Managing director of Techstars Equitech Accelerator, Adam Phillips is also the founder of AthletesInnovate!—a platform that matches the energy and networks of professional athletes with the educational needs of young people that need access to STEM education and resources. Adam has been investing in and operating startups since he began as one of the first five employees at a venture-backed Edtech startup and subsequently co-founded multiple venture-backed businesses. Most recently, Adam was a venture partner at Republic and 11Tribes Ventures as well as the managing director at Mox.E Venture Partners. He also spent several years working in policy and regulatory sectors as a senior attorney and director at the United States Department of Justice, the United States Congress, and the United States Department of Transportation.
TECHSTARS EQUITECH ACCELERATOR
Led by Managing Director Adam Phillips, who brings legal, business, and deep knowledge investment experience, the accelerator is a collaboration between Techstars, the worldwide network that helps entrepreneurs succeed, and UpSurge Baltimore, an organization that envisions building the country’s first Equitech city while cultivating a tech-for-all ecosystem in Baltimore. Harnessing the creative ingenuity of Baltimoreans and beyond, leaders throughout the city of Baltimore are aligning to build an inclusive innovation economy led by this alliance.
MONARCH: As a Black investor and the Accelerator Director of a global investment business like Techstars, what do you think is the barrier to investment for Black and Brown founders?
ADAM PHILLIPS: Black and Brown founders have all of the normal things to deal with. They have to have a good idea. They have to be a credible founder, have a credible business idea, and be above the line in terms of earning possibilities for their business. Investments have to be able to scale however. What makes them good investments is when an investor can see them 10Xing or becoming a hundred times as big as they currently are. So Black and Brown founders have to do all of those same things while unfortunately overcoming the prevailing perceptions that there are fewer opportunities for good investments. That has essentially gotten perpetuated through time for various reasons. Some reasons are nefarious, and some have to do with momentum and people not paying attention—thinking that if you’re a typical white male from Stanford and worked at Facebook or Google, those are the only people that should get venture capital. Now certainly, if you’ve worked there, that can be a benefit, and the reality is that Black and Brown founders have worked there. So sometimes you have to overcome those perceptions. Then, unfortunately, sometimes they also have to overcome the belief that they as a category don’t have good ideas and those ideas aren’t going to be as valuable. That’s part of a larger issue that’s constantly ongoing and won’t be easily solved. It’s going to take time, but the work has begun.
MONARCH: How do accredited investors find high-growth, Black-owned businesses to invest in?
ADAM PHILLIPS: All the regular channels. There are lots of Black and Brown founders that have worked at large tech companies, are creative, have good work experience in the field, have technical skills, and want to be challenged with a startup. That’s a great resource knowing you’re going to find a founder with some experience, but you can also find great Black and Brown founders at good tech schools that have a tradition of putting out graduates with good technical skills, like MIT, Morgan State University, Stanford, Virginia Tech—lots of places that have quality programming that is a niche for A certain area they’re looking for. That, of course, is industry dependent, so if I’m looking for health tech, I go to founders coming out of Johns Hopkins because I know they’re going to have a tradition of working in health tech with experience and access that others wouldn’t have. But there are other channels for high-growth Black and Brown businesses that investors haven’t gone to traditionally, such as HBCUs like FAMU, that have medical traditions. I love going to schools that are atypical. There are great opportunities there to find founders that are unrecognized in certain circles. Those are great places to find founders that other people may not be looking for. Essentially, that’s what every investor is looking for: to make an investment before anybody else knows about it. That’s the best possible return.
I also like getting involved with founders that are overlooked because of their age. Lots of Black and Brown founders have gone through work experience, had a career that was successful, and have wanted to try something new in their forties. The average age of a successful startup founder is 45, but people overlook that a lot. You’ve got to get into the circles of people that have been successful because that tends to perpetuate itself. Founders like to be around founders, so find Black and Brown founders that have been successful and then connect with their networks. Get to know people they’re interested in, and you’ll find future possibilities.
MONARCH: Describe what happens behind the scenes of accelerators and why is it advantageous for Black founders.
ADAM PHILLIPS: An accelerator is a specific kind of investment tool. If you have an idea on a napkin, you don’t want to necessarily do an accelerator that’s not focused on that stage. It’s a different stage of growth when you’re just starting out with an idea. For our accelerator, Techstars Equitech, if you only have an idea, then you’re too early and don’t yet have enough to work with, because we’re making an investment and taking an equity stake in the company. Our accelerator is a post-idea but pre-product market fit, which is really exactly what our customers want from us. So our accelerator is for those who are past the idea; they’re starting to work on their product but haven’t found exactly what their customers want from them. The whole idea of the accelerator is that we help them find a product market fit, and then, by doing so, we are setting them up to be successful for investor conversations after the accelerator. We dig into their business. We call it “slowing down to speed up.” We pull back on what their current business model is, how they’re making money, how they’re thinking of their customers, how they’re hiring and firing and building their team. All of this is critical to building an engine of a business that can actually work and produce revenue but also produce value for investors. That is the business of an accelerator. That’s what we’re here to do.
Hopefully it’s advantageous for all founders that are in that stage, but for Black founders, it can be really helpful depending on the focus of the accelerator. It helps them get the lay of the land in an area that they’re maybe unfamiliar with, especially if you’re a Black founder that was late in your career, like me. I was an attorney for many years and then ended up becoming an investor. When I first started becoming an investor, I had to learn a whole new vocabulary, a new set of rules, and how to speak the language of an investor because that matters so much as far as being accepted as legitimate in the space. It can be very advantageous for Black founders that are making a switch into something else. An accelerator can be a great place to learn the language, the tricks and trade of entrepreneurship, and the reality of being a business owner.
MONARCH: What eligibility criteria do you look for in a standout founder and company?
ADAM PHILLIPS: Founders matter most. Companies change and have to switch their business models and sometimes completely pivot. Founders have to be ready for that. In my mind, a standout founder has to be one that can understand the opportunities and people in front of them and make the most out of both. They need to be somebody who’s able to carry multiple roles at the same time and understand what they’re trying to build as a business, who they are as a founder, and the value of relationships they’re in as far as employees and co-founders. They need to understand the importance of investor relationships—that they own and operate the company while investors are along for the ride. Being able to manage all of that is really tricky and difficult. They need to know what they’re good at and what they’re not good at and how to hire for their deficiencies while trusting other people to do the work.
Being a founder is ultimately about being aggressively humble. You have to be an aggressive person who sees big things and essentially dreams a dream that is completely unrealized. You have to hold that in your head but also be humble enough to know what needs to be done in order to get there. Along with that, you have to be somebody who’s willing to do the work and willing to do things other people won’t. Investors add value as you go, but the founders do the work. There’s a reason that some people become founders and stay founders with successful growth and others don’t. Founders are able to stick through difficulty and hold on to things when it gets tough. Founders really are the asset. They are the ones that make the thing go. They make the biggest difference.
MONARCH: Why is it important that tech accelerators are grounded in the values of diversity, and how can they impact a city’s innovation economy?
ADAM PHILLIPS: A city that doesn’t understand that it needs a whole gamut of businesses available to the people that live there is going to lose opportunities. A tech accelerator is aiming at a specific part of the economy—the tech and high-growth economy. That tends to be the most interesting to some when they think of growing the economy, but it’s not the only one. It’s inspirational. If a city wants to have an innovative economy at all, it needs to have some big wins. It needs to have big solutions it can point to in order to say, “Hey, look what we did.” Everybody can take pride in that. It’s like a local sports team. Every once in a while, you need to win a championship in order to keep people inspired and rallied with local pride. It’s the same thing that happens with a tech accelerator. It’s a part of a city’s innovation economy that you’ve got to have to inspire.
Why be grounded in diversity? Diversity is not a charity case. It’s a strategy. It’s really about offering different opportunities than typically tried, and that’s what investors are looking for all the time. They’re looking for an edge, and diversity is that edge. You’re hobbling yourself if you don’t take advantage of all the kinds of people that a city has available to excel and benefit everyone. It’s really a win–win that just makes good sense to pursue as a plan.
MONARCH: Why does Techstars Equitech aim to build an “equitech” innovation community in cities like Baltimore?
ADAM PHILLIPS: Techstars is a global investment company with accelerators from Lagos to Denmark, Oakland to Boston. Baltimore is one of the more recent accelerators in the U.S. Equitech is a concept that was birthed here in Baltimore by our partner, UpSurge Baltimore. Techstars essentially came as their tech growth innovation partner to do the accelerator. UpSurge is doing lots of things throughout the value chain of the city, from small business to nonprofits and large corporations to endowments and assets under management. They trust us to do the high growth tech accelerator. They see the value and big win for the tech play as well.
We love the vision, and it fits perfectly with what Techstars does and how we approach investing in general. We think there’s value throughout the value chain of people. Diversity investing is not really a thing for us. It’s just investing. With Equitech, the point is to build an innovation economy that works for everybody. Knowing that UpSurge is doing that throughout the value chain of the city, from small business to high growth, we think that a place like Baltimore really benefits from that multi-pronged approach. Not everybody will found a high-growth business. Equitech is biased toward wanting everybody to be able to win. Tech is just one of the plays, and we try to play our part by finding founders and ideas that have “innovation that benefits everybody” baked in. Sometimes that means the majority of our founders are diverse, which is true for this class.
We have some ideas that are high-growth, tech-enabled businesses that have innovation that benefits everyone when they win, such as a health tech business that benefits the mental health of Black and Brown young folks. We also have a community-minded gig platform that essentially does climate-benefit work that makes gig work fair and upscaled so that gig workers get brought along in the economy. We use the Equitech lens here when looking at the founders and/or the ideas to really build something. In a place like Baltimore, you’re going to need multi-pronged wins. You’re going to want to have people that win, and we think we’ve done that. It’s particularly appropriate in a place like Baltimore, but we think there are benefits all over the country and world.