William Leonard

Hey everyone! Welcome back to the Atlanta Startup Podcast My name is William Leonard and I’m your co-host for today. And I’m sitting down with Antoine Woods Jr. His first startup failed, but this didn’t push him away from the startup and venture world. And in retrospect, I think it actually probably entrenched him even further in the tech and startup scene. Now in 2022, Antoine is the founding and managing partner of Vertical404 here in Atlanta, Georgia. And the firm’s ultimate mission is to invest in early-stage, Black, Latinx, and female founders who are rethinking advancing the future of work, the future of health, finance, and media. Antoine and I are going to dive deep into this conversation and talk about a few things like early-stage venture markets, how pre-Seed stage investors can meaningfully provide value to startups, and how the macroeconomic turmoil right now is impacting early-stage companies on a national and also a regional level. So tune in, take notes and let us know what were some of your big takeaways from this dialogue with Antoine. Antoine, it’s a pleasure to see you again, man.

Antoine Woods Jr.

As always, my pleasure. Well, thank you for having me on.

William Leonard

I appreciate it, man. It’s always good to see another Atlanta face on the podcast. Typically, we’re interviewing a lot of founders. But it’s always nice to have an investor on a program to give a perspective from the other side of the table. I’m excited about the conversation and dialogue that we’re going to have today. I think it’d be incredibly helpful for you to just give us an intro to Vertical404. What’s the thesis? How are you all looking to build the fund?

Antoine Woods Jr.

Absolutely. Thank you. Vertical404 is an early-stage, pre-seed venture capital firm. We invest in Black, Latin X, and women founders who are advancing the way we live, work, and play. And for us, that is SaaS and cloud-based platforms that are focused on the future of work, health, finance, and media.

William Leonard

Awesome. I will dive into more details around the fund and a few but I want to get into your background a bit. I know you’re from the Nashville area, you went to Middle Tennessee State, and now you’re here in Atlanta. Can you talk to us about your journey a bit from Nashville to Atlanta, what you’ve done in between, and what really led you to want to start a venture fund?

Antoine Woods Jr.

Great questions. My journey started on the campus of Middle Tennessee State or MTSU. I was fortunate to join a group of guys who were tired of paying for textbooks, right? There has to be a better way to kind of do this. This was early web 2.0, 2006/2007 era. We’re like, “Let’s start something that kind of alleviates this pain, right?” We kicked off the textbook rental industry along with two other companies Book Rental and Chegg. Our model was different. We actually bought the system that allowed bookstores to rent their idle inventory. After that, first two to three weeks rush, those books can just sit on the shelves. We bought the software to allow them to kind of check out their textbooks on a three-day or weekly basis. Things are great, right? Kicking off the industry. Now, a lot of this energy around that terms of, I don’t pay for my textbooks, very popular service and a business model for us. Especially raising in the southeast at that time and especially in the Nashville area, there wasn’t really a lot going on. It was very difficult. But we were fortunate to have found an angel, raised $100K. And so if we just put the money in the wrong places, for us, we thought, “Hey, the more people that know about their product, the quicker we will scale.” This was the case, right? We were in 22 states and people flipped it to the platform, but the platform was not stabilized, right? We put the money into marketing and not to the product. People came to the product and the product burst. It combusted for lack of a better term, right? One of the things we learned getting into venture was the thought of if we would have received that check along with some operational guidance, how different our paths have been because Chegg ended up selling to eBay, Book Rental sold to Amazon, and we went out of business. Getting that check along with operational guidance would have been very helpful because, at that time, we were 21/22. I was one of the younger ones on the team. Being 22 years old, you just don’t know what you don’t know, right? And that’s just the thing of entrepreneurship, just to operation and experience. We did that a few times over. We had a few more startups, and I moved to Atlanta in 2011 and got active in the startup ecosystem around 2015 with Startup Atlanta. One of the things we found from just doing our events and things like that was that a lot of early-stage founders had some of the same questions that I had back in 2007, this is years down the road, was that they either had an idea they were trying to get off the ground, or they were trying to find capital. At that point, I was upgrading a brand consultancy called Cultural Sync where we did brand positioning strategy, Customer Acquisition, and Retention Strategy For Startups and nonprofits. I wanted to do something new. So I was like, you know what, let’s just kill two birds with one stone, right? I can really help the founders in the early stage, not only with operational guidance but bringing money into the southeast. And that idea is what kicked off me starting the fund.

William Leonard

That’s an interesting journey, right? You started out in Nashville, and I didn’t know that you had a startup previously. I’ve known you for probably about four or five years now. It’s good to hear that you’ve been an entrepreneur, you’ve experienced the hardships of building and ultimately, the company not making it, but I think you can learn so many lessons, probably learn more lessons than a company, if they were to be successful, in a sense, because you learn what not to do. That’s interesting. You moved to Atlanta, you saw that the ecosystem needed funding resources, resources to help build, and just to answer the basic questions. You had this vision for Vertical404 and so now, the fund is in full swing, you’re supporting Black, Latinx, women founders who are reshaping the way we live, work and play. How do you all practically describe that vertical and what core industries are you all really looking to invest in right now?

Antoine Woods Jr.

We have four core areas, Future of Work, Health, Financing, and Media. But overall, the thought was, and COVID proved our thesis in 2020 because we kicked off in 2019, we wanted to digitize the habitual habits of everyday people. In terms of when you wake up and you operate, you’re doing something for work, you’re doing something in terms of finance or media, right? That was a thought, digitizing the habitual habits and we landed on four core areas. But again, it’s a kind of SaaS-based, cloud-based technology. The thought with that was whenever you go to assess a company, because like my degree was in Computer Information Systems. I was a programmer for a little bit, you might not have known that as well. I wrote code and things like that previously. But one of the great things about SaaS companies is that once it’s built, it becomes really about sales, which is a real formulaic process. Although things may be tweaked for individual industries, you can’t take one model, one approach, and place it across the board, right? That’s one of the reasons why we like SaaS, we can actually come in and be hands-on again, with being more than just first money in, but providing operational guidance. Giving them the check, sitting down with them and saying, getting to know them as a founder, their trouble areas, maybe some things in which they need guidance, and being able to provide that. Getting first customers or just building teams and things like that.

William Leonard

You said something interesting there that you’re more than just a check. You’re giving operational guidance, which is so important and top of mind for a lot of founders today who can have access to plenty of capital. I spoke to a founder who had a term sheet for seed round from a growth stage fund, right? How involved is that type of fund going to be at this stage of your business? As you all think about Vertical404 and the value you all are bringing to your founders, what are some of the ways that a founder can anticipate interacting with you and Avoilan as you all invest in a company?

Antoine Woods Jr.

I think the biggest thing is making it clear that we have been founders ourselves, we’re missing the journey. Again, you don’t know what you don’t know and it’s okay to not know everything. I often say that entrepreneurship is like building the airplane, while you’re in the air everything is so quick. You’re just trying to just stay afloat and sometimes things can be become chaotic, right? Because you’re just moving. But it’s important to say, “Hey I don’t know this.” Be candid and then we can either assist via our team or tap into our resources and bring on individuals who can actually help troubleshoot these areas. The biggest thing as well is that it’s great to be a founder, it’s great to build a company, to add to the economy, and things like that, right? But at the end of the day, you have to remember too, that life is short. You have to actually take a step back sometimes and actually live. Of course, to people that we invest in, we want them to be focused on building the company and growing that but we also encourage them to be mindful of burnout. Unaddressed burnout will burn down everything around you. Your family life, whether it be you know a spouse or someone that you’re in a relationship with, friendships, family, it’s able to take everything down around you, right? Because it’s easy to become so focused on the thing you’re working on that you just neglect everything else around you. Before you know it, you’re in a sunken place so to speak, where you look up, and just things are just bad, right? It’s important to take a step back, to breathe, to be a person. You can do both and that’s one thing that we do encourage. Let’s build together but it’s important to live.

William Leonard

That’s great advice. I think that speaks to how you and Avoilan at Vertical404 kind of take that approach. But I guess moving the conversation forward, you’re taking a step back and looking at the early stage of interesting pre-seed and seed as a whole. What are some of the most meaningful ways that you think an investor can bring value to a pre-seed or seed company? Now outside of some of the most obvious ways that investors are doing this, you’ve been here for a minute now and as you said, you were a pre-seed or seed-stage entrepreneur, at one point in your lifetime, as well. What are some of the ways that an investor can be just incredibly meaningful at this stage of an entrepreneur’s lifecycle?

Antoine Woods Jr.

I think the biggest thing, which is fun I guess to say this in terms of being in venture, I guess we think of venture capital, of course, me as a GP, have a responsibility to bring a monetary return to my LPs, right? Those who have invested into my fund but I think it’s important to kind of give founders verbal permission to grow slowly and to take the time. When we think of venture capital, I think we’ve got to move, move, move, and we got to either be acquired to go IPO. But I think it’s important to say, “Hey, you can take your time on this.” Not too slow, keep the focus, but it doesn’t have to be rushed. Giving that permission verbally, like, “Hey, we understand you’re learning, you’re growing, we’re growing together.” But then as well, to be actual advocates for the company again, giving the check and then within the market, right? Championing the founder, the company, and then also helping them position themselves because, again, with us being pre-seed our thoughts, you want to come in early to support the growth, build pathways to where they can have a path to follow up on capital in their future rounds. Whether at the seed round, Series A, and so on, they build those pathways and relationships. So say, “Hey, we have a relationship with this seed fund, this funding investment series A has billions of connection points.” Whenever you are ready or in a position to raise additional capital, these relationships are already established right now. But also understand and know your business and you as a founder, helping them build pathways, really supporting growth, I think is the biggest thing, especially at the pre-seed stage.

William Leonard

I would agree. I think you said something that’s incredibly important, building the connection points at the pre-seed stage to those later stage investors because obviously, you want to put your startups on a path to grow and equally put them on the radar of upstream investors so they can track that growth. It’d be in a position to lead those next successive rounds. That’s great advice. Thinking about the world right now, we’d love to get your thoughts on how you see just some of the macroeconomic situations and turmoil right now that are impacting the world. How do you see it impacting early-stage venture markets, think about interest rates from the Fed are increasing. You think about the economic factors out from the Russia-Ukraine situation, other factors that are just plaguing the country right now, how do you see that impacting early-stage venture markets and then asking you to take it a step further? Maybe share how you see it impacting startups here in Atlanta specifically.

Antoine Woods Jr.

There’s a lot going on. The ushering in the 2020s has just been just full of uncertainty, right? It just seems like every year, there’s something else piling on. One of the biggest things with running a business is that revenue, right? Revenue is what drives the business. Whether you’re raising, follow capital or not, your focus on revenue, find your audience, you’re able to grow your customer base, and increase revenue, you’re going to be in good shape, regardless if you get a follow-on capital or not. But one of the biggest things is that if you are driving revenue, investors will find you. I think at some point this year, the amount of capital that’s kind of flowing currently will kind of dry up a little bit just based on all of these external factors that are kind of going on around the world. Not only just for startups here in Atlanta but all over the country, that will be the case. It’s important for founders to be less focused on being full-time fundraisers and really get focused on driving the business forward. Being more revenue-focused, I think that’s going to be a very important factor. For founders moving forward, maybe not only in 2022 but in 2023, as well, right? I think it’s really tough whenever you’re fully dependent on raising venture or raising outside capital to stay afloat. But again, if you have revenue, if you’re well-positioned to do both to continue on growing, and then to also to be investable.

William Leonard

That’s unique insight. I was having a conversation with another investor last week. I was saying there’s opportunity in uncertainty. I think that’s so true. A lot of people are fixated on the now but I think if you’re able to look to the future, if you’re able to be that visionary, and stick to the fundamentals of the business, I think that’s so important at this stage, right? You want to have efficient customer acquisition costs, you want to be growing revenue like you said, you want to be as capital efficient as you can as a founder. We’ve seen record funding going to startups at record valuations, right? But that only places the bar even higher for that next round to meet that next set of metrics. I think capital efficiency, not taking on way too much capital, and having this incredibly high bar to meet for the next round are important. I think we may see a drying up, or just a concerted slowing of capital flowing in the venture market soon. That’s interesting. I think you touched on this a bit, but are there any trends that you are anticipating may really begin to emerge throughout the course of this year, or maybe some that you’ve already seen emerge over the first quarter of 2022 thus far? You mentioned capital could potentially dry up a bit with interest rates, increasing macroeconomic uncertainty, but is there anything else that you see being on the forefront of early-stage innovation?

Antoine Woods Jr.

In terms of trends not only here locally, but I do see there is a movement of consolidating because over the past few years, we’ve seen a lot of companies spin up and things that are out there that are venture bankable companies that have received capital and so on and are growing, and again, kind of falling in line with the slowing of capital just in the atmosphere in general. I think we’re gonna see some consolidation of companies. Joining founders together to be more capital efficient, bringing their thoughts and ideas together, and kind of moving forward that way. I think that’s going to be a trend.

William Leonard

Is that in this sense of aqua-hiring? Or how do you see that trend practically playing out a bit?

Antoine Woods Jr.

From my perspective, as you mentioned, individuals that have fortunately raised money at very high valuations get a sense of whenever growth is slow, can they raise a future round? Are they gonna do a down round and things like that, but then there’s a great opportunity where there are a similar focus, similar markets, things like that where we can just collaborate and consolidate. Take two companies and make one even stronger, not only position yourself to just grow again, based on revenue, but also venture backable. I see that being a trend. There has been a lot of capital going and again, when that slows up, people are like, “Okay, Where’s my next round coming from? Can I stay open?” Things like that. I think people will be a little more strategic on how they can just keep the dream and vision going and I see consolidation as one of those avenues.

William Leonard

That’s interesting and pretty thought-provoking. We think about the aspect of consolidation and the rate that we’re seeing what’s happening in the public markets, and if that’s going to transition come down to the world that you and I play in. Pretty thought-provoking there. I’m curious, Vertical404 as it’s growing, investments are growing, you’ve got Avoilan as your new GP, how did you meet Avoilan? What is next for you two this year? What are some of the things that you all want to accomplish as a general partnership?

Antoine Woods

I met Avoilan a few years prior to him joining up with me. I was a solo GP, initially. I’m a person, again, who just starts things. Fundraising, and as a fund manager is similar to just a founder is difficult, especially whenever you’re raising capital to invest in other founders. One of the questions is, of course, team, experience, but the support, so I knew I needed to bring on someone else. I had met Avoilan at The Gathering Spot at an event previously, and I think we had connected via email prior to that. He was working in sales for a music SaaS company. We kind of just connected on a few fronts. The biggest thing for me when bringing a partner, I wanted someone who, again, just operates in humility,  that’s how I try to operate, right? I think that’s big. Treating people with respect, operating in humility, someone who’s family-focused. I’m a family guy. Married with two kids, so that work-life balance piece is very important to me. I wanted to find someone similar, because I had previously been a workaholic where the burnout is real. He had a similar thought on early-stage with supporting the founder and how beneficial that can be in terms of investing early on and then being a support mechanism for the founder. We had some more thoughts on a lot of things. After several conversations, we kind of looked at a few deals together, getting a sense of how we thought about things. It was just a good, good match. He joined in the fall of 2020 and it’s been great man, Avoilan is awesome. He’s a great partner to have in the fund. We’re looking for 2022 and beyond, just to get more active in the sense of just the ecosystem in general. Doing more events in terms of locally, being more visible in that front, but of course, investing in deals and most are quarterbacked. There are so many great things to hit our inbox that I wish we can invest in all of them but that’s not the case. Getting into the hands of firms like you guys at Valor where we know you’re going to be taken care of. It’s important for us this year, but we’re looking for this year moving forward to do around 28 deals per year is the goal, right? Be aggressive and expand the portfolio. We’re just reviewing a lot of deal flow, a lot of deal memos, and a lot of great conversations. It’s a very exciting time.

William Leonard

You’re aiming to do about 28 deals a year. A pretty healthy pace. What is your check size for some of our listeners who may be out here like, “Okay, I may be an interesting fit for Antoine?”

Antoine Woods Jr.

Our check sizes are between $100,000 and $250,000 . Initially was in the 50k range, but you can do a lot more with 100. Whenever you’re early on and of course, it helps our position within the company. Make sure that we’re in a good position within the company moving forward, and again, with jumping in and getting hands-on with them. Check sizes start at 100 and go up to 250. Of course, we have follow-on. The idea is to get in with the founders early, preferably before they’re even trying to raise a pre-seed. I help them scale, and then also play the role as a bridge to where they don’t have to just jump into having to do with seed, but maybe just need a few $100,000 here or there to kind of just keep the momentum going. That’s having the follow-on to do so. That’s the current investment strategy.

William Leonard

Awesome. Briefly, I want to touch on something you just spoke about in your brief anecdote. When I first met you a few years ago, you were a solo GP. What was that experience like as a solo GP? Being an emerging manager in the southeast is a whole different experience in itself. Atlanta is growing in almost every facet you can think of and I’m sure there are some emerging managers who are listening to the podcast today. Do you have any nuggets of wisdom, tips, tricks, advice hacks for how to get off the ground, as an emerging manager, maybe just here in the region?

Antoine Woods Jr.

The biggest thing is don’t be afraid to ask questions. For me, whenever I wanted to kick off, asking questions on LinkedIn is a very powerful tool that I think is underutilized. But, and obviously, the journalists search for either General Partner, Managing Partner, VC, any of those key terms, and I guess reaching out to people saying, “Hey, I’m looking to get into venture. Can I get 15 minutes of your time?” I got a pretty high percentage of responses and am ready to hop on, to get advice and guidance in terms of how to move forward. And again, I was a solo GP at that time, right? And again, in terms of whenever you’re doing your outreach, being a first-time fund manager, investing pre-seed, and again, with our thesis of Black, Latinx, and women founders, especially in 2019, it wasn’t the most highly thought of thesis so it was difficult. But again, in terms of, hey, have you thought about bringing on you someone more experienced as a venture partner or as a Managing Partner in the fund and things like that. Everyone has an opinion and some things work for you and some don’t, but I think it’s very important to take everything in and to assess and see what makes sense for you. Stay solid on your focus, on what you want to do, and stick to that. Just continue to work and build. Definitely ask questions. I think that’s one of the terms in my opinion, not only for early-stage founders. And in those early ventures, the thought of not wanting to kind of sound silly in terms of the questions and things like that, but again, you don’t know what you don’t know. You won’t get an answer unless you ask the question.

William Leonard

One of my mentors say, “You have to display informed vulnerability.” I think that’s the approach that you took there because you’re informed of the right people to ask, but as you said, you just don’t know what you don’t know. If you’re going to experienced GPs, Managing Partners, investors in the space, the likelihood if you go to them in a fashion that’s respectable, you display a little vulnerability. You’re more likely to get some of your questions asked and maybe even build relationships on the back of that conversation. That’s great advice, Antoine. I’m excited that you have progressed each year since I’ve known you and it’s exciting, man, to see that you all are writing larger checks, that you all are looking to do a plethora of deals a year now, and you’re really going to continue to push the ecosystem forward. I’m excited, man, and definitely will have to get you back on the podcast as you are continuing to grow and get some great companies under your portfolio.

Antoine Woods Jr.

Absolutely. I will say this for any founder out there or anyone trying to raise a fund, you’ll receive a lot of noise when pitching but every conversation before that call ended or when that meeting ended, I would always ask, “Can you give me one person that you can intro me to?” Just never leave empty-handed. You’ll get a lot of noise but those connection points will lead to the right yeses in the right path. Always ask for an additional intro before getting out of that meeting. It’s a very powerful tactic to use.

William Leonard

Never leave empty-handed. I love that! On that note, this was a fantastic dialogue, Antoine, I look forward to following up with you, and continuing to see you and Avoilan advance the ecosystem. How can founders best get in touch with you if they want to reach out about a deal, pitch you, or anything like that?

Antoine Woods Jr.

You can just go to our site at https://vertical404.com/. We have a general form to submit in terms of pitching and let us know that you’re actively fundraising. I’m on social. I’m not one of the celebrity VCs out here. You’ll see me posting some entrepreneurial stuff, but it’s more kind of just random things. I found it humorous but you can find me on Twitter and on LinkedIn at Antoine Woods, Jr. is the handles.

William Leonard

Awesome. Antoine, I appreciate you joining me man. Take care.

Antoine Woods Jr.

Absolutely. Thank you so much. Thank you, Will.

Lisa

We’re thrilled to have you as an Atlanta Startup Podcast listener to help you get the most out of the experience. Let me invite you to three insider opportunities from our host Valor Ventures. First, want to be a guest on this amazing show. Reach out to our booking team at atlantastartuppodcast.com. Click on booking, It’s a no-brainer from there. Are you raising a seed round? Valor definitely wants to hear from you. Share your startup story at valor.vc/pitch. Are you a woman or minority-led startup valor sister program? The Startup Runway Foundation gives away grants to promising startups led by underrepresented founders. The mission of the Startup Runway Foundation is connecting underrepresented founders to their first investors. Startup runway finalists have raised over $40 million. See if you qualify for one of these amazing grants at startuprunway.org. You can also sign up for our next showcase for free there. Let me let you go today with a shout-out to Startup Runway presenting sponsor Cox Enterprises and to our founding partners, American Family Institute, Truist, Georgia Power, Avanta Ventures, and Innovators Legal. These great organizations make Startup Runway possible. Thanks for listening today and see you back next week.