Alexa von Tobel – Founder of Inspired Capital

Colbert Cannon: Welcome to Season Nine of the HPScast. I’m your host, Colbert Cannon. If you’re new to the pod, HPS is a global investment firm. We manage just over a hundred billion dollars in assets for a broad range of institutional and retail investors. That capital is invested across private credit and public credit strategies.

Each week I sit down with key relationships to, partners of and friends of the firm to learn from their experience, ask how that experience shapes their current roles, and give insights into HPS and how we operate. So, with that, let’s bring in our guest.

Our guest this week is, as they say, a multi-tool athlete. She runs a venture capital firm, but she’s also been a very successful entrepreneur and is the author of two New York Times bestselling books. In her spare time, she attended Harvard undergrad and, after some time on Wall Street, went back to Harvard to attend business school but then actually left HBS early to found her own business. It was a FinTech company called LearnVest, which focused on harnessing new technologies to help users build and monitor their financial plans.

The business received almost $75 million of venture capital funding and was eventually purchased by Northwestern Mutual in 2015. She wrote her first book in 2013, “Financially Fearless”, and followed up in 2019 with her second bestseller, “Financially Forward.” In that same year, she launched Inspired Capital, an early stage venture capital firm that she runs today.

She is someone that senior leadership at HPS have the greatest respect for, and so, without any further ado, I’m very happy to welcome in this week’s HPScast guest. Alexa von Tobel, Founder and Managing Partner of Inspired Capital. Alexa, welcome to the pod.

Alexa von Tobel: Hi. I am so happy to be here. Thanks for having me.

Colbert Cannon: Thank you for coming on. Alexa, I like to start from the very beginning, so let’s go all the way back. Where are you from originally? Where did you grow up?

Alexa von Tobel: So, a little-known fact. I was born in Kentucky and then grew up in Jacksonville my whole life. I really love that I’m from different parts of this country because I always feel like it gives me great perspective.

Colbert Cannon: So, tell me, Alexa, how did we get from Jacksonville to Harvard? How did we end up there undergrad?

Alexa von Tobel: Great question. I think I was in ninth grade when I said to my mom, “I’m going to go to Harvard.”

And my mom looked at me and was like, “Sounds great, kid.”

Nobody in my family had gone to any Ivy League schools. At that point, both of my brothers were actually applying or had gotten into Columbia University, and I just decided I was going to work hard and do whatever it takes. Anyways, long story short, I got in.

And so, I started with mind/brain behavior and psychology, and then ultimately ended up writing my senior thesis on happiness in Bhutan. And I spent a lot of time working in the happiness lab and positive psychology.

So, that tells you a lot right there about me, but if you asked me what I was going to do as I entered college, I knew I was going to study business. But there was a moment mid-college it really clicked for me that I was an entrepreneur. I didn’t know about the concept of an entrepreneur, and actually, in the rear-view mirror, I come from a family of entrepreneurs. My dad started his own practice. My grandfather started the von Tobel Lumber Yards. And in the rear-view mirror, I’m like, oh wow, actually, all of them are very entrepreneurial.

But it was sometime mid-college I recognized this pattern in me where I loved building businesses. I helped start a magazine in college. I’d started a tutoring company. It was just like this infectious itch that I had. I loved the puzzle of building businesses and the problem-solving of it. It just feels like I flow, if that makes any sense.

Colbert Cannon: Makes total sense. I went to Harvard undergrad as well, and I love our alma mater. I don’t always think about it as the most entrepreneurial place, so there’s obviously real exceptions to that, but that is something that clearly was in the water for you growing up.

Okay. It’s not that easy to start something right out of school. You end up going to Wall Street. You do a proper trading job at Morgan Stanley. What exactly were you doing, and what was the draw of that for your first employment?

Alexa von Tobel: Well, so I’d actually spent my summer at Insight Venture Partners, and they’d offered me a job. And then Morgan Stanley actually offered to pay me even more money, a lot more money. “And I just remember thinking, “I’ve got to pay for business school, and I don’t want to take out any loans, so I should probably take this job at Morgan Stanley.”

So, I ended up on the prop desk, which was a very, very analytical job and actually something that I really enjoyed. I was helping trade CDOs, CLOs, CDO-Squareds, and a bunch of very specific products. But nights and weekends when I was there, I actually founded LearnVest. I just started writing down the idea of what this business could be and started really dreaming about it.

And finally, I had to go to HBS in the fall of 2008, and the idea that I had actually founded in 2007 I really started working on actively every day. And to your point, HBS I always thought would be more entrepreneurial. And when I was there, I burst into tears because I was like, where’s the track for people like me?

None of this makes it possible for me to run a company because you couldn’t miss school. You weren’t allowed to miss a class. And I said, “But I’ve got to be in New York. And I just won this competition in Silicon Valley, and I’ve got to be there.”

And they were saying it doesn’t work. And I was like, “Well, I’m going to take a five-year leave of absence.”

Colbert Cannon: How far along in HBS were you before you left, Alexa?

Alexa von Tobel: 91 days. One semester in good standing. I passed all my tests and then took a five-year leave of absence.

Colbert Cannon: And I think that call, in hindsight, was obvious and the right one for you. In the moment, how hard of a decision was it, and were family and friends trying to talk you out of it?

Alexa von Tobel: So actually, this comes back to my psychology lab, and this is like a life-changing moment for me, it really is. It gives you a prism into how I really do make decisions.

When I was working in the psychology lab, there was this study about taking 90-year-olds and having them look back on their life, and actually, none of them regret anything they did. You don’t regret the boy you kissed, or the thing you did, or the job you quit. You always regret what you don’t do. So, the big regrets are the relationship you didn’t mend, the person you didn’t tell that you love, the swing you didn’t take. And knowing that so clearly, I always joke that 90-year-old Alexa sits on my shoulder, and she’s a real tough cookie.

The decision was clear. My own best friends actually sat me down and said, “I think you’re ruining your career. Like, you are so talented. You have this amazing trajectory. You have a perfect resume. What are you doing?”

And I remember laughing almost a little bit, being like, I just have to follow this very clear decision in my head. And so, I walked out. I literally walked into the admissions office and said, “I’m taking a five-year leave of absence in good standing.”

They were wonderful, and I flew to New York, opened my laptop up the next day and didn’t look back.

Colbert Cannon: Starting a business, it’s the American dream. I love hearing stories about this. You obviously had an entrepreneurial spirit, even if you didn’t know the framework to think about that as a kid. What was it about LearnVest? Tell us about the idea, when you were on your cocktail napkin, that became the business plan. What was the original idea you got excited about?

Alexa von Tobel: So very simply, when I was younger, I lost my dad when I was 14. And my mom, overnight – really, really talented, very brilliant woman, very, very capable person – realized they split the workload. And my mom kind of managed the day-to-day budget. My dad managed investments and big insurance decisions, etcetera, big financial decisions. And so, my mom overnight had to take over all of our finances. And I just remember having this very clear moment where, I was like, I’m going to be really good at my finances, and I’m never going to be in a position where I have to learn a new skill while going through a terrible tragedy, like just not going to happen.

And so, when I showed up at Harvard, I very nerdly was looking for financial planning classes, and there were none. Nothing. And then I was just appalled by it, and I took Accounting at MIT and was always very good at math. And I was like, I can’t believe that this basic skill isn’t taught anywhere. And it just got under my skin and really frustrated me.

And then the more I started learning about it, I actually became appalled by the problem, which was that, if you have money, you can get access to really great advisors. When you have money, lots of people want to help you with your money, but if you don’t have money, there’s no one to advise you because you don’t have enough money to pay for the fees. And also, the financial world is very unforgiving. If you hurt your credit score, it’s really hard. It takes seven-plus years to actually really get to a place where you can have a clean slate.

And I was like, this is just an injustice. And once that really settled inside me, I was like, I’m going to go build something that makes this better, and that was what LearnVest stood for. It was learn, earn, invest. Learn about money, earn it, you’ve got to invest it. And it was the three pillars, and I literally couldn’t look back.

Colbert Cannon: Okay, so you get down to New York, you’ve got your laptop and an idea. Walk me through those early days to getting LearnVest off the ground.

Alexa von Tobel: I opened my laptop, and I started working. And it was just me and a little bit of savings that I put into the company, And it was just “no” after “no” after “no.” And in New York City, there were no angel funds except New York Angels, which gave me $25k, which doesn’t really get that far. There was no angel network that was real. The first investors were Series A investors, and they wanted you to have revenue and traction.

FinTech wasn’t even a category. I was building something, and I really believed that iPhones and everything else was just going to bring transparency. I thought millennials would manage their money on their phones, and there should be a modern-day financial planning company that meets them where they are and LearnVest was born.

Colbert Cannon: Tell me about those early lessons learned. When I talk to entrepreneurs, you always learn so much in that first six months, 12 months As you said, everybody’s saying “no.” What do you take with you from that experience?

Alexa von Tobel: The best conversations were actually the most brutal ones. I always tell people, take your five smartest people in your life, go find them and pitch your idea to them and then be quiet and say, “Please shred my idea. Destroy it. What am I missing? What’s not going to work?”

And so, I think the biggest thing if you’re an entrepreneur is, you need to take feedback really well and actually embrace it. And not everyone’s feedback is going to be right. So, you have to get really good at knowing what advice to take, and what advice to ignore.

Colbert Cannon: And I think that’s its own skill as well. It makes complete sense. Okay, so, you are now a venture capitalist. You have taken in money from venture capitalists. As you’re growing your business, how did you make the decision with whom to partner? What was important to you besides just capital from people you know that you brought into your capital structure?

Alexa von Tobel: I always just looked to hire the brightest people, just literally the absolute smartest people you could get. And sometimes they didn’t even have the skillset to do the role. And this is just a belief I’ve always had, which is, if you just hire people with incredible octane and horsepower who also are wonderful humans, that you actually want to spend 20 hours a day with and probably even have fun spending 20 hours a day with, you’re going to make great things happen. And I think one of the things that, over time, I realized the big skill set of mine was just attracting the best and the brightest people. Being a really good, loyal teammate to people is a really important skillset.

Colbert Cannon: So then tell me about the growth of the business. You start taking in venture capital. As you say, people are coming on board that you know, and you don’t know – that transition from the one man gang, you’re sitting on the couch, to building out the team – the decision of what you can and can’t delegate to different people is something founders struggle with the right balance on. Tell me about how you manage that growth and how you took on your responsibilities versus sharing the load with others.

Alexa von Tobel: I’m constantly pretty tough on myself. And one day, I was like, I think I should hire an executive coach. I’ve had coaches my whole life for everything I’ve done, whether it was gymnastics or volleyball or diving, and they’ve always made me better. And I’ve never been a CEO, and I should probably just hire a coach and be like, kick my butt, make me better, teach me what I need to know. So, I hired one.

I remember coming home that night being like, I think I made a really bad decision. I was like, this coach wants to interview everybody in my life, including my husband, get feedback on me. And I was kind of like, shoot, I didn’t ask for this. This is going to suck. I don’t want to know all of these things. And, it was just a great moment where I got all of the feedback, and it was delivered in this really kind, supportive way. It was, here’s what you’re great at, here are the things that are definitely not your strengths, so just start filling in people who are better at those. And so, very quickly, I just started hiring people that were significantly more experienced than me and just trusting them.

Colbert Cannon: And what I love about that is that takes self-awareness, right? I think that that’s incredibly thoughtful. Okay, so you built the business. It’s growing. You’ve had a great run. In 2015, LearnVest is acquired by Northwestern Mutual. You have investors that are going to want liquidity at some point, of course, but why was that the right time from the company’s evolution perspective to pursue a sale?

Alexa von Tobel: So, as I said, LearnVest was always a very personal, mission-oriented company that I was building. And the CEO, John Schlifske, still the CEO, came in to meet me the day before Thanksgiving, and I just had my Forbes cover. The company had just raised capital, and we’re starting to generate revenue. He came and sat down and was like, “Alexa, I think we have the same value system. You know, Northwestern Mutual’s been around for 160 years (at that point). We care about stabilizing families. Your software is about stabilizing people with financial plans. What if we teamed up, and we could take your software and bring it to the 5 million households that we already have access to?”

I had built something and was  like, our whole job now is to share it with everybody. I also, by the way, was nine months pregnant. So, we sold on a Wednesday, and I had my first child that weekend, which is, don’t do that!

Colbert Cannon: Seriously? That was the timing?

Alexa von Tobel: Literally.

Colbert Cannon: Unbelievable.

Alexa von Tobel: Sold on March 25^th, went into labor on March 29th, and my daughter was born.

Colbert Cannon: Sold one baby and brought another one into the world. I mean, that’s amazing, Alexa.

Alexa von Tobel: I mean, well, it was the most stressful week of my entire existence, but no, I took my job really seriously. And I basically brought all of the offers to the board and said, here’s where we are and took it all of the way to the finish line. I, kind of, didn’t think about what my preference was until the night before because my job was to get them all on the table and line them all up and make a decision, but it felt like the right thing to do. And actually, I ended up sharing that it was actually a Northwestern Mutual life insurance policy that stabilized my family when my dad passed away, and I didn’t tell anybody that until after we all signed, And I was really emotional about it because I know exactly the value of these policies and what they did for my own family. And it feels like this is my dad sending me a second policy and to take care of my grandkids.

Colbert Cannon: Well, I mean, I have chills. Thank you, Alexa. That’s an incredible story, and I love the full circle aspect of that.

Tell me, Alexa, the deal happens, you then go work, if I have this right, for a couple of years for Northwestern Mutual. Tell me about that. In particular, you’re a startup, you then go to this, sort of, bigger, more corporate structure, what was that like?

[00:15:29] Alexa von Tobel: So, first of all, the CEO John Schlifske, is a really special guy, like really big thinker. He originally acquired us to sit on the side, and I was going to build up the New York tech office, and we are going to integrate the software. And very quickly, I think he appreciated and realized that he could actually even make me more of the team. And so, at one point I joined the management team of Northwestern Mutual and became their Global Chief Digital Officer and became far more responsible for the entire tech platform of both companies. And we realized, as we were integrating LearnVest, that actually we should just merge the companies entirely. And it was, kind of, this incredible compliment that, to this day, I am so grateful for how John, the CEO, thought to merge the businesses. And I was like, merge? One business is, you know, 6,000 employees doing $40 billion of revenue. Another one’s like 200 employees in New York City building a software platform. And I learned about how you make a successful merger happen, which is really about culture at its core strategy.

There’s this great quote. “Culture eats strategy for breakfast,” and it’s just so true. I grew a lot as a person. He taught me an incredible amount.

Colbert Cannon: So, in 2019, you leave to launch Inspired Capital, Let’s start with the fundamentals. It was time to think about what you wanted to do next. Why a VC firm versus another startup versus even executive roles? Given your experience, why was that the right decision?

Alexa von Tobel: I knew I was just ready, very thirsty for my next chapter. And I’m a builder in my core, and I had been, for the prior many years, actively running an angel, my own angel fund, and investing and was responsible for Northwestern Mutual’s venture fund. And I basically realized that, number one, I want to build the venture fund that I wish existed for me. I also just had this vision that the New York tech ecosystem is going to explode over the next 30 years. I really do believe that. I love thinking of New York City as an underdog.

And I just had this very clear vision of this early stage venture fund that is mighty and fierce and super ruthless about hard work and dedication to our founders and literally the word came out of my mouth. I was like, it’s just “Inspired.” And I paused and I was like, is that URL taken? Can we get that?

Colbert Cannon: By the way, it’s insane that that wasn’t taken. Because having named companies or funds before in my life, it’s impossible. Like, everything’s taken. I can’t believe you got that.

Alexa von Tobel: I literally that day was like, well that’s the name. There we go. Next. And so, I just had this very clear vision of how to build a really incredible firm. And then, back to the people, because the people are everything, I have three partners: Penny Pritzker, who is former US Secretary of Commerce, chairs the board of Harvard, and she’s on the board of Microsoft.

Colbert Cannon: A force of nature.

Alexa von Tobel: A force literally for like, I won’t even name all the other things. My like lifelong best friend, Lucy Deland, who was a co-founder of Paperless Post, a Harvard classmate, and also at Insight Venture Partners for years. And we just were each other’s red phones, building businesses in New York and the really gnarly problems that we both had to solve.

Then, Mark Batsiyan, who I sat next to for 14 years and helped me build LearnVest, and we sold it together. We have this very deep, shared value of what we want to build, and the firm was just born It was so easy. And we’ve written a 25-year business plan that took about three minutes to write because we are just so aligned in what we want to accomplish. And that’s when business is easy.

Colbert Cannon: Tell me about the mission early stage. What is an Inspired Capital portfolio company?

Alexa von Tobel: Yeah, so we are an early stage venture fund generalist. And if you said, what makes an Inspire company? We literally do use the lens of, could this be an iconic company that changes the world profoundly? So, we look for big swings, big multidimensional, complicated businesses that have the ability to create a new category or fundamentally disrupt a category. And I think one of the things that always was under my skin is there was always this comment like, Oh, it’s west coast capital that backs big ideas, and New York capital is more incrementalist. And I was like, well, not anymore. Inspired was born, and we’re here to back the big swings. I backed a company of an incredible entrepreneur, and it’s building batteries that can power city grids. And you know, big iconic companies that are complicated and hard and probably won’t work, but if they do, they’re going to change the world.

Colbert Cannon: I love it. Alright, so you started your career in the Global Financial Crisis. Since that period, venture capital has had a real tailwind, right? At zero interest rates, a world awash with liquidity. Things have gotten more complicated in the last year. How have the more volatile economic conditions impacted your business?

Alexa von Tobel: Yeah, great question. So, go back to my roots. I literally built a business at the bottom of the worst recession in 81 years when there was no capital. That’s all I know. The last five years was the world I didn’t understand. This is the world we do understand. And truly, necessity is the mother of invention. It breeds the best ideas. And so, this is when things get fun. This is when the real builders come out. When those people come out and we look for them, we want to say, “How do we get in your boat and grow with you?”

So, it’s changed our business in that we are back to extreme constraints, and we believe this environment lasts longer. And as a result, we’re really prepared for it.

Colbert Cannon: And as you say, having lived through it as you have is so crucial. It’s the old Winston Churchill line “Never waste a good crisis, right?” I mean, there’s a lot to happen right now.

Because it’s timely and specific, I’m curious what your reaction was to Silicon Valley Bank’s failure. What does that mean for the VC space, and what’s the impact of that broadly.

Alexa von Tobel: Well, fundamentally it’s not great, right? Silicon Valley Bank was an incredible bank that provided debt and real liquidity to this ecosystem. And so, one, I’m grateful for all the people at Silicon Valley Bank that stayed and got their feet back up under them and continue to keep being a provider to this ecosystem. And to their credit, they’re back in action. But any way you cut it, it was a provider of incredible support to the early stage venture ecosystem. And so, the way that we think about it is debt is just going to be much harder to come by, and hopefully, that gets better over time. But we almost took for granted the access to debt for businesses that were pre-revenue and all the other things that matter in building a business.

Colbert Cannon: It makes complete sense. Well, listen, always a pleasure, Alexa, to hear what you’re up to. Very exciting things ahead in your world, and we wish you great success with Inspired. With that, I would like to move to the last segment of the podcast, something we like to call “Best Ideas,” where we offer up something that’s added value in our lives recently. “Best Ideas” because it’s our goal, as investors, to always maximize exposure to those.

Alexa, you’re our guest. I’m going to ask you to go first. What is your best idea this week?

Alexa von Tobel: Well, I’m going to share something that my husband and I do that I just think is, if anyone out there is a parent, it’s a great thing. We’d set up these email addresses for our kids, and we send them notes very regularly. Our kids are really little: four, five, and eight. We basically created this chamber to give them – and I don’t know what age we’ll give it to them, whether they’re 14, 17, 18 – where we’ve been, not only just documenting little moments of their life, but also moments where we’re so proud of something that they did or a decision that they made. And we want to give them this really detailed, almost autobiographical sort of insight to who they are and how they’re developing. It’s easy, and I’m always working on the go, in motion. but you can send a two-sentence email to your child and give it to them when they’re old enough to really receive it. And it feels like something I just would be so thrilled if my parents had done for me. So, that’s one quick idea.

And then another thing is, I really think that we’ve relearned how to function coming out of Covid. And the other just thing I’ll say is we’ve been in an office five days a week, and I am so delighted being in person with the people that I work with and the energy that I get. And, and that’s just another thing I will say. I believe more and more companies are returning back to the office more normally and more like four to five days a week. I just want to be a proponent as someone who’s now been doing it for a few years again. I love it, and I just wanted to pay that tip forward.

Colbert Cannon: I love both of those. And I will say on the latter point, you have talked very thoughtfully about firm culture, and I think culture is an exhaustible resource. Like, we monetized that in 2020 when we’re all away from each other. You need to be together to, sort of, maintain that, and I think that having people around and the mentorship and the informal conversations, there’s just a lot there that really matters. I couldn’t agree more. So, great ideas.

So Alexa, for mine, as people know, I like to be inspired by the guest of the week. Alexa, as we’ve discussed, left Harvard Business School early to pursue her entrepreneurial ambitions. It was a very good decision, as it turns out, and that got me thinking about some other favorite famous Harvard students who took a similar path.

And I landed on a movie for my best idea this week. We’ve mentioned it today. And as I mentioned on the podcast before, I have three teenage children, and we’re working our way through some of my favorite films to make sure they’re appropriately, culturally literate.

So, my best idea this week is one that I recently re-watched. It’s a David Fincher classic telling the story of a young Harvard student dropping out to create a digital business. Of course, I’m talking about the movie, “The Social Network.” The movie came out in 2010, and it tells the story of the founding of Facebook and the litigation between Mark Zuckerberg and the Winklevoss twins, as well as Facebook co-founder Eduardo Saverin.

Fincher is one of my favorite directors, and he’s really at his best here. You can talk about “Fight Club or “Seven” or “Gone Girl. They’re all amazing movies. I think this is his best work.

You know the story, but he brings it to life with remarkable performances with Jesse Eisenberg, Armie Hammer, and Andrew Garfield. It’s a great watch, and I highly recommend revisiting it, even if you’ve seen it before. Though, I will say it’s funny that the big reveal at the end is that Facebook had 500 million members or users at the time, which is a funny, dated stat. But anyway, in honor then of a woman who, in the same vein as legends like Bill Gates and Mark Zuckerberg, dropped out of Harvard to start a tech business, let me recommend the film “Social Network” streaming now.

Alexa, did you ever watch that one?

Alexa von Tobel: Of course! Mark was my classmate, and the Winklevoss brothers’ parents are neighbors. Any ways, I watched it, and we know many of the characters. It’s such a fun movie too. It’s an incredibly fun movie to watch.

Colbert Cannon: With that, it’s time to wrap it up for the week, Alexa. Fascinating to hear what you’re up to. Here’s to many successes with Inspired Capital to come, and thank you so much for taking the time today.

Alexa von Tobel: Thank you so much for having me. It’s such an honor. This has been an absolute blast.