello Alice co-founders, CEO Carolyn Rodz and President Elizabeth Gore.

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Show notes

Bios

Bill Cilluffo joined QED as a Special Advisor in the fall of 2014 and became a Partner in 2015. He is currently Head of Early Stage Investments after six years as Head of International, leading QED’s Investment teams in Latin America, Europe and Asia.

Prior to joining QED, Bill spent nearly 20 years at Capital One, spanning several roles and leading several businesses. He spent the first 6 years of his career leading Marketing, product development and credit policy for Capital One’s subprime credit card business; ultimately having overall P&L responsibility, and growing the business to become the most significant player in the market. He moved on to spend 2 years in various new business development roles, spanning the telecom, medical finance and small business finance industries. Bill spent 3 years as Deputy Chief Credit Officer for the bank, playing nearly every role there was to play in the central credit function, after helping build the department from scratch in 2002.

Bill then pivoted his career to general management, leading Capital One’s Canadian, and ultimately International businesses, over the course of 6 years. Profitability of the business grew significantly under Bill’s leadership, through new product and channel introductions, acquisitions, and significant cost take out. During Bill’s last 3 years at Capital One, he led its Co-Brand and Private Label credit card business, building the business nearly from scratch to one of the top few players in the US market, through a series of acquisitions, most notably including leading the acquisition and post-merger integration of HSBC’s US credit card business, which closed in May 2012.

Bill graduated with a BA in economics from the University of Michigan, and competed the SEP program at Stanford GSB.

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Carolyn Rodz is an investment banker turned three-time award winning Latina entrepreneur from Bolivia. Carolyn serves as the co-founder and CEO of Hello Alice. During her time at Hello Alice, Carolyn was recognized as a “17 Women to Watch,” by Inc. Magazine, in 2020 was named Hispanic CEO of the year by the Hispanic Chamber of Commerce, has testified before the U.S. Congressional House Small Business Committee, and was featured in a U.S. Senate report by Senator Shaheen titled, “Tackling the Gender Gap: What Women Entrepreneurs Need to Thrive.”

She was selected by Mayor Turner of Houston to co-chair the Women and Minority Small Business Task Force in 2019. With her previous companies she was stated as “Woman to Watch,” by Entrepreneur Magazine, American Express Micro to Millions awardee, and has been featured in Inc., Forbes, Fortune, and more for her work toward building entrepreneurial ecosystems. Prior to Hello Alice, Carolyn launched the world’s first completely virtual accelerator, supporting over 300 women from across the United States and internationally and helped them raise over $76 million in investments. Fast Company highlighted the accelerator as the “most innovative and fastest growing for women.”

It was this experience that ultimately spurred the formation of Hello Alice, as Carolyn recognized that the inequities facing women entrepreneurs resulted largely from lack of awareness and access to existing resources and networks -- problems that not only faced women, but all marginalized populations. Circular Board also hosted the world’s first “Pitch With Purpose,” a pitch competition awarding $25,000 to a company supporting the United Nations Sustainable Development Goals.
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Previously, Carolyn scaled and sold a marketing firm, Cake, that developed technology-driven marketing analytics solutions. Headquartered in Houston, Texas, Cake was viewed as one of the early data analytics utilized by enterprise companies to streamline their marketing. Carolyn’s first company, Signatures was a luxury retail line that sold in over 400 stores worldwide, including Neiman Marcus, Harrods, and Bloomingdales. Additional recognitions include being selected as a delegate to the United Nations Foundation Global Accelerator. She is a member of the Dell Women’s Entrepreneur Network, and a featured Dell influencer, a Fortune Most Powerful Women attendee, a Sam Walton Emerging Entrepreneur. Carolyn presented the keynote at TEDx Austin on the topic of failure, and serves as a regular contributor to major media outlets.

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Elizabeth Gore is a highly accomplished business leader and entrepreneur who has made significant contributions to the world of finance, technology, and social entrepreneurship. As the co-founder and president of Hello Alice, she is committed to empowering small and medium businesses to achieve equitable access to capital, by building the largest community of business owners in the country, hosting over one million SMBs. Through her work, Elizabeth is breaking down barriers for entrepreneurs from diverse backgrounds, including women, people of color, veterans, and persons with disabilities.

Prior to her role at Hello Alice, Elizabeth served as the entrepreneur-in-residence at Dell Technologies, where she played a key role in driving initiatives to support small and medium businesses to scale and prosper, expanding global entrepreneurship. Currently, Elizabeth sits on the Board for Bunker Labs, an entrepreneur organization for Veterans and military spouses. She also advises the growth of purpose-driven companies and is an investing limited partner with Portfolia fund. Elizabeth is an advisor to Ring Ventures, a Texas A&M University oriented investment fund, and part owner of Gore Family Vineyards in Sonoma County. Elizabeth's contributions to social entrepreneurship are unparalleled. She served the United Nations Foundation for nearly a decade, where she was the vice president of global partnerships. During her tenure, Elizabeth founded strategic grassroots efforts like Nothing But Nets and Girl Up which have had a profound impact on the lives of millions of people around the world.

Elizabeth is the emeritus chair of the United Nations Foundation’s Global Entrepreneurs Council and continues to play an active role in supporting entrepreneurship initiatives around the world. Elizabeth is a proud former United States Peace Corps Volunteer where she served in Bolivia, South America. Elizabeth has been recognized for her work in various media outlets, including ABC, CBS, CNN, MSNBC, Fox Business, Fortune, Glamour, and Time. She has also been named one of People magazine’s “Top 100 Extraordinary Women,” one of Fast Company’s “Most Creative People in Business,” and one of Entrepreneur Magazine’s “Women to Watch.”
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In addition to her professional accomplishments, Elizabeth is a world champion equestrian, a sprint triathlete, and has climbed Mt. Kilimanjaro to raise awareness on behalf of the UN. She serves on the board of The Global Entrepreneurship Network, which operates a platform of projects and programs in 180+ countries. Elizabeth holds an undergraduate and masters degree from Texas A&M University and resides in Sonoma County, Calif., with her husband, James Gore, a California elected official, and their two hilarious children.

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About Hello Alice

A free multi-channel platform powered by data driven technology, Hello Alice guides business owners by providing access to funding, networks and services. Through a network of over a million companies in all 50 states and across the globe, Hello Alice is building the largest community of business owners in the country while tracking data and trends to increase owner success rate.

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Full transcript

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Bill Cilluffo:

You are listening to the Fintech Thought Leaders podcast from QED Investors, your deep dive into the world of venture capital and financial services with today's digital disruptors. QED is a global venture capital firm focused on investing in fintech companies all the way from pre-seed to IPO. Fintech Thought Leaders brings together the most talented entrepreneurs tackling today's biggest problems. If you're looking to learn more about what motivates our founders and team members to succeed, you're in the right place.

Hello and welcome to the Fintech Thought Leaders podcast. I'm Bill Cilluffo, head of Early Stage Investments at QED Investors. Today on the podcast, I'm excited to be joined by Hello Alice co-founders, CEO, Carolyn Rodz and president, Elizabeth Gore. Ladies, welcome to the podcast.

Elizabeth Gore:

Howdy

Carolyn Rodz:

Thank you, Bill.

Bill Cilluffo:

So this one's going to be really exciting, I think for a couple different reasons. Not only is Hello Alice a really exciting story and look forward to having the listeners hear all about it, it's the first time we've ever had two guests on at the same time. So you guys will tax my interviewer skills, hopefully I can rise to the occasion. But probably the most interesting conversation we're going to have is actually related to a lawsuit that Hello Alice is going through, which really kind of cuts at the core of many of the principles that Hello Alice and us at QED hold dear. So we'll probably cover that later on in the discussion, but just wanted to tease the listeners to listen to that. I think it'll be one of the most interesting conversations that we've had on this podcast to date.

But to get us started, before we get into too much of the details, Carolyn, I wonder if you could just give maybe a little bit of a 60-second commercial on what Hello Alice is and what y'all do.

Carolyn Rodz:

Sure. Hello Alice is a digital platform that connects over 1.3 million small business owners to the capital connections and opportunities that they need to build healthier businesses. We're taking into account their business and personal data profile and making sure they get the best resources at the right moment in time to push their companies forward, help them build healthy, strong and sustainable businesses that benefit all of us.

Bill Cilluffo:

That's awesome. Do you have an example of what one of the more common services that you offer to help businesses?

Carolyn Rodz:

Yeah, we focus very much on Main Street businesses, whether it's a restaurant in your local community or whether it's a accountant or service provider, but making sure that they, one, understand the fundamentals of their business. How are they building healthy financials? How are they making sure that they're building operational efficiencies into their company? We focus a lot on access to capital and we've built a really early stage capital continuum. Starting with our grants program, we've deployed nearly $40 million in grants. We have a credit card program, both a secured and unsecured card that serves as a community tool, a credit enhancement tool, and a credit card all wrapped into one. We have a lending marketplace where we focus on really early stage loans from CDFIs or specialty funds that are targeting entrepreneurs when mainstream capital doesn't work for them all with the goal of moving them into the financial tools that they can access at their local bank.

But the reality is most small businesses aren't yet ready for those tools and that's where Hello Alice steps in to make sure that they're getting those stepping stones along the way for the freedom of choice so they can walk into their bank and access a loan like many later stage companies are able to do.

Bill Cilluffo:

Perfect. I mean, it's I think long been true that small businesses are some of the more underserved customers and not just America, but really around the world.

Elizabeth Gore:

We have a huge focus on the new majority of entrepreneurs, so women, people of color, veterans, people with disabilities, making sure that we're really focusing on those that have been traditionally underserved and in providing a really diverse set of tools to a really diverse audience that's representative of what small business looks like today in America.

Bill Cilluffo:

Perfect, perfect. Well, I look forward to getting into more details on the company a little later on in the podcast. But we'd love to start a little bit by hearing a bit about y'all's backgrounds, kind of what led you to the point we're at. So Elizabeth, I wonder if we can start with you, just can you give a quick summary of your story and what led up to where you are now?

Elizabeth Gore:

Well, Bill, I am probably the least likely to be sitting here, having grown up in south Texas on a cattle ranch. I was the first woman in my family to go to college and I studied cattle, not finance, so very circuitous route, but actually college did, I went to Texas A&M and opened up my eyes to there's much more to the world than beyond a fence, I guess I could say. And actually had a full career as a humanitarian prior to going into the private sector. So worked for former President Bush 41 at his Point of Light Foundation and then joined the Peace Corps, very proud to serve in the US Peace Corps in South America.

And then was with the UN for 10 years, and it was there that I really got focused and passionate about the power of the micro economy. For me, it was in developing countries that anywhere where the UN was leaving, whether it was after national disaster or war, which is super relevant right now, if you didn't have small business up and running, you will end up with a failed state. And when I came home and really focused on the US, I realized it was just as important here and so jumped into the private sector, had the great pleasure to work for Michael Dell as his entrepreneur residence, and then I met the most brilliant entrepreneur I've ever met in my life, Carolyn Rods and our story continued from there.

Bill Cilluffo:

That's amazing. Okay, so I have to ask a follow-up on the cattle piece. You probably get follow-ups all the time. So I'm about three quarters of the way through binge watching Yellowstone. How realistic is this or how fake is this? I need to know.

Elizabeth Gore:

Oh my God. Well, I've watched the whole thing twice if that gives you an idea and this drives Carolyn nuts. But my passion at Yellowstone is twofold. One is the horsemanship, so I'm a world champion equestrian. I went to school on a Rodeo scholarship. Most of those cowboys you see on there are actual PRCA legit cowboys and cattle women. And then the second is how hard ranching is. It is very hard to make money in ranching, which my family knows firsthand. The drama side of it, that's just up to you, Bill, whether you like it or not. But Beth and Rip I hope will continue.

Bill Cilluffo:

I will say my wife and I are commenting that every episode has about a five minute gratuitous cowboying scene that has nothing to do with the story and never knew if that was real or fake, and it sounds like it's real. That's exciting to know.

Elizabeth Gore:

It is real.

Bill Cilluffo:

Fantastic. Well, we could explore that in depth on a different pod.

Elizabeth Gore:

Well, I'll say one other thing. If you really want to see what an entrepreneur is, look up Taylor Sheridan, who produced all those. I mean, he's got seven shows right now and went from nothing to, you talk about raising money, which we all do as entrepreneurs. He bought the Four Sixes Ranch when he had nothing, he had to go out and raise that capital. Look that story up. Every entrepreneur should read that story.

Bill Cilluffo:

Wow. I would've never guessed that was real. So I'm going to have to check that out. That's super cool.

Carolyn Rodz:

A lot of it's filmed on his ranch, so it's a really cool story.

Bill Cilluffo:

Nice, nice. So Carolyn, I'd love to hear a bit of your story. That's hard to compete with, but.

Elizabeth Gore:

Oh, trust me. Just wait, just wait.

Carolyn Rodz:

So different. So different. It's funny when the universe brings two people together, it's like there were so many opportunities for Elizabeth and us to cross paths and it took us a while, but I think when we finally came together, I couldn't have picked a better co-founder. Definitely the yin to my yang. It's like every counter that I need for my personality, she definitely fills. My mother is Bolivian, my father, American. I really split my life between Houston and La Paz, Bolivia. Growing up, I would say culturally our family really was much more kind of lean towards my mother's side, on the Bolivian side, a really strong sense of family. We spent a ton of time at my grandparents. They ran a cookie factory, the largest cookie factory in Bolivia, and so we spent a lot of summers there. I interned at that cookie factory.

For me, it was kind of my first exposure to entrepreneurship and in a really tangible way, my father was an entrepreneur as well. He ran a commercial insurance business. Through my father, I learned this incredible work ethic and just focus and persistence to build something from nothing. My dad grew up with no money at all, worked construction to put himself through college, but it was a brilliant, brilliant man.

And my mother had this massive family business and being able to see this established company that really gave back to the community and educated employees and put community investment programs in place was really interesting to me to see what a company could become and how it can make an impact inside a community. And so for me, I think both of those stories together and both of those very contrasting worlds that I sort of jumped back and forth between this middle class life in Houston and then this very, I don't even know how to describe Bolivia, but for me it's just my home. It's home. It's part of my roots for sure. Those together I think just taught me that business really is a path forward.

And so I started off in investment banking at JP Morgan after I graduated from college. Also went to Texas A&M, did not know Elizabeth then, although we have a ton of mutual friends. And I saw the corporate world, but I was most excited about the entrepreneurs, I got to work with the people that had built these massive businesses that had really scaled and it brought me back to those roots of entrepreneurship. So I started two companies prior to Hello Alice, one that failed in the retail space. I've utmost respect for anybody who has to manage inventory and logistics and heavily operational business. That's probably why I gravitated towards tech after. I closed that company down after two years, and it was a really tough experience.

It was the first thing in life that I've poured everything into that didn't work. And I had to prove to myself at that point that I could run a business and I could run a business successfully. And I started a second company in the digital media space that I ultimately ended up selling after seven years. And it proved to me that the same entrepreneur can have really different experiences based on knowledge and access to resources. And after I sold that company, all these doors started opening up to me. People were inviting me to come speak at conferences and join these networks and all these things that I needed at day one that I had no idea existed out there. And here I was, I just had my first child. I just sold my business. So I wasn't even working in that window in between.

And I started deploying all these resources to people that I knew that were in the early stages that needed to know about these opportunities. And I would say, look, don't bring me up on the stage, but bring this other entrepreneur. Don't invite me to this network, but invite this other person in. And that was really the roots of Hello Alice, was just seeing this massive opportunity of how inefficiently word of mouth worked in this environment that what if we could use technology to connect people efficiently and at scale, how would that make a difference? Because I saw it happening at a micro level over and over and over again just based on a phone call or based on an email.

And then I met Elizabeth and I think as she was coming from this really macro level through the UN and through her work with the Global Entrepreneur Council and her work at Dell, seeing this macro perspective, and I came up with a very micro perspective. Here's my experience as a business owner. Here's what I know about technology and how we can solve this problem. Here's how I've seen it impact 1 or 2 or 10 or 60 or 100 entrepreneurs. What could we do together if we made this impact millions of entrepreneurs?

Bill Cilluffo:

That's really cool. So you guys have a lot of common background but didn't know each other at College Station. How did you guys come together and start talking about what eventually became Hello Alice?

Elizabeth Gore:

By the way, I also was in the Peace Corps in Bolivia, which is wild.

Carolyn Rodz:

So we both have really fond memories of Bolivia in a totally different way.

Bill Cilluffo:

That's amazing.

Elizabeth Gore:

Yeah. Lived in Bolivia and then Texas A&M and then none of that was connected. We actually met through a mutual friend and it was right when I was thinking really hard about how do we help more people in an efficient way scale businesses in the United States, particularly women. Carolyn was also in that same thought. She had just built the first, I think very scalable digital accelerator to give back. So she was helping 300 women at a time in this, I thought very scalable way just by herself. So when I was at Dell working for Michael, we sponsored that accelerator, so got to know Carolyn more, and then we just started chatting.

The way the real story goes, we were at this Summit Series event on the side of a mountain camping with a bunch of entrepreneurs, and I was about four beers in. Carolyn was very pregnant, and we were just kind of talking through why does only this amount of venture capital go to women? This amount good loans? And I just thought it was awful and Carolyn kept seeing it as an opportunity and I think that is a real switch for any entrepreneur that sees a macro problem and flips it over to a opportunity, however you want to talk about it.

So I was super attracted to her way of thinking. She's also very technical, I'm not. And I said, can I give you a buzz in a couple of weeks? And I think she thought I was nuts or drank too much or something, and so I did. I called her a few weeks later we met up in New York and she mapped out what was in her head, what is now I would call it the first iteration of what is now Hello Alice. I just thought it was the best thing. We had been looking at Dell for highly scalable solutions to support or invest in after we did the EMC VMware acquisition. And I just thought Carolyn had the best idea. So we were one of those classic groups, never do this, that on a napkin, we wrote out an agreement in a coffee shop in New York of something we could do together and then it grew from there.

Bill Cilluffo:

That's fantastic.

Carolyn Rodz:

And you'll laugh. Our mutual friend that introduced us, we both separately made a phone call to her, we're like, we don't really know each other that well. We're thinking about working together. What do you think? And she's like, you two are so different.

Elizabeth Gore:

Don't do it.

Carolyn Rodz:

I just don't think it's going to work.

Elizabeth Gore:

It won't work.

Carolyn Rodz:

We both ignored her and we worked together anyway and now we always laugh that it was the best decision we could have made.

Bill Cilluffo:

That's great. It's actually fascinating hearing the story of co-founders coming together, how some of them have been friends since they were 12 years old and have created a lemonade stand together and then built and then later did a thing, and then how so many come sort of out of the blue with a random connection and kind of meet that way is definitely no commonality that I've found. It's fascinating to hear the stories.

Elizabeth Gore:

Well, we did fast forward, Bill, in a huge way. We don't talk about this a lot, but we got the opportunity by Michael Dell actually to go help build out the initial engineering of Hello Alice at Pivotal Labs, Rob Mee shop out of San Francisco. Neither of us lived there. Carolyn was in Houston at the time. I was up in Sonoma County. We both had two infants each and I still had a day job and Carolyn had quit to build this, took a huge risk and so we ended up moving in together. It was kind of a crazy thing and we shared, as women entrepreneurs do, we hired probably three babysitters and we just made it work. I think we had a one-year-old and a four-year-old each, and we took the Golden Gate transit bus from Sonoma down to San Francisco every day at 5:00 AM, $7 bus, and we did that until the thing was built and it was a wild, wild time, wild time.

Bill Cilluffo:

How long was that period?

Elizabeth Gore:

It was about a nine month span, and then we actually ended up almost every summer moving near each other and sharing childcare literally up through COVID until this last year. So that's almost eight years in a row. We just found both as working mothers and wanting to be great CEOs, childcare, community people, it is just the way it would work. So we still like each other. We're still together.

Carolyn Rodz:

Needless to say, our husbands and kids are very, very close, so that helps a lot too when we're like we're all coming together every summer all the time.

Bill Cilluffo:

Yeah, that was going to be my next question is if your kids are all still best friends. Sounds like they are.

Elizabeth Gore:

Oh, they love each other.

Carolyn Rodz:

They are.

Elizabeth Gore:

Love each other.

Bill Cilluffo:

Well, I know Carolyn, you're spending some time in Spain, so maybe that'll have to be in upcoming summers moving over in Spain. That'd be a lot of fun.

Carolyn Rodz:

I know. I'm working the lure for everybody for sure.

Bill Cilluffo:

Nice, nice. Well, let me try and bridge a little bit from this idea. I mean you came at it from different angles but all had this point of view that look small businesses were really important, they were very underserved. People didn't really know how to access resources and there just weren't enough resources out there. How did you go from that kernel of an idea to what you described Carolyn, that Hello Alice is now? I mean, was it a pretty linear thing of hey, here's an idea and we're going to excuse this idea, whatever. Or did you start out with 20 different versions of it and now you're on one you'd never thought of? I mean, I'd love to hear kind of that journey.

Carolyn Rodz:

It's funny. I would say it's so different and so much the same. Every once in a while I'll be cleaning out files and I pull out our original pitch deck and I look at it and I'm like, the essence of our business has not changed a bit. Our mission hasn't changed. The idea that we could more efficiently connect entrepreneurs to resources hasn't changed. I think what changed was recognizing the massive opportunity on so many different levels of how it impacted enterprise companies, what the bank problems were and how this could actually support the work that they were doing, how it supported government efforts and so many different constituents in the market. I think that was the piece that we had some knowledge of. We always knew we would build a model that did not charge the entrepreneurs because we knew they were broke and we couldn't build a business model that charged them for access to services.

And we also knew if entrepreneurs made money, everybody selling into those entrepreneurs was going to make money. We knew governments were going to make more money, so we knew everybody was going to benefit financially and we said there has to be a piece of the pie in there somewhere for us, but we had no idea what the real service offering would be to those constituents. And I'm going to give Elizabeth major props here because she's just incredible about bringing the right people to the table.

As we tackle these problems, I kind of lay everything out and I'm like, here's what we have at our disposal. Here's some ways that we might be able to tackle this. Let's figure this thing out. And just bringing all of those people to the table, and people that were really invested in these problems that could sit and talk and work through things with us and who bet on us in the early days when we didn't really know what our product was necessarily, we just knew we could connect them more efficiently to a lot of small business owners for whatever their need was. And it was a ton of trial and error. A lot of what worked well.

I think we always got the pushback from our team, particularly in the early days that we're just doing all this bespoke stuff. But the reality is it was experimenting. We were experimenting with the market and trying to figure out what really scales here and where is there consistent and massive opportunity and we just didn't know. It was hard in the early days I think, and very time consuming in a lot of ways, but I don't think we would be where we are today without all of that experimentation.

Bill Cilluffo:

That makes a lot of sense. If you look back over that period, I mean I'm sure there's 20,000 decisions you've made along the way. Are there any that kind of stand out, I guess in a couple directions, one that seemed really complex at the time, you made a decision and you look back and like, wow, that was awesome and we got that one right and led us down the right path. And then was there conversely a complex decision that in hindsight, hey, maybe that was the wrong call, we needed to learn from it, go back, fix things later. I mean, I'd just love to hear if any in particular has stood out.

Carolyn Rodz:

One is not charging entrepreneurs, which I already mentioned, but we have seen a lot of competitors enter this space who charge and we got pushed from every investor I think that we pitched to in the early days, really pushed us. You could do a subscription model or you could build this way or have you thought about always charging the entrepreneur? And we held really hard and fast on that. I said, absolutely not. We don't think it's going to work and here are the reasons we don't think it's going to work. Some investors agreed and invested, some did not and walked away. But the reality is our competitors who build, the business owners, the majority of them, if not all of them, are not here today and we're still standing. And so I think that says a lot about going with your gut in terms of what the market will and won't sustain.

Elizabeth Gore:

Yeah, Carolyn's right. Conviction in your model, learning and listening to all the yeses and nos, but that conviction. I would say, particularly for your listeners, anytime we've said no and focused more has been a huge benefit. I know that's a big broad ranging, but in the early days we boiled the ocean. We wanted to help small business owners with anything they need, their first hire, their first website, and we just continue to focus in on access to capital, equitable access to capital. And the more we focused just the better we got. I would say the biggest risk we've ever taken was during COVID-19. As you can imagine, our customer set is small business owners since the Great Depression of ever had anything like that, we actually took a huge chunk of money and delayed the build our credit program and we decided to build what was called the COVID-19 Business Center.

Carolyn's team took basically what would probably take two quarters to build and built it in a week, which was a navigation tool for a small business owner based on their industry and their size to get through COVID. How do you apply for PVP, EIDL? When are you closed? When are you open? We had a mental health center that ended up being our greatest growth period and really kicking off the rocket ship growth we have today. We had at one point 200,000 small business owners a day accessing that digital center.

And it was a real risk, we had raised money, we just closed our round to build this credit program, which now I'm having to say is launched, doing quite well, but delaying that, going back to investors, our board saying we're listening to our small business owners, we think they need us right now. We need to be able to pivot, do this for them. It is a great risk and it's a great cost. We were also like everyone, we did a RIF 20%, that's what everyone was doing at the time, and it really not only paid off as the business, it was absolutely the right thing to do for our customers. And I think that's probably today the biggest risk we've ever taken, but we really felt like it was the right thing to do, particularly for our mission. So those are just a couple of thoughts.

Bill Cilluffo:

None of us want to go through COVID again, it was definitely a moment that allowed so many people to rise to the occasion. Sounds like what you did was absolutely aligned with the mission, just not in a way that you ever would've expected. And it's great to hear the nimbleness to help them in the way that they needed it.

Elizabeth Gore:

I do think it's important that any founder admits when they're wrong, but it takes years. Carolyn and I, we've had great investors and we've had tough investors. And when I look back on some of the investors we brought into our cap table, I wish we wouldn't have in the early years. Now the last two, two and a half rounds, we've gotten more savvy about diligence and making sure the add value is there. Y'all at QED are prime example of not just check writing but adding serious value. But I think when your naivete is there, you're trying to get money in the door, you're trying to run a business, you don't know anyone yet, particularly if you're new to venture, that can be really hard. So I think we had to learn along the way of how to pick the right investors.

Bill Cilluffo:

Yeah, that's a pretty common one. And it's kind of funny going through, coming out of COVID, this industry had an 18 month insane boom and the weirdest thing looking back is how the number one result of that was that the average funding round gets done in like four days instead of four months. What you talk about the need to get to know your investors, get the investors to know you, these are going to be long relationships. It's kind of shocking to me that that's kind of the trend of how that happened. It is what it is and we'll all live through it, but I think the relationship aspect of this is so important and in all directions because as what we're about to talk about, you never know when the unexpected is going to hit and the ability to work together is so critical.

Elizabeth Gore:

Absolutely.

Bill Cilluffo:

Cool. Well look, let me move to this topic that we teased upfront. You all are the subject of a class action lawsuit, which if I understand it came completely out of left field and blindsided you and really is kind of getting at the heart of your mission of why you're doing what you're doing. So let me turn it to you to explain a little bit of what happened directly.

Elizabeth Gore:

Sure. So I can just be very technical for a minute. Carolyn and I are learning, has never been sued. We're pretty right as rain company, but you got to be very specific. But we were served a class action lawsuit by America First Legal, Stephen Miller as well as Jonathan Mitchell and proclaiming reverse discrimination based on our grants programs for Black-owned businesses. We, as Carolyn mentioned, have done almost $40 million in small grants to all ethnicities, genders, veterans, military spouses in all 50 states.

We do, however, very much believe in ensuring a very specific focus on underrepresented small business owners who will very much contribute to this economy when given equal access to capital. Sometimes grants are the best way to do that. So we've been sued. It definitely was left field. It's a meritless case, a baseless case. These are grant awards. They are putting this older law that is called 1981 forward on discrimination. However, the private sector has every capability and ability to actually choose and give financial awards. So it's blown us out of the water. I will say entrepreneurs, we all live through adversity, whatever that means. However, sometimes at least adversity is coming from a place of logic, maybe on the other side when this absolutely is not.

Bill Cilluffo:

That's fascinating. So really getting at the heart of saying, hey, you're coming up with grants that are going to help in this case, African-American entrepreneurs really get a step forward. I mean the broader question is multiple underrepresented groups. Maybe go back to that sort of first moment when this started to hit. I mean, what was your reaction and how did this all come to be?

Carolyn Rodz:

I mean, I think like anything, right? You're busy running a business and there's so many important things that need to be done to make sure that we're getting more money into the hands of business owners. So I think similarly, I kind of couple this with when COVID first hit, there's that what are we going to do as a business? What does this mean for us as a company that you go through? And then there's very quickly a what does this mean for all of the entrepreneurs that we serve? And Elizabeth mentioned how we pivoted really quickly over COVID and for this the same thing, we took a step back and said, look what this can do to us, and we can get through this.

We know we'll figure this out like we always do, but there are much broader implications for the 1.3 million business owners and beyond that we serve and support and how does this impact them and what does this mean for them and the funding that they need and how do we ensure that we are really sticking to our mission here of making sure we're putting as many dollars into the hands of as many business owners. And so that's really how we've approached this is it's important to win this mostly because there's a massive impact here. When you look at less than 2% of venture capital goes to women, a tiny portion of that goes to women of color. And when you look at just people of color in general, it's minuscule compared to the amount of funding that's out there. They're starting their businesses with less capital, half the capital of their White counterparts.

So to approach an issue like this is an apples to apples comparison and say, look, we can flip this around and this is what's fair for one versus what's fair for the other, there's just massive economic implications here. And that's where we've kind of focused our time and energy and want to spend our time is how do we ensure that we're taking every resource out there, money from wherever it might come from, into the hands of whoever it might go to. It's the number one pain point for all business owners, and we're not going to stop fighting until we get every business owner with a good idea and the will to work for it, the money that they need.

Elizabeth Gore:

And Bill, this is setting an incredibly dangerous precedent. When Carolyn talks about the pressure we have, one is it is critical that the private sector has the ability to move dollars where they think it's appropriate as a business. That's one. Two is these cases should be litigated in Congress. This is a very dangerous precedent that the private sector is being sued like an ambulance chaser to change the interpretation of law that is not normal. Most of these cases generally are negotiated and debated in congress, in committee. So a lot of these actors who are going out and suing private companies and almost systematically suing them and then raising money off that suit for the next one is very dangerous to our economy.

We're capitalists. Carolyn and I, we are going after, if you tell us there's a $40 billion gap in the BIPOC community in credit and loans, that's a massive opportunity. We want to create more jobs, we want to get money into the hands of those folks. And if we have to say first we're starting with grants, then we're going to secured credit, unsecured. As a company that wants to make money and create jobs, we should be able to do that. So it's important that LPs, CEOs really watch this trend of negotiating policy through lawsuits in the private sector versus pushing those back up to congress.

Carolyn Rodz:

This should not be a political issue regardless of which side of the aisle you might sit on. Small business owners are the most trusted voice in America. It is one of the very few bipartisan issues of support when it comes to politics. And so trying to manipulate this into a political issue is incredibly disheartening. So our goal is really how do we recapture and aggregate the voice of small business and put the power back in their hands because again, Republican, Democrat, whatever they may be, the reality is when small business owners succeed, both sides of the aisle recognize this is incredibly beneficial to our country.

Bill Cilluffo:

Makes sense. Now, I know that you've gotten a great outpouring of support. I mean, we talked about, I guess what's the opposite of support the lawsuit on one hand, but I know you've gotten great outpouring of support. I mean, I guess I wonder if you could take a minute to describe how that's felt and then for our listeners, what could folks do to help?

Elizabeth Gore:

Yeah, I appreciate that. We are doing what we love to do. We decided to put more capital out there. We have launched a new grants program called Elevate the American Dream, where a small business owner can nominate themselves or the general public can nominate their coffee shop, their accountant, their childcare center for an Elevate the American Dream award, a potential grant. Everyone gets mentorship. So we've been thrilled when we came out with our public statement that all 50 states, we've had thousands of people already nominate small business owners, and then we have put up our own capital to produce grants for those small business owners.

So anyone could go to elevatetheamericandream.com and nominate their small business. We'll be pushing this through the end of the year. It's our way to say, we're taking the high road here. We think what we're doing is critical. And we've been really proud that everyone from Reid Hoffman to Ken Chenault, to folks coming out of the woodwork, but most of all small business owners coming out to support each other, which has been really exciting and special.

Bill Cilluffo:

That's fantastic to hear. It sounds like you've been through two incredible crises, maybe it's even more than that, first COVID, now this. I wonder if each of you can pick one or two things that you've really learned about yourself or learned from a leadership perspective, kind of navigating through these twin crises.

Carolyn Rodz:

Prioritizing the customer is critical. I think with each of these situations and frankly just everything in general, there's so many times I think that you can look at things from lots of perspectives, right? What's the fastest solution to roll out or what's going to make you the most money or what's going to provide the most information or insights? But at the end of the day, really focusing on what is most beneficial to the small business owners that we serve has always been core to the decisions that we make. And that means there have been times when we've walked away from money, it's been times that we have, like Elizabeth said, we've delayed rolling out a particular feature set. There have been times that we've taken something that feels quite risky, but always knowing this is ultimately what is best for the business owner and always challenging ourself.

I think when we feel like we're starting to kind of veer off a little bit or something's not working, typically it's because we haven't prioritized what that business owner needs. So I think that for me is a lesson that early on, I feel like in our journey, one, I think I would've been a lot more vocal internally about what that means for us as a team. I think many times we kind of hired this amazing talent and brought people into the team or listened to investors and felt like they had the answer. They knew more than us because they had done all these things or had this great pedigree or this wonderful resume. At the end of the day, I think the people that really know are customers, and we have this very direct line into them. And so we have to be really strong and really purposeful about listening to those needs.

Elizabeth Gore:

I'll just add that as a leader, if we just look at the decade, Carolyn and I have been working together, to your point Bill, there is some kind of crisis every other year, and that might be global in nature, it might be internal to your business, it might be macroeconomic. Your time is so valuable as a leader because there will be things that only you can solve, period. And so how do you really lean on the expertise of your team and your co-founder to get through those times is essential. I can think of four things over a decade, whether they were personal, economic. SVB was our largest investor before QED, that was a big deal for us when they collapsed this year.

But Carolyn and I, the first thing we do is call each other. Which one of us has taking this one? Which one of us is managing the business? Who else are we going to lean on right now? Which board member do we call you hacked in those moments to really understand how to manage talent and time and know that no amount of planning in the world is going to prevent you if you are an entrepreneur from a crisis at some point in your business, particularly if you stand for something. So having that management is important.

Carolyn Rodz:

I always channeled the words of my father in these moments that this too shall pass. We will get through it. And so it's weathering the storm. But Elizabeth's right, I think having a team that you can rely on and divide and conquer on these things because they are all consuming for a single human, any one of them. They're all consuming many times from multiple humans. But making sure that you're still keeping an eye on building the company and growing the business and being able to push the big strategic things forward in the meantime.

Bill Cilluffo:

You mentioned that quote Carolyn, Nigel says that all the time when giving advice to people. So maybe in some past life, Nigel and your dad came across each other. I'm not sure, but it's funny to hear that.

I think we've got tons more we could talk about. I know we're a bit short on time, but really appreciated y'all coming on and sharing such an inspiring story. We always try to end with the same question on the podcast. So I'd like to ask each of you, if you had one tip to share with an aspiring entrepreneur, what piece of advice would you give?

Carolyn Rodz:

I'll say make the ask. This is actually something that I've really learned, frankly from Elizabeth. Just not being afraid to make the ask. I'm one of these people that likes to have everything perfect and prepared and set and structured. And so many times it's when you have the right people around the table and you bring together the right minds, things happen much more efficiently and much more effectively and often very differently than they would otherwise. And so my advice to many now, and I think a lesson that I've learned over the years of running this company and running other businesses is the more you put yourself out there and the more you make the ask, the better you're setting yourself up for success.

Elizabeth Gore:

And I'll just add plan around your passion. Passion is what will get you through both the highs and the lows and just always circle back to it because it'll be what pulls you through and inspires others. So plan your passion.

Bill Cilluffo:

Makes sense. And look, that passion and commitment to the mission is something that's come through this entire conversation and it's clear that every time something hits you, that's the thing that you chew back to. And that's really impressive to see. So anyways, thank you so much for coming on today. It was great to experiment with a slightly different format. Clearly the two of you can complete each other's sentences, so it's not even clear that it really is two people on here, but sure seems like it based on the video tiles.

Elizabeth Gore:

Well, thanks Bill. And we would be remiss if we didn't give great love and shout out to our board member, Frank Rotman and QED. So he is our North star.

Carolyn Rodz:

Frank puts up with the two of us just about every day.

Bill Cilluffo:

We're very happy to have Mr. Fintech Junkie himself here at QED. So thanks so much for coming in and joining today. And to all of our listeners, take care and thanks for listening.

This has been the Fintech Thought Leaders podcast, your window into the world of venture capital and financial services with today's digital disruptors. QED is proud to provide the best fintech advice you can get. To learn more or to read the full show notes from today's episode, check out qedinvestors.com and be sure to also follow QED on Twitter and LinkedIn @QEDInvestors. Thanks for listening.

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