How Aubrie Pagano And Alpaca VC Are Investing In The Next Generation Of Disruptive, Diverse Founders

Alpaca VC is a New York based firm that leads early-stage investments in companies reshaping the physical and digital. Aubrie Pagano is a General Partner there.

Prior to joining, she built and sold her cult-favorite apparel and gifting brand, Bow & Drape. Aubrie drove the omni-channel brand to profitability by retailing online DTC and in over 350 Nordstrom, Bloomingdale’s, Macy’s and Hudson’s Bay stores.

Toward the end of her Bow & Drape journey, she spent time leading investments out of XFactor Ventures, an early stage fund of female operators backing startups with at least one female founder. There, Aubrie led investments in companies like Maude, Shiru, Pod Foods, and Tiny Organics. 

I caught up with Aubrie to find out more about her journey.

Afdhel Aziz: Aubrie, welcome! Please tell us about Alpaca VC and how you came to join the partnership?

Audrey Pagano, General Partner at Alpaca VC, Investment Interest Areas: Female Consumer, Global ... [+]

Aubrie Pagano: We call our VC firm Alpaca because we support our founders through the ups and downs of their journey. Just like an Alpaca (did you know they come in 22 different colors?!). After successfully exiting my customization startup, Bow & Drape, to a larger DTC holding company in 2019, and after years of angel investing, I decided to become a full-time investor and join Alpaca as a GP because I love helping founders.

Aziz: What is Alpaca’s investment thesis? Tell us more about this idea of ‘Founder-market fit’?

Pagano: Alpaca invests in companies using technology to transform the people, processes, and places that shape modern commerce. We like to back exceptional founders with founder-market fit—founders who were put on this earth to build the business they’re building. Are you more well-suited than anyone else to lead your startup into the market you’re entering, based on your prior experience and strengths as a collective team? Then you have a founder-market fit. Especially as we are early stage investors, founding teams are the most important factor to us.

Aziz: The focus on under-represented founders is particularly inspiring. I love what you said about how the world doesn’t need another custom-shirt manufacturer! Tell us more on how you choose to partner with diverse founders?

Pagano: Whew! Where do I start? Investors have skewed white and male and so have invested in products and services from founders they identify as “successful” – surprise, surprise, those often are founders that are white and male and building products for white males (look at how many custom mens shirting companies have been VC backed…spoiler, it’s over a dozen).

As more diverse (in terms of gender, race, and background) check writers enter the fray, they offer more divergent lenses through which to evaluate market opportunity and so over time, more diverse founders and companies will be backed. And this is good for business. McKinsey observes that companies with racial and ethnic diversity are 35% more likely to have financial returns that are above national industry medians.

Historically, diverse founding teams have earned a 3.26x median realized multiple on IPOs and acquisitions, compared to a 2.50x realized multiple for White Founding Teams, a 30% increase according to Kauffman Fellows.

For me, diverse founders can leverage their lived experience to create outsized returns, especially in building for underserved communities: Black and Latinx communities alone represent $2.8T of purchasing power; Women control 70% of the spending power in the US, accounting for $13T combined; LGBTQ+ globally in 2019 had combined purchasing power of $3.7T.

I see dollar signs when I hear about this arbitrage opportunity, don’t you?

Aziz: I couldn’t agree more! What are some of the companies you’ve invested in?

Pagano: I’ve invested in a few companies, my most recent being Lex (a text-centered social app for queer lovers and friends), Teal (the all-in-one career platform for professionals), and a new stealth company focused on creators and live commerce. I’ve also made smaller investments into maude (simple, quality wellness products for personal intimacy), Tiny Organics (health baby meals delivered to your door), Foodology (Latam cloud kitchens), Shiru (machine learning and precision biology to create food proteins), and My Ceremonia (haircare for Latinx).

Aziz: They are all supercool companies. Finally, what advice do you have for founders with disruptive ideas?

Pagano: Find other founders to befriend as allies. Peers will be your greatest source of information and assistance along this journey in terms of fundraising, business development, technology advice and support. Founding a company can feel lonely at times, so surround yourself with people who are also going through it. And don’t let the bastards grind you down.