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- [00:05]
Bill Kelly
Welcome to Educational Alpha. I'm Bill Kelly, your host, bringing you on the ground conversations with business leaders, educators and industry colleagues from around the globe. Educational Alpha is sponsored by iCapital, the financial technology company with a mission to power the world's alternative investment marketplace. Part innovator, part educator and part navigator of the alternatives industry, iCapital offers intuitive, scalable digital solutions that have transformed how private market and hedge fund investments are bought and sold. With iCapital, financial advisors, wealth managers and asset managers around the world now have access to everything they need to deliver the return and diversification potential of alternatives to high net worth investors. To learn more, visit icapital.com.
- [01:00]
Narrator
In this episode, Bill speaks with Jennifer Fonstad, seasoned venture investor and co founder of Owl Capital. With nearly 30 years in venture capital, Jennifer shares her journey from Bain and Harvard Business School to investing in companies like SpaceX, Tesla and Chime. They examine the evolving landscape of early stage vc, the value of diverse teams and the unique community driven model at OWL Capital. Jennifer also discusses the firm's long term evergreen funding approach backed by family offices and offers insights into evaluating startups, emerging AI applications and the real metrics of investment potential.
- [01:38]
Bill Kelly
Jennifer Fonsett, welcome to Educational Alpha.
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Jennifer Fonstad
Thank you very much. Thanks very much for having me Bill.
- [01:43]
Bill Kelly
Well you're I guess a Californian from any measure, but we were put together by fos friends of Sarah, Sarah, once Weiss, now Arabic and there's a lot of connective tissue there too. But I'm so glad she put us together and look forward to discussing a very interesting space. I don't think I've had a guest on in the early stage VC growth space, so I think the listeners are going to learn a few things but true to form in this platform. Jennifer, maybe we could start with a little bit of your background and experience leading up to the founding of al.
- [02:13]
Jennifer Fonstad
Yeah, sure thing. So let's see. I've been in the venture capital industry for almost 30 years now, started my career out at a firm called Draper Fisher Jurbison where I spent 17 years and we invested in companies like Athenahealth, SpaceX and Tesla are some good examples of that. Earlier companies like Hotmail which many people now don't remember, but very early stage investments in very early companies in the Internet back in those days. Since then I co founded a firm called Aspect Ventures where we've done a number of investments both in the cybersecurity space as well as in consumer and financial services and then co founded AL Capital with some of my colleagues from Aspect where we've invested in companies like Vita Health, Ryder and Apple Car.
- [03:01]
Bill Kelly
And I want to talk about some of those portfolio companies in a moment. But just also having looked a little bit on your background, something you typically see for folks like you, Jennifer, who have been very successful in our industry coming out of the consulting space and having an MBA from a top business school, and you did do an early stint at Bain and got your MBA from Harvard. Those are signs of early success. Not everybody gets to the station you have. So congratulations on that because nothing is given in life. But as I think about this whole period of disruption and if I think about your kids and my kids coming up in this space, I'm guessing there's going to be multiple ways of cutting your teeth and early experience. Or is it going to be consulting, top business school and then on to a senior job of financial services?
- [03:47]
Jennifer Fonstad
Yes, it's a great question and it really does differ, I think these days by end destination. So I know, for example, for private equity specifically and investment banking background, the top business school and investment banking is an important criteria to move into that space. There's a lot more flexibility coming into the venture world. I've seen backgrounds in everything from journalism to engineering, computer science, early entrepreneurs moving into the venture space, consulting certainly at very proficient turbots. And where I was cutting my teeth, several of us were from Bain & Co. And McKinsey certainly sends their fair share into the venture world as well. So it is a much more flexible path really depending upon how integrated you are into the tech community and into the startup ecosystem and really your passion for building companies.
- [04:36]
Bill Kelly
And I think if you overlay what's going on in Defi fintech, generative AI, I think these are all disruptive moves and I like to think it provides career alpha to somebody coming in where there's. I don't think there was ever a single pathway, but there's maybe multiple pathways to get into multiple industries. And I think that all in all is a very, very good thing.
- [04:57]
Jennifer Fonstad
It's certainly the advice I give my kids even in the early days when they're thinking about a college major. You're just as likely to become a very successful venture investor as a history major as you are a computer science major, because it really is about analytics thinking, engagement with people and engaging with the ecosystem.
- [05:13]
Bill Kelly
Yeah, I think that's a great opening bid for advice. So I want to talk a little bit about AL initially and then maybe the state of the union of the VC space. So if I have it right, I think Al is about five years old, and you describe it, and your website is a different type of VC model. So I had a few questions on that, but I'll let you run with that as sort of an opening observation.
- [05:34]
Jennifer Fonstad
Sure. Yes. We believe deeply in working closely with our community in which we work, not just the companies in which we work. And we find that a lot of the companies that we invest in also care deeply about their communities. So we give back to our communities, both financially as well as our time. And many of our companies do as well with a 1% commitment of their stock. So, for example, company like Chime bank has committed the 1% of their stock to scholarship foundations. And that's an important part of our ecosystem and our values, which I think is excellent.
- [06:06]
Bill Kelly
And then I also saw that 80% of your funds go to entrepreneurs from diverse backgrounds. And I'll let you fill in the blank, but I can think of why that's an investment thesis as opposed to a public service. But what's your thinking behind that?
- [06:21]
Jennifer Fonstad
Yes, there's actually been quite a lot of data around the power of diverse teams and what that looks like in terms of returns. So Harvard Business School has actually run a number of different studies to say, how does diversity matter in investing? And it has shown that you have better outcomes and you have better returns when you have diverse teams. And my favorite example of that is the early days of Apple when they were developing the first ipod and iPhone. On the development team, it was initially only male computer designers and they were very excited about their prototype. And a woman engineer just joined the team and she was using the device and was having trouble because she had longer fingernails than the guys did. So the device wasn't working in terms of even just the physical pressing on the buttons. And they realized that they had to redesign the entire screen because half of the world's population wasn't going to be able to use the device based on longer fingernails. It's a silly, silly example. But what it really shows is even as simple as a touchscreen, you need to be thinking about the other 50% of your product. And when you're doing product design, you need to be thinking about your other groups and users and what their inclinations and styles may be and how that may differ. And that follows all the way into the boardroom when you're thinking about different perspectives and different values, different experiences that inform their thinking and their decision making. So there's been a lot of data behind it. We're seeing a lot of success in that, in our investments as well, and it's not just driven by ethnicity or it's not just driven by gender, it's driven by age, it's driven by experience, it's driven by introvert versus extrovert. It's a very broad concept. But it's important not to always hire people that are just like you.
- [08:06]
Bill Kelly
And I think it's an important statement. And maybe just to slightly pile on, I think in this current news cycle and political environment, I think DEI has swung too far the other way. Maybe went too far to the right, too far to the left. Left, pick your direction. But I think the underlying value proposition, Jennifer, is just as you state and it's no more complicated than investing. I want diversification. But if I have like minded thinkers, all from the same business school, all with the same background, all with the same investment banking experience, I'm going to have a concentration of thought process as well which is going to lead to a concentration of risk. And we know how that ends. And maybe to finish this up, you raised a very important point across the value spectrum from VC all the way up to the corporate boardroom that you have to have a diverse set of decision makers in there and usually the board seat is sort of the post career perch for somebody that's had a very successful career. But do they have the eyes and the ears of the younger cohort? And how do you use social media as an example? And I think these are blind spots that every governance body has got to be looking at.
- [09:10]
Jennifer Fonstad
Absolutely. I think that's always a risk to not include age, both young and old, to be honest, because there have been a lot of traps that older investors or older board members or experienced corporate leaders have that the younger have not seen. And quite frankly the opposite is also true as you mentioned, whether it's social media or the values of Gen Z and how that may differ from the values of older generations and how that's reflected in their purchases, whether they rent versus buy and a whole other types of trends. So very critical dimension and it's not meant to be politicized, it's just business.
- [09:48]
Bill Kelly
Yep, absolutely. And appreciate the collaboration and hopefully some of the work you're doing, albeit maybe grassroots. It's important and it is appreciated. So thanks for that. So maybe turning our attention to the state of the union of VC on the one end of the pipe, maybe there's fundraising challenges. I don't think there's ever going to be a shortage of good ideas or good entrepreneurs, but how we get the capital to them and we can maybe start There and then. I want to talk about some of the challenges around exits too. And you seem to have as an organization done a fairly good job on the exit side as well. But starting with the entry point and fundraising and valuations early on, I know you use and the industry uses a different value metric, but what is the state of affairs on the entry point and funding of VCs?
- [10:32]
Jennifer Fonstad
This particular cycle is not all that different from other cycles in that it's always easier and brand names always find that they have more success on the fundraising front than newer funds and smaller funds and less well known funds. That's a pretty common refrain. And I think that one of the bigger challenges in this environment right now is that there are just a significant explosion of smaller, less known funds and people just don't know who they are. When I joined the industry almost 30 years ago, there was a relatively well known community of what funds were out there and who was doing what. It's multiples, you know, orders of magnitude larger now. And it's just much harder for everyone really to get their hands around who's doing what, which funds are focused in what areas, who's doing well, who's not. There's just like a lot less data. So I think it's a lot harder for investors to differentiate. And so they're much less likely to take chances on young new funds than even they may have in the past.
- [11:37]
Bill Kelly
And many of these new funds you mentioned, what is the source of capital? Are these successful entrepreneurs that had a single exit that started to fund up because it's not an easy nut to crack, I suspect, and not easy to fundraise. So who are these folks?
- [11:51]
Jennifer Fonstad
Yeah, I think it's a combination of entrepreneurs who have made their own money and either started with their own funds or their own funds, plus several friends who were also in whatever business that they had had as a success. It's often others from other venture funds that are spinning out and those are the two main categories. But a lot of it is also folks that have come out of investment banking. Some of the larger hedge funds, sometimes they'll have folks that'll spin out of that just because they have funding sources. And then there's a number of international sources for funds that have come into the market as well. So from China and Asia in particular.
- [12:27]
Bill Kelly
Yeah, just a lot of balance sheet capital. So broadly speaking, Jennifer, not naming names are your LPs, are these single family offices, high net worth institutional investors? A combination of all the above.
- [12:39]
Jennifer Fonstad
Our funds specifically are only family offices. We have Six family offices that fund our capital. And we do that in an evergreen structure. So it's a slightly different model than we have most of the funds which are out fundraising every one to three years. We have an evergreen structure, so we reinvest capital that we return.
- [13:01]
Bill Kelly
So would it be fair to say, as an outsider view, I think these family office LPs, that is the most patient of patient capital, which I think is a luxury for the gp, but also for them as well. Because long term investing is how you compound wealth.
- [13:16]
Jennifer Fonstad
That's right. So family offices are typically best for looking at long term returns because they're not trying to generate institutional value. Institutional funds have a much harder mandate in the sense that they have to be generating returns annually or oftentimes for foundations. I sit on the board of the MasterCard foundation asset management company. It's a $50 billion asset management company that funds the MasterCard foundation and their work. And so we have a mandate there to be generating returns every year in order to fund the foundation work. And that's a much more challenging model than a family office that may be looking over at the 20 to 50 year horizon.
- [13:57]
Bill Kelly
No, it's an excellent client base to have no denominator effect to worry about either when you have a year like 2021. So I think it's great. So as you think about your approach then to investing, there's probably many metrics you look at, Jennifer, but if I want to pick two, the entrepreneur or the team and the idea, and I don't know if those are the two most important ones and if you want to add two or three or replace one, but how do you strike that balance? Because you are making a bet on a person or a team, but also a bet on an idea. And you could have the very best team in the wrong idea, the very best idea in the wrong team. Talk to me a little bit about sort of the due diligence in the evaluation process of potential portfolio companies.
- [14:38]
Jennifer Fonstad
Sure. So actually we think about it as a stool rather than a two, so three legged stool versus two counterposing points. So we think about it as the team, the product or idea, the solution they're going after, problem they're solving, and then the third is really the market. And the market's also quite important in that dynamic because how large is the market? How dynamic is the market? What's the nature of the market? So that it is heavily regulated or not, how difficult is to go to market? That's as critical as the team and the product and design so we are considering all three of those in tandem and trying to understand the strength of each from the team's perspective, relevant experience and does the team itself have a mix of capabilities? Kind of what we were talking about. Is it sort of a monotonal single note team where they all have similar backgrounds, or is it a team that has different capabilities? You typically would love to see a team that has both the sort of technical shops around the problem they're solving, but also someone who has a go to market mentality and someone who has a sort of a product management, product development, product design mentality and sort of those. Again, a three legged stool on the management team is super helpful because that has typically shown where you have the most success. And then we also care about a history of personal excellence on the team. So not everyone has to have had decades of experience per se, but definitely demonstrated personal excellence and a care for personal excellence and professionalism is the critical factor. On the product and design side, we care a lot about the problem they're solving. We love simple solutions to very hairy problems. And it's surprising how sometimes you can actually have very simple solutions, even though it may seem like a really difficult problem. And companies and teams that really break down a problem to solve in a way that can be somewhat elegant and simple are the companies that really typically knock it out of the park. And then we talked a little bit about the market. So we're looking at all of those variables and then trying to think about what are fixable problems because nothing's perfect and what are unfixable problems and are the unfixable problems sort of deal breakers or not?
- [16:55]
Bill Kelly
And I suspect your hold period, given the type of LPs you have, are longer than you would typically see in a VC space. And if that's the case, or if it's not, not, I think the questions still apply. How do you get involved in trying to help the entrepreneurs grow and run their business? Because they could be a very good ideas group but really don't understand how to grow and scale a business. So is Al's involvement different than the typical VC in that regard?
- [17:21]
Jennifer Fonstad
Well, I'd say probably half the time we join the board and half the time we'll serve as a board observer. But in both cases we're working in tandem closely with the entrepreneur and the team and we help in a lot of different ways, often as just a sounding board in early days of which there's a lot of iterations around go to market, product design, team building. We'll help with hiring, we'll both introduce candidates as well as interview candidates. We spend time introducing early company as potential customers. But a lot of that is really about building trust and really being on the same side of the table as the entrepreneur as they're building their company.
- [18:01]
Bill Kelly
And if then if I fast forward to the end, how and when do you start to have these discussions around exit? I assume it's not time dependent. There must be an average holding period. But what are the signs that the company has reached its maturity level and what's the current exit environment look like?
- [18:18]
Jennifer Fonstad
So it's different for each company. It really comes down to how well they've executed against their original plan. And many companies evolve a lot from what when you invest at a Series A level to an exit or a potential exit. Companies really change and grow. And so you're valid a weighting both how the company's doing, how the products evolved, the uptake of the product, the customer base and then how the market's evolving, how that's changed. And so you may from time to time, as the company is running through its the arc of its journey, you may have opportunities where an acquirer comes forward and wants to acquire the company and you have to evaluate at that time. There may be a time where you feel that the company needs to find the market didn't develop the way you thought it might. But you have an interesting product so you want to marry it to another company and so you may merge it in with another private company and then a few go the distance and you contemplate going public. So for example, I mentioned Chime bank at the beginning and they just announced that they filed their S1 and they're going to go public yesterday. And that was a company where we invested in the Series A and they were solving a very hairy problem around the banking industry. So. And they are the largest Neo bank now and have taken what was a difficult and tractable problem that companies like bank of America really struggled with and they've delivered in spades on a digital platform. So that's just a good example of a company that's not the other end of that cycle.
- [19:46]
Bill Kelly
And your typical holding period is the one. Could you define that or is it when they're ready? They're ready?
- [19:51]
Jennifer Fonstad
Yeah. So I don't think we think about it as a holding period because these companies are young and they're either growing or they're not. And so it's not really a holding period because as they're growing they're taking new rounds of Funding typically, because most companies, when they take a round of funding, their expectation is that that capital will last 18 to 24 months. So these are companies that are fundraising with the notion that they will run out of capital at some point, and ideally they will run out of capital because you don't want to overfund something too early and you want to see how it develops. So you're managing risk as the company is growing. So we don't think about it as a holding period per se, as much as what's the arc of this company and how's that going? I've sold companies after a year and I've held companies for 14 years. So it really does depend on the life cycle of the company and the market and how that's evolving. I guess if you were to try and be typical, which typical is hard to say. You would say the company's journey are typically seven to eight years, but it varies widely across that metric.
- [20:53]
Bill Kelly
And just to stick with typical for a moment, what would the typical exit be? You mentioned an IPO a moment ago, and that's one avenue. A strategic buyer is another. Is there a typical exit or not?
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Jennifer Fonstad
I think if you look statistically, you'd find that the majority of companies are acquired.
- [21:11]
Bill Kelly
And I think given the space that you're in, I talk about on this podcast the TRADFI in the world of DeFi. And I don't think Defi is going to put traditional finance out of business, but I think they're going to get up the learning curve Tradfi by doing acquisitions. So they're seeing a lot of these interesting ideas develop in the VC space and can plug and play into their business model. And I suspect we're going to see more and more of that going forward.
- [21:36]
Jennifer Fonstad
Yeah, I think that's very typical in most vertical industries where some of the incumbents that are fast learners will acquire to stay relevant, and the ones that are not staying relevant and not engaging as incumbents typically fall off. And then oftentimes you'll also have a new company that'll make it into the public domain that will dominate a new category.
- [21:57]
Bill Kelly
So, one last thing on value and valuation, Jennifer, and then I want to talk a little bit about generative AI and AI in general. And we can talk a little bit about Rider, which I think one of your portfolio companies. But I do write for Kaya's blog on a regular basis and I have a submission that's going to come out next week and I focused on an article I read in the Wall Street Journal I think it was just last week on a company called Perplexity and they've got a gen AI search tool that's going to, if I understand the value proposition, put Google and Microsoft out of business or Apple Alphabet and Microsoft out of business. So it's interesting, it's 30 months old. The penultimate fundraise was late 2024, I think it was about 9 billion. They just did a raise within the last couple of weeks to put it at 14 billion. And a couple of observations. They are fair or unfair Because I am taking something out of context but I looked at the public market proxy to say well 14 billion is a big number what publicly has a market cap of 14 billion and I found the Ninja Blender Company, BJ's Wholesale, Warner Music, Dick's Sporting Goods. I'm saying these are companies that are producing tens of billions and maybe hundreds of billion dollars of revenues. So substantial companies that have been around a long time And I also feel, and we saw this with Web 1.0, with the likes of Netscape, Skype just went out of business. So there is a first mover disadvantage as well. So while valuation metrics on early stage companies that don't have profits, fair or unfair, when there is a fundraiser is a valuation subscribed to it. So maybe a couple things. One, how do you think about a first mover disadvantage if there is one? And then maybe valuation in the wholesome way that I just described is not what you think about as a VC investor but it's got to enter the calculus at some point. As a long term holder of these.
- [23:53]
Jennifer Fonstad
Businesses there's always a lot of excitement around new categories. I'm not sure that I believe the notion of a first mover disadvantage most of the time when I've seen new categories emerge there's typically a dynamic of more than just one company and actually it's super valuable to have more than just one company because they're essentially if you're doing it alone, you're essentially educating the market on your dime. That work Perhaps if you're talking about a first mover advantage it could be around the amount of marketing dollars that you have to spend to educate a market. And so oftentimes having a second competitor, a third competitor in a new market is actually valuable because you're all out there creating the momentum around the market and you're certainly seeing an AI right now that a lot of that's happening. Right? OpenAI was somewhat the first mover if you will. They have not seen any slowdown in their valuation or in their revenue and their business model by being the first one out there. But there have been several companies right behind them, a number of companies that have been right behind them or even ahead of them in some ways, but didn't necessarily have the same height. So I would argue that companies like Writer actually were well ahead and are continue to be ahead of OpenAI in some of the key metrics around their LLMs in terms of cost and speed and accuracy. But there's a lot of excitement around the category. And so each of these companies are really both creating the category and benefiting from that growth in that category. So perplexity is a good example. Also you mentioned from a valuation perspective that may seem high, but what you have is you have a group of investors that are thinking about it from a future value perspective, not a present value perspective. They're certainly looking at the key growth and momentum metrics behind it, but they're also thinking about this is a consumer play, what is the future value potential here? And while we used to think of that back in the 90s around you want a billion dollar company and then it's a hundred billion dollar company and some now even dream of a trillion dollar company. So when you think about future value in those terms it doesn't look so expensive.
- [26:01]
Bill Kelly
And maybe last point and then you provided a very good segue to Ryder. So the two examples I used when I focused on this fair or unfair was Netscape, which had 80 plus percent of the browser market in the late 1990s, went public, terrific IPO. And then a few years later they were gone from the landscape. And Skype, Microsoft just put them in a grave last month, but they had over a third of the video conferencing market for a long period of time as well. And maybe it's not reinvesting the business model, but there are examples where somebody comes in and is a category killer. And I agree with your observations. Better to have two or three competitors out of the box so nobody's dominating it. But this is a rapidly changing space and maybe as a segue to AI, tell me a little bit about Reuters model. I don't know enough about it, but I'll preface this with a little bit of a question Jennifer, which is I think it was the Boston Consultant group did a study focused on asset management, the field that I toil in mostly and they asked a large portion of the asset management companies measured in the trillions of dollars of assets, how much of a game changer AI alt data generative AI is going to be to their business model. And the numbers in answer came back pretty much substantially 2/3. But then when asked on a follow up question, how much budgetary commitment are you putting toward this? The numbers were woefully low. So it's almost as if the chat bot or genitive AI or somebody else is going to show up at my doorstep, I'm going to open up the box and it's going to be a game changer for me. Rarely do things in life work like that. Maybe Uber, that I had to download an app and now my life is very, very easy. But this requires some work and I think bridging that gap between what AI can do versus what the expectations are still seems to be very, very wide. So how do you think about that as an entrepreneur and an investor?
- [27:58]
Jennifer Fonstad
Yeah, I mean, I think that's a fair question and I think that's one of the reasons why Writer's been so successful is that they have focused on ROI from the beginning and they've had superior technology from the beginning. So they are essentially an OpenAI but for enterprise. And so they are focused on an out of the box solution and they focus primarily in three categories right now, Financial services being one, healthcare and retail. So they are developing templates and solutions. They really are the leader in a genic AI for enterprise at this stage and they provide out of the box template solutions in those categories so that you are able to essentially change the workflow in your business or how you manage this back office operations all the way through to even how you manage marketing and go to market literally across the entire enterprise, but in a very secure, highly accurate manner because they're ROI driven and they are solving problems out of the box. They've had a lot more success than a lot of the hype that you often read about.
- [29:06]
Bill Kelly
And if you think about the investment themes inside of your portfolio, we mentioned Rider, but is it sort of a fintech based theme and more specifically AI within the entirety of the portfolio companies?
- [29:18]
Jennifer Fonstad
So we are really looking at AI across three general areas. One is generative AI. As we talked about companies like Rider, we do think about very specific point applications into verticals. So solutions that go into using AI in everything from the entertainment business to logistics to the home management business. There are AI applications and solutions and healthcare of course, that are very vertical focused and so we also invest in that category. And then the third area which we are just beginning to invest in is called physical AI, which is really around robotics and humanoid applications, both in the home as well as in enterprise.
- [29:59]
Bill Kelly
So it seemed like on the conference circuit not that many turns of the screw ago. Everybody is talking about Web3. I don't hear about Web3 so much anymore. I'd be curious to get your views. Is it still a thing? Is it an investable theme and what's the future utility of it?
- [30:16]
Jennifer Fonstad
Yeah, it was really much more around using a lot of these tools for sort of a next generation Internet experience. A lot of it was around crypto and also digital assets, digital asset creation and digital asset management. You still have a lot of those themes out there. They're used much more broadly. I think there's an expectation under the new administration that we're going to see more deregulation to enable more digitalization of real assets. So being able to trade stocks, for example, in a digital format or other types of ownership and splitting ownership in digital formats more across a whole number of categories, including real estate over time. So I do think we're going to continue to see more of that. It's not under the brand name of Web 3.0, but the technology and the capabilities that only continue to grow and expand.
- [31:08]
Bill Kelly
Well, we're in a virtual studio today, but the thought of having a virtual studio where you and I are sitting on a couch side by side doing this interview and In a Web 3.0 setting, I just don't know if I'm going to see that in my lifetime. But maybe you'll find an investment thesis and you'll solve for that. So the last thing, it's maybe two questions tucked in one and it's advice and advice to entrepreneurs. And for every investment you make, there's probably hundreds of thousands that you don't make. So your advice to potential entrepreneurs coming to the doorstep of Al or any vc, what do they have to do to make their company investment worthy? And then secondly, it's a similar question advice to this next generation coming into this space. I think there is career alpha, a lot of different ways to enter this. We talked about that a little bit a while ago. But maybe an advice you give to your kids and it'll help me advise my kids too about how do you think about starting a career and doing something you love is the number one goal. But maybe start with the entrepreneurs and then to this next generation of the future of this industry.
- [32:08]
Jennifer Fonstad
Yeah, I mean I think for the entrepreneurs it's really about thinking through all the different dimensions of their business and bringing a team and capabilities to think through. So we talk about the three legs of the stool. The team the market and the product. You really need to have all three and be very thoughtful about all three of those dimensions and understand your markets thoroughly, understand your product design thoroughly, understand your technical capabilities and teams thoroughly. You need to have those pieces in place in order to really be successful on a fundraising and frankly in company building and business building. Many think about they may have an interesting product or an interesting solution, but they don't necessarily think about it as a business. And at the end of the day, we are investing in businesses and they require all three elements in order to be successful. So that's the piece that I really want entrepreneurs to focus on. I'm an executive fellow at Harvard Business School and have been for the last three years. And I spend a lot of time with potential entrepreneurs thinking about those three dimensions and really doing their work before they approach honors.
- [33:16]
Bill Kelly
Okay. And I'll accept that all as fact. I love that answer. Advice to the next generation. Your kids, My kids.
- [33:22]
Jennifer Fonstad
I think the biggest challenge that humans face, not just the next generation, is taking risk. But what does it mean to take risk? I think that risk needs to be calculated. But at the end of the day, many people worry so much about taking a leap that they forget to look at the downside. Is what is the downside? Is it really as bad as you think it might be? And most of the time it's not. And most of the time people should be taking leaps, leaning into what could be rather than what can't be. So my advice, particularly early on in your career, is to take more risk to take those leaps, lean into what can be.
- [33:57]
Bill Kelly
I think great advice too. And I think as an investor we always want to understand how we're being compensated for the risks. And what's my downside? Exposure. And the older you get with tuitions to pay for and mortgages to underwrite, it makes you a little bit more safety aware from a career standpoint. So it seems to have benefited you early in your career with me as well. So excellent advice. And I think you're a testament too, Jennifer, that there are many ways to come into this industry. Maybe you did it and I did it more of the traditional way with traditional experience in school, although Harvard wouldn't have accepted me way back when I applied in the first place. But there are many, many different ways of coming into this industry. And I think that you sit at a very interesting place because you're kind of a traffic cop between capital and ideas. And you have a very important role to direct that to the highest potential opportunities. And I think we're going to have more and more capital formation happening in early stage vc, and I think it's incumbent upon people to take your advice, think about the three legs of the stool, and bring their idea to a reality. Easier said than done, but I think that's great closing advice. So, Jennifer, I'm so pleased that Sarah made the introduction. Wayland is lovely this time of year if you want to come back to the Northeast. Otherwise, perhaps I'll see you when I'm next in sunny California.
- [35:14]
Jennifer Fonstad
Excellent. You're always welcome.
- [35:16]
Bill Kelly
Thanks. Take care, Jennifer.
- [35:17]
Jennifer Fonstad
Thank you.
- [35:20]
Bill Kelly
Thank you you for listening to Educational Alpha. I'm your host, Bill Kelly. Learn more about the Chaya association and.
- [35:26]
Subscribe to the show at kaya. Org.
- [35:29]
That's C A I A Org. See you next time.