Meet Jonah Midanik, COO and General Partner at Forum Ventures

Steven Loeb · April 19, 2024 · Short URL:

Forum Ventures operates its own venture studio, accelerator, and pre-seed 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.

Jonah Midanik is COO and General Partner at Forum Ventures.

Midanik has spent the last twenty years building companies in Canada and the US as a serial entrepreneur. He has been lucky enough to have seen the startup journey from a variety of perspectives: as a successful bootstrapped founder/CEO, having helped launch new corporate divisions at BigCo, and as the founder/CEO of Limelight, a Venture backed company, where he raised 8 figures of capital. 

He currently spends his time helping companies grow with Forum Ventures as the COO and General Partner, and running Forum’s AI Studio, where he leads launching eight AI native companies a year.  

VatorNews: Give me the broad overview of Forum Ventures. What are you all about? Why did you decide to start this firm? And what is your differentiation?

Jonah Midanik: Forum started off about 10 years ago and our thesis was that founders needed a lot of hands on help, along with a very first check. So, we do business to business software investing exclusively; there was a huge shift happening, everything was moving to the cloud about a decade ago, and we realized that a lot of venture funds are available with capital once you can show meaningful traction in the form of customers or something else. However, we thought we could get in even earlier, be the very first check and a true partner when it was typically just the founders and no one else, and really help with bringing new products to market. That means helping them with go-to-market strategies to get that traction and then, once they've got that traction, helping them with fundraising, and being very, very hands on in doing so, as former founders ourselves. 

We've been doing that for about a decade, and we've extended that strategy that we think of from zero to sustainable, sustainable meaning $1 million dollars in revenue or having raised a Series A, and today we inject that first check in three different ways: we have a studio where we build our own AI companies with founders, so quite literally there from the days before there's even a business; we have an accelerator, where we take very early stage founders only businesses that are typically very early in their journey, pre-venture ready and we'll fund about 85 of those; and then we have a pre-seed fund, where we will follow on into our more successful businesses, and also invest in pre-seed rounds for B2B SaaS companies as well.

VN: Do you accept companies into the accelerator that you did not develop in the studio?

JM: The accelerator will be companies that have been developed independently by the founders and we’ll just come in very early.

VN: Do you invest in companies that either you didn't develop or didn't go through your accelerator? Will you invest in companies separately outside of those two things?

JM: I'd say about half of our deals are companies that either went through the studio or the accelerator, but half aren’t. So, we're investing with some later stage companies in our very early world out of that pre-seed fund.

VN: What's exciting in the B2B SaaS space right now? Why is that your area of focus versus B2C?

JM: We picked B2B because it's what we know. There's been a huge change, along with the digitization of the workforce over the last 20 years. We've seen a number of shifts, cloud obviously being a huge one, the introduction of mobile has been a huge shift, and now the shift in focus on artificial intelligence and what that means for new products. And so, just given our experience and expertise, we are all B2B SaaS founders who were successful in our businesses, we've got a lot of knowledge about how businesses buy and use software. B2C is great, it's just not what we know and love.

What we think is interesting right now is there have been these huge paradigm shifts and in these huge paradigm shifts they've changed the very nature of how we work. And in that we see both excitement and, of course, opportunity.

VN: Let's talk about AI in the workforce and in B2B. There's a lot of hype around that space, so where are the opportunities now? What's the reality of AI capability and how is it actually changing things?

JM: First off, there's a pretty significant opportunity set but, to your point, there's still a gap between what's being discussed and what is possible. So, a lot of the hype right now is on generative AI, which is obviously very big, but we see use cases across any number of AI techniques. The better ability to predict what's going to happen, the better ability to sort and recommend what matters to you, the ability to change customer experiences, we think all of those are real opportunities.

Where we see the delta between the hype and what actually is is that, one, a lot of enterprises don't have great data to begin with, or maybe they're collecting but it's not really ready to use. Second, these tools are still expensive, they're still relatively slow, even generative AI, it still takes a while to actually get an answer. Generative AI does have the tendency to just straight make things up which, in a lot of mission critical applications, you just can't have, there’s liability concerns. And then they're not necessarily context aware. So, the gap between the hype and the utility is still pretty significant but if you look at some of those other techniques combined with generative AI, there are whole new ways of opening up markets, serving customers, new possibilities, the ability to work more efficiently, productivity going up. We have use cases of all of those being successfully used right now which is different from this idea that there's going to be a magic thing inside your computer that just does your job.

VN: What verticals are you investing in? Where do you see AI really making an impact? One of those we write about a lot is healthcare; every company that raises funding in healthcare now says they're using AI. So, what space do you see really being impacted by it?

JM: It's touching literally everything. So, yes, healthcare for sure because there's huge datasets, and they've got all the problems of scale and they've been collecting data for a very long time, so that's an obvious use case. Financial transactions is another one, so in FinTech there's huge amounts of data, every time you have a transaction you have a data trail, so there's huge amounts of data to work with and there's a huge scope and scale. Supply chain is another one where we're seeing a couple different things happen at the same time: COVID taught us that our supply chains aren't all that resilient, there's geopolitical factors causing supply chains to move and then, on top of that, there's data and interoperability concerns, so there's a huge opportunity there to build smarter, more resilient, more climate aware supply chains. That's a really big one. And then we pick things industry by industry and what we're seeing is there's no industry that doesn't have some applications of this, everything from power generation to vertical SaaS applications that you wouldn't necessarily think of as being particularly tech savvy, like construction. But we have literally seen a usable, value-generating case of artificial intelligence inside pretty much every major vertical that exists in the last year or so.

VN: When you talk about spaces like construction, for example, I know that there are legacy spaces like that, where they have lagged behind for a long time. They didn't really adopt mobile even for like a decade after everybody else did, for example. Do you encounter resistance from those industries that are populated by people who have done things a certain way for decades? When you come and say, “AI can do this for you,” what's the reaction from those spaces? Are they embracing it or is there a little bit of trepidation on their part about what that technology means?

JM: Construction is actually a perfect example. To your point, construction did not have high take up of mobile, for the simple reason that for a lot of people on a job site, when you're working with your hands, stopping and inputting data onto a phone is not a particularly good use of time, and just is not part of your day-to-day job, that's not how you work. We always look at it by thinking that generation-defining companies are going to fit into people's lives and, in our case fit. into people's work lives. So, rather than approaching, whether it's a contractor or trades or anywhere in between, and saying, “AI is going to do this,” it’s AI’s job to reduce the friction so that this actually now fits into people's work lives. So, instead of washing your hands because you've been working with something on a site and implementing data, it can now just hear what's happening and you can do it with your voice. That's a great example of AI making things easier and having less friction. It's our thesis, and we're beginning to see that in reducing that friction, and making it work better in people's lives, this is likely, in our view, to be the step change in technology that gets these lagging industries to pick up the tech, including mobile. AI will be the back door in which mobile technology actually gets in to revolutionize these types of industries.

VN: Let's talk a little bit about your fund. Obviously, like you mentioned, you have these three tiers, but when you get to the point where you're actually investing in those companies, how much are you actually putting into them? And how many investments do you make in a typical year?

JM: We'll put between $100,000 and $1 million into a business and we do a minimum of 100 checks a year, up to around 115 checks a year, so we're incredibly active investors. How much depends on where the company is and which one of our three strategies they meet us at. 

One of the big differentiators between us and other funds is we're quite hands on with that go-to-market and fundraising help as well as just supporting the founder journey, because founding a company is very, very hard. And so, we do spend significantly more time with our founders than your average fund does, just because there aren't many people at the pre-seed stage that can say they've got 35 employees and in-house engineering and a lot of the things that we have that others in our stage find hard to replicate.

VN: How big is your fund currently?

JM: We have three different funds. Our accelerator fund is $25 million, our studio fund is $10 million, and our pre-seed fund is $25 and growing fund-over-fund.

VN: How do you determine you're going to invest $100,000 versus $1 million?

JM: Some of it's just strategy: out of our studio we have a standard check of $250,000, out of the accelerator we have a standard check of $100,000, and out of the pre-seed fund the bulk of our investing is in the $250,000 to $750,000 range and sometimes we can flex up on that. Which one you're in really depends on the stage. Obviously, if you just have an idea and no co-founder and you're just validating an idea, that's a studio, or if we have the idea and we recruit a founder. If you've got a co-founder or it's just you and maybe you've got some problem validation, maybe you've got an MVP or maybe you don't, that's an accelerator. If you're starting to have some traction on that, that's our pre-seed fund. So, it's stage dependent and then, within the pre-seed fund, whether it's $250 or $750 will depend on just round dynamics. How much is the company raising? Where are they at in their lifecycle? That's very case by case, but the studio and accelerator at that number of deals is pretty formulaic. We have a deal and we stick to it, it's the only way we can get that volume out the door.

VN: When you’re investing at the pre-seed stage, are there a minimum amount of customers or a minimum amount of ARR you need to see? Do you have hard numbers you actually want to see numbers at that point? Or is it still a little bit too early to have hardline numbers?

JM: There's not a lot of data to really go off of and so we are curious and flexible. Traction could mean design partners who are giving you no money and haven't even signed anything, but are just giving you their time; traction can mean some customers as well. We fund a great deal of our stuff pre-revenue, so there's certainly not a revenue requirement of any kind and it's very case by case. 

What we're really looking for is, is there some validation from the market that people want this solution? Validation can be any number of things, it can be pilots, it can be revenue, it can be design partners. We’ve got no fixed ideas about what that looks like, because it can look very different depending on the industry. If you're super early and you're selling into enterprise, there's no way you're going to have revenue yet, whereas if you're selling into little businesses, maybe you've got some revenue and some people using it. It really depends.

VN: What about the product at the pre-seed stage? Do you invest pre product? Or do they have to have at least some pilot or something to show?

JM: It really depends on what type of company. If we're talking about deeper technology, whether it's foundational AI or a deep tech product, then you're likely not going to have a product in the market and that's okay. If you're building something really big that needs to be fully featured in enterprise or defense, well, you might not have that all the way done by then either and that's okay. If you're building a simple vertical SaaS application for small businesses, we'd like to have something shipped at that point. So, again, no fixed necessities, what we want to see is that, for your vision and your market understanding, are you roughly where you should be given the expenditure of time and resources? And do we believe that that's the right path or that you are on the path to the right path? Because there's no such thing as a straight line at pre-seed. So yeah, we don't have any fixed ideas on that.

VN: What about the team? Are there different things you maybe want to see from that team at the different stages or is it that pretty uniform?

JM: It's pretty uniform. At all three stages, it's pretty much just founders, maybe at the pre-seed stage you've got an employee or two, but it's basically just founder or founders, and then the things we look for there are always the same. Are you motivated to build something big? Do you have a right to win in this market? Are you the type of person we’d want to work for and with? And do you have some core insight as to where the markets are going that's not obvious? If you have those things, then that's absolutely the founder we want to founder or founders who want to invest in, but, no, We're not going to see much evolution between the stages of who that person is.

VN: What experience do you want to see from them? Like you said, they should have some knowledge of the space that they're creating a product for, but do you invest in first time founders? Or do you want to see people who have founded companies before? What stage do you want to see them at in their career?

JM: We always think about it in terms of founder-market fit. There's some types of markets where we'd want a lot more experience; for example, we invested in a great anti-money laundering tool platform and they're selling into huge banks, really compliance software into risk departments. If you don't have deep industry expertise, these people aren't even going to talk to you, there's no way you'd understand the nuances. For something like that we want you to have either worked in the space for a decade or have some deep industry know-how and context set or it's unlikely to be successful. Someone who just graduated from Stanford and started that company, that's probably not that interesting. 

That said, for a lot of this stuff, it actually takes someone who has not spent too much time in the industry to have that unique insight and a whole new way of doing things and we're not blind to that either. So, again, no hard and fast rules; certain types of companies, like defense and compliance, require better contacts, more industry expertise but greatness can come in a lot of packages and some of our most successful companies come from overlooked founders. That's really core to our thesis. We think that greatness can come from anywhere geographically, and a lot of people are overlooked. So, often we're just looking for that great, unique insight. Of course, there are markets where, yeah, we'd want you to have worked in it, and at least for a bit.

VN: What about experience with AI, since that is so core to what you're doing, and it's a fairly new space? So, what expertise or experience with that technology are you looking for when you invest in these founders?

JM: It really depends on the application. Sometimes, there's companies that we think of as like holographs, where a holograph is made by pointing two dimensional images at each other, and you get a three dimensional image. So, sometimes just taking things that are reasonably off the rack and modifying it for a use case that no one's thought of, and then if you can build defensibility into that, that's a great business. In that case, you don't need deep technical AI chops to build a winner. If you're talking about novel uses of new applications of artificial intelligence, then yeah, you're going to need to have someone on your team with a research background. So, again, it really depends.

Some of the fastest growing AI companies are not going to be particularly deep tech and then you've got the flip side, the open AI model where they’re in the wilderness and it took them a billion dollars and seven years to release something usable with a huge number of PhDs. Both things can generate a lot of value for users and businesses and, ultimately, venture funds. Again, we just look at, what is it? Who's doing it? Do those things line up? And is it defensible? And go from there.

VN: How do you look at valuations and how those have actually changed over the last two years? For a while it seemed like we were in a bubble and that was a question I used to ask; now it seems like maybe that bubble popped, so I'm wondering where you see valuation now and how that affects your investing? Is it too early to worry about that at the stage where you're investing? Or is it still something you take into consideration?

JM: In our view it’s unquestionably true that 2021 was a little bubbly. You'd have companies that didn't have revenue or products raising at $20 million and that's a lot of money. In the past year or two, it's come down to earth pretty dramatically. We're starting to see it start to move up a bit but, along with that, the bar has moved up a bit. So, valuations are back. The median last month was $13 million for a seed round but the bar for that has is a couple hundred thousand in revenue. So, from our perspective, obviously it is easier to make money if you buy low and sell high, it's not that complicated, but if we see a great company, we're not going to not participate because of a valuation.

VN: You say they come down to earth. I guess the question is, is that a good thing? It's obviously not a great thing if companies are raising money that they shouldn't be raising and valuations that are too high, it's probably not good for the investors, probably not good for the companies. So, it seems like a good thing that they've come down.

JM: I'm a bootstrapped founder originally so that when valuations get too high, what happens is you raise too much money and people start to spend money on experiments that are not yet proven. I don't think that's good for the business, I don't think that's good for the employees, I don't think that's good for really anything. So, raising more appropriate dollars, and really being careful about how you're spending them is probably a long term healthier way to exist. 

We were seeing people who had only ever done, let's say, founder-led sales then hire sales teams of five. It's like, "well, you've never proven that someone else can sell this, that's probably not a good idea.” So, we've landed in a more reasonable, grounded, realistic way to run a business and I tend to think that that's just good for everybody. Having been two decades on the other side, all those hires and experiments that don't work have very real emotional and business ramifications, usually negative.

VN: If you're raising money at too high valuation, then you've got to prove that you were worthy of that valuation for the next round and you might wind up not being able to do that. And your company may just cease to exist.

JM: Exactly. I mean, the way venture works, down rounds are just terrible. They have a bunch of terrible corporate connotations: it’s hard to keep employees, it's bad for the founders. So, I'd rather see people do slow and steady and build real businesses than moonshot and then hope they catch up.

VN: Do you see companies actually having to take down rounds? Let's say you were a company who raised like a seed or a Series A at those huge valuations and here you are, two years later, you need to raise your next round, but the valuations have come down so much in that time. Do you see companies having to actually take those down rounds because they were over inflated before?

JM: Maybe not down rounds, although we do see our share of those too, but existing investors are getting pretty creative about how they put capital into companies so they'll have funky terms. VCs woke up and remembered that they were in finance again so the headline valuation might be the same, but it'll have all sorts of funky stuff in it that functionally makes it a down round for all intents and purposes.

VN: Let's talk about your firm and your differentiation, starting with your LPs. I assume that many firms go after the same limited partners and you have to go and pitch yourself to them and say, “here's why I would be the right person to deploy your money.” What is that pitch? How do you differentiate yourself from other firms?

JM: There's a couple of things. First and foremost, by virtue of having an accelerator and a studio, we have a different model than almost all of the capital that's being deployed; we're actually building companies with founders, so we're in earlier, we spend a lot more time with them, and we get into it at a lot lower prices. So, we have very measurable, very distinct differentiation from a standard seed fund. Even our pre-seed fund, most of our deals are coming out of that accelerator or studio, so your average firm, before they make an investment, maybe they're doing eight to 10 hours of work; we probably spent 80 hours with that founder before we made a decision. So, we just do have very asymmetric information, and a different model when the bulk of the capital goes in.

VN: That's interesting that because you have the three different kinds of investing models, that you're able to get in for a lower price. Can you talk about that a little bit more? I'm assuming those companies still have to be competitive and still be able to go to different firms and get the best terms, so how does it help you get in at a lower price?

JM: We help the most, so we help with go-to-market and fundraising. Your average pre-seed fund, who are deploying $10 or $20 million a year probably have a solo GP, maybe one analyst, maybe one associate, maybe one platform person, but even that's hard to pay for with a $10 or $20 million fund. We have 34 people, so when we say we can help, we can really help. That differentiation lets us get into the deals that many can't and let us exploit some value because we do in actual value to help the businesses, which obviously is helpful for LPs because they're not paying as much.

VN: I guess that answers my next question, which was going to be how you differentiate yourself to the founders. Is there anything else you want to add to that? What else are you offering that maybe another firm isn't able to?

JM: It ultimately boils down to people, most of whom have been founders. It's really easy to put founder friendly on your website but if there's three of you, even if you're incredible, how much time can you really be spending with your founders? It's just not that much, because you just don't have time.

VN: Talk about some of the companies you've invested in. If you want to highlight maybe two or three of them, what it was about those companies, about those founders, when they came and sat across from you, whenever the stage was where you invested, why did you want to invest in that company?

JM: There's three that come to mind, all of which came in through a different strategy of ours. 

First was Anthony Kannada. Anthony was the CMO of Gainsight, he was the CMO of Front, he was the CMO of Hopin, and just an unbelievable marketer. He had a better way of really doing marketing attribution in a content first world, which we were seeing across our SaaS companies. Also, he's been a mentor at the fund for nine years before he started a company, so we had a nine year relationship, he's a world expert at it, he had a really unique worldview. So, that was a really easy one to use that asymmetric information and put a check in through our seed fund. 

For an example of an accelerator company, met these incredible founders doing autism care at Finni Health. A huge growth market, there's more demand than there is supply, and they were hell bent on building a very large business. They worked out of our office; I'd show up and they were there, I'd leave and they'd be there, and they've built a pretty big business, so it's just the drive to solve a really important problem to them that just jumped off the page. 

The last one was Safeguard, which is a studio company. The founder came to us with an idea, he had an incredible background for it, an unbelievable builder, and in just a couple months was able to build a product with us that some of the biggest financial institutions in the world are currently using. So, three very different profiles, but all really passionate builders, which is the through line for all of our founders.

VN: What are some of the lessons that you've learned in your time as a VC? Maybe some of the things that surprised you about venture capital when you decided to become a VC. What are some of the things that you maybe were unexpected about?

JM: What was really unexpected to me, particularly with how early we are, is, frankly, just how little you know because you're doing 100 deals so early in these really esoteric fields. Also, whatever they're telling you is probably going to be different in 10 minutes anyways, so that, to me, was really interesting, because I thought I was going to need to spend 12 hours learning about autism care. And, yes, we do do some of that work but the truth is, even after that 12 hours, you really don't know what you're talking about anyways and that's okay. Because really what you're betting on is people and a market and at the stage that we're in, there's so few proof points that that's okay. That was really interesting. I'm like,”‘Oh, I don't know much and that's kind of the model,” so that was pretty fascinating, because I walked into this huge impostor syndrome and then I was like, “Oh, you're not going to know and that's okay.” So, that was my biggest one. 

The second one is just how much this is a people business. The great founders have lots of places they can get money from and so they're picking your fund because of you. It’s, in a great many ways, a sales job which is interesting. You're investing but the best founders can pick so the “you don't know much and it's a sales job” was a wild discrepancy from what I thought the job actually was.

VN: I’ve had VCs compare it to almost like a marriage between the VC and the founder. You have to like each other, you have to work well together, because you're gonna be together for maybe a decade as you continue to invest in and help them raise money and all that stuff. So, there has to be a personal relationship. If you don't like each other, then it's not going to work.

JM: Yeah, exactly. I was like, “Oh, this is like stock picking,” which has nothing to do with it whatsoever because it's a person, not a thing.

VN: What's the part of the job that really motivates you, the part that you really love the most when you go to work, venture capitalist every day? What's the thing that really drives you?

JM: Two things. One is, to your point, it's, it's people. I always tell my team, “no one in history has ever gotten out of bed for ROI.” So, to be able to work with people doing really interesting things. And then the second is, a lot of the people we work with are solving really important problems. And so, the ability to work with great people solving big problems is for me, anyways, a thing worth doing.

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