William Leonard

Hey everyone, we’ve got a fun and fascinating conversation for you today featuring the VP of Revolution’s Rise of the Rest Seed Fund, Mahati Sridhar, founded in 2005 by Steve Case is based in Washington DC. The firm’s focus is centered around startups located outside of hubs, where traditionally most venture dollars have gone to. Mahati joins me to dive deeper into the firm’s generalist approach. The verticals she believes are most ripe for innovation in the firm’s unique origins of starting in a bus. Equally, you won’t want to miss her advice for junior analysts and associates on how to stand out and level up your career early on as an investor. Super excited for you all to tune in and enjoy Mahati’s insights today. Mahati, thank you so much for joining me today.

Mahati Sridhar

Of course. I’m excited to be here.

William Leonard

Awesome. I love it. Let’s dig in a bit here. Would love to understand what you do at Revolution and the thesis of the fund. I would love to give our listeners some context on you and your background a bit.

Mahati Sridhar

Revolution is an organization that was previously founded by Steve Case, the founder of AOL. Within Revolution, there are actually three separate funds that have their own investment theses that different teams are investing out of. I sit on Revolution’s Rise of the Rest Seed Fund. We’re the earliest stage of investment that comes from the Revolution family. Typically, we’re investing in companies raising anywhere from $2-$8 million. We participate with initial checks anywhere from 250K up to a million and what’s really important to note though is that we aren’t leading rounds or taking board seats, typically, or setting terms. We’re very much a co-investor. We like to use the phrase catalytic co-investor. Serving as those supernodes for many of our investments that are across the rest. Much like our name alludes to Rise of the Rest, we are specifically investing in US-based entities outside of Boston, New York, and San Francisco. I’m really, really passionate about empowering founders to build what they want to build, where they want to build it, and that was ultimately what helped us build out this thesis and differentiate ourselves on this very increasingly crowded stage in venture capital. I’m going to your second point with my background and how did I find my way to this fund. I’m from North Carolina and grew up in Raleigh-Durham and a very proud Tar Heel. Go UNC, go heels! I started my career in investment banking down in Atlanta where you are. I realized that I didn’t really want to grow up to be an investment banker and wanted to find a space that I felt really excited and passionate about. I stumbled into this program called Venture for America. Much like Rise Of The Rest, they have a mandate where they work with recent college graduates to place them in startup ecosystems across the US primarily secondary and tertiary ecosystems. Through that program, I was placed in Charlotte and basically worked through my two years to help launch a VC fund in that ecosystem specifically focused on early-stage Fintech. For me, that was the first experience where I saw the impact that early-stage venture dollars can have on a new growing ecosystem. They empower founders to get access to capital resources that they would otherwise have to hop on a plane to go to New York or SF to get access. It also helps bring together the community to help support the founder. For me, that was just a great introduction to the impact that venture capital can have and also seeing how it can have an even greater impact in a place like Charlotte, North Carolina. From there, I leapfrogged a little bit and bounced over to a different fund called Bull City Venture Partners (BCVP) also in the southeast and in North Carolina. I expanded my own personal aperture and investor outside of just FinTech into more enterprise SaaS. Still, something that had seemed pretty common throughout my time investing at this point was that founders still put a huge value on New York, San Francisco, and just like these really robust ecosystems. I ran a personal experiment and went to business school with the idea of really becoming a part of the New York or SF- based ecosystems to understand what’s so appealing. Why do founders constantly and consistently flock to these places? How can we recreate that in other markets? Through that, I went to Columbia. While I was there, I worked with Primary Venture Partners, which is an amazing fund that focuses primarily on empowering founders within the New York City ecosystem. They have a very robust platform still at the earliest stages. For me, that’s where I saw it. It’s really serving as a connective node, really being able to bring your community together, and add value for the founders. Through that time, that’s where I was able to connect with the Rise Of The Rest team. That thesis made a ton of sense for me. I’ve been working with them ever since. Trying to bring that same community being such as supernode for our founders, just being able to drive impact to them and their overall ecosystems that they’re a part of their fund.

William Leonard

I love that. It sounds like you’ve had an array of immersive experiences throughout the early part of your career. Now, you’re at Revolution. As you think about Revolution’s thesis a bit more, what are the areas that you are focusing on most in terms of verticals or you are geographically agnostic and things like that?

Mahati Sridhar

We’re definitely a place first investor. Emphasizing the rest of investing outside of Boston, New York, and SF but what’s really cool that stems from that are that we’re true generalists. We’re able to tap into a lot of different market segments, a lot of different cities, and geographies across the US are really famous for being very good at certain parts of the industries. Atlanta, for instance, payments are super, super hot right now. Supply chain and logistics are also coming up there. In Chattanooga, we’ve seen a lot of health tech coming out of St. Louis, coming out of Nashville, as well as the RDU regions. For us being able to be true generalists, we’re able to tap into all of the opportunities across these various geographies and build our network strategically to continue to empower our founders that are working in all of these different vectors.

William Leonard

I love that you all are focused on the rest. I think that’s such a cool thesis. We have some context on Revolution’s thesis, the areas, and the verticals they like to focus on, but what about you personally? You’ve been in venture for some time now, I’m curious if you have a personal affinity for some particular spaces or verticals that you just are extremely passionate about?

Mahati Sridhar

Honestly, I feel like whatever space I’m interested in is constantly ebbing and flowing, changing with the types of deal flow that I’m getting where the markets moving, and just generally, my curiosity. Again, thankful to be a true generalist fund that affords me the opportunity to float around across different industries. Presently, I’ve been spending a ton of time and access to care and the care economy. As we become more comfortable in hybrid environments, as telehealth becomes more mainstream, I’m constantly thinking about how we can both improve access to care in different parts of the country, especially specialty care. Different parts of the country that had previously had to travel hours to get access to their homes, through digital format, increasing just the general reach of specialist care. As we think about the care economy and about aging in place, thinking about how the demographics here in the United States are shifting or trending older. How can we continue to provide the care, the network, and the community to empower folks to feel like they have everything they need, where they need it, at affordable costs. I think that’s ultimately where it’s coming back to is efficient and affordable access.  Thinking through how technology can really help push the limits there. That’s kind of one space and then another space has been spending a ton of time as well as in future of work, and what that looks like, and not necessarily for your large enterprises, but also for your small and medium-sized businesses, for your main street businesses. How is technology continually going to impact and drive better innovative processes, more efficiencies, and all these types of business models? How are COVID and post-pandemic tailwinds going to further drive and change consumer habits? How are you going to consistently evolve and stay competitive in an increasingly digital market? These are all questions and parts of the market that I’m currently diving into. There are a ton of really great opportunities out there for each of them.

William Leonard

I think that’s great. The US has an increasingly aging population. Huge need for innovation to deliver care, as a lot of people now are focused on in-home care, no longer going to centers to nursing homes.

Mahati Sridhar

Aging in place, right?

William Leonard

It’s a huge opportunity for innovation there. And then the future of work, I think that’s really self-explanatory. That’s been such a hot space. Now, our listeners know what type of deals to send to you. That’s awesome. Transitioning a bit here, you and I both are at the early parts of our careers as investors in the venture world and so I’m curious, do you have any practical and tangible tips for analysts and associates who are just launching their venture careers on how they can be truly impactful to their team and equally the founders that they’re meeting and working with within the portfolio day-to-day?

Mahati Sridhar

I’m always answering emails. I will say never leave founders hanging. I think what’s really important as you continue to build your career in the venture is to recognize that you’re building your own personal brand, as well as supporting and building your fund’s brand. Thinking about both of those collectively but also separately is really important. I would say get active on Twitter. And by active I mean, you don’t have to tweet every day. I absolutely do not tweet every day. Follow up with people, see what they’re posting, see what articles they’re linking to see where their thoughts are, there are a lot of great nuggets. For our industry, specifically, I feel like that is such a good source of truth and such a great community to tap into and get involved with early on. A lot of jobs are posted there with different opportunities, meetups, coffee, chats, etc. I think that that’s just a great place of knowledge. And then finally, as you’re thinking about your role and getting smart in the industry, do the work, go the extra mile, especially if you’re more junior to build out that market map, build out that resource, take it one step further in terms of your analysis, and answer the “Why now?” and “So what?”, and create your own thesis, too. It’s okay for you to disagree with or not see eye to eye with the lead investor on your team but being able to articulate why and why you’re holding that opinion, I think is really important. Because ultimately, as you continue to mature as an investor, your opinion matters. Being able to voice it and articulate it succinctly is what gets you through the door.

William Leonard

That’s excellent advice, especially around going the extra mile and then building your own thesis because the goal is to ascend throughout your career, right? As you do ascend and go from analyst to associate to principal to partner, you’re gonna have more responsibility, you’re gonna be a decision-maker, and be incredibly informed as you do ascend to those new levels. That’s excellent advice. I think something for me that’s been pretty fruitful is also building relationships with universities. Student founders on campus or the leaders of innovation centers on campus, really connecting with them, bringing value to them in any way you can, whether that’s through mentorship, or making connections to other funds focused specifically on universities and things like that. There are so many avenues that you can explore.

Mahati Sridhar

That’s such a great point. This industry is so relationship-based and relationship-driven. Being mindful of all the connections that you’re fostering, you might meet that person in one year, and then three years later, they’re developing their own startup or they’re at the top of this space in terms of being a subject matter expert and you get to lean on them for advice and support and help. Being able to continue to be a value add back to your community, back to your network, and fostering those strong bonds is one of the most important skills that any investor can carry.

William Leonard

You get it. Speaking about value adds, I’m curious, at the seed stage where you all are investing, how do you present your value? How do you create value for companies at this stage as Revolution is investing today?

Mahati Sridhar

Definitely. I think a lot of it goes exactly back to what we were talking about was being able to foster that ecosystem, create that community, and serve as those nodes to let our founders lean into the existing Rise of The Rest network as they continue to grow and scale. Whether that’s our network of subject matter experts, whether that’s investor network as they go for subsequent growth rounds, being able to lean on us to help connect the dots for them, prepare them for all of those events, just be a voice, and a pure perspective as they continue to grow and scale is how we are able to add value. We have a tremendous member of our team Amira who runs portfolio success and portfolio support. She really helps connect the dots in terms of formal resources for all of our founders and bubbling up all of those bespoke asks so we can make sure we’re addressing them all as a team. That’s how we tailor our approach and our help to each of our companies is by being able to understand exactly what they want and tapping into all of our independent and individual networks, as well as the greater Rise of The Rest network, to be able to bring together the right meeting of the minds to support our founders.

William Leonard

I think that’s an imperative at this stage, right? You have to be pretty entrenched with the founders to get them to that next vector of growth. Whereas with the growth stage, you’re just giving them capital to go a bit faster, but, those connections, you have to really, really be up sometimes late with the founders on the phone, thinking through customer conversations, contracts, things like that.

Mahati Sridhar

It’s very much on-stage dependent, right? Being at this early stage, like you said, like Seed early Series A, many times product-market fit isn’t a thing yet. Being able to be a voice of reason, as the founding teams are working through how they want to establish that. Coaching them that it’s okay to fail, not everything is going to work, and being able to know what plan A, plan B, plan C is, and how and when to execute on all of those to continue towards that path of growth. Always critical.

William Leonard

So true. Transitioning a bit here. There are the markets right now, public markets are certainly being affected by the macroeconomic turmoil going on with interest rates, and the war in Ukraine, but how are you all seeing that impacting early stage? Venture markets, whether asset valuations or just the general market as a whole?

Mahati Sridhar

Great question. I’ve been thinking a lot about this and trying to juxtapose it against what I’ve been seeing with deals, and just generally the conversations I’ve been having with some other investors in the space. I think what we’ve been seeing right now is that there’s a lot more pressure on later-stage fundraising. Because there’s a little bit more of the valuation tied to different growth metrics. Those growth metrics are ultimately benchmarked to public market comps. We’re seeing the markets are all over the place these days. And as a result, we’re starting to see investors be a little bit more conservative, how their pricing deals look more conservative, and how they’re allocating their capital. We’re starting to see, at least in my experience, a little bit of that at the earliest stage at the seed stage, but because valuations are priced so differently here, I’m not seeing as much in terms of the valuation price in and of itself, but a little bit more in terms of deal frequency and volume. I would say deals are slowing down in terms of announcement to actual close, whereas through the end of last year and even though summer and fall of last year, deals were just popping off really, really fast very much at breakneck speed. It’s just definitely been a calming bit. I think people becoming a little bit more anxious about what could and may happen. But I haven’t necessarily seen any large impact on valuations just yet.

William Leonard

That’s interesting. We’re seeing the same thing. Market compression, a bit more of valuations being slightly more conservative. And then you mentioned deal cadence as well. Piggybacking off of that, are there any trends that you see taking shape throughout the first few months of 2022 or that you anticipate will take shape throughout the remainder of the year that you can speak to that you’re excited about or founders and investors should be cautious about?

Mahati Sridhar

Honestly, I feel like it’s still a little bit of the Wild West in terms of what industries are going to like really explode and become big. I’m always tracking Web3 and diving into the metaverse. I feel like most investors are tapping into that trying to understand exactly what their position is, trying to understand exactly how they want to invest what their strategy is there. And personally, I’m constantly reading up and trying to get smarter in terms of what my personal thesis is in that space. I think it is an election year. We’re gonna see a lot of focus politically, changing hands, seeing where student loans are going to net out and I think writing on those political tailwinds, there’ll be a lot of different conversations in different industries that will bubble up as well. I would say Fintech is always one space, that is always hot, always happening. But with student loan repayment potentially coming back online, potentially getting delayed a little bit more, we’re gonna see a little bit more conversation around debt repayment, and just general personal finance conversations. And then finally, I think we’re going to start seeing a little bit more of the longer-term outcomes from the great resignation. Thinking a little bit about how good workers, how small and medium businesses will continue to involve, how different workers and employees have greater demands from their employers, how the benefits space will continue to expand personal care, self-care, I think these are all really critical things as we become more mindful about our headspace as WE become more aware of our mental health. Another sector that I’m really passionate about will continue to be really popular through the end of 2022.

William Leonard

I love the point of what we’re going to see from the great resignation right now. We know the talent is incredibly hard to find. For some of the most qualified and well-paying jobs, talent is still difficult to find. That’s underpinned by a shift to the greater economy and a shift to entrepreneurship. People are starting to work for themselves a bit more and leaving the corporations, leaving the tech jobs, which is leaving a lot of unfilled roles. A lot of things going on, lots of moving parts, and this interesting economy that we’re in and we’re almost at the end of Q1 here in a few days. What’s exciting for the rest of the year in terms of Revolution? I know there’s typically a bus tour, is there going to be going on this year?

Mahati Sridhar

Great call out. We often joke that born from a bus tour, Rise To The Rest is originally founded and based on bus tours that we did throughout the US. We would hold pitch competitions in each city that we visited. The jury’s still out whether or not there’ll be a bus tour for 2022. So stay tuned. Hopefully, you’ll see some news from us on that front. But the Revolution team more broadly, we’re back on the road. We will be in cities all across the US holding different events, meeting up with our portfolio companies, as well as our co-investors. We spent time already in places like Austin, Dallas, New Orleans, in Bentonville, Arkansas. We’re just going to continually continue to visit all the cities that we love, near and dear, as well as new geographies for us, too. And I know personally, I’ll be spending some time later this year in Omaha down in Atlanta, in the Raleigh-Durham area, out in Seattle, as well as in Portland, Maine. Really, really fast and geo coverage there. I’m really excited to be back on the road and actually back in the ecosystems that we love to invest in.

William Leonard

I love it. I was just on the road this week, as well. It’s great to kind of see things opening back up and actually see people in person. Zoom gets a bit exhausting and I’m sure everybody else has some level of Zoom fatigue nowadays, but I’m excited that you all are getting back on the road. How can our listeners, who maybe have some deals to send you or want to pitch you, get in touch with you or someone on your team?

Mahati Sridhar

Definitely. If you go to the Revolution website, you’ll be able to find the rest of our team and our bios there, as well as an opportunity to sign up for our newsletter which goes out quarterly with really great updates on our portfolio companies, as well as a better way to stay in touch with, where we’ll be on each quarter, as well as just being able to get connected to our team. There’s an email at the bottom of that page, it will sync on the back end to all of our investor team. We would also encourage everyone to reach out to us on LinkedIn as well as Twitter, and give us a shout-out. We’d love to connect, see the deal flow, and just try to be a friend to you all in the industry as you continue to grow and in whatever ways that may be.

William Leonard

Awesome. I love it. I’m happy. This was such a fascinating and insightful conversation for me and our listeners. I’m excited to have this episode go live in a few weeks and looking forward to kind of seeing you out maybe in the ecosystem a bit more here.

Mahati Sridhar

I would love to actually meet in person. Definitely will sync up when I’m in Atlanta next for sure.

William Leonard

That sounds great. Thanks, Mahati. Cheers.

Mahati Sridhar Cheers. Have a good one.

Lisa

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