By Barnabas Odeyomi
Class of 2015 graduate Demi Obayomi is one of the founders of A-level Capital, a venture capital startup with a team of over 60 members. This team includes co-founders Elizabeth Galbut and Corey Li, as well as a student team of over 15 members and a highly qualified group of about 40 mentors and 10 advisors. In this interview Obayomi talks about lessons he learned from his first entrepreneurial venture as the co-founder of Jama Cocoa and how it served as motivation for starting A-level Capital. He discusses the crucial support necessary to starting A-level Capital, its implication for undergraduate entrepreneurship, and an overview of business details.
You capitalized on the opportunities that you had while here at Hopkins. Your first entrepreneurial experience in Hopkins started in 2012 during the intersession of your freshman year as the co-founder and CFO of Jama Cocoa. How were you presented with this opportunity?
Before I started at Hopkins I met James Rodriguez on the class of 2015 Facebook freshman page. Rodriguez and I ended up starting Jama Cocoa. We took the Intro to Business class together during freshman fall and we got talking about entrepreneurship. He had a background working with pastry chefs and working restaurants and I thought it sounded like a cool idea to start a company and see what came out of it. We talked about it a lot through our freshman year and we officially launched the company in the fall of my sophomore year.
How did Jama Cocoa raise money? Is Jama Cocoa still in business?
Jamison worked in a restaurant in California, and the guy who owned the restaurant provided funding for us to start Jama Cocoa. We shut down Jama Cocoa around spring of our junior year in 2014.
Can you share things that you learned through the startup about entrepreneurship?
We were not very experienced. Looking back, there were definitely things that we would do differently. The first thing I think anyone needs to know about any start up business is that cash is king, and basically what that means is that your business is only alive so long as you have the capital to fund it. You have to make smart decisions about how you spend your money. For example, the fall of our sophomore year, 2012, we spent about a third of the capital we had putting together our website, which was just a lot of money. First is managing your capital and spending it wisely. That was the big lesson. That’s why our business was not successful.
Number two is to be thoughtful about your strategy and how you want to approach the market. We were targeting our product to hotels and large institutions, and the thing you need to know about those guys is that there’s a very long sales cycle involved with them. So even if they like your product, it might take three months to get approval on their end to wire the money, and that three months could be life or death for your company if you’re not generating cash flow. So, it’s just being cognizant of the fact that it does take a lot of time to sell to enterprises.
Something we could have done was to have a stronger board of advisors to help us in the retail business. I think retail is something that you shouldn’t do unless you have someone who’s pretty experienced and knows exactly what they’re doing, because it’s very hard to be successful in retail. That’s probably because it’s a business where if you’re not efficient you’re going to operate at a loss.
The big take away from Jama Cocoa was that anything was possible from that point on. Once you start one business, you have this feeling that you can start other stuff or do other things, so it was definitely a good way to build confidence. Today I know that if I want to start a business I can look back at my experience in Jama Cocoa and say I did this my sophomore year in college–I can do it again.
Fast-forward to the intersession of your senior year when you co-founded A-level Capital. Can you talk about what led you to start it?
When Jamison and I were working at Jama Cocoa, we approached a venture capital fund based in UPenn called Dorm Room Fund, a group of students that invest money in businesses started by other students. When Jama Cocoa ended around the spring of my junior year, I was focusing on school and the Marshall Salant Investment Team, where I was one of the executive board members. I got to my senior year, rounding up my academic work and my involvement with the Investment Team, and I had more time than usual. I had this desire to start something interesting. I got really caught up in technology and investing in startups and it was something that I was constantly reading about. One day I was looking at Top 30 Under 30 and I saw which schools were most represented–Harvard, Penn and others. If you look at Hopkins, there’s many smart people and people who work crazy hard–why don’t we have stronger representation? I thought one way to solve that from an entrepreneurial perspective was to start something like A-level Capital where you’re encouraging people to be more entrepreneurial on campus.
In terms of the things that influenced me, first was working on Jama Cocoa; second was my experience pitching to the Dorm Room Fund. The third thing: I actually read a book called Smart People Should Build Things. In the book there’s a page that talks about what people do after college, and at Hopkins they found that the majority of our students go to more school after undergrad, whereas places like Harvard or Yale, the majority of their students go to some kind of consulting or investment banking or some other type of professional role. So that was another thing that influenced me–we are in an environment where the focus is not on entrepreneurship, but on research or going to grad school. So we need something on this campus that encourages more people to be entrepreneurs.
Like I said I just had more time on my hands and I decided to just go for it. I mean it either works out or it doesn’t, and if it doesn’t, no problem at all. So I started off talking to a lot of entrepreneurs on campus. I met with some people in the Baltimore Entrepreneurship Community, trying to get everyone’s view on whether this was something that could actually work. I talked to people at the University of Maryland as well, who were working on a startup incubator. I talked to people at Dorm Room Fund. I talked to people in Boston who had started a fund similar to what I was thinking about. I was just trying to get validation, and to convince myself that this was actually something worthwhile to work on. Eventually I decided to go for it.
What were the steps you took after deciding to start A-Level Capital?
The first thing is figuring out the story. Why this is something that should exist? Why am I the person that should start it? Addressing some of the issues like graduating in a couple months – what’s going to happen to this organization that I’m working on? Figuring out the story and how to pitch this to potential investors was one of the hardest things to do. Then from there, it’s having the network to actually reach out to people, get in front of them, talk about the project and concept and get them to back you. So selling other people on the vision or on the idea, and on the fact that you can make it work is probably the next difficult thing.
Frankly I think I just got really lucky. I connected with people at the Innovation Factory and they apparently were trying to work on something similar but had not really put their foot on the gas as far as going down to the community and just doing it. So I started working with Elizabeth who used to run the Innovation and from there we put together the materials that we had, the story and we went out and started pitching this to different potential investors, and things kind of took off. We got some early commitments from people and we started raising money from different alumni. I think there was a lot of providence. We got connected to a lawyer who helped us out with the process of incorporating the fund, which is a very expensive process to do on your own. If I were to define a godsend, this would be the definition of a godsend, because A-Level Capital could not exist today without having found this guy who just happened to be at Hopkins and just happened to be a lawyer who works with venture capital funds and startups. We were really lucky in that regard.
We were a great team. Elizabeth was great. She had all the contacts that she reached out to, and of people she had worked with before and were happy to contribute money to the fund. At the same time we started working on building out the student teams. I have this good friend, his name is Corey, and he’s really just an amazing guy, very hard working guy, very trustworthy guy, someone you could put in charge of stuff, like even after you graduate and you’re not on campus. We had a good mix of the right people at the right places that were able to get this off the ground.
How did you recruit employees?
Technically, we don’t have employees. It’s almost like a club, but not really, because we are incorporated as a for-profit entity. The way we did it was to recruit students who were interested in venture capital, interested in working with startups, and knew a thing or two about the stakes. We did a lot of email marketing. I sent out emails to the campus advertising the positions that we had. We put up posters all around campus as well and eventually some people started reaching out to us later on after I graduated saying they were interested in joining the team. So the team came together as a result of the outbound marketing that we did, and also some inbound marketing. We received a lot of support from the Center for Leadership Education. They were very supportive and sent out some material through their email list. They were very helpful through all the process. I’m very grateful to them for that. That’s how we eventually put together the team. We met with people that applied and we thought were interesting and had the right background. Then we selected a subset of our total applicants to join the inaugural team. Yeah it’s been a really good experience so far. Now that we have a semester experience we can definitely improve moving forward and get to the point where it’s very efficient.
How does A-level Capital make profit from its investments?
The way it works is, at some point there will be an exist event–either a merger or an acquisition. The legal document provides the different ways that your investment can be recouped at a later date. One of the situations is an acquisition. So if a bigger company like Apple buys one of the companies you invested in, there’s a certain way that your investment will be returned to you. Usually the term is maybe two times the money you put into the company in the case of an acquisition. Another way you can exist your investment is through an Initial Public Offering–when a company goes public on the stock market. In that situation, the value of your investment depends on what the market value of the company is at that point in time. So it could be 70 times your investment, if it’s a really great company. It takes a long time usually to get money back. The duration is usually like ten years.
How does A-level Capital get the money it invests in startups?
That comes from the fundraising process that we did earlier on, where we reached out to alumni and other people in our network to support what we were working on, like venture capitalists, and people in the technology industry who understood what venture capital was and why it was important. I personally invested in the fund, and Elizabeth personally invested in the fund as well. That is how we put together the bigger pool of capital that we have.
So A-level Capital is like a facilitator that reaches out to people who want to invest and to those who want to be invested in.
Yeah, that’s a good way to think about it. We find capital and we give it to people who need capital. So we do all the work in between. Some people have money but have no time, so we take their money. Some people have time but no money, so we give them money–if they’re good (chuckles).