The fund focuses on the collision of healthcare and technologyRead more...
Before joining Mindset 18 months ago, Miller co-founded IBM Blockchain Ventures
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.
Jules Miller is a partner at Mindset Ventures.
Miller is an experienced investor, 3-time entrepreneur, corporate innovation leader and ‘intrapreneur.’ Prior to joining Mindset she was an executive at IBM, where she co-founded IBM Blockchain Ventures, launched and ran the IBM Blockchain Accelerator, and led the IBM Blockchain Garage for North America. Prior to that she was a partner at LunaCap Ventures, a venture debt fund investing in diverse founders, and was COO of gender lens investing pioneer BRAVA Investments.
She co-founded and led two legal tech companies: Evolve Law (acquired by Breaking Media), a digital media and events company for legal innovators, and Hire an Esquire, a venture-backed SaaS enabled marketplace startup providing attorneys on-demand to law firms and in-house legal teams. She also founded Carbonado Group, an environmental sustainability consulting firm, and spent 7 years as an ‘entrepreneur’ helping companies including EY, Salesforce.com and Tiffany & Co. to launch and grow new business units around environmental and social responsibility.
Miller earned her BA from UCLA and her MSc from The London School of Economics. She is a Kauffman Fellow (Class 22), frequent keynote speaker, and co-author of The Corporate Accelerator (Wiley, 2020).
VatorNews: What is your investment philosophy or methodology?
Jules Miller: Mindset Ventures is an early stage fund. We invest seed through Series B, specifically in enterprise software, B2B software. We focus on a variety of verticals within that category, so we like FinTech we like and InsurTech, we like AgTech, and pretty much anything that's selling directly into the enterprise. Our check size is about $1 to $2 million on average, we don't typically lead deals, so we'll be part of a syndicate, and we like to add a lot of value. So, we have a platform team that helps with research, with fundraising, with introductions, etc, and we try to be a big value add for our check size. The last thing I'll mention is that we have close ties to Latin America, so it's not required to be part of our portfolio but if there's an opportunity to expand into Latin America, particularly in Brazil, we've got a team on the ground in Sao Paulo that helps with that.
VN: What’s the opportunity that you see right now in enterprise software? Why is that an interesting space for you and why those particular verticals?
JM: I love enterprise software; I spent most of my career in it. Businesses are changing every day; the digitalization of pretty much everything we do when we're doing business is happening on a scale that is just enormous and there's so much more to go, we've only scratched the surface. So, we think there's a lot of opportunity for enterprises to continue to digitize, to change things that they haven't digitized, and then to continue to evolve what they already have. Especially when you have multinational companies operating around the world, being efficient is important and the best way to do that is with instantaneous, immediate, online, digital information.
VN: How has that space evolved, especially recently? A lot of things have changed a lot in the last 18 months, so can you talk to me about what things look like now versus early 2020?
JM: Obviously the pandemic has caused a lot of new ways of doing business. Or, actually, they’re old ways of doing business that have just been escalated and emphasized while we're all mostly working from home or have for a while. What we're seeing is that trends that started before COVID have actually escalated quite a bit, so that's both trends like working from home, but then also particular industries that were resistant to actually being fully digital are really adopting technology in the way they should have. For example, we have a company in our portfolio called Priori Legal and they're focused on the legal industry, which was a little bit resistant to change and was never an early adopter, but they were starting to use marketplaces like Priori for talent and for managing their in-house legal needs. When the pandemic hit, they grew exceptionally fast because, all of a sudden, the trend that had started, was now business critical and we're seeing a lot of different industries.
VN: What's the big macro trend you're betting on?
JM: The big picture macro trend is that people need to be able to work from wherever, whenever, with whatever devices they have. And so the the other industry that has seen a lot of impact is cybersecurity: we need to be secure in our devices, we need to be secure working from home on networks and in coffee shops or wherever we choose to work, there needs to be the ability for companies to feel safe and secure that their employees are keeping their information confidential, they're not going to get hacked, and that they're also comfortably working from those places. So, we have a really interesting company in our portfolio called Eclypsium which is doing firmware and hardware security which, again, the pandemic has emphasized the need for things like that.
VN: Is cybersecurity a space now that you were looking at before COVID, or are you more interested in it now than you were before the pandemic?
JM: We were looking at it before, for sure, and are still looking at it now. We've invested in the US and Israel and we have quite a lot of companies out of Israel as well that are doing cybersecurity and we are continuing to look for that in the US.
VN: You mentioned your focus on Latin America and I'd love for you to do a dive into what's happening there and why that's an interesting market for you.
JM: Just to be clear, we don't invest in Latin America, but we will help our companies expand into Latin America. What we're seeing is that companies that might not have had Latin America on their radar for a first first market to expand to, or even in their shortlist of markets to expand to, now they are.
There's a couple of our areas of opportunity and FinTech, in particular, has been one where Latin America has presented an enormous opportunity; there's a lot of neobanks, the banking systems are really in a position in Latin America where they really need to evolve, even more so, sometimes, than the US banking system. So, there have been really interesting startups out of Brazil and Latin America focused on financial services and banking, and some of the big non banks have come out Brazil, but also the opportunity for US-based FinTech companies to expand into Latin America has been really interesting. So anything around payments, cross border payments, we're looking at a lot of blockchain and crypto companies, we’re looking at a variety of things that make the stability of the currency less of an issue, and we’re looking at things that the businesses who are doing cross border transactions can use in order to stabilize some of the risks that are there.
VN: When I talk to companies and they say they're going to expand, it's always Europe or Asia, it’s almost never in Latin America. I don’t want to say it’s ignored but it's just not a top of mind region for a lot of founders.
JM: Exactly. The other area where we find a lot of opportunities in AgTech or AgroTech and that's that's pretty self explanatory because Brazil has an enormous farming and agriculture industry, but not an enormous amount of tech. So, we have tech developed in the US or Israel and there's a really big opportunity to expand into Latin America and there are also interested parties on the other side of it and so that makes it a really easy first market.
VN: What is the size of your current fund and how many investments do you typically make in a year?
JM: We just recently closed a $53 million fund III, so we do about 10 to 15 investments a year on that and we're currently actively deploying it, and we will be raising our next fund sometime next year.
VN: What traction does a startup need for you to invest?
JM: As an investor, we actually really do like to see traction. So, very rarely will we not be a pre-revenue company, even at the seed level. I've been a founder myself a couple times and even though I know that it can be difficult to start a product, especially when it's a deeper tech, what we really want to see is the team's ability to execute and traction is a good proxy for that. So, we want to see that there is some product market fit; it can be early but we want to see that there are paying customers, that you're learning from those customers, and that, with this round of funding that you're raising now, you can put fuel on that fire and scale it. We're the type of investor that will want to see some early traction at the seed stage, some real traction at the series Astage, and some significant traction at the Series B stage.
VN: Do you have any specific numbers you’re looking for?
JM: It varies a little bit by industry and by stage but we typically want to see a clear path to at least $1 million ARR, even at the seed stage. If you're not there, we want to see a pipeline that we feel comfortable can get there pretty quickly.
VN: What do you look for in the team to make you want to invest?
JM: Of course, the team is critical, and the earlier it is the more important the team is. We're really investing in teams at the early stage and so what we want to see is a founder who is passionate, who cares about the space but, more than that, is particularly well suited to the space. Why is this a problem that you, particularly, can solve and are dedicated to solving for the next five to 10 plus years of your life? And so, I always start with the founder's story and, to me, it doesn't matter if the tech is amazing; if the founder story doesn't fit with the product and with the actual company, then it doesn't matter. I want to see founders who are in it for the long haul, who care deeply about the business that they're in.
I also like founders who have a different perspective; I try to fill my pipeline with non-traditional founders, whether that's women, people of color, people that are not from the coasts, so we try to get a diversified portfolio. Of course, we invest in a lot of different companies, but I try to make sure that we're also taking very seriously companies that don't come from traditional sources.
VN: Let's do a little bit of a deeper dive into that. Why is that important and what do non-traditional founders bring to their companies?
JM: First and foremost, my experience comes from my own as a founder. There were a lot of really incredible female founded companies, which is what I can speak to, that we're not getting the same access to capital that that our peers were and were building equal, if not better, companies. As a result, they had a different trajectory in terms of scaling. That was where it comes from, at least in my personal investment thesis, that are really incredible companies that, with the right capital with the right partners, can scale in an incredible way.
What we find, and what I've learned over the years investing in a wide variety of founders, is that I always look for someone who has something to prove and who has hustle and who can make something happen under extremely difficult situations, which is the epitome to me of a startup. This is not an easy path to take, and you're never going to have perfect information, you're never gonna have perfect access to capital. And so, I want to see founders who can make magic happen with a little bit at the beginning but then, when they raise capital, can really make enormous things happen and want to make those very, very big things happen. Everyone is different, of course, but what I find is I want founders who don't come from the traditional Silicon Valley profile, have a little more something to prove, and I like that drive because that really motivates you to get through some really hard times, which there of course will be in the startup journey.
VN: We’ve all heard about how hard it is for women and minority led companies to raise funding, but now there are funds that are dedicated to that, specifically. Do you think that it's better now than it was? I’m sure there’s still a long way to go.
JM: Yeah, of course it's better. Just the awareness and the amount of capital going into actively seeking diverse pipelines is much better than before. I still think that those check sizes are smaller, so there are more funds doing this, and there are more investors who are looking for diverse founders, but they are not necessarily writing the same size checks that the traditional funds are. So, I want to see more money going into this space and we’ll continue to be part of that, I hope.
VN: Getting back to what you look for when you invest, tell me about what you like to see from the product. Do you like to use it before you invest?
JM: Of course we want to see a product that customers will use. As an enterprise software investor, sometimes it's hard for us to actually use the product because we don't have the supply chain or the massive workforce that we would need to actually fully test the product, but what we make an effort to do is customer references. So, during our diligence process, we typically talk to a handful of existing customers and we’ll also talk to potential customers. So, even if we don't invest, we typically can make some introductions to potential customers who seem interested in the product even if they weren't talking to the founders before. But what we really want to see is real time, what's going on with the product. We do like to see a demo of some sort or use it if we can, but then we rely very heavily on customer references.
VN: Finally, talk to me about the market, and how you determine, especially at the early stages, that it will exist. Maybe it doesn't exist yet but it has to when they get to those later stage rounds, so how do you determine that? How do you look into that and see if that market is going to exist for that company in the future?
JM: It's a tough question because every founder that comes to us of course has a market slide with, “we have an x trillion dollar market or a multi-billion dollar market,” and, for the most part, that's true, there's a lot of opportunity. But then, when we do our analysis, we really try to slice and dice that a little bit and see what the total addressable market is, what we think this company can actually capture realistically, and what the competitive landscape looks like. It's interesting because there are some really interesting companies in big markets but they are highly, highly competitive. We like founders to have a little bit of focus and so, while there might be opportunity to expand into adjacent markets, we like to see a very, very, almost maniacal, focus on one market. One example I’ll share from our portfolio that I really love is a FinTech company called Future Family that's focused specifically on fertility financing. They're focused on IVF and egg freezing financing, going through clinics and employers, so they’re a B2B channel. It's interesting how often we heard that that was a niche market, but it's a $15-plus billion dollar market only expanding and so we also look for markets that are a little bit untapped; there are certainly other players in that space, but it's much less crowded than if you look at something like real estate financing or something else where there's tons and tons of players in the space. So, we look for a big market but also where we believe that the company can have a competitive advantage in some way.
VN: When they say that it’s “niche,” it's probably because it's a problem that mostly affects women, even though women are more than half the population.
JM: It's really about families and so I actually found it offensive that every time we would call and do a reference call someone would mention that the market was niche. It’s one in eight families and you might think it's a woman's problem but it takes more than one person to create a baby, so it's an interesting way to look at it.
VM: I want to ask you about valuations and check sizes. There seemed to be fear at the beginning of COVID about deploying capital but 2020 was a record year and 2021 is going to be another record year. Check sizes are getting bigger and valuations are getting bigger, so can you talk to me about what you've seen happen and what that means for those companies at the early stages getting higher valuations going forward?
JM: The market has certainly been interesting in the past two years. There was that fear at the beginning but then, as you said, we've had a record year. You've got different players coming into the market who think differently than more traditional VCs and who are deploying enormous amounts of capital. If you're an $8 billion hedge fund, it doesn't seem like a lot of capital, but it does to a $50 million VC fund. So, we are getting new players, which is important because it is putting enough pressure on the traditional VCs to rethink our model. So, what's happening right now in the venture world is that we're rethinking what venture is, what's important, how we invest, what our profile is, what our brand is. How do we help entrepreneurs? Why would an entrepreneur want to work with us as opposed to another fund? And so every fund is going through this thought process right now because of COVID, because of new entries into the market, because of valuations, and it's forcing us to have a little bit of a reckoning with ourselves on what we have to offer in the market. This is, as it is in every industry, good for evolution, which the VC industry really needs.
What we’re seeing, in particular, as you said, very big valuations, lots of capital being deployed. That can be very good for a company if they're prepared for it, because then they can really scale quickly and do some exceptional things. It can also be very dangerous, because too much capital when you're not ready for it can also raise the expectations and cause you to burn through capital in a less efficient way, and not be prepared for the follow-on round. So, we are always cautious. Our fund is a little bit different in that we don't have ownership thresholds so we can be a smaller check in a bigger round or we can get a bigger check in a smaller round, we we don't have to own X percent in order to participate, which gives us the freedom to participate in a variety of rounds, which is useful. What we to try to vet for when we're participating in a bigger round, where there's a lot of capital and a very big valuation, is that the company is ready to execute and that they can actually get to the next milestone, whatever that is, either X number of customers, revenue etc, because they're going to have to raise downstream capital. You don't raise a big round to save it for five years and spend it over five years, every round you raise should be spent in 18 or so months, and be prepared for the next significant milestone and the next either capital raise or exit or whatever it is. And so, if you don't know how to spend that money effectively in a very short time period, and then be at a stage where you can raise the next round of capital, then that's not a great situation for the investors or for the entrepreneurs. I expect to see a lot of down rounds at some point when the market stabilizes a little bit, but the ones who can raise that capital and are prepared for it are going to be very well positioned to do extremely well.
VN: Have you seen that happen already or is that something that you think is going to happen down the road? Are companies already starting to take those down rounds because they have those big valuations?
JM: Not yet, but they will.
VN: Talk to me about what that means for the smaller funds. You talked about being able to be a smaller check in a big round so you can still invest into those companies, but if those hedge funds come in, and they put a lot of money into these companies, does that edge out most of those smaller venture funds? Is it harder for them to then participate in those rounds and what does that mean for the market if that's the case?
JM: It means that we have to prove our value, which we should be doing all along. We live and die by our reputation; it's a private market, entrepreneurs absolutely should check references on their VCs and you want to know if we're going to be good partners for you. The most dangerous place for a venture fund to be is in the middle: you either have a very specialized, focused boutique mindset, or you have a giant, go big or go home mindset, with a much larger capital under management. Where the smaller and midsize funds are focusing right now, and need to focus, is why would a company take our money as opposed to Andreessen or Tiger or Sequoia or any of the other funds that have billions under management and can deploy it quickly and have a lot of downstream capital? For us, that means we need to be specialized in something, and we focus on enterprise software broadly, but we like to be good enterprise software partners. Our experience in Latin America really differentiates us for a lot of companies, and then also we need a personal connection, we need to want to work with the founder; I spend the majority of my time not making investments but actually working with our founders on a regular basis and so it needs to be someone that I want to work with and, in return, the founder needs to want to work with me and we need to have a good working relationship. That's much better than a passive check. That’s what every VC will tell you all along, it's about the expertise, but we try to really roll up our sleeves and do that and really live and die by that reputation. So, if we’re not doing that then you shouldn’t take our money, but if we are then you should, and that's pretty much it. So, the venture industry is changing, a lot of the center of gravity and the power has gone back to the entrepreneurs, as it should. And so, good entrepreneurs should have a wealth of options and when they think about who they want on their team, it's a good idea to have a diversified investor base, number one, because different investors can help with different things, but, in that diversified investor base, ask, how is this person going to help me and yours and do I want to work with them for the next few years? If the answer is, “there's real value, and I like this person, I want to work with them,” then you should try to get them on the team if you can.
VN: There are many venture funds out there today, how do you differentiate yourself to limited partners?
JM: It’s a good question and one that, to date, has not been particularly difficult for us because most of our LP base is based in Latin America. We were the first, as far as we're aware of, cross border fund out of Latin America, so most of our LP base is in Latin America and we invest only in the US and Israel, so it's about investing capital for our LPs in markets where they're not necessarily located or have access to. That is actually changing; with this fund we've started diversifying our LP base a little bit more, and with the next one we will again. So, where we become more attractive is, number one, as with every fund, our track record should speak for itself. We have good performance and that should be first and foremost. Number two is our ethos, because what we're investing in and why is really important. We have specific reasons for the things we invest in and why. Also, and this is becoming more important, we're a diverse team; we have a Latinx and women led team, which is also really important in today’s venture and startup world. Beyond that, it's just, again, about, is this the right fit for what an LP is trying to do? Do they like us? Do they want to work with us? Do they think that we have access to information that they don't? So, one of the other areas that we invest in is blockchain, and before Mindset I was at IBM running their Blockchain Ventures initiative and so we have access to certain expertise and a certain view of the world that other funds don't. Those are the things you want to look for as an LP. We are a little bit diversified, so we're not we're not saying, “Hey, we only do this one thing,” and sometimes that's harder but I do think you have to believe in the team, just like we would believe in the team in the startup world. And so, we have several different areas that we think we excel at and LPs are either aligned with that or they're not.
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?
JM: There’s a few that I want to talk about that I can’t right now. I've mentioned a couple already so I’ll mention some of my personal portfolio companies. I mentioned Priori, which is for in-house legal teams, which is a really outdated business that is starting to become more and more digitized and they're right at the center of that. They're working with Fortune 500 legal departments, which is a group that really, really needs some additional support and they have done a good job there. We have a great cyber company out of Portland called Eclypsium, which is doing firmware and hardware security. We’re coinvestors with Intel and Andreessen Horowitz and Medrona there, which has been great. They're growing really quickly and, again, cyber right now is an important trend that we need to make sure is enabling the remote workforce. We have Future Family, which I mentioned, in the fertility financing space. We have Brex, which is one of our portfolio companies that is financing credit cards for startups and they're doing a variety of different things: they just launched a venture debt line and a bunch of other things, so they’re the source of capital for startups and the source of credit for startups. And then we've got a bunch of other companies that I can't talk about quite yet, but that are starting to perform really well.
We do a lot of healthtech adjacent investing, so we like healthtech and we like, especially, companies that are focused on the financing piece of healthtech. We have a company out of New York but now has a big office in Indianapolis, Indiana called Simplifeye, which is focusing on telehealth for the dentistry industry. Interestingly, Brazil has more dentists per capita than any other country in the world and it's a big country so it was interestingly aligned. They’re now doing a financing platform and focusing on both the customer piece of the dental industry and then also the financing piece, which is really interesting and they're growing well. And then, lastly, I'll mention a company that's doing HR and hiring called Scoutible. Mark Cuban was one of the early investors and actually was the part of the origination story for the founder there; he encouraged her to start the company and then was their initial financer. She's focused on gamifying the HR industry so you play a game and that tells a lot about your personality and then they use that in hiring decisions. Anything around HR and hiring right now is really interesting because people aren't meeting their bosses and their teammates in person, so we always look for ways to enable that and in more creative and new ways than going into an office for an interview or going into an office and working side by side with someone, because that's just not going to happen anymore.
VN: Tell me about your career, what led you to VC, and some lessons you’ve learned.
JM: I had no interest in being a VC at first. What happened was I was in the corporate world, I was at Ernst & Young as a consultant for a while, I actually was in the venture capital group there, so I was working with VCs and doing basically outsource diligence and market analysis. After that was like, “I'm never going to work in the VC world,” for a lot of reasons. After that, I worked in the sustainability space for a while; I'm not quite a Millennial but I'm almost a Millennial and I really like focusing on things where they're good businesses but also have a high impact for the world in some way. And so, I spent a lot of time in those environmental and sustainability space working with Salesforce and Tiffany on projects with Ernst & Young, helping them launch their initiative there. And then I went on this entrepreneurial journey and built two companies in the legal tech space, so I like the future of professional services and the future of work and built a legal marketplace and so I have a specialization there. Honestly, for both companies we raised some venture capital, but we had a really tough go raising venture capital; both of those companies were founded with other women, and let's just say I have quite a few interesting stories and that it was certainly not a meritocracy and it was access to capital that was a real problem for preventing what I thought were incredible companies that were not growing in the way that they could have. So, after the second one had an exit, and I was doing a little bit of mishmash of stuff here and there, I started working with a couple of venture funds as an interim executive helping them get set up and I realized that the best way to change the industry, rather than do another startup, was to be on the funding side of it, because that's where you actually have the influence and you can actually make your decisions with with your investments.
At first I was working for funds who had an impact focus, and I was focused on women and people of color, military veterans, and realized that, again, that is what I personally care about, in addition to what the company does, but also one that does not have the the check sizes that I thought were high impact enough to make a real difference. So, I ended up going to IBM, I ran their Blockchain Ventures Group, because it was a bigger platform and I just happened to fill the pipeline with companies that I liked that fit the profile that I liked, and then recently, about a year and a half ago, I joined the team at Mindset Ventures because we're aligned in values, aligned in our backgrounds, aligned in what we're trying to do here. It has been fantastic since then and we are doing extremely well, off to the races. I am the US partner, so I focus on our US portfolio companies, and we're building out and growing the team here, we're building out and growing our portfolio here, and there's just a lot of opportunity to keep on the path that I was, but doing it from the investment side instead of the startup side.
In terms of the lessons I learned, number one, it's all about people. As much as you think it's not, it is 100% all about people, and that is a very subjective thing. What is a good person doing something exciting is not what the person next to me thinks is a person doing something exciting. It's a private market with very different opinions and backgrounds and personalities and so you have to carve out your own lane and you have to figure out what you like and who you like and why. A lot of it is really challenging your own assumptions and redefining your own personal investment theses and fund investment theses along the way. Number two, it's a constant reevaluation, you cannot stay static. If you're not continually pushing yourself and growing and evolving and challenging your assumptions then you're not in the right business because our business is all about change and all about predicting the future and tapping into what's next. If we’re staying the same then we’re not going to be part of it and we're not going to have visibility into what that is.
It's interesting that the hardest skills in venture are the soft skills and the people skills and the, I hate to say “gut” because there's a lot of problems with that and the pattern recognition that comes from doing things, perhaps, in a way that we didn't like at first, you have to develop new patterns. But it is about really tapping into the soft skills and making decisions with very, very limited information, so you have to trust your own intuition, you have to trust your instinct, and you have to trust your own beliefs. You have to really know what those things are in order to make those decisions. I find that I become a better human, as well, because you really have to understand yourself in order to know what your investment thesis is and why you are doing what you're doing and how you can help the founders that you want to be part of their journey.
VN: What excites you the most about your position as VC?
JM: I'm a very intellectually curious person. I love learning, I love new things, I love challenging myself, snd so it is such an honor to be, every day, learning something new. I loved being a founder because you can go very deep and I like the operational component of it, but you're only working on one company and so you are very siloed and you don't see the big context. The best part of the venture world is seeing the huge amount of context and getting inspired every day by a new challenge, a new problem, a new way of approaching a market that I wouldn't have thought of myself. That makes me a better person, a better investor, helping our portfolio companies because I can synthesize that information to share with our portfolio and then, also, it's just really interesting. It's lots of fun.
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?
JM: This is a great time to start and build a company, and it's a great time to maybe think out of the box because things are changing in every industry, and so don't do things the same way that everyone told you to do it before, including raising capital. Venture is not the end all, be all of raising capital; there are plenty of ways to finance your company, and there are plenty of funds out there, if you do go the venture path, that aren't maybe the traditional sources of capital, but that will be better partners for you then what has been done in the past.
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