Room for More Than One Winner: How Tessa Flippin Helps Founders and LPs Get Their Bag

After building and fundraising for her own company, Tessa tried her hand at investing...and never turned back

We hear the word “grit” a lot when it comes to great founders and builders. Venture capital fund Backstage Capital “pattern matches for grit” when evaluating founders. Many investors and thought leaders have written extensively about the importance of grit. But do we see (or even demand) that same expectation of venture capitalists?

Grit seems to be an unfortunately rare characteristic of investors (especially in Europe I’ve noticed). They do not always have the entrepreneurial drive of their portfolio founders, even when some insist on being founder-friendly and wanting to build along.

Though the lack of grit isn’t necessarily a requirement in the field. Traditionally, investors focus on business growth aspects like mergers and acquisitions, global scaling, and IPOs. Investment bankers and hedge fund managers are rarely involved with ideation and product development.

So while that formal knowledge of finances can be helpful at the early stages, there can also be a misalignment in incentives and motivations when the investors are not as keen on building and troubleshooting.

Luckily, there are investors like Tessa Flippin of Capitalize VC who feed their entrepreneurial drive by being a true value-add investor. Tessa first encountered venture capital as a founder in Latin America while building a remittance company serving the migrant population (think anyone who would use Western Union to send or receive money). 

After participating in numerous accelerators and then successfully launching their product, Tessa and her team need to raise a round to reach their next milestones. But in 2016, there were mostly just accelerators and series A investors in Latin America—and very few (if any) pre-seed and seed investors.

An opportunity ripe for disruption, as they say.

How Tessa Became a VC

To be in crypto at that time and in Latin America just goes to show how ahead of the curve Tessa can (and will continue to) be. She knows what it’s like to be building an emerging technology in an overlooked market, and being faced with doubts.

“That experience of fundraising, of going out to the market and just hearing ‘No, no, no, no,’ ultimately made me want to better understand the perspective of an investor,” Tessa explains. “I felt like I wasn't telling them the right things that they wanted to hear, but I didn't know what that was. So I decided to take a step back and say, ‘Well, if I could learn more about their perspective, I might be able to convince them that this is a good opportunity.’”

She became a venture partner at Tech Nexus in Chicago while still working on her company. She planned to go back to building full-time after spending a year with the firm, but it didn’t quite turn out that way.

“Venture is an opportunity to be more strategic,” Tessa says. “I like the process of putting your money behind somebody who you believe in, but then also helping them continue to accelerate their ideas after you invest. So I get to feed that entrepreneurial side of me through being an investor.”

During the pandemic lockdowns in 2020, Tessa was still able to work remotely for the fund from her home on the west side of Chicago. Every day she saw the impact on the historically Mexican neighborhood full of brick and mortar businesses, especially in light of the fact that businesses owned by people of color had a significantly harder time obtaining relief funds.

“I started my career wanting to make an impact and make the world a better place,” Tessa says. “I knew there had to be a solution for private capital to come in and help these small brick and mortar businesses. And so I started to think more about the venture model, the racial wealth gap in this country, and how some people have access to this asset class, and some don't. And so one day it just dawned on me: I can create a fund.”

Building Wealth at Both Ends

Tessa and Capitalize VC serve the overlooked community in two ways: she raises capital from Black and Latino LPs, and then she invests in Black and Latino founders.

Like many VCs, she started fundraising the same way that many investors start: raising from people within her existing network. But unlike many established VCs, her network isn’t mostly old white guys already familiar with investing. “I wanted to bring my family members into this asset class and the people who have been my mentors. It's scary to invest in something for the first time. It's scary to invest in an industry that you know nothing about. And so that's what I've seen is the hurdle for some people that I've been really excited to get into the fund.”

Tessa makes an additional effort to educate her LPs and keep them excited about their investment in Capitalize VC. “I would much rather take the long road and work to educate prospective LPs,” she says. “Over time, we are going to see this shift in who's accredited. We're going to see laws changed to where more access is granted to people to invest. And I think that this creation and impact is by creating, you know, more opportunities and more accessibility is really the greatest opportunity for wealth.”

Similarly, Tessa is also seeking out Black and Latino founders, with the hopes of helping them achieve generational wealth as well. Although she was inspired by brick and mortar businesses in her neighborhood, they’re not part of her current strategy. “I haven't figured out the way to fund a brick and mortar through a venture capital structure at this point. But hopefully, one day that's coming,” she says. 

Instead, Tessa is investing in CPG companies and the technology that may support their infrastructure. “CPG companies are more globally accessible, which also speaks to the scalability of them. We’re looking at anything that can help an emerging eCommerce brand to scale.”

Looking Ahead

Tessa has already seen some amazing results from her investments beyond financial returns. Her thoughtfulness, experience, and overall grit as an investor has led to fruitful collaborations between portfolio companies, and she intends to continue leveraging that as a value-add investor.

“As we're looking at new deals,” she explains, “we ask, ‘How does this increase the value of what we're doing here, and the opportunity for helping another company in our portfolio?’ That's been really cool, because we do a lot of food and beverage investing on the CPG side, and then we're looking at live streaming platforms for monetizing creators. And those two things fit together really, really well.”

Because no one builds wealth alone.