Clear Ventures focuses on investing in B2B enterprise softwareRead more...
SignalFire invests from seed to Series C out of a $500 million fund
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.
Yujin Chung is Managing Director and Head of Platform at SignalFire, where focuses on accelerating the growth of the portfolio by directing SignalFire’s network of advisors in sales, marketing, growth, and business development, and by providing direct access to senior executives at Fortune 500 corporations.
Chung manages the Network team which operates programs at a run rate of over 150 events per year to drive expertise sharing, customer introductions, and community building between the SignalFire portfolio and the SignalFire Network of experts, corporates, advisors, and thought leaders.
He joined SignalFire from Andreessen Horowitz, where he was the first Partner in the Market Development Group. He advised portfolio companies on go-to-market and business development strategy and helped build the Executive Briefing Center, where he developed relationships with C-level executives of Fortune 500 & Global 2000. Under Chung, the Executive Briefing Center proved to be a key differentiator of the Andreessen Horowitz Platform strategy, scaling to the point of hosting several thousand meetings per year where executives shared perspectives on emerging trends and met portfolio companies for commercial partnership and strategic investment. He also owned strategic relationships with key distribution platforms including Apple, Google, Facebook, and Twitter.
Prior to Andreessen Horowitz, Chung was Associate Director of Digital Strategy and Business Development at Warner Music, where he led a CEO-priority negotiation on a major technology platform partnership, advised on digital partnerships spanning iTunes, YouTube, and emerging streaming startups, and recommended three strategic investments for review and execution.
Chung received an MBA from the Wharton School at The University of Pennsylvania, and graduated from Cornell University with a B.S. and a MEng in Electrical and Computer Engineering.
VatorNews: What is your investment philosophy or methodology?
Yujin Chung: There are probably two things that really differentiates us; one is that we have a very strong data and technology angle. For an industry that invests in data science and healthcare and all these emerging sectors that are cutting edge, venture capital itself is quite backwards. I'm coming from Andreessen Horowitz, I've got partners from General Catalyst, Kleiner Perkins, Bessemer, all these traditional firms, and we can tell you stories, and I’m sure it's still like this today, where it's like, “Oh, my kid told me about this app. We should go take a look at it,” or, “Oh, this angel is really good, let's just follow him blindly, no matter what.” You're sitting there like, “Really? This is how we’re going to invest?” We demand from our portfolio companies dashboards and analytics and, “Where's this machine learning project?” and then how we work is from the ‘70s, almost, where you only need a telephone and a laptop. So, we have a full engineering data science team, we have a CTO, which is unique in its own right, we've built our own proprietary software platform that helps us identify diligence and, most importantly, add value to our portfolio investments. Obviously, a lot of this is proprietary, but the net of it is that there's a lot of information out there around companies showing traction, or inferring traction, growth, revenue levels, and also on the talent level, trying to understand the quality of engineers. Are they open to leaving? Are they starting something new? When you marry that all together, you can actually develop a more data driven approach to understanding what's happening there.
The second part is really around our philosophy about working with our portfolio. As we all know now, capital is a commodity. Anyone can write a check; my money is no greener than your money. So, we have a very strong value proposition around how we support our portfolio: we have a full fledged talent team, which delivered over 1,000 introductions across the portfolio over the last year. We have a network of 100 advisors, we've built custom software to help them recruit, as well as identify customer leads in sales efforts. My team interfaces with hundreds of executives and corporates and experts to connect them to the portfolio, and we managed 155 virtual events last year to help them meet and connect. So, roughly a third of the team itself is focused on just supporting the portfolio. What I’m saying is we’re earning our equity; it's no longer where you're the investor, you sit back and wait and hope. It's more like, “We’ve got to roll up our sleeves, we got to do the work, and we want to help our companies get there a little bit faster and a little bit easier.”
One one fun story about our founding, which is a metaphor for how we think about our portfolio and how we invest: Chris Farmer and I go way back; I actually met him at my first job in consulting, I think, back in 2004. He's had this idea for over a decade, so he’s been working on this for a very long time. When he first started fundraising, he was meeting with various LPs and other managers, trying to obtain advisors and capital. He met this very prominent GP, this is probably one of the most successful GPs in venture history, and the meeting could mean a lot. If this worked out it's a stamp of approval, it could open doors and all that, but this meeting could not have gone worse. This guy literally said five minutes after meeting Chris, “Why are we meeting? This is a waste of my time. Are you done yet?” He could not have been more rude and disrespectful, because Chris was introducing this whole new model, it broke all the taboos of venture. There’s this traditional thinking of, “Venture is a craft and you have to learn and be an apprentice,” but he was proposing something far more disruptive. He was telling this story and I'm like, “Man, that must have sucked,” but he had a really interesting insight. He was like, “No, no, it’s incredibly motivating because if this partner had actually listened to what I was trying to do and critical analyzed and told me where my flaws were and what to improve, that's one thing. That actually would be quite demotivating. But he, and others, reacted almost religiously, like ‘This can't work, this is impossible.’ And when you hear that a lot, then you're onto something.” Now, with three funds and over a billion raised, yeah, we're onto something. It's clearly working and we're excited about it. I love that story because we feel very connected with our founders because we went through that journey too, where we have a very different approach, a lot of folks maybe didn't believe in us, or outright disagreed with what we're doing. But we had conviction, we had a vision, we had a plan, and here we are today so
VN: I'm sure that plenty of entrepreneurs will tell you similar about meeting VCs who would tell them, “Your idea can't work.” Probably Uber would tell you something like that, and a bunch other companies, like Airbnb. They didn't listen to the actual idea and then the person who does actually reaps the benefit.
YC: I totally agree. Also, maybe where our firm is different too, and I'm going to get a little squishy here, but it's about our ethos. We have an engineering team, we have OKRs, we have operational metrics and goals that we report on but, beyond that part, it's more that we roll up our sleeves and if it means we have to take a midnight call, or we have to work on the weekend, or whatever it takes, we'll do it. A lot of people in venture, some of these folks, they're not here; they’re in Aspen or Hawaii or whatever, they're living the good life, so it's hard to connect. Whereas, for our team, there's a definite culture of scrappiness, hard work and, “Let's get on that, we want to be responsive, we're going to make stuff happen.” Because our founders are the ones in the trenches working their butts off, so we’ve got to support them 100% of the time.
We did an interview with Zach Reitano, the CEO of Ro, where we were investors since the Series A, and we asked him how it was working with us. He had this great line, which I love, your founders can always tell you more about who you are than you can; he said, “You’ve got to invest with SignalFire, they're always there. They're always in your corner.” I love that. That's exactly how we feel about it too. We’ve got to be behind our portfolio 100%.
VN: What are your categories of interest?
YC: Sector wise, healthcare is a big category. There’s a lot changing, a lot of opportunity, particularly around telehealth. We have several bets in the telehealth category. FinTech, what’s happening there around new banks and modern finance, and a lot of that’s driven by demographic changes, folks being very wary of credit cards or traditional institutions and wanting to gravitate to something new. A lot in infrastructure software, the underlying guts and back end of a lot of software is evolving and changing. And then cybersecurity, that's a category where, obviously, the threats and the substantiation of those threats are gaining every day. And so, we have a lot of investments there.
Lastly, a very exciting category for us is around ecommerce infrastructure. You're seeing a lot of companies riding the boom of the Shopify ecosystem but a lot of companies are now selling picks and shovels to that category. That's been very exciting to see, we have a few investments they're all doing relatively well.
VN: What's the big macro trend you're betting on?
YC: Just like we're bringing data science and AI and machine learning techniques to venture, we’re trying to find companies similar in approach, doing the same thing for their industry. So, oftentimes internally we’re like, “What is the SignalFire for finance?” The portfolio spans a lot of categories, and we're trying to see which ones are feasible, which ones make sense. You've got a lot of sectors, like healthcare, in particular, where they’re almost stuck in the 70s, they're literally on paper and pen. Maybe they have Excel, if they’re advanced, so even some modernization around data collection, software and the like can make a huge difference towards efficiency, and then also bring value to the patient and to the provider.
VN: What stage/series do you invest in and how much is that in dollar amount for you?
YC: We invest from seed to Series C, so check size is from $500,000 to about $25 million or $30 million. So, there's a pretty broad diversity in terms of our entry point.
VN: What is the size of your current fund and how many investments do you typically make in a year?
YC: Currently it's $500 million and we do over 20 investments a year, so we’re pretty active across all sectors.
VN: What kind of traction does a startup need for you to invest? Do you have any specific numbers?
YC: The answer is that is it depends. The strength of the founding team, if there's real domain expertise, and then we believe the market opportunity is significant, then, yeah, maybe even if there's no traction you can invest pretty early to take on that risk. That said, though, what's the norm now? Even at seed, oftentimes they've launched. They may not have significant revenue, but at least there are some key points around, “Hey, this is working. There are some customers we can talk to. There’s some idea that this market is gravitating to this product or this market itself is growing and it’s super exciting.” That's enough to have conviction and to make an investment.
At the later stages, as you can imagine, and we have a separate team focused on those types of investments, it's much more around sustainability of the business model, around the strength of the core team. Have they achieved past targets significantly or reliably? There’s a lot more data and proof points to evaluate. And then also, where do you think the company is going? What's the vision? What's the story? That piece of it is always part of it.
VN: What do you look for when it comes to the team?
YC: I think it really is a team and market. You're trying to find the flux of the two. No doubt there's still the individuals, but you also want to have some understanding of the opportunity. There's the old adage that when a good team meets a bad market, the market wins. That might be a Buffett quote. You shouldn't do either/or, you're trying to find the match. So, we do a fair amount of analysis and diligence on the category and the industry as well as on the team itself.
But, to your question on the team, that part is really interesting because when we describe our data driven approach, people are like, “Do you even need to meet the team? Is this just purely a crystal ball and you press a button?” There are some firms that do that; we don't understand how they work but they are out there. The reality is that our approach is very much human and machine put together. It's augmented, because you’ve still got to meet the founder and then the criteria we're looking for are obviously their sector expertise, their professional background, their history of some success, but the other part of that really is grit, it's passion, it's is this person going to run through a wall to get this to happen? Is there something deeply irrational about this individual to make them want to succeed and pursue this?
I'll tell you a funny stat: we do a lot of founder get togethers, and a question I ask is, “What did you do when you were a kid or in high school?” I'll keep everyone anonymous because the answers are surprising but roughly 30% or 35% of the time in high school, or even earlier, they all had some kind of side hustle. Sometimes they were in web development and they got paid and they realized they want to do this full time, but oftentimes it's slightly illegal. It's computer piracy, it's software piracy, it's weed, it's other stuff. Then adjacent to that is, and this will be surprising, they're terrible in school, they hate school. They just can't stand the structure and the tests and they're bored. They’re obviously very bright and talented, but the monotony of a curriculum is just strangling them and so they can't wait to get out, which is why they do all these side projects. To be fair, as with all things, there's no pattern, this is a portion of them, but it's just interesting that when we go around you just keep hearing this. You're like, “Oh, that's interesting, there's some gene that shows itself early,” and as long as they keep on the right path and have success, it will come out later. Also, along with that entrepreneurial DNA, there’s irreverence. It's like, “Why does it have to be this way? I don't want to follow the rules.” You see that across the board on our portfolio as well.
VN: You said that a lot of times now with seed companies they've launched, they have a product. So, what do you want to see from the product when you invest?
YC: The Holy Grail is there's significant revenue, good pricing, but that takes time. At the initial onset, you're really looking for NPS. Do the customers absolutely love this product? Can they live without it? If it went away would they be unbelieving disappointed? That's one of the questions we ask sometimes on diligence: “If this went away, what would you do?” Sometimes they answer, “Well, I would just use an agency,” and it's like, “Okay, this is not that core.” But oftentimes you also hear, “I wouldn't know what to do. I would be at a real loss.” So, there's just a sense where the founder and then the customer, there's a real match in understanding.
Also, if you talk to founders, there's a comprehension that it's not just that they're solving this pain point, but there's a real empathy for understanding the entire use case, understanding how this product fits into their customers’ workstyle and workflow. This is a pretty dated but Clayton Christensen has the example of why people drink a milkshake from McDonald's; this is an actual consulting project. You think, “They're thirsty,” that's your intuition, but he did a lot of customer interviews and analysis, and oftentimes the main answer was, “I just needed something to drink on my commute to work.” They optimized the product by making it easier to fit into a cup holder, they realized it's part of the overall flow, that you're bored on the drive and you need something to do, and it's sweet and it's delicious and it works. We're trying to understand if our portfolio understands and has that kind of empathy in delivering itself, because that will give you a sense of not only if that product works but, as they expand to adjacencies and launch other features, if it can do that reliably and consistently over time.
The other element is we have actually a great pricing advisor, a gentleman named Keith Pradhan, who runs pricing monetization at LinkedIn. We’ve worked with him now for five years and he'll actually help our portfolio think about segmentation as they get scale and they’re launching, and how to optimize revenue. The main lesson he provides for our founders is the conviction to raise your prices because, oftentimes when you launch you’re nervous. It's just fear of rejection, so you’re giving it away for free or it’s heavily discounted, because you want to make sure they get the logo or there's other objectives in play. He provides them the process, the advice, the guidance to be like, “You can raise it, here's how you should do it. Here's the way to do it thoughtfully and carefully by tier and to have a very sophisticated approach.” When they do that, that itself is telling, because what we've seen consistently is that they double and triple prices and it's fine, the customers don't leave. Is that always the case? No, but that's a signal itself. More often than not, we can double or triple price and we see this product is really sticky for the customer and then we get very excited about that.
VN: That reminds of something someone told me about a liquor brand, maybe it was Jack Daniels, or maybe it was some other brand, where it was very low price, and they weren't selling anything. Then they raised the price so it would seem more premium. They didn't change the product but they started making all this money because people were buying it to show they could afford it.
YC: Price is a feature, sometimes. We just had a council with this wonderful woman named Marta, who is an expert on enterprise sales pitching, and she was remarking that if it’s too cheap then there's no value. There's a sense to the buyer, particularly if it's an enterprise CIO or CXO, about what it's worth if you're giving it to them at this cut rate price, relative to your competitors who are charging hundreds of thousands, or even seven figures. So, if you go too low, you're almost hurting yourself in that sense.
The other thing is, don't make it too convenient, don't make your value prop too extreme. One of our portfolio committees was saying, “You can install in seconds,” and then Marta was like, and I agree with her here, “I’m sure that’s true but nobody really believes that software gets integrated in a second. It just doesn't sound believable. You’ve got to say, ‘In a day.’ Take it back a step, just make sure that you really understand the customer's perspective, and there is a realm of believability. You can be good but if you're too good, there's no conviction.’”
I love that example you gave because there have been so many times where, not only do they not lose demand, but demand may actually go up. It’s irrational, if you think about it with classical economics, but that's human psychology, that's consumer enterprise marketing for you.
VN: What do you think about valuations these days, especially given what’s happened over the last year with COVID? Were they affected by the pandemic?
YC: For the first month or two, there was definitely a correction, where it was like “Oh my god, prices are dropping.” Our Chairman, Walter Kortschak, the former CIO of Summit Partners and now CIO of our firm, has been through five cycles. So, we actually did this massive webinar on Zoom, and about how the portfolio attended, for him to share some of his lessons, his learnings, what to look out for, what to be careful of. And then along with that, we have two senior operating partners, a woman named Tawni Cranz, who's run HR at Netflix where she penned the Netflix culture deck, and gentleman named named Chris Scoggins, the former general manager at Datalogix, where he joined very early and then sold that company to Oracle for I think $1.7 billion, so a very successful scaled growth story. They both have lived through various downturns, particularly in 2008. We did a lot of work around how to think about layoffs, budget, focus, how to survive, and just to help reassure companies.
We had some portfolio companies, particularly around travel and hospitality or retail, who got hit pretty bad, so there was a lot of retrenching and refocusing, but the flip side was we had a lot of portfolio companies do extraordinarily well. In particular, as you can imagine, Ro on the telehealth side; in fact, our broader telehealth portfolio all received something of a tailwind or bump. We have a company called Tempo, an at-home fitness company, kind of the Peloton for weight lifting. They’re doing extraordinarily well; I mean they already had a great product in concept, but when gyms closed they received a huge boost. ClassDojo is one of our companies in the edtech space: they're a communication collaboration platform for teachers and students in the K-8 segment. We're all learning via tele-education now and they're the primary communication mode, so they received significant growth as well. And so the net of that is many of our companies raised pretty healthy follow-on rounds and additional capital.
Just to finish with what you asked, a lot of that has continued to this day. Valuations and multiples have never been higher. You see some very significant players that are coming from the late stage, maybe traditional hedge funds or private equity players, moving earlier and earlier and earlier, and not just writing at significant valuations, but writing checks very fast. Maybe they take one meeting and they're ready to roll. So, that part of it has been interesting to see. On the very late stage, with things like SPACs and all of that additional capital, the whole market is moving to tech, in a broad way, which is just making things a lot more complicated, but also a lot more interesting. You're seeing a lot of interesting plays and excitement and innovation happening, but it's also a lot more complicated and competitive to a certain degree.
The last thing I'll say is that you're seeing a lot of individual angels, micro VCs, or even this new concept of rolling funds where, though AngelList, you’re able to raise capital maybe $5, $7, $10 million dollars, relatively seamlessly on a regular basis. That has lowered the barrier of entry for a lot of folks who maybe had some capital but now can now invest more aggressively. And so, it's just amazing to see how things have flowered. I joined venture capital in 2010 at Andreessen Horowitz, which itself was an innovative model, and we thought, “Okay, this is the beginning,” but the last year has far outpaced anything I saw when I was there back then.
VN: We’ve already seen the amount going into early stage companies is growing, so what used to be a Series A is now a seed and what was seed is now a pre-seed round. So, if hedge funds are going earlier, and presumably writing larger checks, what effect does that have on the entire venture ecosystem and those companies who need to raise those early rounds?
YC: In general, it's great for the founder; obviously they have a lot more leverage, they have a lot more options in terms of capital. No doubt there's going to be situations where we see valuations rise or it’s ahead of the market just because they're investing more out of a thesis versus the individual company. But there's also a sense of caution because when you're investing late it really is about capital allocation and valuation, and that sort of thing. When you're investing early, and we all know this, this isn’t anything groundbreaking, you need a lot of guidance and support. It's not just around, “This is going to work automatically.” I'm kind of segwaying into what we do, but you need customer introductions, you need help with hiring, advice on pricing and go-to-market. You're going to need help with finding that next engineer, and the savvier founders realize the capital is out there, but you really want more of that operational support and feedback. That's going to make this company last, versus just another $5 million or $10 million, or whatever that number is.
VN: Venture is a two-way street, where investors also have to pitch themselves. How do you differentiate your fund to entrepreneurs?
YC: For the best opportunities, it's very inverted; we are competing with other firms to invest, and we better have a story and a value proposition. So, the broader story is that we have just an arsenal of resources to help with hiring, with advice, with network access. We have a full fledged effort there, and my team focuses primarily on the network access; everything from customers, advisors, experts, strategic investors, even platform access. If you hit a roadblock at all and you're stuck, you call me and we'll find a way to connect to that person. We manage a network of over 10,000 people, so there is probably someone we can talk to, or a friend of a friend who helps us get to the answer and make this smoother and easier.
That can be as simple as email intros, but the best way is actually through events, so we host about two to four virtual gatherings on any given week. In aggregate, last year we hosted 155 of these, so it's been very active. We have a lot of intensity behind us. We're designing these events by industry; so let's say we have a healthcare council, we'll bring our network of leaders in that category together, we’ll invite our relevant portfolio, and then we'll just broker a friendly conversation. We'll talk about trends, what's exciting, what's happening. The idea is you just get to know each other. It's warm, it's friendly, it’s informal, but no doubt we want people to connect afterwards. We've driven a lot of leads and value to the portfolio that way. We have a company that has a partnership with Snowflake through that, we have another company selling to VC brands, so it's a very systematic and easy way to get access to friends of ours.
The second thing is around our expertise. I don't care if you're a second or third time founder, whatever you thought you knew about sales and marketing and operations and finance is somewhat dated. It's changing remarkably fast, and so we have a set of councils around helping with that. For example, just yesterday we had one around enterprise sales pitching. We had a sales expert critiquing everyone’s pitches, giving them actionable feedback on how to improve it, how to think about that. Next week we have one on financial planning and analysis. A lot of our companies are scaling and they have the capital and business models working but how do you do think about resource allocation, budgeting, and relevant topics? We have another one around enterprise lead generation strategies. Now that you have a core sales team, how do you find ways to increase the funnel, be creative around attracting leads, inbound, and that sort of thing? Those are just examples, but there's a whole bevy of areas or topics that we try to bring together.
The last thing to note about differentiation is, when I was at Andreessen they were the pioneer around the idea of corporate access. Other firms are now hiring to collect platform teams or other resourcing but what I often hear, and this is from our founders as well as from research, is that they're generally thinly staffed. It's like one person, and that person just makes a lot of intros, but it's not like there's a strategy or thinking behind it. Our firm is really rigorous about this. When we have a new portfolio company, we have a formal onboarding, we are taking notes, we're taking all those actions items. It sounds very mundane but it really is important; we take this stuff super seriously. We move it into our platform, we follow up on it, we have weekly meetings around, “Hey, is this done yet? Are we finished with this? Where is this at?” We have a lot of rigor around the process. When we do our council calendars, we do a ton of surveys and portfolio interviews. The portfolio is our customer, this is a user resource, so we are trying to really understand, across the portfolio, what topics or common themes are we hearing so we can design the content and the events to be the most impactful? The net of that is that we also measure this. So, on a quarterly basis, 70% or 75% of our portfolio attend at least one council throughout the quarter. On average, they’re attending one to two a month, so there's heavy frequency and engagement. We're not just doing events for the sake of events. And then we do a lot of feedback around if it was impactful, if they got new leads, did they change some of their strategy or operational approach? We have a ton of examples where that's actually the case, where this is actually moving the needle for our portfolio.
I give you all that to show that there's a lot of rigor and a lot of thought as we're trying to make this an actual operation, versus, “Here's a dude who does this.” We're really proud of that because our team is significant here, and we have an MPS of 94. I mean, it's just something where we deliver results for our portfolio, but there's a lot of work and effort to make sure that’s consistent and high quality at the same time.
VN: What are some of the investments you’ve made that you're super excited about? Why did you want to invest in those companies?
YC: One I mentioned before but this is just an awesome company is Ro. That was one where the founder story, he himself suffered from a lot of men’s health issues, specifically ED or erectile dysfunction. He’s been very public and very authentic around sharing that story, and wanting to solve that. And then Zach, or “Z,” as we call him, is just a force of nature, like you feel the energy and then the commitment to this. But, then along with him, his core team, like Rob Schutz, the Chief Growth Officer, and then Saman Rahmanian, the Chief Product Officer, are just an unbelievably talented and thoughtful group. I've worked with Rob on occasion, where we've tried to connect him with experts around brand and consumer marketing, and he came from BarkBox, which itself was a very successful consumer-led startup. You can tell they've thought about growth in a much more sophisticated and much more advanced level and since then have proven that out.
The other element along with that is that the business is very robust and fast growing and there's the financial element of it, but obviously there's a very strong cause behind it. They're literally trying to bring monetization to an industry that's strife with embarrassment, strife with inefficiency, and unnecessary process, and they're trying to streamline all that. They started with ED and a few prescription elements but the goal is much broader: it's to be a modern health company, to treat a variety of causes, a variety of diseases. Every month they’re making progress toward that and it's exciting to be part of that.
VN: I actually just did a podcast with Saman. It was a great conversation and he's a really interesting guy, and he talked a lot about that vision, that evolution and also the future of the company and he's very passionate about it.
YC: With that team we’re super humbled, and also super proud of what they've achieved. It's awesome, it's unbelievable.
Another company that’s growing and doing really well OneSignal. They enable brands and startups to install alerts and notifications for their product. This is one where it actually started as a gaming company, and then made a pivot. It's very interesting. It's similar to Slack, you might say, where they were a gaming company and then moved into enterprise software. George Deglin, the CEO, has been unbelievably deliberate around how he's thinking about the company's growth and the hiring of an exec team, and they brought on a great set of leaders who are building that company. They’re doing just a great job in terms of continuing to hit milestones and being successful, so that's one we're excited about.
VN: What are some lessons you learned?
YC: I joined Andreessen in July 2010 and then moved over to SignalFire in August 2015. So, I’ve been in VC for almost 11 years. One lesson I’ve learned is that our job is to be on the sidelines. When our companies succeed, we're there to cheer and applaud them. They take the credit, as they should, but the work is done when things go wrong, and that inevitably will happen. So, what I've learned through working with so many founders and companies is, when you make the investment, there's always a lot of excitement. You did all this research, there's a thesis, we're going match up, there’s this opportunity and the modeling and all that. But the reality is we still don't know, it's still early, and so the point is that we have to stay pretty even keeled and sober and focused on what matters. No matter how good that initial investment or thinking is, every company hits a roadblock. Oftentimes, it's impossible to have seen beforehand, so you've got to be calm and ready to support and be helpful and to understand what that is and roll up your sleeves and do something about it. I think a lot of other firms whine or they complain; I don't want to poo poo everyone there's just folks who are like, “How did you miss your quarterly? What were you doing?” when the reality is that this is going to happen, there's no straight line to success, so when you hit a roadblock, what can you do? What ideas do you have? How can we support the founder in that vein?
Now, some of that's operational, but oftentimes it's almost more emotional. Maybe you lose a significant customer, or maybe a member of the founding team leaves, these difficult challenges that our founders go through. It’s our job to be like, “This sucks. We've gone through this as a firm, we've lost some great people. That's just how it happens, but we have to keep going. We have to persist, we’ve got to be productive. It’s okay, there’s no problem with acknowledging that pain and loss, it sucks, but then there's a time period you got to move on and we have to fix this, we have to figure this out.”
So, I guess my main lesson there is that I try to support our portfolio as much as I can. It's hard, because we have over 90 companies now, and it can be a resource issue but, to me, it's something where you never know what's going to happen, you always have to have a prepared mind, and we have to be in their corner no matter what happens.
VN: What excites you the most about your position as VC?
YC: One is obviously the founders. I love working with founders. That's very generic but part of the reason is, I've worked in corporate jobs. There’s nothing wrong with corporate jobs, but for myself, personally, it's just very frustrating because if you want to do something, you want to get something done, someone's always doing a hand off, or someone's like, “Oh, I'll get someone to delegate this,” and it's like, “Oh my god, this is going to take forever.” I'm not the kind of person who wants to wait, I want to get stuff done. The founders are great, they're super execution oriented, they're like, “We need to get this done.” They're clear on what they need, and let's make it happen. That's very motivating because a lot of our work is connections and advice and finding the match between folks, and when you get that right, there's just so much value you can give. They're eager to learn, they're motivated, there's no bullshit, there's no politics. The early stage is really fun because when you go later stages there's all this weird stuff around incentives and economics, dividend recaps and you may not be on the same page as the founder. But on the early stage, if that company doesn't do well, we're not going to do well either; we have to work together, we have to collaborate, it's very clear. That kind of purity, that simplicity, I really love.
Part of that actually comes from, this is a personal thing, I grew up in a family business. My mom was a computer programmer for 20 years, so she had the corporate job. She somewhat hated it but it delivered a living. When I was in second grade she discovered this thing called Kumon, which is an after school math program. I did that for a year, I made some progress, but my mom was like, “Oh, this could be a great business.” In a couple years she was running three franchises and we added all these after school programs like writing, math, science, computer programming classes and then we added SAT prep, which is a very lucrative business in its own right. It became our family business and we were working six days a week. My dad, he was a professor at that time but he still put in three or four days a week writing the books, helping operate the whole thing, while my mom was the main teacher and principle, and my sister, who’s five years older, she helped onboard customers and set up programs. I was the janitor, and I did data entry. We were all just hustling. It was great to be part of that, our family is very close, but it's hard. I can tell you stories: like one time I'm in the bathroom and I know it's clogged. I can't go back to my parents to be like, “There's a clogged toilet.” My mom will be like, “Fix it. You’ve got to do it. I'm not going to do it, I'm busy right now, so you got to just do it.” There's this ethos where I feel very much this, I don't know if you’d call it empathy or a connection, to our founders, because I've seen my parents do it. I feel like we’re all trying to do the same thing, with limited resources, and trying to survive. So we’ve got to do that, we have to be there to support them 100%.
The last thing I would say is we've got a great team. Again, it's corny, but you hear stories about a lot of firms where it's sharp elbows and it's competitive, there's so much at stake and a lot of ego and whatever. Our firm really just doesn't really have a lot of that. We all are on the same page, we're very team first, we collaborate wherever we can. If anything, there’s almost too little ego. I make fun of myself, the whole team is very self deprecating, we don't take ourselves seriously. We take the work seriously but not ourselves. There are many jokes about me and doughnuts and dad jokes and I love it, I think it's great. This is a long journey; they say in venture capital that it's “a get rich slow” business. There's no rush here, it takes time, and because of that you better enjoy yourself along the way so we try to make sure that we're calm, we're focused, we're cracking jokes, we're having a good time. Our team is great, they’re humorous, they’re hard working, they're scrappy, but it's very much like, “Let’s get to know each other as people too, and bring their whole selves to work.” Otherwise, this is gonna be a long journey.
VN: I've heard some VCs talk about investing in this in the early stages, that it’s almost like a marriage: you’re going to be together for like 10 years at least, so you better have some chemistry and find a way to work together.
YC: Absolutely. For me, actually a lot of the joy is understanding an individual as a person versus as CEO of a company and trying to connect there because there may be challenges or other things you don't know about until you have that relationship, and then it brings everything to focus, and then you can be even more supportive and empathetic. Otherwise, you're just dealing with half the person. And, as you can imagine, the founders themselves are a wonderful group. They're high energy, very quirky, brilliant, but also sometimes OCD, sometimes panicking, there's a whole variety of personalities, it's great. It’s a lot of fun. It brings a lot of energy and to my and my team’s life, as well.
VN: Is there anything else that you think I should know about you or the firm or your thoughts about the venture industry in general?
YC: I probably mentioned this before but just this ethos where we really are focused on supporting our founders. We're still an emerging brand; we have some efforts out there, but we're still kind of new. The way we win and compete is through our founders and portfolio references. There's so many stories where founders will talk to our other portfolio founders, and they’ll say not just that we're nice or good people or whatever but, “Here are three things they did for me last week. Here's are four introductions, here’s an expertise, here's a session that we did.” There are specific things that we provide and that's a big part of it in terms of what makes us unique and the message we want to make sure people know. We spent a lot of time and energy on this part of it.
You can run an organization where it's like, “Here's a request, you must deliver it. Make sure to follow up.” It can feel very robotic. Something we've trained our team on is to try to connect with the portfolio, whether it's the CEO or their executives, to try to understand who they are, develop a relationship, and be supportive and listen, no matter what. A lot of the value we add is encouragement, it’s an ear, it's advice. What they're doing, it’s very challenging, it's very tough. No doubt they're hearing a bunch of negative feedback or naysayers, just like Chris when he was starting out, and then our job is to remind them, “You can do this, we're going to get through this together. And we believe in you and we believe in the concept, and we're going to make this happen. And screw those other guys, they don't know what they’re talking about.” I want to always make sure they know we're in their corner, and we're going to fight for them, no matter what it takes.
Support VatorNews by Donating
Read more from our "Meet the VC" series
The Games Fund is a Moscow-based $50 million early stage fund that launched last weekRead more...
Envoy Ventures is the investment arm of consulting firm Envoy GroupRead more...