By Fiona Njagi
Eric Klose manages Ground Squirrel ventures. Ground Squirrel Ventures is an angel and seed-stage investor based out of Boston M.A. with a goal to extend the resources of the Boston ecosystem to underserved markets and industries. They are currently active in Zambia, Madagascar, Haiti, Kenya, and Rwanda.
Eric was an early employee at Wayfair.com, an online furniture retailer, and oversaw Sales & Marketing for 12 years while the company scaled from a 10 person startup through their IPO. At various times he has overseen UI, UX, Customer Acquisition & Retention, Business Intelligence, Creative, International, and more. Now he’s an active angel investor focused on job creation and climate mitigation throughout Africa, Haiti, and the US.
I sat down for a virtual interview with Eric Klose to discuss angel investing in emerging markets.
Let’s get into your background
I worked a customer service job at Wayfair right when it was a startup. I grew my skill set there overseeing the sales marketing, customer acquisition, retention, user experience, international expansion, and pricing algorithms. I worked there for 12 years. I left shortly after their IPO and spent some time learning software engineering and working on my own projects. The global emergency around climate change had me really stressed out, and I realized that I wanted to chip in and do what I could.
I had the resources to help out and the freedom of flexibility to go where I might be needed. So, I got involved in climate mitigation, investing in solar, and off-grid projects. I’ve also gotten involved in investing in general business startups throughout Africa.
I have no geographic focus but Zambia was a starting place. It’s not a big hub like Kenya or Nigeria, people don’t have the same access to VCs and mentors. I thought I could make more of a difference in places like that. I’ve made a dozen or so investments on the continent for about three years now and I plan on getting more involved in the bigger markets like Lagos and Nairobi.
The biggest lesson I took away from my experience at Wayfair, growing with it from a Startup of about ten people to over a thousand staff, is that we didn’t use venture capital, at least not until preparing for the IPO, we ran a good business, watched our sales and profit margins and used that to grow. So I’m an investor with a bit of skepticism about investors in general, and I try to provide the view of whether a company needs investment or just business execution.
What do you look for in a startup as you evaluate it for potential investment?
I’m looking for a startup where the founder has made a real effort to launch the business. It’s easy to have good ideas. The real success of a business is in doing the work. I want someone I’ve seen deliver, whether it’s for the startup they are actively involved in or a past venture. It brings up red flags if a founder has launched a couple of startups and won pitch competitions but none of those startups are viable.
I’m also relatively sector agnostic. I’m looking for low CAPEX needs, though, I don’t have the capability to ensure the CAPEX is well used. If an entrepreneur wants a truck for deliveries and the company doesn’t work out I can’t realistically get that truck back! That is a very uncomfortable position to be in as an investor where I’m not physically in each market.
I’m also interested in Agriculture, though I’m not a big player in the industry. I would love to learn how to be more involved in that. A lot of it is outside my knowledge base, and the CAPEX is pretty intense. I’ve been increasingly involved in fintechs as well and I’ve invested in a few approaches to that around Africa.
Ultimately, consumer tech is much more comfortable for me because my background is in online retail. I know how the decision matrix, and how customer acquisition, and retention work.
Your investments in emerging markets, are they all in clean energy?
No, not at all. I’m invested in 2x to 3x as many startups as energy plays. My challenge with clean energy is that it takes a lot of money upfront. I’m passionate about the sector, but don’t have the depth of capital to be a major player there. I’ve invested in a couple of small businesses; a seamstress shop, a logistics software company, a point of sale startup, two solar investments in Madagascar, and several fintechs.
What inspired your move to emerging markets?
I was initially interested in renewables and climate solutions, but energy infrastructure is expensive, and astronomically so at the scale of US projects. Emerging markets were usually smaller and riskier so conventional financiers wouldn’t touch them. Even so, I couldn’t find a lot of business-oriented investable clean energy projects, but while I was there learning and talking to startups and accelerators, I got the opportunity to be really hands-on, mentoring, and advising small businesses. You really feel like part of the team. It became very exciting and fulfilling.
I’ve been part of a team scaling from ten employees to thousands of employees, I understand the stress and uncertainty of fast growth, and how to approach that chaos. I wanted to use that experience to help small businesses grow. I’m an angel investor, not a series A investor so it takes very small amounts of money to give people the opportunity and access.
What are the most interesting investments you’ve made so far?
There’s a startup I’m really impressed with called Betaksys. It’s a traffic routing company based in Antananarivo, Madagascar. They’ve put Bluetooth transponders onto semi-public buses, on light posts, and even balconyies to map the flow of traffic in the area and co-ordinate public bus drop-offs and pickups through mobile alerts.
It’s a very hacked-together solution. The founder at Betaksys taught himself how to code and manage the data. He’s been making it work. That to me is really exciting and inspirational.
Dr CADx is using machine learning in X-ray imaging to create new tools to help experts interpret medical images. There’s only a handful of competitors globally and they are astronomically expensive and not tailored to the needs of Africa.
For example, a field hospital might not have reliable internet connection, or access to a specialist that patients can see, so the innovations in the medical sector are about providing a generalist with the information to make decisions. I think that is exciting.
What would you say to other angels looking to invest in emerging markets?
Listen to a few pitches in a certain sector and understand the patterns of how different companies are handling their logistics, presenting themselves, and the business models they describe. The first few businesses always sound so exciting (and they are!) but there are always multiple companies working on similar problems. Make sure you understand the landscape before acting too quickly.
Also, get to know the space better. I started with a disciplined geographic focus, though that’s gotten sloppy over time, and learn what models are realistic locally. It is risky, but with risk comes reward. And I like to remind myself that even if an investment doesn’t work out monetarily, it’s still creating businesses, jobs, and long term impact in terms of skill development and training.
Any advice for entrepreneurs pitching at The Nest?
I’m not looking for a sales pitch about magically changing the world — significant change comes from executing effectively over long periods of time, not a single flash of inspiration. I want to hear the nuts and bolts, what are you doing? How are you doing it? How does the software work?
As an angel investor, I come at it from an operation vs a financial perspective. I want to know how the business works, and that you can develop the business.
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