Ask A VC – Allison Baum, Managing Partner at Fresco Capital

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Chicago-born and Harvard graduate, Allison Baum is a Managing Partner of Fresco Capital, an early-stage venture capital firm investing in exceptional entrepreneurs building global businesses. Previously, as Regional Director of Asia at General Assembly, she established and grew the company’s first education programs for technology, business, and design in Hong Kong. Because of her experience at GA, she focuses on education technology investments at Fresco Capital. Currently, Allison resides in Tokyo, Japan. Interviewing Allison was a lot of fun. We actually chatted for 2 hours via two separate Skype calls! 

Tell us about your startup experience at General Assembly!

I joined General Assembly (GA) when it had only 15 people. They wanted digital skills and didn’t care that I went to Harvard. I helped launch part-time and full-time programs in New York, and was lucky enough to be involved in every aspect of getting the business off the ground. It was an awesome crash course in startups in the heart of New York’s tech scene. I loved the process of not knowing all the answers and figuring things out.

After a while, I went to Hong Kong for vacation. On the trip, I saw a huge opportunity to do the same type of programs in Hong Kong. Selling courses to individuals in the U.S. can be difficult, but not in Asia. People want to pay for education! That’s part of their culture growing up. I went back to the GA team and they said, just like any other US-based startup, “We get it. Asia is a big opportunity but not right now.” I put together a plan and pitched again. They said no. This is when my entrepreneurial spirit came in. I said, “I quit! I’m moving to Hong Kong and doing it anyway.”

Looking back, I call that fake confidence - no idea what I’m doing, but I’m just gonna run with it.

GA was shocked. They finally agreed to let me represent GA and start the new market in Hong Kong. With that, they gave me three months to break even to prove Hong Kong was a viable market. So that’s what I did - I created the first education business of its kind in Asia.

So you were in Hong Kong. How did Fresco Capital happen?

I met my two partners at Fresco Capital in Hong Kong, who had also built many cross-border businesses. Due to our previous experience, we all agreed that more startups should target global opportunities, so that’s how we decided to approach investing. We invest in companies regardless of where they are headquartered and then leverage our global team to help them find the right partners to expand into new markets like Silicon Valley, Washington D.C., Dubai, Hong Kong, Tokyo... You name it. I moved to Japan in May this year, and started working to bring Japanese investors into Fresco and our portfolio companies.  We now have a global base of LPs as well.

What’s the investment strategy for Fresco?

Our strengths are each partner’s success in certain sectors and our global story. The three of us are stronger together. How we work and interact with each other is really great. We challenge each other but still finish each other’s sentences. Steve (Forte) has a strong background in technology, Tytus (Michalski) in finance, and I am focused and passionate about EdTech. We care about the impact of our investment. 

In June, we launched Fresco Education Fund, which is a sector-specific fund with strategic investors as Limited Partners (LPs). Right now there are a lot of funds that are potentially raising, but fewer are actually executing or pushing forward. Many investors want to wait and see who’s actually doing it.

Why is EdTech particularly interesting to you? What differences are you seeing between EdTech in Asia vs. the U.S.?

EdTech has been very hot in the US the past few years. You could see that lots of funding went to early stage startups, and quite a few active foundations and accelerators. However, the market size in the U.S. is limited. Most education startups need to sell to school districts, universities, or corporations. Asia is different - the market size is huge! 

There are roughly 30 million students in the U.S. but 600 million in Asia. 

But there’s less intelligent capital flowing into EdTech in Asia, and companies have not caught up yet. The infrastructure for innovation is not there yet. We are very focused on helping to build a more interesting ecosystem. 

(Pocket’s side note: From what I’m seeing in Singapore, the education is very much about following the rules and not crossing any lines. Students are told to be obedient and competitive from very early on. A big part of Singapore’s huge Smart Nation initiative is to ignite more innovations among the next generation. I’d like to see what can be done!)

I noticed that Fresco has a great team across geographies and disciplines. How does this talent structure work and how do you attract people to be part of Fresco?

We have three levels of brainpower: Managing Partners (the three of us), Venture Partners, and Impact Partners. Our Venture Partners each have specific strengths in a geography or sector, so that they can help with investor relationships and support portfolio companies. Impact Partners are advisors and mentors to us or our companies. Their judgment and knowledge add great value to us. For example, one of our Venture Partners is an early employee at Dropbox, and he knows the ins and outs of how to build teams and products. He is a Limited Partner in the fund, and sometimes interviews potential hires for our companies. 

Most of these people have worked with us before, so we know they’re good. If we bring on someone new, we always evaluate their motivations. Why do they want to do this? What do they want to get out of it? Our pitch is that we are a filter of startups, and only select the very best ones for our partners to get involved.

If they are not already incentivized to do this, then it’s difficult to make sure they’ll perform.

You have an awesome blog (also on Medium). Is writing helpful to your career as a venture capitalist?

I started a blog when I moved to Hong Kong because people thought that what I was doing was insane. I always wanted to write, but their doubt gave me a purpose. Through writing, you can connect with people in a way you couldn’t otherwise. At Fresco, I started writing about EdTech, because no one was talking about it in Asia. 

Writing a blog is the most scalable way to say things that have not been said yet. It’s a way to share my thoughts with people in my area of expertise. It helps my career because writing forces you to crystallize your ideas and justify your views. 

Writing is also a conversation starter. I noticed that not many VCs in Asia blog often, so there is a big opportunity!

How do you feel being a woman in VC? Any noticeable advantages or challenges? 

I’ve always been in female-light professions. My first job out of college was on Wall Street in Equity Derivatives, a quantitative product with not many women. Then I worked with lots of male developers and engineers at GA. Now I’m in venture capital. I’d say being a female VC is a strength because being different is valued in certain ways. At the same time, it’s hard to overcome stereotypes and biases. 

People are hard wired to make assumptions. If men dress up super casually, people think they’re chill and super cool. But almost nobody takes a girl in a hoody seriously in the meeting room. I need to dress up more than my male counterparts do to prove my value. 

I noticed that when I show up in jeans with no makeup, my meetings go very differently. People make judgments based on what you wear. 

In Asia, it’s hard to tell whether it’s my age or gender that causes unconscious biases, maybe both. People here give more credit to older men. I do believe being young is a strength — we have a beginner’s mindset and are willing to dedicate a lot of time to our portfolio companies. 

You’ve been raising for Fresco Capital. What’s your fundraising strategy and winning tips?

I’m just starting out with no track record in VC, so I have to make people believe in me. I may have fewer years under my belt, but I still need to convince people to trust my capability based on what I’ve done. In fundraising, everything counts - the quality of interactions, your thoroughness, and punctuality. Success is built on every little thing that you do.

My strategy is always to understand what matters to the person you’re talking to and what incentives he/she has. Then, I have to figure out how to align ourselves with their incentives. After all, our job in venture capital is to make other people successful.

What do you look for in a startup or founding team?

There are two main ways for a startup to be innovative - in its technology or go-to-market strategy. Very few teams can do both well at an early stage. You need to know what approach they are taking, and whether the team is properly equipped to execute on the approach. As a result, what value does the company create in the marketplace? Is the value-add scalable?

As for the team and founder, it’s important that I understand how they make decisions. Do they have the courage to be different? Is there a purpose behind what they do? When people are mission-driven, they become much more powerful and less likely to give up, and can attract better talent. Other characteristics I care about are their integrity, curiosity, and authenticity. 

The founders need to be honest about their weaknesses and strengths. I often ask, “What keeps you up at night? What are you most worried about”? It’s a big red light if their answer is “nothing”.