Lisa: Welcome, everyone. I’m Lisa Calhoun. I’m the founder of the Startup Runway Foundation and also the General Partner at Valor Ventures. We’re an early stage fund here in Atlanta, Georgia and for the Startup Runway Foundation, I am excited to welcome some of the strongest and most inclusive venture capital investors in this country today. I’m going to let them introduce themselves and share a little bit about what they’re looking for in founders today. If you don’t mind, Brittany, I’m going to start with you and just ask you to kick us off.
Brittany: Sure. Hi, everyone, my name is Brittany Henry and I’m an associate with Impact America Fund. Our investment thesis is we invest in tech-enabled businesses that provide economic agency to low income communities of color. We’re investing from seed to series A but our focus is really on helping founders during bridge rounds to get to their next round up.
Lisa: How about you, Eller?
Eller: Hi, I am Eller Mallchok. I’m the Managing Director of Jumpstart Foundry. We’re actually based just a few hours north of Atlanta in Nashville, Tennessee, but we’re investing primarily in healthcare, early stage healthcare companies from across the country. We love working with first time or early stage founders and small teams as they’re getting their product to market. Again, all focused in healthcare, which has been really exciting, particularly over the last couple of months. And I’m excited to be here. So thank you, Lisa.
Lisa: My pleasure. How about you, Tanya?
Tanya: Hi. Lisa. Hi, everyone. My name is Tanya Sam. I am the Director of Partnerships and Operations at Tech Square Labs and also the Founder of The Ambition Fund through both of those entities I work to help early stage founders that are typically minority founders. Women are underrepresented founders of build scalable, successful companies, both in the technology sector and now have branched out into small businesses as well.
Lisa: Awesome. Now let’s go to the gentleman. Let’s kick it off with Allan.
Allan: Hi everyone. This is Allan John Baptiste, I’m an investor for KKR Technology Growth Fund. We launched that fund in 2016 and now manage about 3 billion across the US and Europe and focused on later stage startups writing checks between 30 and 300 million. Both software businesses that are focused on selling to other businesses, as well as consumer internet companies across North America.
Lisa: So glad you’re here. Richard, how about you?
Richard: Sorry. Thank you for having me. I’m excited to participate. So, I’m a partner at Knoll Ventures, which is a $26 million pre-series A fund based here in Atlanta, Georgia. My partner Andrew and I’ve raised them to invest in pre-series A B2B technology-enabled businesses with a primary focus on non-coastal markets. So, we’re really looking for this tier two tier, three markets like Atlanta, which are undercover from a venture capital perspective. And we invest anywhere from pre seed to proceed all the way up to a small series A round.
Lisa: Thanks, Richard. How about you Marlon. Thanks for joining us.
Marlon: All right, can you hear me? Yeah, great. Hi, Marlon Nichols. Founder and Managing General Partner at Mac Venture Capital. We are a seed stage venture firm, which means that we invest in technology and technology-enabled companies that have built products and are starting to get some feedback from the marketplace. We invest in a range of half a million to 1.5 million seeking about 10% ownership within the companies that we invest. We take a generalist approach, but have a thesis around cultural investing, which is basically to say that we look at consumer behavior to predict, you know, where consumers are going to be spending their capital in the future, and their time and make investments accordingly. We’re investing out of our second fund and a portfolio of about 120 companies so far.
Lisa: Marlon, you did some fascinating research recently and really goes into your ability to do depth of research. I wanted to kick off our discussion with what other investors, seed stage investors, early stage investors,our other venture capitalists, did not know about underrepresented founders that they should know.
Marlon: That’s a big and loaded question. I think, well, I’ll instead, I’ll reframe it. What we know about diverse and underrepresented founders is that they make up they cater to a demographic that makes up a heavy portion of the spending in this country, which gives them a lot of- a lot of power and say in terms of what becomes viral, what becomes a part of pop culture, etc. where money is spent, how it’s spent and the other thing that’s important about that demographic is there haven’t really been products built or that cater to their to their actual needs. So, while they spend a wee SSA spend a lot of our discretionary income on new technology in our early adopters, we’re spending on things that typically don’t really matter for us. So with, you know, education going in direction is going so many more people in our communities, learning how to code and wanting to be entrepreneurs and starting businesses, they are going to be building solutions that are meaningful to their communities and they’re actually best seated or best positioned to build those to build those startups. So, when we look at that group, we’re looking at a group that’s able to create new markets that generate tons of- tons of revenue and capital, it can become a multi-billion dollar company.
Lisa: Just like to throw that out to the rest of the panel for any other comments on what about the community of underrepresented founders? What do you think investors should be focusing on?
Brittany: Oh, I think one of the things, and this is due to just the lack of capital that these companies or these founders are able to raise, is that these- that underrepresented founders are- are extremely capital efficient. They don’t- they’re not getting the resources that they need and as a result, they’re able to do a lot more with what they have. And given that there’s recently been a trend away from growth at all scales for startups and more focused on profitability, the underrepresented founders are at a greater advantage because they’ve been operating under capital constraints since starting their business and as a result, they’re going to be highly capital efficient. So, that’s one of the things that I’ve experienced.
Lisa: And it makes a ton of sense anybody else has a perspective they want to share?
Eller: I’m happy to jump off of that. I completely agree with you, Brittany, like incredibly capital- their capital strained from the get-go and so they just have a better, more like, more focused mindset around how they’re going to use it. I’d also say that a lot of times that I’ve seen, particularly in healthcare when we have a founder, and maybe a diverse founder that is focused on a part of the industry that is addressing that same demographic. They know the market, they know the customer better than anyone else, and they’re likely going to approach it in a way that current systems haven’t been able to. And so for me, I really love seeing, you know, diverse founders that have experienced and they’re bringing their experience to the business or solution that they’re developing and it’s, it’s been incredibly impactful and valuable to have that perspective, you know, as we start working with them.
Lisa: You know, one of the things I think about is that we’re in a situation especially here in the southeast or started runways based on the startup runway Atlanta, where we are half people of color, half white, in the southeast with our population of 125 million, so the size of the population is huge. And yet historically, as venture capitalists, our industry has done a poor job of investing into diverse founders and diverse teams. I just wondered if some of you would share your wisdom on how you manage bias in your own investing decisions, and your own pipeline, actual firm’s some best practices or, or take away thoughts for investors.
Allan: I’m happy to start there. Yeah, one thing that we try to do is we try to be as metrics-driven as possible in the areas where we can. So, when we’re thinking about things like capital efficiency, or go-to market efficiency or salesforce efficiency, we try to have benchmarks to have a more objective view on what’s good versus bad. Obviously, you can’t do that across every single aspect, and as you get earlier and earlier, so data becomes a little bit more difficult because you might not have the type of data that you need to have those benchmarks. But trying to mix the qualitative and quantitative enables you effectively to have a little bit less bias, while also recognizing that regardless of who you are, you’re going to have bias. So you need to try to check that at the door recognizing as you’re going through your investment process, and then having a pretty regimented diligence process and approval process ,for as fair as possible, across all the different types of opportunities. And founders who you know, you end up meeting.
Lisa: This is great for that.
Tanya: Oh, sorry, Lisa
Lisa: Please do!
Tanya: And I’m going to say my, you know, my answer is probably a little bit edgy in that I – we- tend to take the approach of being intentionally biased. You know, our fund like many of us here, it’s an unpopular way to say it, but like we really go after founders that are underrepresented and that goes across, you know, many, many different areas from men, women, LGBT, etc. And, you know, oftentimes we’ll use the expression, not the pale male. And so we take in that thesis because we’re just trying to, you know, really put a flag out there that this is who we’re looking to invest in for all the reasons that you guys talked about before me, the diversity of thoughts, you know, that entrepreneurship mindset that often times many of these founders have used to get where they are at life, you know, and I find that the populations that we tend to write checks towards have that entrepreneur grit that serves us well as investors. And kind of, you know, we’re working to counteract, like many of us are that unconscious bias that oftentimes we’ve seen throughout you know, historic investing and the areas and sectors that we’re in. So I’m trying to be antagonistic and making that statement.
Lisa: Edgy is good. Love it, Tanya, really good. Anybody else with a thought around that?
Marlon: Yes, sir. So, you know, venture has been a very, and still is, to a large extent a very closed environment. And the way to to get your deal funded is to be a part of that community or network or whatsoever. And so that- that’s hard if you know, there aren’t a lot of diverse founders already in a network, or for that matter, diverse investors. So, how do you reach people, right is a big- is a big challenge. So one of the things that we said is that, you know what, while we love getting referrals from CEOs that we’ve worked with in the past, and as well as investors that we’ve co invested with, or work with, etc, we have to open up a channel where anyone that has a great idea with merit can- can get in touch with us. So we, you know, so we open up our website and have a full application where people can put their stuff into their information, and we review every single one of them and get back to people. We attempt to get back to everyone with a decision on whether we’re going to move forward or pass within 14 business days. And that- that just allows us to somewhat level- level the playing field. In terms of, you know, bias or or not bias, you know, I’m, I’m a black man, obviously. And so it would be pretty crazy for me to look at another black person and think that they wouldn’t be capable of, you know, of delivering on something, or being great because what does that say about how I look at myself?
Lisa: That’s a great point, Marlon. And so metrics, rigorous pipeline, trying to take bias out of the equation, call it out. Recognize you have it, a great point from Allan. Does anyone have a recent investment that they want to highlight or talk a little bit about and how bias was maybe, the role of bias was factored out of the decision or hopefully was factored out of the decision. So I’m going to move into what founders need to know about VCs and I’m going to focus really on those underrepresented founders, people of color, female led firms. You know, the numbers say that it’s really very hard for them to get especially a seed stage check but we’ve all made investments in founders of color and women led companies. So, I’d like to hear what you would like to advise founders to do about getting the right first investor.
Brittany: I can start. I think the advice that I would have is to be strategic in the- the investors that you’re going after but that takes some time to get to know those individuals. So for example, where Impact America Fund where the majority of our team are black women. And so there’s times in which we, because of the community that we’re focused on, will get in underrepresented founders that will pitch to us. And they’ll try to tell and try. It’s been a lot of their time pitching on, let’s say they have a haircare product. We have a Maven in our portfolio. And they spend a lot of time trying to demonstrate to us the value of haircare and how big the market is. Well, as a black woman, that’s a very quick conversation for me. You can say, you know, this, this is a large market, and I’ll say yep, moving on, let’s talk about your company specifically. So, that’s an example of, if you’re pitching to us, get, you know, do some research and understand who’s behind that, behind that desk. Who are those individuals? What are the things that they’re interested in? Everything’s on the internet. So, be able to tailor your pitch to those investors that you’re looking for- that you Investing in because you know for to use 10 years towards the pale male you may need to spend a lot of time trying to demonstrate how much value is in black hair care but for me, I know that let’s- let’s move on and let’s you know focus the conversation somewhere else because I can I automatically see that value.
Eller: So I’ll chime in. Sorry Go ahead, Richard.
Richard: No, go for it.
Eller: I was just gonna say that, you know, what I love seeing in founders is when they’ve sought out us as a strategic partner because they’ve recognized their own limits and their knowledge of the industry or their connections and that, you know, they recognize their strengths that they’re bringing to the table but they’re not looking for someone exactly like them. They’re looking to bring a diverse, diverse from them, investor or partner. And so going back to I love when founders really have a very specific experience or knowledge of the market, or customer that they’re serving, but they may need help on you kind of with the business side or business model side of things, and that- that’s not their strengths. You know, knowing- knowing that their own strengths and saying and being able to recognize, you know, “I need a partner and an early stage investment partner to come on and help me with the things I don’t know or don’t have access to.” To me, I think that’s something to be very thoughtful about. It’s kind of contradictory to a very, pretty common thing, common theme around a lot of these types of conversations, which is that there aren’t enough, you know, women or diverse investors, because people like to invest in people that look talk or similar to them. But I actually, you know, it’s pushing both the investor but also the entrepreneur to find people that are diverse from them. It can be harder to sell or navigate but it actually, in my experience, has been very, very valuable to have diverse founder-investor relationships.
Richard: Yeah, no, I totally agree with that. And I also think it’s important to stress the point that fundraising takes time. And you really have to spend time building relationships with investors. For a lot of funds and investors, it’s really hard to make a decision in a couple of weeks, much less less than 30 days. And, you know, investors like to track businesses over time to see how they perform. They want to get to know the founder. So when you’re raising capital, especially if you’re a first time founder, it’s really important to do your research on the funds that you want to raise capital from, and then invest in building those relationships well ahead of the time where you actually need the capital, you need to spend the capital. So I think it’s important to assume that there’s a very- there’s a relatively long time frame to getting around close.
Lisa: Yeah, it’d be great to hear from a lot of people on that average speaking, or looking across your portfolio and your own investments. How long have you generally known founders? I mean, I can speak for Valor and we usually know the founders three to six months before we actually complete the investment, you know, from like, first raising a hand, maybe email to we sent you a term sheet. That’s kind of where it falls, it can be faster, it could be longer. How about the rest of you? What do you see in your pipelines?
Allan: For us, at least it tends to be between one to three years, extremely long, and the longer the better. And it goes to actually your earlier question. We think of it like a marriage and therefore diligence should be a two way street. We want our portfolio companies to get to know us over time. We want them to talk to the other companies in our portfolio, run reference checks, figure out how we have been helpful? How consistent is that help? How long are we being helpful for and do the ways in which we add value, align well with the ways in which they need help. And so the longer we have to build a relationship, and for both of us to be diligent to each other and understand how our organization has grown and scaled over time, and achieved its own goals. Similarly, with the startup the better and that’s how we get comfortable. Obviously, can sometimes be a lot shorter than that but I’d say the majority of our deals, we’ve known the founders for, you know, years over time.
Eller: And I guess I might have a different perspective that my model, our model, is very different than that and that we will make very quick decisions within really to- Marlon, you said fourteen days. Ours is probably more like three weeks. And I think when you’re writing early stage checks that window of time when a founders going to be alive with their startup is- can be so narrow that if you are taking years to develop a relationship they might not make it if you if they don’t have a bit of that capital that early seed check writing ability quickly and so I think that there’s the need for both for you know, for fast decisions but also for the really, you know, build the relationship over the long term strategy as well.
Richard: Even maybe- just one more point and this is you know, sort of topical in the current environment. And, you know, with with as time goes on, it seems like this environment may persist longer than anybody thought when people are still working from home. is you know, as you qualify investors, I think at this stage, you probably need to ask if those investors are comfortable investing, having never met you in person, right? Because there are a lot of venture funds out there that are- that are- that are still struggling with the concept of investing in a founder having spent zero face to face time with that person before. And there are a lot of funds that are still struggling with this concept and deciding if they’re going to ultimately become comfortable with it or not. I think as more time goes by, it sort of forces the venture funds to have to be more comfortable with it. But I think that’s an important qualification sort of in the current environment, as you’re prospecting and qualifying investors.
Lisa: That’s a great point. You know, in the last few weeks, we’ve sent out three term sheets to founders we’ve never met, and I’d love to hear from perspectives either way from those of you who have or would never Allan, you go get coffee.
Allan: Actually, we would, we would. We want to do and I think it’s the difference between like later stage in early stage, depending on how early, we would certainly want to build a relationship still over time, but the reality is that I’m, I’m at home, my colleagues are at home, and all the companies we want to invest in are also at home. So we will adapt to the market. But I think, you know, to the earlier question, the most important thing is that you start to build relationships and look down the line over the long term. And if you know that you want to have, you know, continual rounds of funding to get started on that network getting in that relationship building sooner rather than later, regardless of whatever stage you’re currently at.
Lisa: Awesome. Anybody else want to?
Marlon: Yeah. For sure. Yeah, for-for us. Just one point of clarification. So, 14 days is the time that it takes us to evaluate internet submission. To determine whether or not we want to dig in deeper. The diligence begins after that- after that point. Typically, because of, you know, some of our deals are competitive and fast moving, we do have to make decisions within a two to three week time period. And so we just find ways to hack, you know, getting to know people. And that means getting to know them through- through their- through their network. People that we have in common that can speak to them. If they have investors that they work with in the past, looking for things in their background that- that, you know, shows that they’re standouts in some other aspect of their life or career shows that they have drive, determination and can win. You know, we look for a lot of different things and founders to be able to make that decision, but it needs to be quick, and we need to keep moving. We don’t have any problem making an investment in you know, in a founder that we haven’t physically sat in front of because by the time we’re- we’re ready to make that decision. It feels like we’ve known them for a long period of time.
Eller: I’m just curious to- for everyone, everyone else in Marlon to your point here, what are, for founders that are going to be listening in, what are some of those, I don’t want to call them hoops to jump through, but what are some of those things that they might expect us to ask them to- to provide us in an environment like this where meeting in person is going to be hard? It’s hard now and it likely is going to be hard in the coming months, you know, what are you all doing to adapt to that? About difficulty.
Lisa: A big fan of their financials, let me see your financials let me take a look and I’ll get back to you. I mean, I know that sounds maybe a little bold, and it’s not the first conversation asked, but we pretty quickly want to see financials and their pipeline. What is your CRM? What can your CRM tell us about you and it can usually tell us a lot. Love to hear. Great question, Eller. Marlon, others, how are you getting to know people remote?
Marlon: Yeah, it hasn’t really changed for us that much. Right? So the- the- what happens with being remote versus being in person is you can have more of those kinds of impromptu like types of conversations, right? So if you’re- if you meet for a drink or lunch or dinner, you know, you might start out talking about business, but it goes into a completely different place, right? And you start to get to know that person personally, which we’re human, so that will factor into, you know, investment decisions at the end of the day. But if you really think about it, you’re not going to make- we want to like the people that we invest in and work with, but you’re not going to make a decision to, you know, drop a million dollars in the company because you like someone, if the business is shit, right, so sorry for the language. So, you know, so it’s really about understanding the opportunity that’s in- that’s in front of them, why they are best positioned to, to take advantage of that opportunity and when and how they’re going to sustain it. So, what’s the moat? How deep, how wide and why- why you? Why do we back you? And I think you can get to all of that without, you know, going to dinner and having drinks. One-One-One hack, though, is that I like- I always like to understand how entrepreneurs are going to communicate with us, frequency, depth, etc. And, you know, if this is their first kind of investor relationship, they may not have the kind of monthly updates that they sent to investors. But how do you communicate with your team? And how are you keeping track of your goals and- and whether or not you’re achieving- achieving them or not? Show us those documents, right? So we can see how you organize your thoughts and how you communicate out.
Allan: The only other thing I’d add is one of the benefits of you know, in person larger group meetings is you understand the team dynamics by picking up on social cues. And so that’s something that can often be lost, you know, on a phone call, or you know, even over zoom or a video conference. But that’s the one thing where I still want to figure that out. So whether it’s including a number of the people on the management team for, you know, larger diligence sessions to understand, you know, is the CEO allowing other members of the team to communicate and to show their own capabilities and skill set, are people cutting each other off? How should we think about the ways in which the team communicates? And what does that and what can we infer about the way in which the businesses run. And so that’s something I think we’re still all learning to do at a video conference. But that’s one of the big areas where you can learn a lot just inferring from social cues effectively is really the internal team to team dynamics, which in the end are pretty important. If you’re betting on the team more so than anything else, the ideas will change, the strategy will change. Everyone, you know, encounters hiccups along the road, you’re betting on as a cohesive team that can figure it out and find your way to the finish line.
Eller: And I think the reason-
Marlon: Very, very true, but by the way, we don’t always get that right in person. I mean, the worst deal that I’ve ever done was because of the team falling apart, and the team that I had spent a lot of time with. They just hid it really well, for a while.
Eller: I think the reason I really asked it is just because I think entrepreneurs are going to have a different experience fundraising over the next couple of months where they may typically have relied on their in-person interaction to really carry the business — particularly in the early stage because in the early stage, it is so much about the founder and the story and and how they express that. They’re going to have to kind of work some of their other muscles in terms of really nailing down your financials and making sure that when you deliver them, you deliver them in a very clean and clear way. An investor now is going to be reading into everything they send because they don’t get to read into your mannerisms or your social cues as much. It’s just been something I’ve been thinking about as entrepreneurs are going to be navigating fundraising and not being able to have a firm handshake and be face to face.
Lisa: I think that may play to the strengths of underrepresented founders. To be completely honest, the social network cues in the current venture capital environment, where it’s still 95% led by white male teams, is not necessarily ideal for the social networks of less networked founders or underrepresented founders, founders even from the southeast, even geographically under-networked. If you’re showing your business off like, “Here’s my spreadsheet. Here’s my financials. Here’s my customer testimonials. Don’t I look fundable?” Well, you do look fundable, and just because you weren’t hanging out on Mission Street at the hottest charcuterie bar with a great wine doesn’t matter anymore. That could be awesome.
Eller: I love that. I love that. Yeah, it’s going to be really interesting.
Marlon: Yeah, I was going to give one more tip. The speed at which you respond to data requests says a lot, too. If we asked for margins or some financial information or customer growth, whatever it is, the faster you’re able to turn that around says a lot about how well you understand your business and how well you’re tracking it. Because if you’re thinking about this for the first time and need a couple of days to put it together, that says a lot. If you turn it around a couple hours, because if you’re looking at it every day, that also says a lot.
Tanya: I think that is a key, key piece. It’s preparedness. I’m in the — and I think a little bit Lisa, as well — very, very early stage, we’ll see the gamut of founders who are looking for financing and investment. Oftentimes, they’re just not ready for it, and they think they are. If you send out requests for meetings to 50 different VCs and no one responds back, it’s probably not because the money isn’t out there, but you’re not ready and you haven’t presented your business in a way that’s exciting and enticing to the VCs. I would say 100% preparedness and being very strategic about who you reach out to. There’s a lot of different ways where you can look up investors and what they’re excited about, so if you know you’ve already invested in hair care products, like Mayvenn, that’s in your vein. If they reach out and they’re like, “Oh, Allan, they’re asking for a meeting, but it’s not a good fit.” I think that’s really discouraging to founders, so if they kind of do that work in advance, they get further faster as well.
Tanya: Tanya, that’s such a great point. I’m going to ask everybody to kind of close the section of the conversation for your favorite founder “do.” I’m not going to talk generic — everyone can read this on TechCrunch or wherever. Your personal favorite founder “do.” This really gets to you. You love it. High pipeline CRM export. Show me your conversion funnel, and I’m already going to talk to you. I don’t care how bad it is. I can’t wait to talk to you about how to make it better. That is super fun for me. I love conversion funnels. I know it’s really weird and it’s kind of far along, but, for me, that’s a huge “do.” What are huge do’s for you? Just y’all, jump right in.
Allan: Mine is definitely acknowledging competition. I am often in meetings and you ask people, “What’s the competitive landscape? Who keeps you up at night? How do you think about this?” You often get back “No one else is a competitor.” That’s just not true. It can’t be true.
Eller: If there isn’t a competitor, I lose interest. If no one else is doing this, then that’s a problem.
Allan: Or at least they’ll be a fast follower or something, whether it’s an incumbent who has already been in the space who you don’t consider to be a competitor because their technology or what they’re doing isn’t as innovative, or whether there’s someone else who’s closer to your size who’s doing something similar. Think through that question and have a real answer. For me, it actually makes me have a worse opinion, almost, of the business and gives me a bit of just fear or concern effectively that they’re not thinking about the entire landscape and the potential issues that might come up from competitive threats over time. That is my “do” for sure. Acknowledge competition. Understand their business models and figure out why you’re differentiated both now and how you sustain that differentiation over time.
Lisa: What about the rest of you?
Brittany: I think for me, it goes back to the Eller’s point earlier around understanding how we can be helpful. Because if you come into the conversation and say, “I’ve seen you made these types of investments” or “One of your portfolio company founders say that you were helpful in this particular way,” it takes a step off of our diligence process. We don’t have to think about how we can be helpful beyond providing capital. It shows that you’ve done your homework on who we are and the value that we can add. To Allan’s point earlier about this being a marriage, if you come in and say “Here are your qualities that I like in you, so let’s get hitched” then that makes for an easier conversation to say, “Okay, I can see this working long term.”
Tanya: Mine is super easy: revenue or customers. Something that at least has proved your model, you’ve done some sort of vetting, you’ve been able to get X far. As an investor, it’s just it shows a lot of tenacity if you can just have someone backing your idea. Obviously, that doesn’t always happen all the time.
Richard: Yeah, for us, it’s having a very clear understanding of how you’re going to put the capital to work and what critical thresholds that you think you’re going to cross by raising that capital. A lot of times we talk to seed stage founders and they say, “I want to raise a million dollars.” You ask them why they need to raise a million dollars and they say, “Oh, well, it gives me 9 to 12 months of runway.” It’s sort of like, well, so what does that really mean? Why is your business going to be more valuable after you’ve gotten that runway and put the capital to work? We like founders who have very kind of clear goals on how far they want this capital to get them and what those critical inflection points are that are going to create a lot of value and then ultimately make the business a lot more fundable by the next fund over the longer term.
Lisa: Great advice.
Marlon: For me, it’s transparency, and specifically around acknowledging the risks associated with the business. Because if this is a high growth potential company, there has to be risk. Otherwise, everyone would fund it, everyone would have created this business, and there’d be a million of them out there. What are the true risks and how do you plan to mitigate those risks? Just be honest about it.
Eller: For me, it’s actually being able to very, very clearly articulate the market opportunity and how their solution solves or helps alleviate part of that market opportunity. It’s shocking to me how many applications I read where it’s talking about the product and the technology and how great it is, completely glossing over why that technology is even needed. To me, when a founder can very, very succinctly get to what that pain point is or why a user or customer is going to buy their product, it’s more rare than you would think it would be.
Tanya: I also feel that way about the roadmap. Oftentimes, they’ll be like, “Okay, this is our roadmap in three years, we’re going to solve the entire world and take over the market.” Then once you say that, it’s fair game for me to go, “Okay, how are you going to do it?” “Well, we don’t know. It’s just my idea. I want to convey this idea that I’ve got a big mindset.” I think people underestimate once you say something, it’s a fair game for me to poke holes in it.
Eller: Yeah, so I love really tangible — in regards to the roadmap — very tangible, clear steps of how they’re going to take it to market. When they say they have a billion dollar market opportunity, I’m like, “Okay, that’s maybe someday, but what’s the go-to market? How are you going to scale to that?” Again, that clear articulation of that pain point and how they’re going to achieve those milestones.
Lisa: I think a lot of your personalities really came out on that answer, so I’m going to double down. This is really our last question question. We’ll do a little closing, but I want to know what you all are each excited about as you look at your investments in the back half of the year. I want this to be a personal answer. You’ve already talked about your investment teams. We know where your funds are. Sometimes we feel like, for founders especially, we’re going to be some of the first VCs that the founders who come to Startup Runway have ever met, if not the very first. When you sit with them in their mentor groups, they may have never, likely will have never, met a VC before. To let them know that we’re people too — we are not walking checkbooks, despite the reputation. We’re real people behind this, and we’re really excited about the things we invest in. I’d love for each of you to share something about investing you’re really excited about, and if you’ve just done an investment that’s spent all your brain and you’re really excited about that, feel free to share that. Just let them see who you are and what motivates you to get up and do more diligence in the morning.
Eller: I can start just because, again, at Jumpstart we’re exclusively healthcare investors, and I love investing in healthcare. I’ve been doing it for just over five years now. Really over the last couple of months it’s become incredibly exciting. What I am increasingly excited about and opportunities that I think entrepreneurs are going to just be crawling out of the woodworks for is how people and consumers — and consumers as the patient consumer, if you will — how they’re going to interact with their health, well being, mental health. I truly believe we’re not going back to the way the world was at all. There are going to be some very major shifts in how people take care of themselves — very self-directed sense of well being, whether that’s food is medicine and really how can grocery and retailers play a role in an individual’s health and wellness choices? I love that space. I think, again, just entrepreneurs knowing that the world is not going to be the same after a post-COVID sense and kind of embracing that and saying “We’re going to deliver something different because it’s going to be so different.” I’m just excited. It’s a scary time to be going through, but I think there’s a ton of opportunity for really impressive and interesting innovation.
Allan: I get really excited about companies that democratize access. My last two deals are along those lines, and most recently, it was a company called Slice, which focuses on giving independent pizza shops and those small business owners the technology that they need to move their business online and compete with large scale chains and, in horizontal, food delivery apps at a price point that work a little bit better for those local businesses. Prior to that in January, I led a deal in a company called Policygenius, which is an internet marketplace for consumers to educate themselves on life insurance, home insurance, and auto insurance. They can go there and shop for different rates as you would on a Kayak.com and get the best fit policy for your individual needs. Those sort of businesses get me extremely excited. They’re also great business models being internet marketplaces, but they are helping consumers or small business owners really move online and follow a lot of the trends that we’re already seeing that I think have accelerated due to COVID-19. Things are moving online and commerce has moved online and decision making is moving there. Those are the types of business models that get me super excited and I look forward to finding hopefully a couple more this year.
Brittany: For me, I’m really excited about the focus on the essential worker and what are the things, products, services that those individuals need and who’s coming up with the ideas that will help them become more empowered in the economy. We, at our fund, focus on these communities already, but I think the world now sees how fundamental and essential they are. A part of that is from a career perspective: what are the things that they need to feel empowered to shift careers? Also from a FinTech perspective: what are the things that they need to get access to asset ownership? That’s really exciting for me to see that the world sees how fundamental and essential these workers are, so what are the products and services that could help them feel more empowered in this economy?
Tanya: I’ll piggyback on that, Brittany, as well. This is my second Coronavirus outbreak. I was just graduating nursing school in Toronto when SARS hit, and I lived through it then, and I’m living through it now. Obviously, it’s so much more severe, but just for the second time in a lifetime, having come from healthcare to now be in sort of the tech world, I’m just fascinated by what the outcomes are in terms of like public health, tracing, testing, all those aspects, especially championing essential workers, such as the nurses who have been frontlines who really understand the intricacies of how public health pandemics like this affect the world I think is really huge. Having those discussions and making those valued healthcare workers see that they have a place at the table in informing how we continue.
The second one is education. I just see all my friends at home with homeschooling and having to make these pivots. I think about how we were educated years ago and how I don’t remember half the stuff I should and so just wondering how education really changes out of all this.
Richard: Yeah, for us, one of the things that gets us really excited are businesses that have long term tailwinds associated with COVID-19. As unfortunate as the epidemic is, but obviously it’s causing a wide range of different behavioral impacts and changes. Some of those are short term changes, some of those long term changes, thus is still to be settled on which are short and which are long term changes. But I think this is also an environment where companies are being forced to do more with less — less human capital, less marketing dollars, less salespeople. Therefore, we’re really focused on companies that help businesses drive efficiencies, and whether there’s a cost savings or ways to generate additional revenue with fewer resources — businesses that have really clear ROI for customers and businesses that can sort of benefit from what the new normal could look like. One example, we just announced our most recent investment today in a voice AI business based in Austin, Texas, which is a platform that helps quick service restaurants do a better job of handling customer voice orders and offering upsell opportunities. That that kind of checks all the boxes that I just mentioned, as far as efficiencies, driving revenue, etc. That’s one that we’re particularly excited about.
Lisa: That’s awesome. Congratulations.
Richard: Thank you.
Marlon: I’ve always been interested in companies that can generate a lot of revenue but at the same time have a significant impact on people’s lives. We are very, very early in I guess what they’re calling telemedicine or telehealth these days or health tech companies. We got four or five companies in the space that are obviously, in this environment, now thriving. We also, I also, love companies and solutions that are addressing things that haven’t been adequately, or have inefficiently or in effectively, been addressed in the past. A deal we just announced yesterday is a company called StoreCash. StoreCash is essentially — think of it as kind of a mobile gift card application, but you don’t need to attach it to a bank account. If you are a gardener — I live in California, so and there are a lot of Latinx gardenersm and some are undocumented, some are — and the only real way to pay them is is cash or they can take a check and then go to a check cashing place and get gouged for a good percentage of that check. StoreCash basically eliminates that for them where now I don’t have to have a bank account, they don’t have to have a bank account, and I can put money into their account, they can go upwards of I think it’s like 400 different retailers now to spend the capital or buy a partnership with Western Union. They can actually withdraw the cash at much better rates. It’s a company that seems simple, but no one’s been able to really pull it off before, and it addresses a massive problem for a substantial number of people in our country. I can’t quote the numbers right now, but unbanked and underbanked is a significant portion of our population for many reasons. This company addresses that. I’m really interested in companies like that. It doesn’t have to be in FinTech, it doesn’t have to be in and HealthTech, but massive challenges with unique solutions towards them.
Lisa: Yeah, more or less like one in five or one in four Americans depending on what you’re reading because I just had the opportunity to do some diligence on that when we invested in CapWay. That is a challenger bank for the unbreakable or underbanked kind of cash economy, but I couldn’t agree more. There’s so many opportunities in that space.
Just to share one of the things that I’m really excited about is we lead a deal in Physician360, which is a diagnostic teledoc. It’s a new type of telemedicine and the go-to-market is through independent pharmacies. They have a network right now with hundreds of pharmacies and they’re growing that. It’s exciting to invest in the future of what we call financial inclusion, and I look at things that are on the path of demographic change in the US. We all know we’re headed to be a minority majority country in just a few years, but in the Southeast, where I live, work, and invest, we’re already there. A lot of the models in the economy today are predicated on an outdated buying persona, and so we’re able to look for any opportunity that increases the path towards equity and inclusion for the real consumer that is today is something I always love hearing about. Of course, we want to see the software platforms that accelerate that change. That is a conversation I’m always up for unless I’m extremely, extremely tired and I need sleep.
We only have a couple more minutes. You’ve been so generous with your wisdom and your time. I want to make sure founders, when they’re prepared and they know what your “do” is and they’re really ready to reach out to you, that they know how to get in touch with your firm. If you wouldn’t mind, let’s close on that. Just go around the room real quickly and advise our Startup Runway finalists, when they’re ready, how they should get in touch.
Brittany: I can start. Similar to Marlon, we have a transparent process in terms of reviewing all pitch decks. If you just go to impactamerica.com, you’ll see on there where you can upload your materials and we’ll be sure to take a look at it.
Eller: Yeah, we have a very standard approach to applying for funding. Similarly, I don’t know if I can point to it, but it’s jsf.co. We have an apply page. We actually have a proprietary application application, so no submitting pitch decks. If you fill out that application, we’ll review it. We review that twice a year. We have those dates listed on our website. That’s the best way to get in touch with us.
Richard: Yeah, for us, at knollventures.com we have a webform where anybody can submit any sort of inquiry, including investment opportunities. Also, just a cold email works as well.
Tanya: If you go to techsquare.co we have an intake form and those are typically for companies that are high growth, scalable technology companies. Theambitionfund.com funds businesses across all sectors that are all underrepresented founders looking for investment.
Allan: For us, we’re a little bit later stage so we don’t have a form online, unfortunately, but you can always shoot me a quick email or LinkedIn message to anyone on our team. Easy to find. Assuming it’s a good fit, we’re happy to get in contact.
Marlon: For us, it’s macventurecapital.com and we have that form. You can also find me on whatever social media channel you want. Twitter, it’s @MarlonCNichols and I usually respond. I like having interesting conversations there, but just know I will redirect you back to the form to fill it out so that we can get the team involved in the evaluation. Always happy to connect on all platforms.
Lisa: Awesome, and we host a virtual pitch fest once a week on Friday afternoons. It’s free to sign up for. You’ll only get three or four minutes, but you can have your three or four minutes and we will see if there’s a fit.
Thank you so much for your time and volunteering your efforts and mentorship of Startup Runway Foundation. You are amazing. I look forward to doing lots of deals with each of you.
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