The fund focuses on the collision of healthcare and technologyRead more...
Kolodny is a former Googler, and was the youngest ever board member at Brown University
There has been a big debate over the last few years over whether the Series A crunch is real or not.
What everyone can agree on, though, is that there are definitely more seed and early stage funds now than ever before, and more people willing to give money to young companies looking to make it big.
But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?
We're highlighting key members of the community to find out.
Kolodny worked in product marketing at Google, where she led a number of launches for the Google Apps for Business team, including Google Drive. She also worked in early stage tech investing at Cowboy Ventures. Kolodny began her career in partnership development at the Clinton Foundation facilitating large scale clean technology & infrastructure development in India.
She earned her BA, magna cum laude, from Brown University and her MBA from Stanford GSB. Kolodny also completed an MS in Sustainable Design from Stanford.
Kolodny is a Trustee Emerita at Brown University where she served as the university’s youngest board member. She is currently a member of the President’s Leadership Council and the Advisory Committee on Computing and Information Technology.
VatorNews: What is your investment philosophy or methodology?
Lauren Kolodny: Aspect is all about long term partnerships. We’re focused on the early stage but when we make a commitment to working with a company, we stick with them through the entire arc of their growth.
As we looked the venture financing landscape, we saw a gap between seed and later stage venture. Over the last decade, a number of great institutional seed firms have popped up - many of whom we work with very closely. At the same time, the larger institutional venture firms have moved their focus later and later stage. At Aspect we aim to be the bridge between the two.
Generally speaking, that comes in the form of a classically-sized Series A round. At this stage, entrepreneurs have demonstrated that their product works and addresses a real need. It’s at the point when an idea and early product have just started to be a real company and they’re ready for that next push to scale. We’ll also invest in seed rounds - generally in partnership with an institutional seed fund - and help founders get to the Series A and beyond.
Long term partnership really is at the core of what we do. And we think we’re uniquely suited to do this because, though we focus on the early stage, our collective team has experience investing and working with companies at every stage of growth.
I should also say this idea of partnership extends to other firms as well. We’re collaborative with other investors at both the seed and Series A. We believe it’s often in the best interest of the company to have multiple voices around the table.
VN: What do you like to invest in? What are your categories of interest?
LK: As a firm, our primary focus is early stage. As for categories, we’re a bit broader. We invest across consumer and enterprise in software driven or enabled businesses. We have a thematic emphasis on mobile (which doesn’t necessarily have to be mobile first but we want to know that the company has a strong multi-device strategy)since mobile so clearly continues to be where the world is moving.
Most recently our investments have included security, mobile health, marketplaces, analytics and tools for the next gen workforce. We’re all generalists, but lately, I’ve spent a lot of time on the last two.
I’m very excited about next gen labor tools because it’s so clear to me that our approach to work is evolving dramatically. We see it in every category of labor - high skilled workers, self employed contractors, hourly workers. Something like 80% of workforce is now considered part of the mobile workforce, meaning they use their phones as a core part of their jobs. And this has opened up a bunch of interesting opportunities for startups to play a key role in everything from job placement to internal communication to professional development.
With analytics, there is so much more data available about human behavior that companies are finding all sorts of interesting new insights and building products around them. For example, SelfScore is a consumer finance analytics company that's using data inputs previously unavailable to offer an alternative to a FICO score. They make creditworthiness about more than just payment history. Their first product is for foreign-born college and grad students which is awesome because, as a group, these are people who are extremely credit worthy but don't have access to financial products.
VN: What would you say are the top investments you have been a part of? What stood out about those investments in particular?
LK: It’s a hard question to answer because their are a lot of great ones - SelfScore is among them. Another great one is The Muse which is a career development platform for Millennials. The founders Kathryn Minshew and Alex Cavoulacos are very impressive and built the product based on a pain point they were facing - choosing a next job. As a young person, figuring out a next career in a world of so many possibilities is challenging enough. It’s made worse by the fact that most job boards are built with the employer, not the job seeker, in mind. These sites make it very tough for a candidate to actually evaluate whether they want to work somewhere. The Muse offers a solution that showcases the culture and people behind a company - characteristics of employment that we know to be very important to Millennials. Employers love it because they get high quality candidates who are intentional about choosing them. And they just launched a new product on their platform this week, CoachConnect, which is a marketplace for live career coaching.
Mobile Action is a really interesting seed company of ours that does real AppStore optimization. They pull unique data from and around the AppStore to help app owners crack the mysterious code to app discovery. This is a tough problem to solve, but the founder Aykut Karaalioglu know his stuff - he was working as a consultant for a bunch of companies like eBay which hired him to to raise their App Store ranking. They gave him $1 million budget and he did it with $20,000. Now he’s productizing those insights.
VN: What do you look for in companies that you put money in? What are the most important qualities?
LK: With all three of the companies I mentioned before, the founders really knew the space well and had personally experienced the pain point. That’s definitely something I look for - alignment between the team and the opportunity. It’s not uncommon to see impressive and accomplished founders going after a space they don’t know well. I’d rather see a founder who knows the problem they’re solving really well even if they have a lot less overall experience.
Outside of the team and their solution, I like to see potential for scale. Obviously that’s important from a product perspective, but also from a customer or user perspective. Meaning, if they are an enterprise company and they’re only selling into startups, I’ll question whether they’ll provide value for other kinds of companies. If they are going after consumers, they should have users outside of the major metropolitan hubs as well.
VN: What kind of traction do you look for in your startups? And can you be specific? Are you looking for a number of customers or order volume?
LK: With Series A, I'm generally looking for real market validation.
For consumer companies, that’s not just about topline users but real consistent strong month over month growth, with repeat engagement and usage. I also want to see that they've built some way to build growth into the product, with evidence to support that they have great product-oriented organic growth.
On enterprise, we need to see at least a fewearly customers --not just startups --whoare using the product in a meaningful way and can speak to their experience. They need to tell me that the product or service is a 'need to have,' not a 'nice to have.’
VN: Given that these days a Seed round is yesterday's Series A, meaning today a company raises a $3M Seed and no one blinks. But 10 years ago, $3M was a Series A. So what are the attributes to get that Seed round? Since it's a "Seed" does it imply that a company doesn't have to be that far along? What are the attributes of a company getting a Series A?
LK: What makes a company ready to raise a Seed is much harder to answer because it varies tremendously by category and firm. Since Aspect is looking to fill the early stage gap, we generally look for some market validation at the Seed. But I know plenty of firms that are excited to invest pre-product or pre-product launch. I think the key for entrepreneurs looking to raise a Seed round is to be smart about who they approach for investment. You can learn a lot about what an investor looks for based on past investments and you can use that to inform who you target in the first place.
VN: Given all the money moving into the private sector, I believe there's more money going into late-stage deals in 2015 than there was during the heyday, back in 2000, do you think we're in a bubble?
LK: I think there is a private market valuation bubble, but I don’t imagine some dramatic single day bubble burst in the public market. Today, companies are staying private longer. At some point, funding will dry up for late stage private rounds, and some companies won't be able to raise enough money to survive. Right now there are about 120 private companies valued at over $1 billion, and from what I can tell about their earnings, the public market isn't going to support many of those valuations. The ones that have raised sufficient capital will make it out the other side but for the ones who get low on cash and are are forced to go public - or worse - things won’t look so rosy.
VN: How does that affect your investing?
LK: We are still really bullish on early stage companies with good sound, growth fundamentals, led by strong entrepreneurs. And like I said before, we think there continues to big growth opportunity around the mobile ecosystem. The ability for companies to reach a global audience through mobile that has been largely untouched by tech until now still provides a lot of opportunity.
VN: Tell me a bit about your background. Where did you go to school? What led you to the venture capital world?
LK: I grew up in San Diego, and I was entrepreneurial as a kid. I was always trying to find new ways to make money - I even got my dad who is an attorney to legally incorporate a company that I called Peachy Gifts where I essentially sold crafts that my friends and I would make. I ended up going to Brown as undergrad where my interest in entrepreneurship grew and I started a non-profit organization offering alternatives to firewood cookstoves in East Africa. At Brown, I really focused my studies on how technology could facilitate economic development.
My first gig out of college was doing cleantech partnerships for the Clinton Foundation in India. While I was there Brown did a governance review, and decided they wanted the Board of Trustees to better reflect the alumni population. I was very fortunate and they asked to join as a Trustee a year after undergrad. I was in that role for several years, and it was an incredibly meaningful experience. That's where I first met and worked with Theresia Gouw, who was the next youngest person on the board at the time and she became a mentor of mine.
Theresia was really my first lens into venture capital, and I remember thinking how awesome it was that she got to help so many great entrepreneurs across lots of industries build new businesses.
After India, I came back to California for a role at Google in product marketing. I spent most of my time working on the Google Apps team where I helped lead the Google Drive launch among other things. My interest in venture grew as I was exposed to Silicon Valley, so I went to business school at GSB, where I also did a VC internship. As I was gearing up to graduate, I found out Theresia was starting Aspect, and it was perfect alignment for me - an opportunity be entrepreneurial at the ground floor of a firm, invest in early stage companies, and work closely with Theresia and Jennifer Fonstad, two incredibly impressive investors.
VN: What do you like best about being a VC? What makes you excited?
LK: Working with lots of amazing people solving hard and interesting problems.
VN: What is the size of your current fund?
LK: We are operating out of a $150 million fund.
VN: What is the investment range? How much do you put into each startup?
LK: When we do seed stage, we do smaller checks because we are usually partnering with other seed firms. Our most frequent check size is around $200 thousand.
With Series A, we write checks ranging from about $1 million to $6 million. We are often the lead, and we also partner on these deals.
VN: Is there a typical percent that you want of a round? For instance, do you need to get 20% or 30% of a round?
LK: It varies by opportunity. At the seed round it's more about building relationships with companies and working with other investors. While ownership matters, it's not the driving concern. With Series A, we’re looking for more ownership but it depends a lot on the round and if there are other big investors involved.
VN: Where is the firm currently in the investing cycle of its current fund?
LK: We are a year and a half into our first fund with good runway ahead of us.
VN: What percentage of your fund is set aside for follow-on capital?
LK: We really believe in follow on investing and we retain a meaningful amount. Even though we’re a new fund, we’ve had several companies go on to raise later stage rounds already where we’ve participated - in many cases over our pro rata.
VN: In a typical year how many startups do you invest in?
LK: This year, we’ll probably make five or six Series A investments and at least half a dozen seed investments.
VN: Is there anything else you think I should know about you or the firm?
LK: We recently launched Aspect Labs, which is a co-working space in our San Francisco headquarters, where we've got a number of early stage companies, and others that are too early for us but we like what they're building. It’s a great opportunity to engage with entrepreneurs in a casual way. And for those we haven’t invested in, what better way to test a working relationship than have them in our space? Afterall, building strong long term relationships is really what this business is all about.
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