What follows is the transcript of my recent video interview with Rob Hanna, a prolific Angel investor focusing on women-led companies and diverse founding teams, nationwide. He believes that women founders represent an enormous untapped, underrepresented market for investors. Mr. Hanna’s criteria for selecting investors reflect his unique style. He seeks high-energy innovators who deliver balance sheet value as well as social and environmental impact. Rob is based in Austin, Texas.
All in all, this is a powerful interview with a “real” investor. Watch, read, and learn!
VIDEO TRANSCRIPT
Robert Steven Kramarz:
Hi everybody. This is Robert Steven Kramarz, and this is the Vision Master podcast from Intelliversity. And we are here again to interview another prolific investor.
So for all of you Vision Masters out there, you can get a better feel for what investors are looking for. And today I would like you to meet Rob Hanna, also of Austin, Texas.
So we have two investors Robs in Austin, Texas. That is going to be tough at dinner parties, but it has been really fun meeting you and talking to you, Rob. How are you this morning?
Rob Hanna:
I’m doing great, Rob, and thank you very much for being generous with your time and inviting me on. I really appreciate it.
Robert Steven Kramarz:
Awesome. Give our audience a quick background on what you’re doing and how you got here.
Rob Hanna:
Well, I do not know if I can be quick about it, but I will give you a 90-second story arc.
First-generation, American born in Miami Beach; I went to the University of Florida, did some post-grad at New York University; I spent time in DC and eventually ended up on Wall Street.
I worked around and then finally I got into the oldest Merchant Bank in brokerage, Dominick & Dominick. Started as a sales grant, eventually figured out how to raise capital and LPs.
I did that fairly well. I became director of marketing. I said, “Why are we selling other people’s stuff?” So we created our own product and then eventually migrated into running a subsidiary for the firm, doing offshore hedge funds for high-net-worth individuals and the tides institutions in Europe.
From there I joined a charitable think tank because I felt that we had amazing private wealth creation tools. How come we cannot use them to create public wealth? I did 16 public-private partnerships across the U.S. which is what brought me to Austin and I have been here since 1993. That evolution has continued where previously I was working more as a public-private investor manager into operators, working with individuals. I was tapped to design and change the university of Texas at Austin’s business plan competition into a global challenge. Then I ended up working with 6,000 venture founders around the world and figured out a few things about how to make investments, serve founders and their ambitions for success. That also helped me improve in terms of what I look for when I write checks and invest in early-stage ventures myself.
Robert Steven Kramarz:
Wow! So talk about that for a second. So first of all, I just want to be clear, you have two ventures, one is called social wealth partners, which is your advisory group, and you have social wealth investment management, which is your investment fund.
Rob Hanna:
Yes, correct.
Robert Steven Kramarz:
So talk to us about what kinds of companies you have invested in.
Rob Hanna:
I started investing for my own account back in the early 90s and early-mid-90s. I was very much passionate about a thesis that I had, which was that if you can create value for others, you are going to get compensated and earn a premium. That is, I think, probably the best description of what I hear people talk about when they mean impact investing; it is like they are trying to create value for others. But from my perspective, I believe in a much more sort of integral thesis, which is that the more value you can create in a venture, the higher your returns. Not that you are going to be concessionary. Not that you are going to lose money. So when I look for investments.
Robert Steven Kramarz:
Mm-hmm.
Rob Hanna:
I look for companies that could generate value and get traction from that value generation on a broad basis.
Rob Hanna:
So a lot of businesses have a novel product or innovative product, and they think here is the transactional value with this customer and how many customers can I acquire? And what is the cost of acquisition? And that is certainly one dimension, but it is not the only dimension. And as we see more and more in society, companies are not only being punished in the marketplace for creating negative externalities but high-performing companies are getting compensated and sustaining market share and persisting when they are able to create more value for everything. From investors to team, to partners, to customers in the general public.
Robert Steven Kramarz:
So in general, you look for companies to create return as well as impact. In my understanding.
Rob Hanna:
That creates value that I believe will drive the balance sheet. So, I do not want to use the term impact too much because it is such a lost in the sauce narrative right now.
Robert Steven Kramarz:
Well, every company creates value that is reflected in the balance sheet. Why would you invest in a company that is going to lose money to the point where they go out of business. You got to have a positive balance sheet. What is novel about that for you?
Rob Hanna:
Well, the reason I am trying to make a distinction that we have a problem when we start using a fuzzy definition like impact, is that there is a lot of companies with business models that do not capture the value that is concessionary. The buy one, give one free model for instance, which is just running two businesses. One’s a charity and the other’s a for profit business. And so you can do that, but I think it is taxing. And I think it does not necessarily have to be that type of model. You can easily come up with an amazing product and then figure out how to create value across the board, without being concessionary or charitable.
Robert Steven Kramarz:
Well, so try to narrow this down a little bit. So when we talk about what kinds of companies you choose to invest in, for example.
Rob Hanna:
Well, right now my portfolio started out with climate impact because I felt that was both a necessary area for innovation and rapid acceleration of innovation. It had a long tail possibility. It was not going away. I thought of fossil fuels and alternative energy, you are going to have some sort of overlap and crossover. So I was very much interested in the space and remain so. I invest in companies that have a way of creating positive impacts and climate mitigation, adaptation reversal, and that are able to be long-tail profitable in that industry. The second major, I would say, area focus for me is health innovations. Similarly, I think it’s incredible…
Robert Steven Kramarz:
Sorry…did you say health innovations?
Rob Hanna:
Correct. Not necessarily medical, but health in general, which I think is huge long-tail growth. So those are the two areas you might want to think of it. Yeah. Clean energy and health outcome improve movement is sort of like the two areas where I feel there is such a huge potential, such a long tail wave that we are starting to feel. I just think the time is right. I think the minds are bright. I think the industries that preceded them are getting disintermediated are right.
Robert Steven Kramarz:
I often argued for me. Those are the very two areas that I have been investing in lately and I plan to invest more in with the greatest emphasis on health innovations.
Rob Hanna:
I would say from my investment portfolio side, those are sort of the two areas where we are slowly accumulating a little bit of domain expertise, network relationships, and the ability to be a good steward of our own capital. As well as the energies of others who are trying to make a difference.
Robert Steven Kramarz:
Cool. All right. Do you offer advisory services as well on the side?
Rob Hanna:
I have a group. I have a separate group, social wealth partners. This has largely been a sort of an evolution of when I left wall street and started to prove out the thesis that creating positive externalities and value for all stakeholder groups are going to outperform in the market. There are very clear operational tools, frameworks, heuristics that when you use them, you outperform and they are not necessarily anywhere to be found in business schools, in accelerators, and all those groups.
Rob Hanna:
Social health partners are really focused on helping to arm and provision early-stage ventures and founding teams, as well as quote-unquote impact portfolios on how to rapidly accelerate value creation and value capture. Do that in the private capital space. Do that in early-stage investing. Do that with, I would say, ventures who are around the series A area on either side.
The reason I focus on that is that a lot of the practices that we bring and the operational frameworks we bring, need to be embedded in the organization before they become sort of path-dependent to a lot of the other forces out there. When they start having fiduciary capital in their cap table and start to be driven by their crimp quit. If we can work with founders and their teams early on, and they can get these practices, and it becomes operational for them, then they are good to go. Then they have not only a more effective way of telling a story, but a more effective way of operating and making better decisions day to day.
Robert Steven Kramarz:
I got you. So let’s say somebody approaches you and they are kind of meet your initial criteria. How do you know that it is going to be a deal that you want to move forward past that first pitch. What do you look for or past the first pitch?
Rob Hanna:
Well, it is a great question, Rob. I think of three dispositions in the money, in transactional money space. You can be a giver, which we can think about as being almost philanthropic, right? You do it, have an emotional need to do it, and you want to feel good. You can be a funder, which is where a lot of large scale capital ends up defaulting to, which is you come up with a thesis, you have procedural compliance to it. You have got your filters positive and negative, and everything fits your template. That works. And in fact, you have to do that as a fiduciary. Then what I see as the third area is what I call the investor, which is, it is almost impossible to do it as a fiduciary for a lot of reasons.
But for an individual who is risking their own skin in the game and capital, the investor is very opportunistic. And the investor basically looks at the sight line of opportunity no matter what door comes in. Is this an opportunity in the market? Is this an opportunity in betting on a good founder? Is this an opportunity with a product? When I say, “what do I look for?” I am trying to share with you that I am just wildly opportunistic and I do not necessarily have a form to fill out or set criteria.
Robert Steven Kramarz:
If you are like Peter Thiel, you have seven published authors and well known investor has seven. I think it was seven particular things he looks for. If you do not have a check mark in each of those boxes, you will not be in his portfolio.
Rob Hanna:
Well, and that is great.
That is a great static.
Robert Steven Kramarz:
I may be wrong on the number. It may have been five.
Rob Hanna:
No, but I mean, I think like Warren Buffett. He doe not touch anything. He doe not understand.
Robert Steven Kramarz:
There you go.
Rob Hanna:
That is a huge check box.
Robert Steven Kramarz:
That is a one-box check box.
Rob Hanna:
For me, I do not work with founders who lack energy.
I mean I can deal with negative energy and positive energy in high amounts. I cannot deal with listless people because I just do not believe they are going to get anything done.
Robert Steven Kramarz:
You look for a certain size company that has a vision for a billion dollars in five years or a hundred million, or any particular size venture that you look for.
Rob Hanna:
If I were to speak from a funder mindset, I could give you the ideal. What I think would be a way to arrange criteria to be a top-performing funder. What checklist should you have? I do not subscribe to that. I am much more idiosyncratic and self-absorbed. I have not written any books or made at work in theory. So I do not have to justify my decision making process to anybody, which is also why I do not take outside Lps in my investment fund. To sit back and think about how to project, being a good investor and what to look for, or to look on the other side of how do I want to show up as a recognizable value-creating founder, which I think is where the audience for this podcast would be. Clearly in the venture space, the typical investor is looking for a founder.
And when I say energy, maybe this is the proxy for a founder who is capable of executing and accelerating execution, right? At levels of progress that are objective and verifiable. So whether that is top line revenue or whether that is customer acquisition or whether that is driving down cost, I mean, whatever it might be. Investors are looking, trying to look through the eyes of a founder and seeing if they get it. And if they have a clear vision as to what needs to be done with some degree of probability of getting it done.
Robert Steven Kramarz:
Well, now we are getting closer to the way I think, which is really all about the founder’s ability to execute.
Rob Hanna:
For sure.
Robert Steven Kramarz:
Now, what about the founder’s ability to deal with black swans, unexpected pivots that almost always happen.
Rob Hanna:
Well, I mean, you do not know that until they are under the gun, right? I mean, it is like iron does not become Damascus steel until it is in the forge and hammered a few times. You could look at anybody, any founder as raw talent, and unless they have done it before unless they have already been forged into that super metal.
I think the criteria that I would want a founder to be provisioned with before they get into that crucible and get hammered on and come out the other side, something better than it went in on, would be energy, would be a bias to action, would be a disposition towards taking personal responsibilities, opposing as opposed to blaming the environment. They have to be inclined to work with teams. What I mean by that is, I am autistic and a lot of people, especially in the tech space share being on the continuum. People who are brilliant with concepts, ideas, and things oftentimes may not be brilliant with people relations. You may have called that a little bit of EQ or what have you. But I think if a person cannot effectively motivate and communicate to others, they think everything exists within their world and they cannot delegate effectively, that is a huge miss.
Robert Steven Kramarz:
Particularly since many founders are on the spectrum. That is just natural to be a visionary and to have thick skin. You have to be able to hire the right people and delegate to them or partner with them.
Rob Hanna:
The biggest challenge is that incredibly bright people who are right is the problem. You do not have to be right on everything. But the obsession of being right, displaces the opportunity to be not as right, but yet good enough. That is the real challenge , how do you relinquish control of perfection so that others can show up and make it good enough to happen , which is perfect.
Robert Steven Kramarz:
So you do have biases. You see?
Rob Hanna:
Oh, absolutely. I do have biases.
Robert Steven Kramarz:
I just had to drag them out of you.
Rob Hanna:
No, I love my biases and I do not mitigate them. I double down on which part of our earlier chat before we started, this was like, how do you mitigate biases? Like, I do not. I doubled down. I like my biases because they are predictive and actually increasing the probability of success.
Robert Steven Kramarz:
So what brought us together was the interest in women founders. How does that affect your decision-making?
Rob Hanna:
I think women are the most undervalued, premiums in the market you can find. I mean, they had to go through so much to get where they are. So you have got a natural filter. It is kind of like turtles, sea turtles, they made it, they come back to shores. So why would you not already, this is the crucible that they have already been through. Just like any other minority founder. If they are there, they have already overcome so much. So you are already starting ahead of the field, in terms of personal dispositions, capabilities and biases. I am not saying that translates necessary into the right product to market fit or right market or timing. But at least in terms of betting on the right horse, jockey individual. I think they are undervalued and they are still at a huge discount in the market. So I like starting there.
Robert Steven Kramarz:
In what way do women bring extra value as founders?
Rob Hanna:
They are 2% of the total allocation of venture capital. They are not 2%.
Robert Steven Kramarz:
We have arrived at the scene at 3%. Right?
Rob Hanna:
I mean already look at that markdown. That is huge. They are certainly not 2% of the population.
Robert Steven Kramarz:
Right.
Robert Steven Kramarz:
Any particular attributes that you think women have a particularly strong suit in that would be useful. Would be really good business to look at them seriously as founders.
Rob Hanna:
I mean, if you think about the apex human individual, regardless of gender, there are composite of strengths. Right. And like any elite athlete, what you excel at , usually comes at a sacrifice for other things, because you cannot put in the time. You are putting all your time into this one angular momentum. So I think women in general, in Western culture maybe even in all cultures, come to the table already preloaded with a higher emotional IQ. So I think you just start there.
Robert Steven Kramarz:
That is a generality obviously.
Rob Hanna:
That is very general. I mean, I am still working on just coming up with the baseline. I am still at a deficit in my EQ and it is a lifelong challenge for me. But I mean, I can recognize, and often I am counseled by women who are very observant and very aware about things that I totally miss and do not get. They have a good read. Do you want your full-stack CTO to be all emotional IQ and no tech? Maybe not.
Robert Steven Kramarz:
Probably not.
Rob Hanna:
But if you have a CEO, somebody who has to be outward-facing to, work with investors, partners and be the face of the company, stand on the stage and work a room. I had a friend who was one of the early single digit guys at Dell, here in town. He used to always say to me, Rob, I can teach a dog to climb a tree, but I would rather start with a squirrel.
Robert Steven Kramarz:
Well said. Now we have our new neighbor, Elon Musk, who’s got well admitted in his office autistic on the spectrum. But he certainly learned how to run a company. Listen, I think we have run out of time. So I just want to let people know where they can get hold of you. Where would that be? How could they get in contact with you?
Rob Hanna:
I am on LinkedIn, or I think are you going to be handing out my email?
Robert Steven Kramarz:
It will be going on, but just give it to us now verbally.
Rob Hanna:
It’s R Hanna. My first initial R and then Hanna, H A N N A rhanna@socialwellpartners.org.
Robert Steven Kramarz:
All right, Rob. Well, welcome to the Vision Masters podcast. I am sure we will have some fun together. I know you are not going to stay around for south by Southwest but we are because it is our first time.
Rob Hanna:
Definitely do it. I mean, it is a lot of fun. Life is a deli, taste everything. Have fun. And I am going with my wife to meet her family. We are taking the kids down to east Texas, so awesome. We will stay in the state.
Robert Steven Kramarz:
All right, man. See you next time.
Rob Hanna:
Thank you, Rob. Thank you very much.
You can contact Rob Hanna on LinkedIn here.