William Leonard
Welcome back to the Atlanta Startup podcast. My name is William Leonard, your host for today. And I’m excited to be sitting down with Claire Hansen, who is a partner at Firebrand Ventures. Claire, welcome to the podcast.
Claire Hansen
Thanks for having me.
William Leonard
Yeah. And I want to kick it off by just saying congrats to you on your recent promotion to part Gardner. How does it feel to now kind of get to that next step of the ladder here?
Claire Hansen
Yeah, thank you. It’s, it’s a fun big step. But it comes at kind of an interesting time in the ecosystem where the market has been a little slower, I think, as we all know, in terms of making new investments, so it wasn’t quite the, like, climactic moment, I thought it would be all these years imagining that promotion, like imagining, like late nights and like landing the deal that’s gonna make or break, you didn’t quite happen that way for me, just given the market, but it’s still a great, great feeling.
William Leonard
I think it just speaks to you and your character and your work ethic that you’re able to land such a strong promotion in a down market like it is now. So, again, kudos to you. But I’m excited to talk a little bit more about Firebrand here. So, you know, I’ve been studying the firm for a while. And I love the thesis of reinventing the Midwest investment culture. I saw that on your LinkedIn I and I immediately gravitated towards that. And I would love for you to level say here and maybe tell our audience about Firebrand, your thesis, how you all think about the investing stage, those types of things.
Claire Hansen
Absolutely. Firebrand is a $40 million fund. We invest in software companies at the seed stage. So we we write initial checks under the seed stage, and then we’ll follow on, we typically are investing around a million dollars. So that means we can lead small seed rounds. Well, these days, they’re small seed rounds, they used to be traditionally sized seed rounds. But we can also be a good co-investor for larger seed funds, who want to lead around and have strong co-investors. As you alluded to, our geography is a little unique. I’m based in Austin, Texas, and I work with two general partners. One is based in Boulder, Colorado, and one is based in Kansas City. So the firm was founded to your point in Kansas City with with a focus on investing in companies in the Midwest, basically allowing them to stay in the Midwest instead of having to take investment from coastal investors, before COVID, it was very common for investors to insist that companies move to the coasts to receive investment. Right. So that was the kind of the thesis when we started was just investing in kind of underserved markets and allowing companies to build and grow in those markets instead of getting magnetized to the coasts.
William Leonard
Yeah, I love that. I think we’ve seen the proliferation of early-stage firms that have planted their flag in the Midwest, I’ve seen like Firebrand 68 capitol, fire over Capitol know those firms that are bullish on the opportunity. I think we’ll dive into that a little bit later in the conversation, but you’ve got a partner in Casey Boulder, you’re in Austin. I know you’re you’re certainly not new to us. I know you worked at the Capitol factory there for some time. But when you and I first connected a few weeks back, you know, I resonated with your path of breaking into venture. So maybe you can unpack that a bit more. Your story is fascinating.
Claire Hansen
Thank you. I’m glad it looks fascinating now because it was painful at times while I was going through it. But yeah, I’m happy to talk about it a little bit. And I’ll try to keep it short because I took some twists and turns along the way. But yeah, when I first moved to Austin in 2015, I was fresh out of grad school. I had taken an internship after completing grad school basically to get some experience outside of academia onto my resume. I moved to Austin, with that little bit of experience, but I didn’t know what I wanted to do. To make a long story short, I ended up getting a job working for an accelerator and micro VC here in town called Capital Factory. It’s also a co-working and event space. At the time, it was the only co-working space in town. There wasn’t even though we weren’t here. So we were kind of a popular destination for anyone involved in the startup ecosystem or investment ecosystem. But as you mentioned, the fascinating part about me taking that job maybe was that I wasn’t trying to work in the investment or startup space specifically, I was just happy to have a job offer, it was an operational role mostly helping with the accelerator portion of the business. So I was doing things like organizing, you know, company interviews, gathering feedback from mentors in the ecosystem, taking notes in the Monday partner meetings, all the while not understanding how much access I was getting granted in that role. So that was sort of my first step into this space. But as I mentioned, I didn’t know what I wanted to do at the time. I wasn’t, you know, chasing after a role and venture certainly. So I took a couple of years to kind of try different things, I thought I wanted to work in a more quote-unquote, creative space, I didn’t even know what that meant to myself, but I just knew I hadn’t quite found what I was looking for. So I took some time off and worked for, excuse me some time out of the venture space, and worked for a hospitality brand. I worked for an E-commerce retailer, I worked for a friend who was launching a jewelry brand, I physically helped her make the jewelry, as well as hosting events and pop-ups and that sort of thing. And one day I was on the street, kind of during that period, I was walking down Congress downtown in Austin and bumped into someone who had been a mentor at the Capitol factory while I worked there. And he was like, What are you doing with all these odd jobs? How are you making ends meet, come back to the ecosystem. And he referred me to a role as an investment associate working for an angel network that’s based here in Austin. It’s called the Central Texas Angel Network, or si tam for short. At the time, it was one of the most active Angel networks in the country. I thought I would never get the job after having such an oddball resume at that point. But, I did get the role, and it ended up being a great fit because it gave me a lot of access, and the opportunity to participate on the investment side and evaluate deals, and sourcing deals. But also, it was a good entry point for me, because there were a lot of operational tasks involved with running an Angel Network, that I was pretty well, my my experience was pretty well suited for. So I got to, to kind of use my existing skills to open that door into the investing side. From there COVID hit. I realized that the Angel Network business might not might not be the right fit for me for a long time, is for the long run. Anyway, just given that, our activity had slowed down quite a bit. And I had already been thinking about trying to find a way to join a venture capital firm. So I took a role in between my time at the Angel Network and Firebrand, actually working for the US Army, which has a large presence here in Austin, specifically geared around innovation efforts. So I was in a role where I was helping, essentially try to source companies to apply to specific grant opportunities for the army and meanwhile, informing the army internally on how to make those grant opportunities more compelling for venture-backed startups, as a poor as opposed to more like dev shops and those sorts of things. I was thinking about getting an MBA in that role so that I could break into venture. And I just got fortunate that at that time, a firebrand was looking for a presence here in Austin. So as the ecosystem had grown, my partners, John and Chris couldn’t keep a handle on deal flow from afar. So they were looking for someone to be on the ground here with an existing network. And I just got, as I said, the timing was just right for me to leap that, and in 2021, and joined the team as a principal.
William Leonard
Nice, that’s awesome. And, you mentioned the oddball resume. But I think that can be a strategic advantage for someone looking to break into a new industry. Oftentimes, it’s a good thing when you bring that combination of experiences, and makes you almost like a Swiss army knife for the team. And it sounds like that worked out for you nicely.
Claire Hansen
Yeah, it did. And I want to double down on one point I think I made a couple of times in my story, which is just that network was so key. My Network once I got the job at Capital Factory, basically the network from that job and then the network from working at the Angel Network is what you know, propelled me into the venture space and was actually what John and Chris were looking for it in a teammate down here. So in addition to the skills of just meeting people, being curious, and being kind to people, it goes a long way. Yeah,
William Leonard
it does. And it’s fascinating that your team, you know, they were sounds like they were inundated with deal flow before they hired you. You had this Austin presence. And I, you know, I’ve been talking to a lot of firms that have a regional scope and focus as of late, and one of my favorite questions is to ask them, like, how are you leveraging your geography and your scope to win what you believe and what you’re convicted by to be like the most competitive the best deals in the region or space or your backing? So curious to hear how you all see your region, your geography, and your scope, as a true competitive advantage over firms that are situated maybe on the coast or in Detroit or like Miami or something like that.
Claire Hansen
Yeah, that’s a fantastic question. So, I want to clarify one thing, which is that I think I mentioned our first fund was highly focused on investing in the Midwest, we’re currently investing in our out of our second fund. Since then, the team has expanded. So now we have coverage in the Midwest, from Kansas City coverage in the Rocky Mountain, and Mountain West, with Chris being based there. And then Texas is a big enough region in and of itself or Texas. But in addition, we look, we look outside of those regions as well. I think one unique thing I always tell companies is that with us, you know, you get access to talent, potential co-investors in three markets, right with us on your cap table, you don’t just get the network of one town, or one region, you get power in the Midwest, Rocky Mountains, and Texas, with our team. So that’s one sort of pitch I give, I would say the thing I specifically find myself talking about and you and I have talked about in the past is just our check size is nice for both leading investments, leading seed rounds, and also co-investing. So when we write those million-dollar checks, we can and do lead many rounds. But for those companies that are over-subscribing, that are raising larger seed rounds, we also play nice with bigger firms that want to write bigger checks at the seed stage. And we can slot in nicely as a sophisticated partner, to those firms into those founders. So I think that our check size is also key and unlocks a lot of opportunities. In our geographies, specifically, in Texas, there are a lot of big funds here that will invest in large seed rounds. And we can play nice with them, essentially topping off their rounds instead of needing to compete with them for term sheets. So I like that we can kind of play both sides of that as a lead or a co-investor, kind of depending on the dynamics in each of the markets that we cover.
William Leonard
Yeah, that’s interesting. And I’m curious to hear right, because you all can write the million dollar check either leading around or CO investing, like you said, but those larger firms like curious to hear how you are thinking about diligence at this seed stage? I know it varies, whether you’re leading around or you’re co-investing but curious to hear sort of your framework from a high level of how you think about diligence in a deal that you’re leading, or diligence to do that you’re you’re following in on?
Claire Hansen
Yeah. And that’s that’s a great question at the early stage. It’s so unique and different firms have different approaches. As a Firebrand, we don’t have a strict process that we follow. We’re very conversational, we like to get to know the entrepreneurs we’re working with and make sure that there’s an alignment with values there. In terms of transparency, and openness, you know, we want to be the ones companies call our founders call when things are great. But we also want to be the ones who call when things aren’t going so great. So that’s something that we screened for, regardless, and it’s super important, especially at the seed stage. I would say aside from evaluating teams and founders, which I think is an obvious answer at the seed stage. The other things I’ve looked at are ensuring that the market is large enough, that there’s a large enough tam to invest. You know, the potential for returns work for our economic model. So that’s probably the biggest next thing we look for, and especially in some of the geographies we invest in, or that we look in sometimes founders’ mindsets aren’t quite as, as like expansive as as coastal companies, coastal companies tend to know that if they don’t sell for a billion dollars, their investors aren’t going to be happy, sometimes in more underserved markets. That’s a process we need. We need to go through to make sure founders are aligned in terms of the size and goals that they have for the company, so that’s another big piece. The only we really vet for is just ensuring that there’s a large enough market to, be able to have the possibility of of exiting at a nice, nice value. The other thing I would say is just, I think, especially at the seed stage, but I think this is probably true at other stages, as well as you have to have a little bit of imagination, right, you have to believe that the product that a company is selling today at the seed stage might not be the product that gets them to 100 million in ARR. Right, things are going to change between now and then. So I like, to have that creative space to think throughout the diligence process, and work with the founder, sometimes to kind of get me there. And then lastly, I think listening to our gut is important at this stage of investing, you know, we look at only seed stage companies and you get good gut feelings and you get bad gut feelings when you talk to the company. So I think honing in on that in the diligence process, which kind of sucks for the founders because you can’t always put your finger on it in terms of what feedback to give them. But that’s also a really powerful tool that we use in intelligence.
William Leonard
Yeah, I’ll double-click on the evaluation of the market size, I think most early stages and I think every investor thinks about this, but especially at the early stage, like they’re thinking, does this deal have the potential at exit, you know, with pro rata to be a fun returner for us? Can can this company, if we have a $40 million fund $50 million fund? Can this return one extra fun at minimum for us? And I think a lot of founders are like you said, there’s maybe just some, a lack of awareness around the vision in scope from an exit perspective of like, hey, if we don’t exit for this amount, our investors are probably not going to get a meaningful return in this deal. So I certainly appreciate your thoughts on that. And, you know, it’s Thanksgiving week, you know, Thanksgiving is in two days, but I saw you all recently announced a new deal in an Austin startup called Hand Race. So you all are actively investing right now. I’m curious to hear you know a little bit about that deal. And maybe some of your broader thoughts on the current seed market, and maybe some things that you’re seeing from a valuation perspective or not, just what is getting you all excited to be continuingly actively check writing right now?
Claire Hansen
Yeah, that’s a great, great question. And I’ll kind of start by talking a little bit more about I think, like broad trends we’re seeing at the seed stage. Before I tell you a little bit more about hand raise, but, but we’re experiencing a lot of what the data is saying, which is that experienced founders are having, I don’t want to say an easy time, it’s never easy to fundraise, but in a much easier time fundraising than first-time founders. So we’re seeing experienced founders, say with previous exits, especially raising at really healthy total round sizes, and also pretty, I would say high valuations. I mean, we’re still participating, of course, but higher valuations, I would say as compared to the rest of their, their founder or peers. So we’re seeing those deals moving really fast. Those with experienced founders moving fast, healthy evaluations, and healthy round sizes, are often oversubscribed. And it’s kind of like a tale of two cities where then seeing first-time founders or those with little experience, really struggling in the market, having a tough time raising taking more dilution. So from a valuation standpoint, more investor-friendly valuations and struggling to hit the ever-moving goalposts that investors seem to have in terms of traction. So we used to say I will talk to a company when you’re kind of hitting around 10k and MRR might be getting interesting. You know, all of a sudden 10k In MRR doesn’t seem like very much and we’re asking them to hit 2030 before we become interested. So it’s it’s a tough game out there for founders, especially raising for the first time. With hand raised specifically, that’s an example of more of that experience founder raising around that came together pretty quickly. We didn’t have a ton of time to do thorough, thorough diligence. But we’re more big making a bet on the founder on the founding team and their vision for the product in the market. So that one came together quickly. And another example of where a strong larger lead took the majority of the round and and a few of us other firms were able to kind of top off that round. They ended up over-subscribing and raising a $6.4 million seed round so that will move quickly. Now we’ll move quickly. But we did invest. Over the summer we invested in companies that were kind of on the other side of the equation. We’re less experienced founders, but with really solid businesses, and solid unit economics, nearing cashflow positive at friendlier valuations for us. So, we’ve seen and participated on both sides of the equation recently.
William Leonard
Yeah, I love it. I love it. And, yeah, I think we’re kind of seeing the same thing in the market right now is that the founders who have built a company previously, whether it had a successful exit, a flat exit, or you know, it was an aqua hire, right, I still think there are valuable learnings from just going through the motions of building a company and understanding, hey, this didn’t work in this company. But now I can go back and execute on a similar or an adjacent idea. And now go build it again. And one, you can kind of go back to some of the investors who may be passed on your prior rounds, and be like, Hey, I’m taking another shot at this. This is what I learned. This is how I’m doing it differently now.
Claire Hansen
I was just about to double-tap that. What we think of as failed startups, I mean, there’s, that’s just part of the game, if it’s not a failure. I mean, that’s just one step closer to your big exit, right? So having even investors that that invested in your quote, unquote, failed startup are great reference point to talk to new investors, new potential investors, about your work ethic, about your character, about how they, how you make decisions, how you may have grown sense that again, quote, unquote, failure. So all of that, to your point is just a fantastic experience. When you’re hitting the fundraising market again,
William Leonard
yeah, for sure. And, you know, Claire, as we’re, as we’re wrapping up the conversation here, you and I were talking before the call just about your passion for learning, and kind of growing your knowledge, as an investor and expanding from, you know, many of the junior roles that you probably did with some of your internships and add in a Capital Factory, to now serving as or to want to serve as a principal, to now serving as a partner, and taking on a lot of the tasks and responsibilities that go just beyond sourcing deals and just doing diligence, but things that make a fund, I would love to hear your thoughts on how you’re kind of seeing that and implementing a lot of the learnings that you’re taking on in your day to day work.
Claire Hansen
Yeah, I don’t know if there’s like a clear answer yet, because I’m in the thick of it right now of figuring all of it out. But, but what I like to remind folks is that, you know, venture investing goes far beyond just making investments, which is I think, what, what’s the kind of public understanding of venture capital is or, you know, when I explained to my parents what I do, I refer them to Shark Tank as just an example. But as we all know, and as your audience probably knows, there’s so much more that goes into venture investing and running a venture capital firm. So in addition to investing, that means taking active board seats with your companies, I’m, I’m an observer on several boards currently, but hope to take on full seats myself sometime soon. So that will be a learning. And then behind the scenes, we’re getting ready to fundraise our next fun. So everything from actually the legal formation of that fund and the different entities involved in a fund, to the actual fundraising, to maintaining LP relationships to hiring and growing a team and maintaining a brand. You know, I don’t have it all figured out yet. But those are all of the areas where I’m looking forward to learning in this next phase. So currently, I’m trying to figure out how to fundraise and what that means for me, based here in Texas, how to pitch our fund, how to find high net worth individuals and family offices fund to funds that are interested in a vision and an ethos like the one we have at firebrand so that’s my current focus, but, but from there, I’m gonna have to have to learn the rest of the ropes of actually, like I said, building a lasting brand in the venture space. So that’s where I’m spending a lot of my time and energy these days.
William Leonard
Yeah, there’s a lot of, I guess, they call it building the plane while flying it. That happens in venture and one of my good friends was telling me how he just sees it as an apprentice-heavy business where you’re learning from the partners, the GPS, and the founders who have done it before. And venture is so dynamic. You know, the fundraising environment for a fund is different now than what it was just three years ago, and so many of the lessons and and meetings that happened then are probably irrelevant now to, you know, formulating a fundraising strategy. So it’s a very dynamic and nonstatic industry and continual learning is most important.
Claire Hansen
I was just gonna say I hope I am naive enough and energetic enough that this race, even though I know it will be hard, is hard for most funds to be raising right now. I’m hoping that it doesn’t feel so bad because it will be the first time I’ve done it. So I hope that naivety will take me through.
William Leonard
Oh, good. And, you know, the thesis is so fascinating. You all are, you know, check writing right now, what is the best way for a founder who’s listening to this conversation to get in touch with you, or someone on your team for a potential investment, or another VC who just wants to reach out and potentially build a co-investor relationship?
Claire Hansen
Sure, yeah, I’m for potential co-investors. I’m available on LinkedIn. That’s, that’s a great way to get a get a hold of me just include a little note when you send the request so that I have context of why you’re reaching out. And then and then kind of for both parties, for companies and maybe other investors, our email addresses are listed on our website. So if you’re interested in reaching out directly, you’re certainly welcome to do that. I would say for companies, what makes a big difference is if you can get a warm intro either from another investor who we might have in common or maybe another founder, that that support from someone in our network really goes a long way. So those are much easier emails to respond to, we usually get a little bit of context from the person who’s introducing us. So if there’s any way for you to get a warm intro, those always helped but please do feel free to reach out directly if you don’t have a warm intro available.
William Leonard
Awesome. Claire. This was a fascinating conversation. And I look forward to building our relationship. And again, congrats on the promotion to partner.
Claire Hansen
Thank you so much. Take care
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