Lisa
Welcome to the Atlanta Startup Podcast. I’m Lisa Calhoun, General Manager at Valor Ventures, and your host for today’s deep dive with an investor that has been working actively in the southeast for quite some time. Kyle, I’m so glad to have you with me on the program. Thanks for coming!
Kyle Schlotman
Thank you for having me. I’m very excited. I’m Kyle Schlotman, Managing Partner of Connetic Ventures. Been with the firm as a co-founder for six years. Before Connetic, I worked at a data analytics firm for six years and Wall Street for three. We are an early-stage venture fund that focuses mostly on what people call the “flyover country” in the seed and Series A space.
Lisa
Kyle, tell our listeners a little bit about Connetics and yourself.
Kyle Schlotman
Yeah, absolutely. I started with our investors, we had as much money like everybody else. We didn’t take salaries for four-plus years. We were there as part of the team and to show them that we would do what we could. Fund One went well, it started hyperlocal and kind of evolved into regional. We met you, Lisa, during this process of kind of going down to the south and a little bit more from Kentucky. We kind of realized we needed a way to be everywhere at once. Fund Two, two years ago, we took what was a hobby into a reality and we created Wendal™. It’s an online bot, it sits on the Microsoft Azure platform. I, Brad, and then a partner of ours, Joe, created this. It started off as a small, little project that was on our website. And as we were fundraising, everybody thought it was you know, quite frankly, better than Connetic. Wendal™ Inc. now exists as its own standalone. It’s a completely unbiased solution for investing. Last year, I’m actually looking at the numbers. We had 1200 plus companies that clicked on our website and went to Wendal™. We did 23 new deals and nine follow last year. A pretty low percentage, but the coolest thing that’s happened is the equality of distribution of checks.
Lisa
I remember meeting you at Startup Runway in its very first year. You guys were just getting started. Dollar Fund One was still raising, we were just getting started. Now here we both are, you’re in the middle of Fund Two. Valor just started investing in Fund Two and you all have already come up with an AI solution to deal flow. Before we talk more about Wendal™ which I think is super exciting. I remember the first version of it because I clicked through it, too. I was super curious. I want to talk a little bit about the nature of sourcing from your perspective because Connetic is thought a lot about it. Why did you and Brad Zapp over Connetic feel like a digital front would be a better solution than the traditional venture? You know, seeing a pitch, associates call out, see pitches, great pitches get forwarded to the Investment Committee, Investment Committee goes green or red, you know, diligence. Why is a digital front end better?
Kyle Schlotman
There are probably three main reasons. One, you know, Fund One was 5.6 million. Fund Two was just under 25. We’re not a big firm, and we can’t pay 20 associates to be in the 20 biggest markets across the US Midwest. We don’t invest in San Francisco or Boston, but everywhere else we will. A part of it was the scale and obviously, to scale, you need some type of cloud based solution. In the absence of having someone in every market window, the software can be open and available to everyone so that was the problem one. Problem two was deal flow in itself. I think most regions and most areas outside of- I’ll call it New York, Boston, San Francisco- have a deal flow problem. We couldn’t focus in Cincinnati. We did the math, we looked at everything. We needed 100 Cincinnati’s equals San Francisco’s deal flow. Again, scale and cloud-based solutions, obviously have to drive the people to the website but that was the big thing. And lastly, we just thought the venture model was broken. It’s one of Brad’s favorite slides. But in our old pitch deck, he basically had a slide of 12 Angry Men, the really old movie, black and white movie. And he goes, this is basically what a venture capital investment committee looks like. 12 old white men sitting in a room, having no idea what technology is, and saying, “I don’t think this will work for me. it’s not a good idea.” And we wanted to get away from that. Our view was, “Let’s use data. And let’s use rationale to look at these companies.” All we’ve done is really, we replaced the associate call with an interaction with an online bot.
Lisa
What has the founder’s reaction been? Because I bet you can relate to my experience. My experience is that a few dozen founders contact Valor every week, and we’re grateful for that. And yet, we don’t have like you, the bandwidth. We’ve closed on 20 million in Fund Two while we’re recording this but we don’t have the bandwidth in our team to have one-on-one conversations with every founder that would like to reach out to Valor. There’s definitely a filter process that happens before we have the one-on-one. The founders who don’t get a chance to actually speak to someone though, they don’t like that, at least that’s my experience at Valor. They feel, “It’ll be helpful for at least a crumb of guidance or explain a little bit to me about the process.” And frankly, it’s one of the reasons we started Startup Runway, the foundation, is to have those very early founders go through an investor introduction program that’s completely aligned around talking to them about Investor Relations and getting that first check. But neither here nor there. How’s the reaction been for you? What are some of the results from Wendal™ and this approach?
Kyle Schlotman
Overall, the reaction has been great. There are the outliers that get extremely upset that you know, they talk to a bot. In 72 hours or three business days, if you’re not a fit for Connetic, you’ll get a notification. The one thing I will say to everyone is Wendal™ does not auto pass or auto fail anyone there is a human that looks at the data and the scores. It’s not just going into a black box and spitting out information. Overall- again I’m going to take out New Yorks, Bostons, and San Francisco’s that are used to the way things are done and have so much money that it’s just that way- we get very positive feedback and some of our more positive feedback is from the people that do fail. It’s really that they find out very quickly. Lisa, as you probably know, a lot of venture firms string people along they don’t give them an answer.
Lisa
Like they don’t know what they want, I mean just say no. I mean, we may say no too fast, but we say no. And I agree with you that it is a failing in our industry, not to tell founders where they stand. It’s godless. And I know why we do it. We do it so that we can string someone along if they raise a great round later, we never said no so maybe we can hop on board. That’s not great though. That’s not the best way to do it.
Kyle Schlotman
Yeah, and for us, you know, what’s really happened is, founders understand that we have principles and a process that we built, and every company is being evaluated the same way every time. It’s really not a problem. They think it’s okay. We do get feedback and people love our principles the same way every time. No one’s being evaluated. If you send me a company and tell me, I’ll know it’s yours. But at the end of the day, we’ve built a system that every company, regardless of where you are, race, gender identity, whatever you want to use as a qualifier, get asked the same questions depending on how you put in the information.
Lisa
Do you ask questions about race and gender on the front end?
Kyle Schlotman
No, it’s more we find out later. We’ve done some research and going back to why an online solution, and I talked about those investment committees, there is data that some of the underrepresented groups don’t get asked the same questions from an investment committee. For whatever reason, he avoids that. It’s really been great. We get a lot of founders coming back. Our system will notify us if somebody comes in and updates, and valuation hires somebody new. Because one of our big things is we built our own behavioral analysis test that is unbiased, it’s been validated. We’ll be notified and we actually will invest in companies that might have hit Wendal™ 12 months ago for the next round. It’s not a permanent no and I think people have come to understand that.
Lisa
Fascinating. What happens after Wendal™ gives you a pretty positive signal. How would a founder move forward in your process? I’m sure we have several founders listening right now. First off, I guess we should ask, where’s the URL in case you don’t want to jump to applying to the Connetics fund?
Kyle Schlotman
Absolutely. It’s right on our website https://connetic.ventures. There’s a big button in the middle of our website that says “Apply for funding”. It’ll direct you to a window. And then it’s just like any other website, you register, we do ask all of your founders, so anyone especially early stage, they all have some type of C title, all put go in there and take the behavioral test. Again, it was created by us, Brad and I took about 60 tests to figure out what we wanted to do. We finally found something called the Vector Analysis from the 1940s. We built it ourselves. We had a behavioral psychologist from Xavier and one from TCU evaluate it and it is accurate. It is not biased towards any age, race, gender, anything that you can come up with, which has been great. Anyone can apply. What happens for anyone that’s been in the finance world and knows what Morningstar is, basically, companies go through this, they do the six pathways, and we get a star rating based on how many points you get. I always say we’ve created a venture for anyone because it’s really simple. Basically, my team knows if you’re four stars or above, they’re going to reach out to you. If you’re three stars, and under, it’s just not a fit for Connetic. We get about 1200 data points per company. It could be a combination of many things. But assuming you’re four-star, it could be within 24 hours. It won’t be more than three business days, someone from my team will reach out to you depending on what region of the country and or world you’re in. We’ll send you a list of- 18 or 22 documents- it’s always evolving. But basically anything you tell us at Wendal™, we audit. If you said your revenues x, we’re going to ask for your financial statements, your tax returns, and you know, if you say your option pool is 12%, I want to see where you created an option pool. It’s really just validating what you’ve done. At that point, we will have a conversation with the founder. That’s about the first time we find out if the founder’s a male, female race, whatever it is. Also, the interesting thing outside of telling us what general industry are companies doing? I don’t know what your company actually does. In terms of a business when it’s three, four, or five stars. All I know is you’re an industry. That’s good. You’re a founder that we think is possible to run and your valuation’s right then we dive into everything else. It’s kind of different. We know we’re different. But our view is everyone has said in the venture, the team matters. We asked how or why do you do that? We found a way to analytically analyze the team. We look at the team evaluation and assuming that’s good. We like the industry and business here. And we’ll move forward.
Lisa
How long does it take a founder to go through the initial application?
Kyle Schlotman
It shouldn’t take more than 20 minutes. I think the average is 10 to 12. I mean, it’s all basic questions.
Lisa
Each founder takes 10 to 20 minutes to go-
Kyle Schlotman
Oh, no. Not each founder. Usually, if the CEO fills it out, he’s/she’s 15-20 minutes. The behavioral analysis is six minutes at the longest.
Lisa
Awesome. This gives a lot of confidence to your team at Connetic, that this is the type of founder whose belief correlates with greater success. I know that some of this information is really private. And it’s not like your venture firm has been around for 40 years, and it has funds and funds and funds to talk about but what are some of the early signs that give you encouragement that you and Brad are on the right path?
Kyle Schlotman
We actually have conclusion metrics. Every six months, we analyze all of the data. Of the 1200 companies that applied, we have a quarter of them that have had an outcome. And the way we look at outcomes is really basic right now- good deal, bad deal. We have an intern every six months, kind of go through all available market data and say, “Okay, this company has failed completely, gone bankrupt, or something like that.” Or a company has raised another big round, or they’ve exited. We’ve done that. And just looking at four-star companies, if I just blindly pick them, we’d be at 40% of companies with good deals, which is higher than the normal market and venture. If I look at five-star companies, and this is not taking the profile side, this is just the overall window score, 65% of five-star companies have had a positive outcome. I could blindly just choose those and not even do anything else. When I overlay the behavioral side, it actually gets to about 85-90% on five stars.
Lisa
What do you call a positive outcome?
Kyle Schlotman
Either an exit, which is not an obvious positive outcome. We’re a seed, depends on the market, seed bridge to A. Whatever growth-
Lisa
Check size range, does Connetic like to write out of the second fund?
Kyle Schlotman
We do two or three checks. The first check is always 100 grand. It’s just a very simple, easy process. We’re going to do that eighty times. We’ve done 45. We still have, you know, call it 35 checks left, in Fund One. Of those 80, 30 or 32 of them will get a follow on depending on the real math, but somewhere in there, we’ll get a follow on. We’re going to up to 600 companies. Assuming the follow on rounds equity, which every venture capitalist prefers equity over a note or a safe, you’ll get the full 500. If it’s a knitter, we do 250 and hold the 250 back for the equity round to make sure you’re still showing progress. But a total of 600-100-500. The easiest way to think about it.
Lisa
In a way, this is perhaps the follow-on strategy in the southeast. It reminds me of a lot of correlation ventures. Did you all look at their model as you went into this?
Kyle Schlotman
We did not. We heard about them after we started. We stumbled on I think some of the same thesis. We did a lot of Monte Carlo analysis, we studied a lot of reports and just looked at distributions and you know, Kaufmann Institute, and it just kind of made sense. We’ve de-risked the portfolio and we realized by de-risking the portfolio by having that many companies, you don’t actually give up the return. We wanted to get to 100, with COVID, we didn’t get to the phone number. We wanted to hit two in the fund. We picked 80 companies instead of 100. But you know, 100 was our actual target goal to be able to invest in fund two.
Lisa
Since you don’t even meet the founders until they’re really far forward in your process, how have the demographics evolved in your portfolio using this process?
Kyle Schlotman
It’s definitely evolved. I think Fund One, I would say, I can look at it but just off top of my head calls it 30-40%. That was about low 30s or women or minority-led companies. We started using some type of a process towards the end so I think it kind of skewed the results. Fund Two has been all windowed as of yesterday because I had an Investment Committee. I saw the data that 54% of our portfolio companies are co-founded or led by a female or minority leader, which is obviously significantly higher than the market that averages six or 7%. Kind of showing that all we do is look for the best companies and the best people. I don’t know who you are, I don’t really care who you are. I just want a good founder that’s going to grow a great business and drive a return for my investors.
Lisa
Absolutely. And what kind of relationship does Connectic have with founders after that first $100,000 check?
Kyle Schlotman
I say a lot of it depends on the founder. We write small checks, you know, we don’t have the right to be on the board usually, or wield a ton of influence contractually, like a lot of venture firms. But, you know, at least twice a year, I’m going to have phone calls with all of them. They send monthly or quarterly updates. I’m on four boards personally. I think there are some companies where I probably talk to the founder twice a week. There are some companies I’ve talked to the founder about, once a quarter. I’m as involved as the portfolio company wants him to be. We’ve done a lot in the CPG space. In the last year and a half, I worked at a data analytics company that oversaw retail and CPG, one of my co-founders did the same. That’s a space where I’m on boards, I’m having calls with them all the time. Health care, when we were talking about it earlier, I wouldn’t get involved. I don’t have that much to do other than, you know, a financial check and introductions. We do have a health system as one of our investors. But it really just depends, I let the founder dictate how much they want us involved.
Lisa
What have you learned about being a venture capitalist in these last six years since you made the pivot? There are a lot of rising venture capitalists in the southeast because our region has so much momentum. I think it’s one of the most exciting dynamic things about being here. A lot of those emerging VCs are looking for the lessons learned, the do’s and don’ts and not to say there are shortcuts. But is there anything you’ve learned the last six years that you wish you could have told yourself year one, our first 18 months?
Kyle Schlotman
I would say the most important thing now, assuming you already are a venture capitalist and have a fund is to know the co-investors on the board. When you start out, you don’t think about it, you know, and I was just spent all this time talking about the founder. Your co-investors on the board matter. You want to make sure you all have the same vision. We’re going through now with a portfolio company. It’s mostly angels. The founders are, while they’re not married, we’re calling it a founder divorce, they don’t get along. They got the 12 million in revenue, and there’s no reconciling the situation. Angel investors are ecstatic, they’re going to get a 10-15% return. I think if they would have waited three more years, it would have been four or five extras. You got to know your co-founders, and you got to make sure everyone’s in for the journey that you want, especially the board. They wield so much influence on the founders and not being aligned with your co-investors. I also think, especially in our underserved markets, there’s a lot of state and city and whatever funds. Sometimes they’re more of an economic engine view versus an investor return view, which can also, I think, skew the results for a company or the decisions they make. It’s really important to know who your co-investors are, and that you’re on that same vision.
Lisa
That’s great advice. Assuming you already have a fund, but even Brad has been building the funds together. I’d like to pull back into that fundraising perspective, there are a lot of people who are called into investing, they don’t have a fund yet. Any advice that you would give them or that you might have given yourself when you were fundraising that you know, now and, again, I understand this is all lessons learning.
Kyle Schlotman
At the end of the day, it’s getting involved. Brad and I joined, between the two of us, I think, seven Angel groups, just to learn network and, you know, figure out what this all meant. Just get involved especially if you’re a younger person, or women, or minority, a lot of these Angel groups and funds have lower entry points for people that are younger than aren’t your typical 45+-year-old white male. There’s just so much opportunity and just put yourself out there. It’s uncomfortable, I know, I said it earlier, Brandon, I didn’t take a salary, but I didn’t think about salaries for a few years. You gotta try and network? It’s small, and it’s friendly. We have an employee and she gets nervous sometimes because she’s newer to the industry and I tell her, “You know more than 95% of the people you’re in the room with because you’re a full-time venture capitalist.’ You just welcome people with our open arms. We’re friendly. We’re nice. We want more people to grow into this industry. And all you have to do is show up and raise your hand and say you’re interested and people will take you under your wing.
Lisa
So true. You know, a lot of times I think founders look at Crunchbase, look at the funds around them. And especially in the southeast, they see fewer first check writers. They look at the West Coast, they see 800 in theory. First check writers, if they’re still living out there on the west coast, y’all welcome here, come on. But anyway, there’s such a disparity that I feel like the venture capital industry can appear to be too emerging for some of our best founders. Are there some venture capital networking groups that you yourself have found to be particularly helpful in these last few years that you’d recommend?
Kyle Schlotman
Yerah, especially for people new to the market, what you’ve done at Startup Runway’s great. It was amazing to see the growth and the evolution. There’s Carolina Angels in the south. We have one of our investors. He’s part of the Charleston group as well because he has a home down there. I love Queen City FinTech in Charlotte, they’ve done some great stuff in Cincinnati, we’ve got Queen City angels that are, you know, I think, are some of the best. I mean, Brad, I learned so much from them in terms of understanding and evaluating deals. And you know, they’re extremely welcoming. You know, these are the groups to reach out to, there’s tons of and, you know, obviously, I’m from the Cincinnati market, there’s a centrifuge here. But that kind of does the startup Cincinnati ecosystem, and you know, it has events to welcome founders in. Every major city has one of these now, and as I said, it’s really just going and networking. We’re a small community, and we know most of the people in our communities. If you show true interest and want to learn or want to get involved, it’ll happen, but you just have to be present. And I know, in COVID times, that’s a little bit harder. But, you know, in the fall, when we’re hopefully doing in-person things again, I would just say go and try. And don’t be afraid to ask him one. There are no dumb questions, especially in this world. It’s a world of evolution and learning. I was on a panel Monday and for a conference, and I was shocked at how much I learned from my peer group. We were talking about the same topic. But you know, I’ve been doing this for six years. And I hope I do it for the next 20. And I hope I learned every day.
Lisa
What a great attitude. And you know, I feel the same way. It’s one of the reasons I joined Kauffman fellows a few years ago. I learned so much from the body of practice from venture capitalists. I mean, it takes a lifetime to perfect this art and no one perfects it. But if you can put together some of the best stuff in different niches, it’s an amazing thing. It really is. I think venture capital is so much a practice, you don’t learn it from a book. It’s very relationship-centric with getting that next round working with your co-investors trying to help bring the company along. It takes the network, I think.
Kyle Schlotman
Especially when you’re not in the key markets in the Bay Area. We are co-investors and deals together, Lisa, you know, and the West Coast, it’s an arms race, and I’ve got a billion dollars, and I want this whole round. In the Midwest or southeast, where we focus, it’s a team. It’s usually 2/3/4, or five venture firms all about the same size going together to do a deal, which is very different than probably a lot of the deals people read up when they think of a venture.
Lisa
Well, I think founders per se don’t appreciate necessarily that they have a choice in how they put together their round. When you’ve got your hand out for money, and you’re looking for the right investor, it doesn’t feel like you have a whole lot of power in that negotiation. But you do. And one of the things that you can negotiate is room in the round for the investors you want beside you. There’s very, very few VCs in the world, even top tier ones that won’t say you can hold 20/30 even 40% of around for other investors that you want with you for the value they bring to the journey as well as capital. Why would a larger investor bring that up if they didn’t have to? They don’t, it was not in their favor. I think the right seed investors are really critical to getting the network around them they need to grow. Let’s talk about those founders that have the trajectory of success that Connectic is looking for. What are some of the traits that you know, with your behavioral analysis, you’ve discovered are associated with really outperforming founders in the early days?
Kyle Schlotman
You know what we do? We look at the CEO, we look at the whole founding team, and there are 22 behavioral traits that are behavioral profiles. In our system, I’d say there are six that we think are good for a CEO. They’re all high leadership. But you know, the thing within the leadership is the unwaning desire to win. Above all else, that person wants to win and has one vision, one idea, and chases it. You know, we look at winning versus, I guess detail would be that, you know, the opposite side. Brad and I are good examples of this. Brad is a person that has a crazy desire to win and doesn’t think about detail at all unless it’s critical to the business. I have the highest score of winning, but I have high attention to detail. While Brad and I are both flying high with a vision, I catch all of Brad’s ideas to use, you know, kind of a baseball term, and filter them to be like, “Okay, we can do these three, but I gotta do these six things before we can move on.” But it’s analyzing the team in that nature, to understand how they work while
Lisa
That’s why you’re the managing partner!
Kyle Schlotman
Brad’s a visionary. I’m the one that keeps things going and the details. It’s been crazy how we look at it.
Lisa
Well, this is fascinating. And I know, founders are always interested in character traits in themselves that kind of help them progress. Will to win, commitment to winning, ’s one of the CEO traits, what are some of the other five?
Kyle Schlotman
They’re all high leadership. But you know, for us, and Lisa, you understand this. I’m going to remove healthcare from this conversation because there’s a lot of regulation and detail and thoroughness that needs to happen in any type of healthcare regulated industry. But for the broader tech CPG investment space that we play in, speed and deployment of a product are imperative. The longer it takes for you to get clients or customers, partners for you to win. We want people that move fast and are going to market. We actually analyzed our entire first fund on window ex-post, just to see what would happen. Since we know so much about them, and we learned a lot, there were companies that you know, had the best product in the market, but could never launch it. We realized that this person is a technician. They’re perfectionists. They have a desire to win, but they care more about the detail and the perfection. Great CTO, great head of product, but not your CEO. Those are things that we’ve kind of learned that the CEO has to be the person that’s always driving forward, paired with someone that has that detail and perfection, to get the product right. But the CEO knows, we don’t need all of those things to be perfect. That’s why I put healthcare outs on the outside of this. We don’t need all those things to be perfect to at least launch. That’s kind of the big thing for us,
Lisa
I think the speed of execution is you know, to your point, extremely undervalued. Because you can fail faster, and people joke about that, but it’s true. If you can get to one to five and learn that it was the wrong direction, and repost and repeat and go in a similar direction with the same idea and faster, you might actually find yourself winning the market. But if you’re perfecting idea number one, iteration number one, you know, there’s going to be some people who move fast around you who make that product increasingly irrelevant.
Kyle Schlotman
Exactly.
Lisa
Interesting point, is there anything else that’s less intuitive, perhaps, but actually, really works when you’re screening founding teams?
Kyle Schlotman
It’s really making sure that pairs are right. A visionary and an artist are great together. I don’t have all the names in front of me, but basically, it’s a wheel and you know, the top of the wheel side by side, or both the most aggressive, probably not the best founding team. One thing we’ve learned that doesn’t work is you know, it’s four quadrants. If your entire founding team is in the same quadrant, it doesn’t work. But it makes sense, in a sense that each human is wired to think that you’re a great person, and you’re wonderful. When I hire and find a partner, I’m gonna find people like me, and that makes total sense. As humans, we generally associate with people that see the world the same way, which is good. But if you’re somebody like, for example, if you’re somebody like Brad, while we both are in the leadership quadrant, we are on opposite sides of the leadership quadrant. You just need that parallel to make sure not everyone is going in the same direction, and you have people that are in the right roles.
Lisa
It’s such a great perspective. I’m not surprised to hear that come out, you know, diversity of perspective, as well as types of diversity that provide a diversity of perspective. They’re not nice to have, they’re a must-have for great companies. I can relate to that, too, and how Valor is building our team. Gary Peat, someone else in the general partnership with me, and Robin Bienfait another general partner, we come from very different backgrounds, actually, professionally, and different ways of solving the problem of is this a great investment. The disagreements about how we see something really allows us to seek the truth together. I think that that’s been very helpful as we’ve been making investment decisions, just that attitude of we all are truth seekers. We look at it very differently and have had different experiences and what would be successful. I’m super compelled by the creativity in Connetic about Wendel. That’s a fascinating approach. How do you project it will be for you in 5 or 10 years? How do you see the future for the firm?
Kyle Schlotman
I think we go down this path. Our future, hopefully, you know, we raise at least one more fund, and it’s, you know, we keep expanding, but the fundamentals of using data and an unbiased approach, I don’t think that changes, I think it’s really more of how we structure the fund how we look at deals. You know, if we had a 7500 million dollar fund, the cheque sizes change. We looked at it, and we didn’t really want to go over 25/30 for these current funds, mostly because we didn’t see the ability to deploy it in a responsible way. I think the tide has turned, you kind of mentioned, you know, come on out to the southeast, I think the world is evolving that these, “flyover investment regions” aren’t as flyover as they used to be. I’m glad funds like ours and yours have that call it first-mover advantage in the market and have the brand reputation to still get in the good deals. I think that’s only going to continue. But I think you’re going to actually see more investment in our regions than we’ve ever seen before. I don’t think it’s a COVID trend. I think it’s a real trend in the market. I’ve heard it from my friends on the west coast, they can’t believe that the same company in Chicago or Indy is almost half as the valuation of something they’re seeing in San Francisco. I hope it stays that way. You know, it’s a great opportunity for us to know for us and the founders to make a great, great return. But I do think the investment activity and “flyover country” is going to skyrocket in the next 5-10 years.
Lisa
Awesome prediction. Let me completely change gears for a moment and go into the pure founder-centric territory. I wanted to ask you your perspective on founders seeking the right angel investor. And because you come out of angel groups, you’re embedded in lots of angel groups. I know you see a lot of that first check-writing behavior. Speaking to the founders, is there any advice you’d give them about approaching angels? Like, what should they be looking for? What is a good Angel founder relationship in the southeast right now and your perspective?
Kyle Schlotman
I think it’s going to be someone that’s a value add. I don’t want to say a lot, but it’s a relative term, that there are quite a few people that write Angel tracks and Angel groups, you want to find someone that’s aligned with you and your growth. What I said earlier about aligning with the right investors, it’s the same thing for the startup. Some Angel groups can really hamstring you to a location, an idea or you know, a growth structure, you want someone that ideally has a track record of investing in an early-stage company, helping them formulate an MVP, most likely, or at least your first alpha-beta clients. And actually, and has some resources for venture funds like mine or yours. Hopefully, they are maybe an angel and then also an investor in a fund like mine. What happens in my fund all the time. Our investors see stuff in other groups and send it that way. I think it’s really making sure they’re more than just a check. And also what strings that check comes with as an early-stage Angel. You don’t want a $50,000 check in the pre-seed to lock up a board seat for the next 10 years if it’s not the right person to help your company grow.
Lisa
And it makes a lot of sense. Kyle, I really appreciate the time you spent explaining Wendal™, how you source and you said everywhere but Boston and San Francisco. Is that right?
Kyle Schlotman
Yea! That’s pretty much what we’ve done in New York. It’s just really valuations and the amount of capital. We just can’t compete there. We don’t really enter companies above a 9 million valuation. A lot of the deals that we see from those markets just don’t fit our fund.
Lisa
That makes perfect sense. You know what you need. And so it’s https://connetic.ventures/. Hit the button that says apply for funding.
Kyle Schlotman
Right in the middle of the page.
Lisa
And it’ll take you no more than 20 minutes to get kind of a response back.
Kyle Schlotman
A call in three business days.
Lisa
That’s fabulous. Thank you so much, Kyle. I look forward to seeing you in Startup Runway.
Kyle Schlotman
Thank you so much. Have a great one.
Lisa
Thank you for listening to the Atlanta Startup Podcast. You know, we’re not just a podcast, we’re a community, and we’d love to see you at one of our digital or physical events, go to valor.VC and sign up for an event that makes sense for you. We have events for founders and the investors who back them. Another event you might enjoy is Startup Runway. The Startup Runway Foundation is a Valor organization that provides $10,000 grants to founders who are women or people of color building next-generation software products. Applications are free and we’d love to hear from you at startuprunway.org. And as always, thank you so much to the organizations that make this podcast possible. Not only Valor Ventures, but also Write2Market, a tech marketing and PR agency in Atlanta, Georgia, and the Startup Runway Foundation and Atlanta Tech Park Valley’s headquarters, and also headquarters for over 100 local entrepreneurs, building global businesses. See you next week. Please bookmark the podcast and join us.
