William Leonard
Jen Richard is no stranger to Atlanta. She’s an Emory graduate who spent time early in her career as an operator with multiple D to C, eCommerce startups. today. She’s a Principal at LA-based Bonfire Ventures, which focuses on leading seed rounds for B2B software companies. Jen and I dive deep into the current state of seed-stage investing. We also talk about how founders can differentiate themselves as they pitch investors and the importance of storytelling while pitching prospective investors. Jen will also be here for Ventura Atlanta this week, and she shouts out many of the events that she’ll be at during the conference. This was such a fun episode to record. So let’s jump right in with Jen Richard. Atlanta Innovation week is here headlined by Venture Atlanta, which for the first time in conference history sold out two weeks early. We’re looking forward to participating in this week’s festivities. You can find me at several events this week, including judging startup battle tomorrow evening, and then also at the investor dinner immediately following. Later in the week, I’ll also be at the Spelman Innovation Lab talking with Atlanta University Center students about building decks, finding the right investor for their company, and basically all things fundraising. Also, Valor General Partner Lisa Calhoun will be at Venture Atlanta in the first half of the week, and then making her way to San Francisco the second half of the week to participate in 2020 to Raise Global Summit. It’s certainly a busy week ahead, but we’re excited to see many of you out and about in the city of Atlanta. Now, back to the episode for today. Jen, so great to see you. Thank you so much for being with us today.
Jennifer Richard
Thanks for having me. Excited to be on.
William Leonard
It was nice seeing you in Tulsa a few weeks back and I’ll see you again soon here in Ventura Atlanta. But this is a conversation I’ve been really looking forward to. I know you are an Emory grad, you spent some time as an operator, and you’re also a Kauffman fellow, and now a principal with Bonfire. I would love for you to tell us more about your background and string it all together here for us.
Jennifer Richard
Sure. It’s interesting. Whenever I tell this story, I think that I’m able to string it together in a way that makes a lot of sense but when I was in the moment, I didn’t quite know what was next. I did go to Emory. I spent some time in Atlanta. I was an English major. Definitely didn’t pick a major that was going to prepare me for this career path, although there’s a lot of writing required so I guess it’s helpful. But after I went to Emory, I spent a year in France teaching English to public school students. I did apply my English degree for a little bit. I came back, I’m actually from LA. I came back home to LA after my stint in Europe and joined Creative Artists Agency. It’s a huge media and entertainment agency. And so there I was in the speaker’s department where we were representing talent around the agency and private events, corporate events, and we also had our own roster, which was mainly business people, tech entrepreneurs, and business authors. That’s when I first got exposed to tech. I knew that I didn’t see myself in a long-term, entertainment career, but what our clients were talking about in the tech industry was really interesting. I ended up jumping ship, maybe this must have been back in 2014, to join a startup in LA called Prizeo which was a crowdfunding platform to help celebrities raise money for charity. I was there for a couple of months before the founders sold that company and started another company called Represent.com, which was an ad tech platform to allow digital marketers to create and sell custom apparel. I ran the E-commerce portion there, doing some front end of the website, managing engineers, and also all of the backend logistics and support. After about two and a half years, that company was acquired by Custom Ink out of DC and one of the founders left to start a women’s fashion accessories pureplay DTC company. I left with him as employee number two and built out e-commerce there, stayed for a little over a year before deciding to take a step back and really think about what I saw for myself as a future career path. I decided to go to business school at UC Berkeley while continuing part-time at Pop & Suki. I ended up getting an internship and venture there. And the rest is history. I’ve been in venture for almost five years now and just had an incredible experience that summer during the transition.
William Leonard
That’s awesome. I love the combination of experiences that y’all have and it probably really shapes your perspective as an investor now from operating for so long in the industry. Bonfire is LA based, is that correct?
Jennifer Richard
Yeah.
William Leonard
Tell us more about Bonfire, the thesis, what types of companies you all are investing and things like that.
Jennifer Richard
We are seeing firms so we lead seed rounds in B2B software. I think in the past couple of years, especially, everyone has a different definition of what seed is. The way we define seed is companies with a product in the market, and early traction. Our entry point is usually around 500k in ARR. We are typically writing a $2-3 million lead check into a $3-5 million seed round. Pricing the round, setting up the board, and we’re very, very hands-on. We do this onboarding workshop with our founders when they start, which ends up being around 16 hours over the course of a few weeks. We are meeting with our founders anywhere from weekly to monthly, but I think, typically bi-weekly. Our aim is to be our founders’ first call even past the seed round which is something that I think we earn through the partnership.
William Leonard
No, I love that. You’re doing everything a lead investor would do; writing a larger check a round, pricing a round, joining the board, and taking a hands-on approach to help companies really at this early stage, build, scale, and grow. As you think about the various sectors that you all invest in, what are the firm’s sectors that you all focus on? And then I’m sure from your personal experience, you probably have an interest towards E-commerce in DTC channels like that as well.
Jennifer Richard
As a firm, we’re generalists within B2B software. We do like enterprise deals, enterprise SaaS, we’ll do like sales enablement, and DevOps. Gosh, I mean, pretty much anything within B2B, we will take a look. I have found that pulling back and just having a little bit more of a focus on either verticals that I’m passionate about, or verticals, I have experience, and it’s just a better approach for me. My focus is, as you mentioned, e-commerce tech, SMB tech, and vertical SaaS, which often overlaps with SMB Tech, and then more opportunistically, I’ll look at anything that’s being led by a woman or a diverse founder.
William Leonard
Got it. Interesting. What fund are you all investing out of currently?
Jennifer Richard
We’re currently investing out of core Fund 3 and opportunity fund two. We closed our core fund earlier this year, which is I think, $168 million. And then our opportunity fund, I believe, it’s around $60 million and that is a growth fund that we reserve capital for our later-stage companies that are performing really well. As well as a small allocation for growth companies that we missed at seed, but have some kind of connection to.
William Leonard
Interesting. Well, Jen, you and I were catching up before the call here today. We were just discussing how we’re both pretty active right now on the deal front and in finding new opportunities and with that comes hearing a lot of pitches. I’m wanting to know, from your perspective as an investor who probably hears hundreds of pitches each month, what makes a pitch stand out to you? What should founders be doing to differentiate themselves in the markets right now, where investors are on the hunt to find the best companies? What can a founder do to separate themselves from the pack?
Jennifer Richard
I would say that one thing that should seem obvious, but it’s just not, is just bringing some energy and passion to your pitch. I mean, there are so many founders that will pitch me and I leave the call just kind of thinking, do you actually care about this problem you’re solving, or are you just starting this to make money? I just don’t feel that passion for what they’re solving. I would say that’s one. I would say another really important piece is to just really know the competitive landscape of what you’re building in and be sure to reference it in the meeting because it’s just never a good look when you’re in a meeting and an investor says, “Well, what about this company in your space?” What do you see them as a competitor and you’ve never heard of the company or you don’t bring up the competition because you want to pretend like there is no competition? I think just showing that you really know this market and that you know your customer and that your competition is just so important.
William Leonard
That’s the one I hear a lot. “We don’t have competition.” “We don’t have any competitors right now.” I’m just like, interesting. Typically, I think when an investor is bringing up competition in the space, they probably already have a list of maybe three to five competitors that are either direct or adjacent to you in some capacity. They’re looking to see how well you know who else is building in this market. If a competitor you don’t even know is there, can they come up and disrupt the market and capture some of your market shares? I think that’s a very important aspect of pitching that founders should really over-index because the competitive landscape is continuously evolving. There are new entrants into the market daily. I think that’s a great point.
Jennifer Richard
I think one more thing is that every once in a while, I will get a pitch for a company that truly doesn’t have competition. But I think in that case, it’s important to really dial down on what are your customers doing now? How are they currently solving this problem? What other tools are they kind of lacing together where you can really, like, if there’s no competition, you don’t want the investor to feel that this isn’t a legitimate problem? Just finding a way to say, this is the pain point and if someone hasn’t solved it already, this is why it’s a huge opportunity to solve and this is why customers are not content with the status quo. Hopefully, that’s helpful.
William Leonard
There will be instances where there probably is no competition but I think that’s the opportunity for you as the founder to really talk about your wedge into the market and why you’re going to be the one that customers call on to solve this problem that is being used by antiquated manual solutions right now in the market. Great call out, Jennifer. I know you also were on like a panel or webinar a few months back talking about the importance of storytelling while pitching. I would love to get some of your insights on how founders can sort of paint this arc of the customer journey through their pitch.
Jennifer Richard
At Bonfire, one of our partners, Brett, who’s also going to be in Atlanta for the venture. He actually has a blog post about this and he’s very passionate about it. It’s just something that we really tried to inspire in our founders is that storytelling is just everything. We have to story tell when we pitch to LPs, limited partners, who are our investors. Founders need to be able to tell a compelling story to get us excited. Founders need to be able to tell a compelling story to get customers excited. I think it just speaks on just this broader notion of storytelling when you have a limited amount of time to deliver a message to an important potential stakeholder. How are you going to get that done? What elements do you start with? What’s your middle? What’s your hook at the end? I mean, it’s even something as simple as what is your last slide in your deck? Is it a call to action? And I think that the deck itself is so important when it comes to storytelling that you think about if I were to send you a company that I’m interested in investing, and I want to pull you in, a lot of times you’re looking at the deck with no voiceover and so how does your deck alone just tell a story that you’re not able to speak over and how does it get people excited? When we talk to our founders about pitching even as they go into later stages, we really want to focus on even if you’re having a conversation with someone, how are you making sure that you’re just telling a compelling story of where you’ve been, where you are and where you’re going that will get people excited to want to take more meetings and go back and tell their team?
William Leonard
That’s so true. The best pitches are really a story that’s being told from the perspective of this problem that you may have had firsthand experience with, your Aha! moment as a founder for saying, “Hey, I can build XY&Z software or a solution to solve this problem.” And then maybe your journey of early customer discovery and validation, then transitioning to building the product and what the product does. And then maybe even talking about a customer case study and some of the outcomes. Talking about what’s next for the business, and then like you said, a call to action. I think that’s a piece of the pitch and the deck that a lot of pitches do miss is this an actual call to action? How can an investor be this advocate for you at the end of the day? I love, that you mentioned the call to action piece.
Jennifer Richard
I think you nailed it spot on.
William Leonard
I want to transition the conversation here a bit, the markets are in a pretty interesting place, right? You had a lot of federal stimuli that were pumped into the market over the last couple of years, interest rates were low, but now everything did a complete 180 and now valuations are coming back down from historic highs. What are you all seeing in the market right now? How is that impacting your investment cadence and strategy?
Jennifer Richard
As you mentioned, over the past couple of years, since COVID the market has been incredibly frothy. We were seeing a ton of just really inflated valuations in comparison to what the historical norms have been. Over the past couple of years, I would say we have remained very active but we have always been a more price-discipline firm and it’s for our benefit in our economics, but also for the benefit of the founders. As you enter into this year, where the markets are crashing and we’re seeing some corrections, I think that the founders that raised in the past two years with these really inflated valuations are going to have a lot of trouble. That’s part of the reason why we find it so important to stay disciplined because you never know what the next year is going to bring. For instance, if you’re a seed company that raised at a $30 million pre-money valuation with barely any traction last year and right now, you’re seeing Series A valuations fall to like a $30-40 million average, it’s going to be really hard for those seed companies that raise to be able to get the step up that they wanted. You’re going to see a lot of flat rounds, and in some cases, some down rounds. I think that’s why our approach has always been the way it is. With that said, this year, we have continued to be very active in the market. As I mentioned, we have a new fund. We have money that we need to deploy but we’ve also seen a lot of really great opportunities and so we’re continuing to invest, we’re continuing to stay price disciplined although that has been easier, of course, this year because valuations as a whole have fallen and it just sets our companies up for success at the next round because I think we have an 80% graduation rate from seed to Series A. We’re continuing to see our companies get the markup that they want and just continue to show progress and hit their milestones. When it comes to the later-stage companies in our portfolio, it’s a bit of a different story. I think seed and pre-seed have been somewhat protected. I think when you start looking at series A and beyond, a lot of later-stage firms have just been a lot less active this year waiting to see what’s going to happen in the market. The best companies will always be able to raise. But I think a lot of the companies that have struggled or haven’t quite hit the growth milestones that they need are having trouble raising. Our advice has been do some breaths, reductions in force, layoffs, find ways to save money, reduce burn, extend your runway, and try to hold out for as long as you can in hopes that the market will change. But we’re all so realistic that this might be the reality for another two or three years. Give advice for the companies that are impacted the most.
William Leonard
You mentioned something that was a common theme throughout that was discipline. I think you have to have discipline as an investor and discipline as a founder to take on the appropriate amount of capital and not set yourself up for a potential flat round or down round at the next capital raise. It’s something that’s hard to put into practice sometimes but I think firms like Bonfire and Valor are very strong in their discipline because you have to think in terms of cycles, what happens in the market, and you kind of know that there has to be a top somewhere and you know that valuations are going to come down. Discipline is key. I know you mentioned Venture Atlanta, it’s literally just right around the corner. Talk to us more about it. I’m excited for you to be here in this city and for any festivities that you all are participating in, and I think Bonfire may have a couple of Atlanta investments as well. Feel free to give them a shout-out.
Jennifer Richard
As I mentioned, I went to college in Atlanta so it’s a bit of a homecoming for me. Really excited just to see from 10 years ago when I was in school into what the tech ecosystem is looking like now in Atlanta. It’s just really exciting. I’m really excited to see where the ecosystem is going. We do have two investments in Atlanta that we’re excited to support and see in person. One is FlowPath, which is in the facilities management space. The other is Tourial, which is helping your software companies provide a hands-off demo on their website. It’s a really cool product. Shout out to both of them. We are starting to just see more and more opportunities come out of the Atlanta market and that’s why we are so excited to go to Venture Atlanta get our feet on the ground, meet more people, meet with founders while we’re there, and just kind of see what’s going on in the space. In terms of events, I know I’m going to the Goodie Nation event, there’s a venture crawl, I will be at the conference, and I will be at the TechStars event on Monday. I think there’s also an investor dinner on Wednesday. There are a few other investors getting together with that I know on Thursday before I head out. My calendar is pretty jam-packed. I’m just so excited. All I’m gonna get to do while I’m there, it’s going to be a really productive trip.
William Leonard
Venture Atlanta is going to be such a great time. I know Valor is helping sponsor the event as well. We’re going to be at a plethora of events. I’ll definitely see you around. Some of our founders who are avid listeners will probably bump into you as well. What’s the best way that somebody can get in touch with you regarding a pitch or send their opportunity over to your investment team?
Jennifer Richard
If you go to our website which is www.bonfirevc.com, there’s a way to connect with each person on our team. You can also send a general email. I think that that’s the best way. We all are generalists, but we also each have different specialties or different backgrounds that lend more to certain categories and others. I think that going back to the pitch point, I think that that’s another tip I have for founders if you want to connect with a firm, try to find a person on the team that you have the most synergy with. Maybe you went to this same school as them, maybe they worked in the category you’re building, and maybe they’ve spoken on a podcast like me in SMB tech. If you’re building an SMB tech product, then please reach out to me. Try to find someone that you think will resonate with your problem the most.
William Leonard
When you get a cold outreach that’s so generalized and it’s just like, okay, let me read it, you read it, you take it. When you get something that’s like, “Hey, Jen, I love that you’re on the board of XYZ company. We’re building in a similar or adjacent space and would love to get your thoughts.” Thoughtfulness goes a long way, especially when you get 10 or 20, or maybe 30 inbound pitches a week. How do you separate yourself as a founder? Jen, you really dropped some gems on the podcast. I appreciate you joining me and looking forward to seeing you soon at Venture Atlanta.
Jennifer Richard
Thanks so much for having me. See you in a little over a week.
William Leonard
Thanks, Jen. Take care.
Lisa Calhoun
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.
