Investor AMA with Kelly Kalaitzaki from Morgan Stanley

Kelly Kalaitzaki has been at Morgan Stanley for almost a decade. She recently became Vice President lead of its Multicultural Innovation Lab in Europe, the Middle East and Africa. The Lab is an in-house, start-up accelerator programme promoting financial inclusion, and providing access to capital for early-stage technology and technology-enabled companies led by women and multicultural entrepreneurs.

Last year, female founders in Europe received just 1.1% of capital raised by companies, while ethnic-minority founding teams saw 1.3%, and mixed gender teams received about 9%. This issue often makes headlines, and it is good that we are talking about it. Indeed, the Lab is one of the few initiatives that is making tangible efforts to rebalance this huge deficit.

We were lucky enough to be joined by Kelly for our first Investor AMA as part of a new series. Kelly talked about what motivated her to join the initiative, what qualities they are looking for in successful founders, and her insights into the future of sustainable investing.It was also inspiring to be joined by so many founders working in this space, and to hear from an investor actively trying to ensure funding goes to diverse teams.

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Could you please tell us a bit more about your background? And what motivated Morgan Stanley to actually run an in-house start-up accelerator?

‍I’m originally from Greece and have been living in London for about 12 years. I joined Morgan Stanley almost a decade ago, and started my career at the bank in shipping and commodities. It’s a very exciting world, and also very traditional in Greece. I held a couple of roles in this division for about two and a half years, before deciding to move out of the physical oil world and into a more strategic role.I worked on corporate strategy for about seven years, before joining the Multicultural Innovation Lab in London a couple of months ago and committing full time to this wonderful initiative. The Lab is our in-house accelerator focusing on start-ups with female and/or ethnic-minority founders, raising post-seed to Pre-Series A funding.

It was started five years ago in the US, and has funded over 51 companies to date.Given its success, we’ve recently expanded the initiative to Europe, the Middle East and Africa. This is our pilot year, and we’re excited to provide more financing and growth opportunities to multicultural and female founders, with creative tech and tech-enabled ideas, in the region.In terms of our motivations, back in 2017 when the Lab started in the US, we sought to find solutions to the profound funding gap that multicultural and female founders face. When we looked at it, it seemed that many were talking about this issue, but that only a few initiatives were actually trying to address this systemic deficit.And the numbers are getting worse. Female founders in Europe last year received just 1.1% of the capital raised by companies, down from a 2.4% in 2020, according to a large study on the challenges facing European tech.

Ethnic minority founding teams raised 1.3% of total funding, while about 9% went to mixed gender teams.The problem is clear: women and ethnic-minority entrepreneurs are effectively being disenfranchised from the European capital-raising landscape. The Multicultural Innovation Lab is meant not only to highlight this systemic inequity, but offer a unique platform for early-stage female and multicultural entrepreneurs to tap valuable capital, and operational and strategic expertise, within an immersive Morgan Stanley-led process.
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‍What is the specific focus of the programme? And are there any particular areas that you're really interested in?

‍We are sector agnostic in terms of what types of entrepreneurs can participate in the Lab. So, sectors ranging from healthcare to consumer products to engineering and more are all acceptable – so long as the company is tech-enabled and engaged in creating solutions for a more sustainable future.
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‍What does a sustainable future look like for you?

‍That’s the exciting part! In a nutshell, our mission is to advance the financial wherewithal and commerciality of companies which are striving to do business without negatively impacting the environment, community or society as a whole. And the Lab is focused on those chronically-underserved female and multicultural-led businesses that haven’t been materially backed before. It’s very much aligned with the principles of ESG, particularly in addressing the ‘S’ or social inequity we see in entrepreneur funding.
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‍Can you tell us a bit more about some of the companies that you supported through this programme in the US? What would the support look like for a founder joining the accelerator here in Europe?

‍The programme in the US started in 2017 by funding five companies. Since then, we’ve expanded to running two cohorts a year of up to ten companies each. Clearly, the in-house accelerator model has proven successful, and now we are exporting it from the US to Europe, Middle East and Africa. We want to give opportunities to more entrepreneurs. Like its start in the US, the inaugural EMEA programme will invest in five companies who will join our accelerator programme for five months during the second half of 2022. If the pilot is successful, there should be no reason why we can’t advance the programme going forward.In terms of the format, founders can either come to our offices in London, or join remotely if they are not based in the city.

The Lab’s curriculum covers various topics critical to start-ups, such as financial modelling, business model advice, hiring, and building confidence in pitching. The speakers will either be subject-matter experts from Morgan Stanley, or external experts from the ecosystem.For its part, Morgan Stanley offers each business the equivalent of £200,000 in exchange for a small, single-digit equity stake.We understand the priorities facing busy, early-stage founders, and so sessions are very much tailored to add value to their businesses.

The Lab helps identify and offer solutions to specific critical challenges of entrepreneurs. It also gives them the opportunity to meet industry experts, and participate in one-to-one consultations. Most exciting of all is the end-of-programme Demo Day, where entrepreneurs, armed with five months of experience and expertise gathering, get to pitch their company to an array of professional investors, such as venture capitalists, who can take the business to the next level.
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‍What qualities and expertise do you look for in founders?

‍There's no golden rule of what we seek from a start-up. It does have to be tech or a tech-enabled business involved in a sustainable commercial endeavour, and we want to see some indication of initial funding – for example, seed funding. It doesn’t matter if it’s from an institution or family and friends. We also want to see some track record in the form of revenue and a customer base. Above all, we want to see proof of passion, belief in the idea, commitment, excitement, and an openness to learn and grow.
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‍What is the benefit to getting Morgan Stanley onto a founder’s cap table?

‍That’s probably a question best answered by participants in our Multicultural Innovation Lab. But, having our brand name on the cap table hopefully acts as a gateway for attracting a broader mix of investor interest, allowing companies to progress to further funding rounds.Another important factor is the global nature of the programme. Morgan Stanley operates as a global business and has offices in six continents across 41 countries.

That’s a lot of international experience, expertise and know-how that we bring to the table.While the entrepreneurs we work with in the Lab are inherently local, their business aspirations and the sustainable products and services they’re offering are, with the right nurturing, capable of attracting an international customer base.

The global peer-to-peer discussions also provide them with valuable insights as, regardless of where they are based, they face the same challenges. So, when they progress from the Lab, founders have a lot of tools in place to succeed.Applications for the Morgan Stanley Innovation Lab close on 7th March 2022.

Find out more here.