Daniel Pianko and Nasir Qadree of Investing in the Future of Learning

If you’re listening to the Getting Smart Podcast, I’m Tom Van Der Rook and today we’re speaking with Impact Investors Daniel Pienko and Nasir Kadri. Hey, guys. Hey, Tom. Great to see you.

Hi, Tom. Great to have you on the podcast. Dan is a co-founder of Achieve Partners. Dan, congrats on the big recent round. You raised $175 million in the last few weeks.

Is that right? A few more shackles than that, but yes, that’s exactly right, Tom. That’s awesome. So you’re putting about $200 million to work in the new fund. Dan was also the co-founder of University Ventures and his work with Ryan Craig over

the last decade resulted in me often describing them as the most important investors in the post-secondary learning in America. Dan is also one of the co-founders of a new industry association for Impact Investors. It’s called Impact Capital Managers and for ICM, Dan is producing a regular podcast called Better Money, Better World.

Download it now. It’s a terrific discussion with Impact Investors like our other guest, Nassir Kadri. Nassir is the co-founder and manager of Zeal Capital Partners. It’s an inclusive investment vehicle. Nassir, what is an inclusive investment vehicle?

Yeah, it’s an investment discipline. First of all, Tom and Daniel, it’s great to be with you both. I sit on the shoulders of both of you since being in space, only for the better half of six, seven years, more formally across two funds. I admire both of you and Daniel, you and I have a number of conversations.

It’s really shaped my thinking as an investor, both of us coming from the dark ages of Goldman and traditional financial services. It’s just warming to see where you are and for us to be where we are as a new investment vehicle across the private markets. Tom, to your question, and we can get into this a little bit more, inclusive investing

to us is a new investment discipline that we’re pushing and sharing across the private markets, whether you’re a story franchise or you’re an emerging manager. Essentially, we often hear impact investing over here, ESC over here and traditional financial services over here, but we truly believe that when you build in this five-pronged market back approach, you are more likely to have better source entrepreneurs everywhere, not

just come from very few places and historically data-wise backing the same people quite frankly. It’s taking a more proactive approach to hopefully better levels of playing field, but also factors in a civic investment focus and impact measurements as well. It’s a combination of impact, but also achieving alpha as a means to widen our lens from a sourcing perspective.

I appreciate the term and Nassir, it sounds like you’re trying to be inclusive in terms of how you shape your firm, where you’re sourcing founders, the space that they’re in. Using that term pretty broadly. It’s inclusive in three buckets, inclusive in terms of the team that you build, in terms of that being having inclusive diverse team and what that yields when your team is diverse.

It’s the founders in which you invest and see it’s the geographic inclusivity and what that yields when you over index or you’re more proactive. We talk about the US, we want to focus on the US cities that are outside of your traditional tech hotbeds, so Boston, San Francisco, New York for example. It’s taking more of a proactive approach in terms of how you think about your infrastructure,

your sourcing and communities, ecosystems in which you interact with. I appreciate that. Nassir, you mentioned that you both got your start at Goldman Sachs. Dan, what was your path from Goldman to impact? What spurred your interest in this idea of high impact, high return?

Well, first of all, I’m glad Nassir feels like he learned from me because I feel like I learned from him at least as far as marathon running and the like. Kudos to Nassir for closing. Nassir has completed 18 marathons and your goal is 51, right? 51.

I’ve had two, a little rock in Wisconsin, this Arkansas and Wisconsin this year. We’ll make 20. That is awesome. Dan and I are envious of your achievements on that front. At least I have slightly more hair than he does still.

I joined Goldman as a history major, so I was a little different than my other fellow analysts to start. But I knew pretty quickly that I wanted to try to save the world. While I had a wonderful experience at Goldman, the concept, I was in the financial institutions group, so my job was to help banks buy other banks, basically, which is a very lucrative

profession, but it didn’t solve what I was looking for, which was to do something more impactful. And I knew pretty early on that I wanted to do something different. And when I left Goldman, I actually joined a charter school organization run by Jim Shelton, who I think everybody listening to this podcast, if they don’t know, they should know.

And he was my first mentor in this brave new world where you could save the world and also achieve great returns. I didn’t know I was going to go into impact investing. What I knew was I wanted to do something different, and I wanted to try to save the world. And where I ended up was people like Jim and some other mentors early said, hey, it wasn’t

even called impact investing then. They were like, hey, you can solve problems in a way that attracts capital to solve them, so you’re not reliant on philanthropy. And I thought that was probably the single most important realization that I learned very early on as I moved into what is now known as impact investing.

That’s a cool connection, Will Shelton. I didn’t know that. I had the chance to work with Jim at Gates Foundation, and he was a terrific thought partner. And one of the things that you always ask your guests on Money Better World is just to give

an example of a deal and investment that illustrates your thesis. Is there something you look back on over the last 10 years that illustrates this idea of high impact, high return that would help people understand what we’re talking about? Yeah, so first of all, I struggled answering this question when you said you’re going to ask me this.

But I’m actually going to talk about the first deal on our new fund, which is optimum healthcare IT. Our basic philosophy is there’s a massive mismatch, a chasm between education and employment. And you got 8 million unfilled jobs and tens of millions of people who are either unemployed, under-employed, or unhappily employed.

And so our fund is geared towards buying companies in skill gap areas and then adding what are effectively apprenticeship programs frequently in partnership with traditional universities and other sources of talent. And one area that no one on this podcast has probably heard about or thought about is healthcare IT.

There are hundreds and hundreds of thousands of healthcare IT jobs. We invested in a leading healthcare IT implementation firm called Optimum Healthcare IT. This is a business that implements healthcare IT systems at over 200 of the largest hospitals in America, great established business, top brand in its space. But the founders realized that we are inhibited in our growth by a lack of access to qualified

people who can implement healthcare IT systems. So we invested and then what we brought was we call last mile training, which was we partnered with the University of Central Florida, Denver, and a few other universities. We’re running cohorts of students, boot camps, but we’re recruiting people and guaranteeing them a job when they graduate.

So we get hundreds of applicants for every slot, get really high quality talent that’s generally left out of the traditional talent pools. This is for an IT job. About 60% of our talent is diverse, either female or underrepresented minority. So we think that’s really important to what we do.

We train them. We pay them while they’re getting trained. And then we place them in job afterwards. We think of it almost like a Swiss style apprenticeship program in the U.S. But it really solves everybody’s problem because the healthcare IT needs literally hundreds

of thousands of more professionals. There are lots of recent college graduates and others who are looking for great first jobs. And then we basically take the risk that we can identify really high quality, diverse talent, place them in jobs, and then have set them off on their career. And the goal of our fund is to create 100,000 good first jobs that wouldn’t otherwise exist.

And so we think healthcare is one of those areas where we can clearly add talent in that regard. Impact investing wasn’t really a term that we used much 10 years ago. It feels like the field has matured relatively quickly. Maybe you could also give us the origin story of ICM, this impact capital managers and sort of how you found your tribe and how what this affiliation is trying to accomplish. Yeah, so I always kind of felt a little out of place when I talked to sort of my friends who left Goldman to do private equity for banks or other types of things who were really primarily or solely focused on economic return and doing bigger deals.

And at the same time, you have on the other side, philanthropists, you know, you’re from the Gates Foundation, does wonderful work, but not exactly trying to maximize economic return. And so what impact capital managers was a group of managers that got together and said, we don’t have to sacrifice return to get high impact. And basically it’s a group of people who believe that by solving the world’s greatest problems, we can make the most money. And so we have about 70 members and the seer is actually a recent additional member so we’re really happy to have them joining impact capital managers. And 70 managers managing about $15 billion right now.

So it’s a great group from the TPG Rise Fund, Bain Double Impact, down through funds that are, you know, $25 million and supporting native populations on reservations. So it’s really an amazing group of about 70 GPs. And Dan, is everybody seeking high return, high impact, or is there sort of a continuum between both high bar for both and some that will accept a mitigated return? No, and this is I think probably the most important point. We are solely, we believe there should, we believe that the focus for us is that there shouldn’t be this mushy middle, right?

I think the biggest problem for traditional allocations, if you think about the allocation of capital in the world, right, there’s $350 trillion of assets out there. 99.9% of those assets are purely return seeking. And so by creating sort of this mushy middle, it kind of makes all impact investing look like it’s not return seeking, which means that a lot of people won’t invest in impact investing. Historically, the biggest problem is people won’t invest in impact oriented funds because it doesn’t comply with their fiduciary duty. And so what we’re focused on is saying, hey, we’re high return and high impact and all of our members sort of go along with that approach.

Nassir, you also started your career at Goldman Sachs. What was your path to impact investing? Yeah, it’s interesting. Like I had maybe three core reasons why I felt it was important to start my career in traditional financial services. One, the gain and style skill set to get some personal capital. The first nation college graduate with my family, it was important that that personal capital is very important.

And three, to really expand my social role with that. I come from Atlanta, Georgia, a community where opportunities is in terms of succeeding is rare. And so I felt the more I expanded my reach and social networks, the more I was able to really get a sense of what other options are out there. And I knew very early, much like Dan, that as vague as it was that early, that working in capacity that was mission-aligned but also had the ability to achieve economic mobility was important. And so became very interested in education first.

I was already sitting on several nonprofit boards of playing that one foot and one foot out. But the interesting, my four-way into the private market into venture capital and impact investing more specifically is that actually in New York City, I opened up a coffee shop to my closest friends in the West Village. And it was essentially a coffee shop that meets an incubator. And we, it was called these knees. And we attract a lot of entrepreneurs, as you can imagine, a lot of NYU students, just given we were in the heart of NYU.

And in turn, we also attract a great deal of investors. So as an owner, you walk around, you want to make sure your customers are doing okay. But as for me, I became even more respectfully nosy and inquisitive and learned that there was a lot of one-on-ones with investors and entrepreneurs. And so I befriended a number of those investors and they introduced me to the product markets more specifically, impact investing and even more civically ed tech. And I later learned very at that point that there was a market opportunity, as you know, when we’re, most of all the tools we use in the classroom in schools and universities are private companies.

And so I became more and more interested in the tools that were being leveraged for instructional purposes, operational use, administrative use from pre-K through 12. And then a little later, I started really getting interested in K-12, excuse me, in post-secondary and then later in the workforce. But very much, you know, the coffee shop is where I credit my introduction into venture capital investing. And then spent time in Connecticut as an Ellen Shaddow, the Education Pioneer fellow, a nonprofit that really helps those who come from the private sector to hound those skills into education work. And so really had a chance to work on several projects in Connecticut as a special assistant to the commissioner education, former Stefan Pryor and worked closely with former governor Dan Malloy on all things, the role the technology plays to increase student achievement and employment outcomes.

And so from there, I moved to DC and joined a small firm called Village Capital. Right. I think, Miss Sire, that’s probably, we probably met when you were at Village Capital. I think that’s exactly when I believe it was either a new school venture fund summit or South by Southwest. Yeah. And then you had the chance to lead the AT&T social impact fund. Yeah. I’m wondering if you think back over Zeal and Village and AT&T, is there a deal that is an illustration of your investment thesis?

Yeah. And the spirit of being biased and using this week, given our announcement, and even though we’re a newer fund on the block, you know, we’re running a pretty highly concentrated portfolio. You know, we’re investing in early stage companies. So pre-seed, seed, series A. And so the company I like to share is a company called Year 1 that’s led by two brothers that is based in Portland, Oregon. And the reason why I highlight these individuals, these co-founders, they speak clearly to our investment mandate, which is backing exceptional, diverse management teams that’s rethinking the building blocks of wealth from education to employment pathways to financial wellness. So investing across two verticals, the future of work and financial technology. But our future work practice, Year 1 essentially is a platform that connects with graduates, software engineer graduates from coding boot camps around the country, and connects them with software engineering jobs at medium to large size technology companies. And they’ve had incredible traction in the 40, either 250 in revenue last year and now approaching 2 million this year.

And so the returns in terms of their growth has been exceptional. But of course, especially over the past year, we’ve seen an height in C and interest from large corporations, particularly technology companies that do want to see an increase in diversity as it relates to employees in general. In this case, they’re sourcing exceptional software engineers. And so Year 1, we believe, is going to become a market leader, while they’re still early, but a market leader in terms of the go to platform source for medium to large tech companies in terms of sourcing software engineers, diverse software engineers. That’s a great example. Dan, you get a chance to talk to impact investors every week on better money, better world. It strikes me that it’s still a challenging profession because most of the areas of intended impact are many of them are in the social sector and they’re sectors of the economy that don’t have typical market characteristics. Isn’t that an impediment to impact investing that you’re trying to make a difference in a sector that doesn’t operate much like a traditional market? Actually, it kind of is what creates what we call alpha. And so Nassir’s example, I mean, what Nassir is doing is really incredible. How many venture capitalists are running around Portland, Oregon?

And if you look at returns, we have some amazing rethink impact to women when I went to business school with. They’re basically focused on women oriented deals. And founders who are female, who are frequently overlooked by other venture capitalists. So you have some sort of diversity alpha creation, which is if you actually find something like 96% of all funding goes to men, some crazy number like that. The numbers for African Americans, I mean, Nassir, you probably know them better than I do, but I think like four black women have raised over a million dollars. I mean, the numbers are staggeringly bad. So on one hand, we have venture capitalists who wear Patagonia vests and run up and down Sand Hill Row who invest another white guy is like me. And so that’s a blinder, right? So that their alpha creation by backing diverse entrepreneurs is well understood. I think you were though asking about sort of a second major category where I think Nassir and I both play, which is that a lot of businesses, whether they’re environmentally oriented or education oriented.

People think of as non market right and so they’re actually real gains to being an expert in a space. Whether that is, you know, nascent areas of ed tech being able to call up someone like Tom Van Der Rark and ask him does a ed tech product actually work will people eat it. Will people buy it. You know, reach capital who I think many reviewers will know, you know, they’re a bunch of former teachers, and they’re able they’ve had four or five unicorns by identifying companies that teachers will actually use their products for and have a massive outsized returns. You know, ecosystem integrity fund. Early on realized that, you know, people would, you know, solar panels, everyone is focused on the technology of solar panels and Silicon Valley. And they realized early on that actually if you change how you mount a solar panel is actually much, much more impactful or cheaper or whatever so they cut the cost of solar installation by 50% by backing a company that wasn’t sexy.

But it was incredibly important to the process of installing solar so actually we believe that the non market forces you referenced and sort of the blinders of the traditional investment community creates the opportunity for alpha. Nassir, what would you add to that about working in spaces where we traditionally have thought about the market being inefficient. Yeah, yeah, I say two things. Hey, you’re finding you’re finding entrepreneurship, entrepreneurs building businesses being a bit more evenly distributed, especially over the past year there are living everywhere they’re not just living in New York and in San Francisco I think that’s that that could correlate to a valuations right at a bit more expensive across the coast. You’re building a company in Cincinnati or Denver or Detroit valuation you can be a bit more you can work working your favor. But but I also think there’s an interest there’s an interesting dynamic around building on top of local assets. Right. And if you’re a company in Atlanta, I mean, you have, you know, you have companies, Fortune 10 companies from Home Depot to Delta to UPS Mailchip you name it about maybe 10 Fortune 30 companies in that ecosystem.

I think that’s overlooked and the ability for entrepreneurs to get that first pilot or at those at those companies and and they’re in their interest in in partnering with these overseas companies and so I think there’s an interesting dynamic also around building on top of local assets. Baltimore, if John Hopkins has really been leaning into the Baltimore’s entrepreneurial ecosystem in terms of piloting new products across health and and education technology. So I think those that can be a great. This year I guess what I’m most worried about these days are accelerating inequity. And what we saw in the last two years was these compounding. Accelerance of climate change, the pandemic. Life with smart machines can impact investing really address accelerating inequity or does it take more, more than that. I think it takes more. I think we play a major role. But you know, you think about inequity and for me when I think about it, I think about it in two buckets. It’s this conversation that we have been really paying closer attention to probably since the 1960s is racial equity.

And then you have economic equity, which I don’t think we talk a lot about. And it’s and for me it’s like racial equity. I define it as people and communities not working for them. Right. And then economic equity is systems change. Right. And I think venture capital we play a major we have the ability to inject capital into innovative business models and that that can truly possibly disrupt systems that enable the people that alleviates racial equity that burgers level level play levels the playing field so that all of us can succeed. And I highlight obviously, African Americans and Latinx and those from low wealth communities that have been disproportionately impacted most and I truly I truly believe that you know, and I agree with Daniel here it’s like, like they’re doing it to us to be some form of capitalism, capitalism infrastructure put in place. There continues to be a discretion between LPs and in in in GPs, for example. So what what’s the future of convenings and conferences is there a way can we get come together and and and not just totally revamp is not going to happen over one convening but maybe you know we have a issue GSU coming up and we we have an early morning breakfast going to make sure the number of LPs that’s that’s that’s going to be there and have this type of candid conversation around.

Yes, because a lot of these LPs are also are are focusing on racial equity right a few of our LPs. Investing in us because of our racial equity lens, but also pushing them to say this is not just about racial equity, it’s important. This is also about economic equity that that that really debunks the system that the systems that hasn’t worked for, and I think entrepreneurs can debunk that as well. I’m still learning and you’re really, you know, fleshing all this out but hopefully that that makes a little sense. Daniel this new form of capitalism does require not only a new approach to investing but a new social contract. So is there a policy complement to the work you’re trying to lead. I hope so. You know, I think that you know the government was very important to starting venture capital by creating some things in the tax code. If there’s a way to actually identify impact and then give preferential treatment to those investors.

I think that would be very helpful. I’m not trying to have a good answer for you there. I’m just going to say one other quick thing which is, I think this equity issue is is across lots of different cross currents like that, you know, veterans. I mean, we don’t talk about veterans in the equity conversation but you know, there are other the after you know, the stat that’s crazy is you know $140,000 is the average white family net worth, you know, like some 10% of those average African American family net worth like there. There are such systemic issues at play across multiple cuts of this that I think it’s, it’s going to require a lot more than you know, it’s going to require the way the way limited partners give money to general partners to change a lot of these things. And I think the unions are taking a lead on this. I think BlackRock has started to make some of these changes. I think some of the big asset allocators are starting to think about this. But, you know, right now impact is like, you know, it’s a huge impact. And I think that’s why I think that we’re not going to be able to make that impact.

I think the unions are taking a lead on this. I think BlackRock has started to make some of these changes. I think some of the big asset allocators are starting to think about this. But, you know, right now impact is like 1% of all asset allocation, even the way we do it right which is for profit impact right market rate impact, you know, until that becomes 50 60 70% I think I think that’s going to be the driving factor. It sounds like you’re optimistic about the fact that, you know, BlackRock founder Larry Fink is talking about taking a long term view about taking climate into account. You got to be excited about the increased focus on ESG investment. Is that all a good? Yeah, I’m waiting for I’m waiting for him to divest to I mean I think look, the one of the people on my podcast that did those amazing story where it’s an environmental fun and he goes to a convening and a bank CEO comes up and says, we’re devoting 1% of our equity capital to impact. And Ron Gonen who runs an impact oriented environment environmentally oriented fund gets up and says, Okay, show of hands. Who here uses good, you know, healthy cleaning supplies in your home, every single person raised their hand and non toxic cleaning supplies in their home and listed a bunch of brands everybody raised their hand and he turns the bank CEO says, Why are you only doing 1% of your funding impact. Right. That’s the message we have to until banks insurance companies large asset allocators start thinking, Look, 99% of our funds should it’s crazy. We still have any money in this old economy. Right. The world the industrial world is changing away from, you know, our energy grid is 100 years old.

Our road systems are 100 years old. Our most of our core telephony is 100 years old right like there are massive segments of the economy that have to be changed in such a fundamental way. We need trillions of dollars flowing into this stuff. And the equity issue like you can’t tell me that there are only four black women in the United States who deserve a million dollars or more adventure capital. Like that does not compute to me. And so we’re clearly at the early innings of a radical shift of how we allocate capital. And it’s and it’s not just the folks at ASU GSV but it’s it’s the folks who don’t care. Right. How do you convince Larry think that it’s not 1% it’s 99% Hey, I’d love a headline from both of you on innovation or to that you’re excited about in education or workforce development, either a new technology and new business model but the series or innovation you’re excited about in the learning space. Yeah, I, I, I highlight the workforce.

Just that’s just where we’ve been spending a lot of our time. You know, I believe what the unemployment rate is at a red 6%, just south of 6%. You know, we still, you know, there’s, there’s still a great deal of workers or that are looking to to to never impacted from COVID. And we’re crossing paths and a number of companies that are thinking about new training and skill development programs for employers but all that are affordable as well. Workers can remain upskilled or get re skilled. And so I’m excited to really lean into that capacity of the workforce in terms of ensuring workers are have necessary tools to compete in today’s malls workforce. Daniel, you probably agree with that you’re you guys are excited about new workforce development models right. Yeah, I think it’s a structural shift where we’re realizing that there’s enough money in the system to train people.

Right, so for from from the late 90s until until recently, every major company not every most major companies got rid of their training programs, you know they got rid of their, you know, this year and I were lucky enough to go to the Goldman’s training program that maybe one of like 10,000. And so I think what we’re seeing now is bespoke training or a new model of apprenticeships that is that is rising and I think the technology infrastructure there the sort of human capital infrastructure there is probably the single most important thing we can do in the near term to recover from COVID. Last question is impact investing and attractive path for somebody that wants to make a difference. I’m bullish, Tom, you know impact investing is going to evolve. You know, not to to my own horn a little bit I do think you know I was pushing this inclusive investing thing could really generate a discussion around is inclusive investing its own truly his own investment this when my vote is that it will be what it remains to be honestly remains to be seen and

you know we’re we’re we’re new funds so kind of theory to action concept, but but that indicator alone I truly believe that a young person who has an interest in investing. And I think you’re seeing is already right most young people we saw this obviously over the past year who were on the front lines, they they have an interest in social change and environmental change and, and of course, for those who who haven’t been interested in investing the ability to get I’m sure they’ll also have an interest in more mission driven related investments so I do think is valuable. Obviously, for firms like us we need to make sure we have the systems in place that they can actually get the right exposure to really get the full depth of the investment lifecycle and how to source deals and, and really identify impactful companies but also companies that could be outside generate outsize return, but yeah, I do think there’s there’s an opportunity overall.

Yeah, first of all, you know, you can’t tell me that in three years and a seer won’t be managing twice as much capital as he is today so like, you know, this space is growing it’s always great to be in a place that’s growing. We helped start mosaic fellows program at impact capital managers so anyone who’s listening, you know, encourage you to apply to that. It’s for graduate students or impact interest in impact investing and they get placed with an ICM member. The sector is growing when we started ICM we were literally, you know, 10 firms in a basement managing, you know, probably less than a billion dollars today, five years later, as I said, it’s probably 70 firms managing over 10 billion. So, you know, this is a growing field and I think the real interesting thing is, you know, when does all in all investing become impact when when is it that it’s odd that you don’t have to report impact metrics to your LPs because or the diversity of your team to LPs.

So I think we’re going to see this become not just an attractive path but sort of the only path to be on if you want to be in a pro social environment going forward. It feels that way, Daniel and it to the extent we can say that’s a viable trend it’s important because of the work. Both of you have been doing over the last 10 years so we appreciate your leadership. Thanks to Daniel Bianco from Achieve Partners. Nazir Kedri from Zeo Capital Partners. They’re both members of Impact Capital Managers. Check out Dan’s podcast called Better Money, Better World. We appreciate your leadership and thanks to both of you for joining us on the Getting Smart podcast.

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