CEO Stories: Karla Mora, Alante Capital

This Is Capitalism: Karla Mora

RH: This is Capitalism. I’m Ray Hoffman. Karla Mora fully expects to have a major impact on the apparel industry, the clothes we wear, and where we dispose of those clothes after we’re through wearing them.

She is a self-described impact investor and her venture capital fund, Alante Capital, co-led by former JP Morgan executive Leslie Harwell, and backed enthusiastically by women’s fashion legend Eileen Fisher, is investing in a future in which landfills won’t be overloaded with yesterday’s throw-away polyesters, meaning a future of sustainable apparel because Alante Capital is investing in young companies that are offering a better process for making and remaking apparel.

The road that Karla Mora took to this went by way of a United Nations compound in Kabul, Afghanistan, and a neighborhood in Costa Rica, Barrio Escalante.
KM: I was really looking at international political economics and trying to understand the intersection of the private and public sectors, how can we impact the economies to improve livelihoods in emerging markets. And I was doing that with public sector organizations.

I worked for the U.N for a while, looking at inefficiencies in the coffee sector; after graduate school I worked for a group called…at the time it was called Peace Dividend Trust, it’s called Building Markets now, to build more vibrant ecosystems where the people living in those communities can lift themselves out of poverty. So that was really my background, my passion was in that and specifically looking at agriculture and how do we provide more access to markets for small holder farmers.

So that’s kind of my background before I entered the world of impact investing. And it was actually after Afghanistan–I was living in Kabul, doing an assessment across Afghanistan. And then after six months of collecting data and analyzing the data and writing the reports, I came back to California to finish writing the report.

And in that time, I was at a cafe, I met somebody who ran an impact investment fund and I thought, “wow, exactly what I want to be doing because I can work within the private sector and be able to work with purpose but from the private sector”. So I did that and that was in about 2012, when I began working in impact investing.

RH: What was your life like in Kabul?
KM: [Laughs.] Well, it was limited. It was fascinating and interesting and I’m so glad that I lived there but it was very challenging, you know? We couldn’t just freely walk outside. I love to be outside, I love to walk miles every day, it just clears my mind, helps me think. And there we had to run on a treadmill in a basement and it was dusty and the security guys were smoking cigarettes while we’re running and watching the news. It was not…[laughs] It was hard to find that level of peace I was used to.

But the Afghan people I worked with were amazing and resilient. And you’re looking around and we’re being driven around in these armored vehicles and wearing safety equipment and you look outside and there’s kids playing soccer in the street. And that always struck me deeply. And also, as you drive around Kabul, you’ll see graffiti all over that are love poems and huge bumper stickers on all the cars that say things like “love me” and “I’ll follow you anywhere.”

RH: And when you were there, in that secure compound, what were you thinking about in terms of the future?
KM: Well, I was working a lot on the project I was working on there but when I get home, one of my friends, he was out in New York and he was starting a company that was helping small holder farmers in the  United States reach farmers’ markets and communities that don’t have access to fresh food. And I loved this idea and so I would work on it with him every day and honestly, it’s what kept me going. And I spent my days working on the impact reports that we were doing in Kabul and my evenings thinking about farmers’ markets and food security in the United States.

RH: And how long were you in Kabul?
KM: Six months. Yeah, it was a long six months. But there were some incredible things. I got to go back-country skiing in Bamiyan, a region in Afghanistan that at the time wasn’t dangerous. I mean that was a once in a life experience that I’ll never get to do again. And it definitely led me in the direction that I am in now with my career.

RH: Do you have any idea what the altitude was at Bamiyan?
KM: I don’t know what the altitude was but it was high! Climbing these mountains on these skis and these snow boots that were from the 1980s and didn’t fit and our feet were bleeding and the sun was bright, but it was really amazing.

RH: Alante in espanol means “forward” in ingles. And I know that would make perfect sense as a meaning behind Alante Capital but I see the official explanation relates to a time when you lived in Costa Rica?
KM: Yeah, yeah that is. So yeah, I was living in Costa Rica in a neighborhood called Barrio Escalante. And Escalante is a last name and it means to scale up. But alante, coming from Escalante, means to move forward. And I had been working on the concepts of Alante Capital for about a year. I had been living…my husband was on sabbatical. We were getting married in Costa Rica. His family is Costa Rican. So I spent my days just studying the industry from my little apartment in Barrio Escalante.

And at the end of that year we were about to launch, I was bringing on my partner Leslie and we were talking about names. And I loved alante because to me it was to move forward, I’m moving forward into this dream. I spent a year trying to convince myself I shouldn’t do this but it was just too good to not do. I thought. “wow, there’s huge opportunity in this that can have transformational change within the apparel industry and it’s everything I want to do with my life.” So after a year of trying to see if I shouldn’t, I decided I’m going to move forward, so forward we go.

RH: When you started Alante, were you already working with Leslie, was it a two-person firm at the start, or was it a one-person firm?
KM: That’s an interesting story in itself. I actually started the idea behind what became Alante Capital with another friend of mine from San Francisco. And he and I both were in impact investing, we were talking about starting a fund in fashion. We spent a good time, probably about eight months or so, working on the idea. Ultimately it didn’t make sense for us to start a fund at the same time, we were in two different geographies, different ideas for our career path.

But I kept going. After the amount of research I’d done and looking at it, I had fallen in love with the concept and the thesis and the industry and I knew I wanted to move forward. So at the same time that I was playing with the idea with him, I’d been introduced to Leslie by one of my advisors who had been at JP Morgan with Leslie, and she had become a very fast friend and thought partner. When I’d get off the phone with her, I would just feel creative and want to put sticky notes up on the wall and start to think through how we’re going to build this.

And it was actually my husband who noted it to me and said, “look, how you feel when you get off the phone with Leslie, like, she’s the one that should be your partner.” So I slipped her a job description and somehow convinced her to leave the bank and the rest is history.

RH: And what was she doing at JP Morgan?
KM: She had been at Credit Suisse for about eight years before she moved over to JP Morgan because she really was passionate about impact investing and social finance. And so she was on the team that was investing in impact funds, similar to what I was building with Alante. And she had been seeing this trend of these industry-specific systems change funds that were popping up all over but she’d not seen one in apparel. So when I came her way she was just really excited to get started, to learn about what we were doing and then ultimately to get involved as my partner.

RH: So now you start out. Tell me about the very beginnings of Alante Capital?
KM: I was just focused on this in Costa Rica, thinking through everything. And my husband was really my main business partner. He would listen to all my ideas and he would help do the…collect the data and put it in the spreadsheets for me and really was my righthand man in these early days and kept me wanting to move forward, trying to learn an entire new industry. And I’m…“Am I crazy? I just got married, we want to have a family, am I really about to bootstrap this idea for the next three years before we can raise money to actually begin investing?”

And so that was a scary time. It was scary and exciting. But I told myself I should never make any decisions based on fear. So each day I was like “well, you know, what is this emotion coming up?” And if it’s fear, I would acknowledge it and keep going and really I just kept seeing these signals from the industry, from the market, from people around that I was on the right track. And before I know it, I had launched a business.

RH: And you were about to have a family.
KM: Yeah. So we were a few years out but yeah, I came back, we moved to California, and I got pregnant about a year ago now. So I actually had the baby and came off maternity leave just two months ago. We had our first close for the fund and had our first investment. So it couldn’t have been a busier time but it was so exciting and now it’s just this insane and fun juggling act every day.

RH: What does it take for two women on opposite sides of the country to not only build out an investment firm but to build out an idea?
KM: She humored me in taking all of these quality soft skills tests and we would present ideas to each other and have the other one tear it apart and see how we would react. I mean we were so thoughtful before joining that once we joined, we already had this great rapport of working together.

And the initial, like right after she joined Alante, she came out to Santa Barbara for a few months and worked with me, side by side. That’s when we brought on our anchor investor, Eileen Fisher, so that was a really big time. But now she is always just one quick message away. We talk throughout the day and it’s as if she’s in the next room when she is across the country.

RH: How many messages?
KM: Oh gosh, I don’t…endless. I don’t know—100, 200? Going back all day long. We’re just kind of chatting all day. While we’re both working. We’re just very engaged with each other’s lives at this point. So I love my messages from Leslie coming in each day.

RH: So how did Eileen Fisher get involved in this?
KM: She is our anchor investor and our general partner. So Eileen was critical for us in the early days of getting this fund off the ground. Leslie actually knew somebody at JP Morgan that was working with Eileen at the time to figure out how to put her capital into something that supposed a shift to sustainability for the apparel industry. We sent out this announcement saying Leslie has joined the team and were launching this business and it got shared around and before we knew it, it got shared with Eileen and she saw our deck and was just like “this is what I’ve been looking for.”

RH: So how surprised were you that a major figure in apparel was interested in what you were interested in?
KM: Wow, it was humbling, very exciting. So we had this list of potential general partners. We needed a GP to come on to help us fund the early parts of launching a fund that’s very capital intensive. So we had this dream list and Eileen Fisher was No. 1. It was incredible.

RH: You made a comment on another podcast that I’d like to you to amplify.
KM: Okay.

RH: In terms of allowing the apparel industry to shift toward more sustainability, more environmentally friendly practices, one of the things you said was that consumers should not perpetuate a race to the bottom in price and quality.
KM: We work very closely with the biggest brands, apparel brands, on the market. And it’s important to acknowledge the struggles that they face. I mean our–as a consumer–race to finding the cheapest product possible puts a lot of pressure for them also to be able to provide the cheapest product possible.

RH: And the cheaper the product, especially in this era of fast fashion,  cheap polyester fabric in our landfills is one of the reasons for Alante Capital.
KM: Actually we just invested, our first company we invested in–to be able to have this company as the first one–is an incredible company called Mango Materials, started by a couple of women founders from Stanford who figured out a way to create a biodegradable polyester that’s not made from plastic so that if it does shed into our environments it will break down completely.

RH: And this leads right into your other investment, Titan Bio Sciences, which is a leader in fiber recycling using hydro technology.
KM: Yes. So we love Titan Bio Sciences. What they can do is they can break down polyester/cotton-blended garments. A lot of the chemistries that are coming up can’t recover both fibers, Titan can. So they can take these shirts, which some statistics say it’s about 80% of clothing is cotton/poly blend and they’re able to break it down, recover both fibers, allowing brands to now make clothing that came from the fibers of old clothes instead of relying on virgin materials: virgin polyester, virgin cotton, virgin wood-based fiber.

RH: How quickly can these companies scale?
KM: It really depends on the model. But we see with both of these a good level of scale within about three years, three to five years, at which point there’s a couple different directions that can accelerate their scale greatly.

RH: And that would suggest within three to five years, a lot more quality, sustainable material in the stores?
KM: Oh yeah. Eighteen months to two years, we’re going to start seeing collections in stores where you can buy clothes made from post-consumer garment waste, old clothes.

RH: How many other next-generation technology firms are knocking at your door and what do you say to them?
KM: We have about 140 or so companies now that fit squarely into our thesis. So since our first two investments were in the new materials and recycling categories, we’re now focusing really on innovation that can increase utilization of garments. There are lots of ways to do this but right now we’re looking most at the models that enable clothing rental or resale.

Even if the companies are a little too early stage for us to invest, we like to have the initial conversation early, casually, keep in touch, and then we reengage closer to the round that we’re actually going to consider. And if it’s not a fit, I like to let them know as early as I can to manage both of our expectations and time commitments. Because we’re looking for things that can be transformational for the industry.

RH: Yeah, on your website it says you’re looking for companies with big visions and clear strategies with large market opportunities.
KM: Huge. This is the way that the industry is moving, honestly. Most brands are now talking about sustainability in one way or another.  You’ll see articles coming out in The L.A. Times, The New York Times, across industry and mainstream media everyday talking about sustainability in fashion. I mean this is the future of the industry.

And consumers are getting way savvier at spotting greenwashing. So it’s driving more investment of capital and time into improved business practices, new consumption models and sustainable production.

RH: And even though you are a young company, I know you’ve already partnered with many of the biggest apparel brands. Some time ago you told me how you approached them. Tell me more about Alante and the big brands.
KM: Sure. I love working with big brands, it’s my favorite part. Many see them as the reason for the problem, why the industry is so wasteful. And while part of that is true, it’s also those brands that will be a major part of the solution. And they really want to be a part of the solution.

So I go to them in the spirit of collaboration, with an approach to be helpful and to help them achieve their sustainability goals. And in order to do that, I have to understand the true operational hurdles that they have in doing so. Once I understand where they’re coming from, I start to introduce startups that can help them achieve their goals and help them think outside of the box to identify other initiatives and other approaches that can help them improve their sustainability.

For example, right now the conversation often goes toward what rental or resale could do in order to decrease waste and dependence on virgin fibers. So they like working with us because we are able to help them think outside the box and we are very up to date on all of the newest innovations that are coming out and we can help drive those early interactions with the brands and those startups.

And I love working with them because we get to learn about the companies in our pipeline and really figure out which ones are truly viable and actually solving a problem identified by the market.

RH: Now I want to take you out to 2025, which is only five years from now. What is Alante Capital going to look like and how different is the apparel market likely to be?
KM: Five years? Hmm. Well, hopefully we’ll have a portfolio of about 15 or so companies and have seen a few exits. And in five years I think that the apparel industry will have made some significant improvements, especially in the use of recycled fibers. That seems to be the first innovation that all the brands are looking at now and I think that within five years we’re going to start to see as consumer lots of garments out there in the stores made from recycled fabric.

RH: Karla, how would you like to grow as a person over the next five years?
KM: Well, I have been running a startup for the past three years so over the next five I expect to have the security that comes from leaving start- up mode. Like, knowing your company is funded, operational, successful, which means having a set salary and a house and the ability to make plans and control my schedule. That’s what I see for myself in the next five years.

RH: Karla Mora is capitalism. And Alante Capital is capitalism. I’m Ray Hoffman.