Meet Jessica Peltz-Zatulove, Partner at MDC Ventures

MDC Ventures, formerly KBS Ventures, is the corporate venture arm of marketing agency MDC Partners

Venture capital used to be a cottage industry, with very few investing in tomorrow's products and services. Oh how times have changed. While there are more startups than ever, there's also more money chasing them. In this series, we look at the new (or relatively new) VCs in the early stages: seed and Series A.

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.

Jessica Peltz-Zatulove is a Partner at MDC Ventures.

Prior to joining MDC, she specialized connecting marketers with emerging technology and has a passion for helping startups secure their first customers. She previously spent 10+ years working with Fortune 500 brands including Verizon Wireless, Kraft Foods, and H&M. As a VP at Zenith Media, she was recognized an industry pioneer in the mobile space; her cutting edge collaborations were often featured in Mashable, Adage, Mobile Marketer, and Mediapost. Jessica has a global footprint with strategic relationships at over 300+ startup organizations across 20+ countries.

In addition to being featured on CNBC, Fox Business, and popular podcasts - she's been named one of "NYC's 100 Most Influential People in Tech”, “35 People in NYC Tech to Watch in 2016”, and a Rising Star by Global Corporate Venture.

VatorNews: What is your investment philosophy or methodology?

JPZ: We're the corporate venture fund of a global advertising holding company, so our core business is working with Fortune 500 brands in the capacity of their media strategy, creative, PR, social brand positioning, and everything in between. We own 60 advertising agencies around the world, working with over 1,500 brand clients.

Our investment philosophy is centered around investing in, and align with entrepreneurs and technologies that are addressing the needs of the modern CMO. We’re looking to invest in emerging trends to help educate our brand clients on the marketing implications, enabling test and learn in these nascent spaces. Our value to the portfolio founders is helping with customer introductions for revenue acceleration, domain expertise, understanding the customer and their respective workflow. That's something that really differentiates us, because we are the customer.

In terms of our methodology, myself and my partner, Michael Nicholas are the day to day point people on the fund. Then we have an investment committee of senior leadership within MDC Partners, our parent company. We invest off the balance sheet, as most corporate VCs do, and our investment committee, along with Michael and I ultimately make investment decisions.

We've also created an advisory board which includes a select group of executive leadership from over a dozen agencies within our network. This includes thought leaders such as the CEO of Anomaly, Head of Production at 72 and Sunny, VP/Executive Creative Technical Director of CP+B, CTO of MDC Media Partners – these are some of the best minds in the advertising industry. It’s not only helped us create a nice feedback loop for diligence of people with intense subject matter expertise, but its also a diverse group for our portfolio companies to tap into for customer opportunities, mentorship, or feedback on the product.

VN: What do you like to invest in? What are your categories of interest?

JPZ: We're exclusively looking for early stage B2B, digital media and marketing tech companies that we believe are not only changing the advertising landscape, but addressing the needs of what we call the "modern CMO." I saw quote that I love: "The CMO of Tomorrow is the Data Nerd of today." This role of the CMO is constantly evolving, in terms of having to adapt to more data, more channels, new ways that customers want to be spoken to. It's extremely different 10 years ago, when you just had TV, radio, print and magazines as a way to reach your customer. There's so much more that you have to think about now. We’re looking for companies solving problems we didn't even realize we had yet.

We break it down our investments into four main categories, with personalization at scale really being the common thread- creating better, more customized interactions with customers.

• Adaptive analytics, primarily predictive and prescriptive analytics - using advanced business intelligence for non technical users to make more data driven marketing decisions.

• Evolution of communication channels. We’re not looking for next Snapchat. We're moreso looking for communication infrastructure that's going to create a new way for brands to talk to their customers. For example, we invested in a company called Msg.ai, which is using human-assisted AI to manage 1:1 conversations at scale across social platforms, messaging channels, CRM. We invested in Roost, a Web-push company. We’ve also recently been spending a lot ot time looking at various companies in the voice space.

• Next generation content. Techologies or platforms that can reimagine the tangible brand message, and how its experienced by customers. For example AR, VR, mixed reality and video, dynamic content sequencing, automated creative, etc.

• Brand Safety and security: Technologies that can help protect brands, customers and their assets. For example things around digital identify theft or online bot fraud.

It’s imperative for us that the main go to marret customer is a Fortune 500 brand or an agency. A lot of times we'll see things that are targeting SMBs. There's absolutely a market there, but it's just not where we feel we can add the most value and that's incredibly important for us. We want to understand how we can help move the needle on your business within the next six to 18 months.

VN: What would you say are the top investments you have been a part of? What stood out about those investments in particular?

JPZ: I'll talk about one of our recent investments, because we’re very excited about them. What makes us want to invest is having clarity around the problem, and when the founders have figured out a problem that we didn't even know that we had yet. For example, we recently invested in a company called EntryPoint, which is infrastructure for interactive Web content.

For context, I came from the customer side - so I spent the first 10 years of my career working with Fortune 500 brands like Verizon, AT&T, Gucci and Puma at a global media agency. Often we see similarities in how markets are developing from the early days of social or mobile. We believe there are quite a few parallels between when mobile first came out and where VR is now. When mobile first launched, there were all these dev shops popping up to build apps, and brands were spending tens of thousands of dollars on these apps that had no visibility in terms of metrics. Nobody knew how to drive downloads, nobody knew how to create a good experience, or a utility for these apps, but people thought, "Well, that's what I should do- I'm going to build an app." These brands were doing all of this before they had a mobile optimized website. They were spending tens of thousands of dollars on a mobile app that nobody was downloading, but consumers would go to their website and it would be that awful inch and zoom, and not an experience that was optimized for mobile.

Fast forward to today, I believe we're seeing the same thing happening now in VR - there's VR production shops popping up, and some brands and publishing platforms are pouring hundreds of thousands of dollars to develop one VR app on just the Gear, or just the Cardboard. Again, there's no good way to drive discovery, there's very limited metrics that you're getting behind all of this, and there's not a lot of data around what creates a good VR experience. They're doing all of this before having a VR optimized website. Given the advancements being made to web browsers, we believe hat every brand is going to need to have an interactive website, just like they needed to have a mobile optimized website 10 years ago.

EntryPoint is building the infrastructure to be able to create interactive Web content across browsers. It's an example of a this light bulb moment, that of course there's going to need to be tools and a platform that enable a seamless way for brands to create, distribute, and measure this type of content.

VN: What do you look for in companies that you put money in? What are the most important qualities?

JPZ: Team is always going to be so, so important. Not only what is their background, but what is their “Super Power”. What domain experience do they have? Who do they have in their network? Why do they see the world differently? Why do they almost obsessively want to solve this problem?

To me, communication is so critical. As the CEO of an early stage company, you're constantly selling. You're not only selling to investors to raise capital, but also to customers, and to recruit talent, partners, press, etc. Being able to clearly communicate your vision and why this is a problem, and this is why you are the team that's going to be able to execute on it, is incredibly important. Additionally, being able to articulate their differentiation within the competitive landscape is not something that you can take for granted. Especially because we are a team of operators that have experience on the customer side - something we know the competitive landscape better than the founders, and that can be a pretty big turn off.

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?

JPZ: We're comfortable investing pre-product and pre-revenue, but we prefer if there was at least a minimal viable product, or some beta customers. They don't need to be paying beta customers, but just showing that there's some initial signs of product market fit in terms of getting people to interested enough to spend time working on it. We don't have any hardline requirements in terms of of revenue or traction. We really look at the team, concept, problem, and how it's a strategic fit for what we're trying to do.

VN: How long does it take before you meet a startup and make an investment and how do you conduct your due diligence?

JPZ: Michael and I will do the sourcing of the investments opportunity, then if we want to dig deeper, we bring in our advisor network to get their feedback to further assess strategic fit. From there we weave their feedback into our investment scorecard, and go through our formal diligence, like most traditional VCs would (e.g. customer introductions, financials, IP review, etc.), write an investment memo, and then ultimately share it with our investment committee, and collectively make decisions from there. That whole process takes about four to seven weeks, recognizing that we're at the mercy of other people's schedules. In general, from first meeting to decision, we try to get things done in that time frame.

VN: 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 of a seed round vs a Series A round?

JPZ: I think the goal posts keep getting moved father and farther back. There's so many microfunds, CVCs, seed funds and new angels that have popped up over the last five years. Capital is much more accessible to companies than it has been in the past, so you'll always see this drop off between seed and Series A because that's when the more tangible business metrics will matter.

Obviously it depends on the category and the company, but it's not uncommon to see Series A milestones being in the $100-250k MRR range (for B2B). To raise those bigger rounds it's really demonstrating that you are well on your way to product market fit, you've been starting to generate some meaningful revenue and you're ready to add more fuel to the fire by scaling out your sales and marketing. It’s important to recognize that every fund is different. What works for one Series A investor doesn't necessarily work for another.

VN: Tell me a bit about your background. Where did you go to school? What led you to the venture capital world?

JPZ: Like most people, I've had a winding, diverse career path to get into VC.

I'm from from the Midwest originally, from Minnesota. I went to school at Indiana University, studied business, marketing and international relations. The first decade of my career I spent on the customer side, working at a global media agency. I was running the integrated media strategy for brands like Verizon Wireless, H&M, Puma and 20th Century Fox. I was really fortunate to have a front row seat to the mobile evolution. I was on the team Ii 2009 when the strategy started shifting away from the switchers- stealing customers between AT&T and Verizon, and more about getting people to upgrade to data plans. That 2009 to 2012 time frame was such a pivotal moment, looking back in terms of mobile and consumer adoption. As part of that experience, I started learning more about emerging technology and working with startups. At the agency, I was the person that started a mobile task force and started tracking adoption trends, new devices launches, and new advertising opportunities. I started mentoring with startups on the side back 2011 and just fell in love with the space and working with entrepreneurs.

I recognized there was a deficiency in connected large brands with emerging startups for partnerships- ultimately joined a startup called Evolution which had just launched. We worked with brands such as Kraft Foods, Unilever and Time Warner Cable to understand their business needs and match them up with different technology solutions for partnerships and POCs. One of things I did there was build out our partnership network, so I had relationships with hundreds of different venture funds, accelerators, shared work spaces, startup festivals, things like that. When we would get a briefing from a brand, I could tap into my network of people from London to Tel Aviv to San Francisco, and we’d get a huge pipeline of startup talent to consider for the briefs.

It was through that network that I had a relationship with an early stage fund in New York who, when this role opened up at MDC three years ago, recommended me. My vision for Corporate VC is that our domain expertise will help us identify these gaps in the market – and we’ll be able to test and learn with the companies in our portfolio. In addition to making investments – we see Ventures as an innovation pipeline for our agencies. Although we only make a handful of investments a year – we screen over 500+ companies, and often times we meet startups that we may pass on the investment for a variety of reasons, but still represents an interesting customer opportunity for our brands and the founder. Given that we often see things pre-product and pre-revenue, these solutions typically wouldn’t get to agencies of our size for another 12 to 18 months. This has become a great competitive advantage for us in the market, while also being able to connect founders with various customers around the industry.

VN: What do you like best about being a VC? What makes you excited?

JPZ: I love this question. You get to surround yourself with people that want to change the world. To me that is just such a fortunate position to be in, because you are constantly learning, thinking about the market and the way things are changing.

Something that doesn't get talked that much in venture is that is a human based business. My background is in client services. I believe our portfolio founders are my new clients. These are relationships that you have for five to 10 plus years, and you really get to know the founders – early stage investing is always a rollercoaster. It takes a unique relationship to be unconditionally supportive of a person, make them feel comfortable being vulnerable and transparent about whats going on, have healthy debates about the market and business, and ultimately try and contribute positively to their success.

One of the key attributes of a good VC is you have to genuinely enjoy helping other people. I think there's skills and there's character traits and I think that's a character trait that you can't really learn. You either get positive energy off of it, or you don't, and that's something that I've always thrived on. I've also always enjoyed being a connector and thinking about my network holistically, figuring out what connections between people might be helpful to both parties.

VN: What is the size of your current fund?

JPZ: We invest off balance sheet, so we're all opportunistic.

VN: What is the investment range?

JPZ: Our sweet spot is companies raising between $750,000 and $3 million with a valuation under $10 million.

Our initial check is usually between $100,00 and $250,000 and then we'll usually follow-on for one to two more rounds. We don't operate like a traditional VC in that we don't earmark a specific amount of capital for the life of the company, we evaluate it as the financings come up.

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?

JPZ: No.

VN: What series do you typically invest in? Are they typically Seed or Post Seed or Series A?

JPZ: We invest pre-seed, seed, post-seed, and Series A opportunistically

VN: In a typical year how many startups do you invest in?

JPZ: It varies per year, but I would say three to five (plus follow-ons)

VN: Is there anything else you think I should know about you or the firm?

JPZ: We recently rebranded to MDC Ventures (to move into our parent company) from KBS Ventures. This has allowed us to scale the expertise and venture initiative more efficiently, which is allowing us to open up more commercial opportunities and more domain expertise with our founders. We're really excited about that, because we just have so much curiosity and so much excitement from the network of people who want to get involved in venture. We're really looking forward to executing on that in the coming years.