DIVERSITY: A Candid Convo With Carey Ransom, the Co-founder of OC’s Operate (a venture studio)
inter-TECH-ion Intern Noah Chavarria contributed to this article….
One of the only venture studios with HQ in Orange County has pivoted to reach a wider clientele geographically. OC4 Venture Studio took the “OC” out of its name and is now known as “Operate.”
But the studio, by any name, has not adopted a diversity rider. That’s a trending way, in the VC world, to adopt a call-to-action, with the goal of increasing opportunities and access to wealth for under-represented demographics —such as Black, LatinX, female and LGBTQ+.
Firms adopting the rider language — which was crafted by a venture capitalist in LA — pledge to bring people from these communities into deals as co-investors. That instantly increases diversity at the core of the deal-making process.
inter-TECH-ion talked to Operate Co-founder Carey Ransom about the transition from OC4 Venture Studio and asked about his thoughts on diversity. Here’s what it found…
Since then, it’s already pivoted to reflect a wider geographic reach and hone in on its mission.
The new name is Operate. Since “OC” stood for “Orange County,” it’s not pigeonholed to a specific geographic locale anymore.
The new moniker is also meant to emphasize that it’s not just a venture studio, but more of a hands-on team that wants to be known as “operators” first and “investors” second.
The idea is to be the first place where an early-stage tech entrepreneur, even as a solo founder, can be fully supported with capital and ancillary support.
The studio was originally founded by Carey Ransom and Kyle Kamrooz, a co-founder of Cloudvirga, a fintech startup in OC that’s digitizing the mortgage process. See more about Cloudvirga here.
The studio team is now up to five full-time staff and expects to grow in 2021.
Focus on Diversity?
Ransom said Operate is keyed in to diversity. For example, one-fourth of the founders who received investments from the first fund are women.
Seeking out and working with diverse founders is important for any VC firm or studio, Ransom said, because they are going to come from different backgrounds and provide varying points of view.
Historically, Ransom said, women and people of color have had challenges getting funded because they don’t have a well-formed, fundable story that’s enticing to investors.
“It may be also that they lack a network or experience,” he said. “Most investors are looking for that single reason to say ‘No.'”
Operate provides capability, experience and a network — in addition to capital — so it’s able to provide more confidence and support to all founders, he added.
“We believe we can be an ideal partner for under-represented founders, and are proactively sharing that message with the startup and venture capital community,” he said. “We are also considering an even earlier founder engagement opportunity — in the form of an incubator, as well as an associated investment and program — as another way to help more diverse founders in developing their concept and funding story.”
Operate has not yet committed to a diversity rider because the co-founders don’t believe it’s necessary to do so at this point in time, Ransom said. But the studio will continue its commitment to supporting and working with diverse founders, he added.
One way that Ransom honors diversity is by respecting inclusivity in his weekly podcast that highlights global innovators, entrepreneurs and investors.
He noted that a recent interviewee was Luke Cooper, the founder and CEO of Fixt. Cooper started the company in Baltimore in 2013 and sold it to Assurant last year for an undisclosed amount. Prior to that, in five funding rounds, Fixt had raised more than $10 million, according to Crunchbase.
The company is an on-demand service for corporate IT managers and individual consumers. Fixt staff comes to wherever they are to replace broken phones and tablets.The goal is to replace traditional repair staff like Apple “concierges.”
Opportunity Zone Fund Ahead of Its Time?
One unique aspect about OC4 Venture Studio was that it had created the concept of an opportunity zone fund, as well as a standard venture fund.
The former enables those who receive capital gains – profits from the sale of a capital asset like real estate, stocks or bonds – to defer paying taxes on that profit, and instead invest it in a fund that targets startups located in certain designated opportunity zone areas.
But although this fund still exists, no money was ever invested into it. And, it’s on the back burner for now, due to lack of market understanding, as well as lack of interest in opportunity zone funds in general, Ransom said.
But that’s not for lack of trying. The venture studio hosted an educational forum last year and published some papers on the benefits of investing in its opportunity zone fund.
And, while the co-founders had high hopes — and even established their brick-and-mortar HQ in an opportunity zone in Costa Mesa — the concept just hasn’t gained traction nationally as a way to fund startups, Ransom said. As a result, there’s been no trickle-down effect to SoCal.
Ransom is still a staunch advocate of the concept. But, he explained, it can also be a tough sell because any capital gains received by an individual must be deployed in an opportunity zone investment fund within six months, based on how the federal legislation is written. That timeline can add even more pressure to the already inherent risk of investing in startups.
“I’m disappointed, as I see how compelling it is,” he told inter-TECH-ion. “The good thing is that by being in an opportunity zone (area), like we are, we’re attracting many others to this area… drawing attention to the power of community. And post-Covid, creating more serendipitous collisions that everyone needs.”
For example, Jim Pickell, a VC friend of Ransom’s, moved his company into the building where Operate is located. Pickell, who runs Tech Coast Angels’ OC fund (see article on that here), moved a new business of his into the building.
For the near future, Operate is focusing on investing its traditional venture fund, and the expertise of its team, in co-creating software startups, especially those focusing on data, and as a result, creating jobs within those companies.
Ransom declined to disclose the precise amount invested in the first fund, saying it was in the millions. Operate made eight investments in 2020 out of this fund, which it closed in December. They include ChatterWorks, Ardius, Grin Gaming and Spoonful.
ChatterWorks, with HQ in Irvine, provides software tools for recruiters and sales professionals to land prospects with speed and precision.
Ardius, with HQ in Brea, enables startups and established companies to discover and claim tax credits each year.
Grin Gaming, with HQ in LA, combines the science of high-frequency trading with the fantasy sports world, enabling users to predict the outcome of every event in their favorite esports streams and sports games, including the NFL, NBA, and MLB. It uses AI and low latency data processing to track the game in real-time.
Spoonful, with HQ in Orinda, in the SF Bay Area, uses AI to help people make healthy food choices. Inspired by the “food-as-medicine” movement, its goal is to build a platform that connects what we eat to how we feel – both physically and mentally.
Operate is fundraising now and would like to obtain about $2.5 to $3 million for its 2021 fund, Ransom said. There are a few new startups in its queue that could potentially receive investments this year, but they have not yet been announced.