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- [00:00]
A
And so having that experience and that tactical support and advice, and I think the recency of a lot of that knowledge as well has also been super helpful. And it's allowed me to bring together the things that I love about being an operator and also the finance and quite frankly, the execution part of investing. So that's made it a lot of good fun. And again, I think the two things that founders need most is access to markets and access to capital. And so for anyone who's interested in pursuing a career adventure, it's really about how do you help chuck off those two boxes, especially as capital is increasingly becoming a commodity.
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B
Welcome to the Investor, a podcast where I, Joel Palathinkel, your host, dives deep into the minds of the world's most influential institutional investors. In each episode, we sit down with an investor to hear about their journeys and. And how global markets are driving capital allocation. So join us on this journey as we explore these insights.
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A
Can you hear me? Okay. Your audio keeps, like, it gets a bit grainy at times.
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B
Okay. How is it now?
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A
Crystal clear.
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B
Okay, great. Yeah, I have a little fan, so we're. I think we're live.
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A
Okay.
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B
All right, so we. Can you guys hear me? Okay.
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A
Great.
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B
All right, well, why don't we just jump into it then, you know, so, you know, Melissa, thanks for popping in. You know, excited to have you in here, you know, talking about your journey. You know, you're at Tech Square Ventures, but you just had a really interesting background and you know, that's quite prevalent with anybody in vc. Right. We've all kind of had our unique journey. There isn't really a clear cut path to get into venture. Right. So we all kind of have our unique path. But, you know, why don't we start with, you know, your background, where you grew up, you know, what your parents did and how you found out about venture, and then how you broke into it and maybe why you did, and then we can maybe take it from there.
- [02:11]
A
Yeah, absolutely. So I think I had a bit of an international upbringing. I'm blessed to have family across the world. So that allowed for exposure, I think, to different, I think different schools of thought. And most importantly for me in my career, seeing commerce through many different lenses, that's largely what's inspired my journey throughout E commerce. So primarily did the bulk of my schooling in New York. I went to University in D.C. and, and I have the. In hindsight, I can say I was fortunate enough to have graduated from college during, you know, turmoil and economic collapse, which allowed us all to forced Us all, I think, to be really creative about how we thought about crafting career paths. And that's largely how I started my career off in the world of startups. So the very first startup I worked for was Frontier Strategy Group. They'd just taken on funding by Spark Capital, who primarily invested in a lot of social and consumer focused technology. And that's where I learned a ton about innovation and product building. I was on the product solutions team and really we were doing product development and product launch and really fell in love with that process. And then iteratively, I think across experiences it's sort of like first you do product development, then you have to figure out how to take that product to market. Then it's, you know, do you go through channels, direct sales, corp dev conversations. And I think that's what's really inspired the trajectory. And then having been through multiple startup journeys, so I've been through, let's say five acquisitions across six startups to date. When I thinking about what I wanted to do with my career next, I realized that I had learned so much as an operator in those environments that I wanted to be able to take that experience to supporting a portfolio of companies through a VC firm. And at the time also was meditating on a move to Atlanta. And so I think lots of wonderful things aligned and found a wonderful opportunity to support the mission of Tech Square Ventures, where in our primary thesis is that entrepreneurs really need two things to thrive. It's access to capital and access to markets. And much of the team has an operating background.
- [04:34]
B
Yeah. So, you know, backing up a second. Right. Because I also, you know, have some anecdotes about product. I was a product manager as well. But, you know, maybe backing up when you were in school, what was your major and what did you think you wanted to do? And then, you know, well, you know, how did you kind of get surprised when you, you know, got into product building and, and maybe maybe a couple learnings from, from product building as well than you have?
- [05:01]
A
Yeah, absolutely. So when I was in school, I had an incredible philosophy professor my freshman year, Professor Ambrosio, who basically said everything that you learn in college is going to teach you how to think. None of this will prepare you for a job that you're going to have in the real world. So just assume that you're going to effectively have to, you will, you will show up on the first day knowing nothing except for how to teach yourself. And so I never felt the pressure in terms of what I needed to focus on directly translating to what I was going to do as a career path later. So I double majored in government and economics and I double minored in sociology and philosophy. And again I chose those because I really love economics. Actually if I didn't go into the world of technology, I started a PhD in economics and then decided that I needed to get a real job because PhDs are expensive. But I think where that was most impactful is that it taught me how to be scrappy and taught me about the different ways that was most effective for me to teach myself how to learn and approach new topics. And so I think product development and specifically product solutions at Frontier Strategy Group was great because it was a new group. There was no defined method or process around how to do things. And so it was really about breaking things and moving quickly, trying to create data sets where data didn't exist. And most importantly, I think what was always top of mind was that constant was the process of constant market validation. So we'd make some hypotheses and we'd go and test and we'd go and test it in the market, which is a large part of what you're doing through the process of research. And in academia.
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B
Would you say that pivoting into product is a little like similarly opaque to venture? I felt that's something that I felt. So I was an engineer and then I was. And then, you know, product immediately became like this highly sought after career. Right. People are like the product managers at Uber and, and Slack and everyone wanted to be a PM and it was like really difficult. So I felt like I had my own journey kind of trying to pivot into product which didn't have, you know, there's not a real degree in product management. And then the same thing with Venture, right. I kind of had to like, you know, reinvent myself and brand myself to be, you know, attractive to like someone to hire me as a vc. Um, but I guess did you see some of those same parallels like with just the role of a product manager?
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A
Yeah, I think what was unique about the role is that I wasn't a traditional pm. I really straddled that line between product and commercial and I think similarly opaque. But if I have to reflect on the roles that I've found myself, that I found myself in across my career, I've sort of really leaned into serendipity. And so if someone were to ask me like, how do you get, go get a job in product? I'd be like, I don't know, let's figure out how to build one. And Then go show people that you've built something. So it seems like snowpicked process but I'm sure that there are other schools and programs at university and now there's so many great like postgraduate like opportunities for learning. Right. So many communities like Beyond Deck and I'm sure a number of other similarly focused like certificate or certificate programs or communities where you can learn about that journey. And I think the one thing that we always take for granted is like find someone who's doing that thing that you want to do and ask them, make sure it's a really specific ask. But I find that most people do or at least they should always want to lean in when it comes to helping others because the rising tide really raises all ship. So if you don't know, ask. And I think just try to be scrappy.
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B
Yeah, no, that's really good advice and maybe you can unpack a little bit of the roles that you're working in. So you started doing a lot of E commerce. What were some of the products that you were focusing on in? E commerce? Was it?
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A
Yeah.
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B
What sectors were they?
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A
So the first E commerce company that I worked with was SPRE Commerce and they started off as one of the largest open Source projects on GitHub as a Ruby on Rails based platform prior to their wanting to take the commercial route and start charging for the product and platform. And effectively when I joined the mission was to build a channel program both on the agency partner for co sale and implementation and on the technical integration partner side. Because E commerce when you look at any retailers tech stack, it's sort of a many varied ecosystem of tools that all need to be integrated to work in unison. That way the retailer can make money. And so that was great and I think that was the broadest view of E commerce at the platform level. And then started to specialize more in the Martech stack and payments. So then I worked with Curel Aid and MPP Global. SecureLate was focused on Martech integrating sort of social media content and signal onto your site. And MPP Global was helping media and entertainment companies really embrace E commerce through subscription payments. And then working with Diff Agency. Right. So seeing the services side as well. And Diff Agency is one of Shopify + largest agency partners so learned a ton about the challenges of different sizes and scale of e commerce and also through different perspectives working at various points sort of in the technology stack for an E commerce retailer. And for me that was, that was great. Like I always think about my personal mission in life is right. I Want to help empower entrepreneurs and merchants across the world to sort of bring their products and goods to the world stage. And so E commerce is just so clearly aligned with that. When I reflect on trans, sort of my family and the very entrepreneurial roles that they've had, it's really all been centered around commerce. I mean, my grandfather on my mother's side and Trinidad, he had a large cocoa estate and did a lot of exporting of cocoa that like chocolatiers would use to make products.
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B
Have you ever, have you ever cracked open the cocoa like inside?
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A
I have, I have. I actually think it's better than the like final sugary product.
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B
I know it tastes like, it tastes like lychee almost, right?
- [11:04]
A
Yeah, it does, yeah. And then you get to enjoy the Lychee SAP and then you have to. What they do is they dry the seed and let it ferment and then grind it up and that's how you get the unsweetened cocoa powder.
- [11:15]
B
Yeah, my cousin that's back in India, they have like crops and like, you know, they, they've had the cocoa. So I have like a memory of being a child and traveling back home and like cracking it open and I'm like, wow, this is what, this is what chocolate is. It's like lychee, you know. So, you know, that's really interesting. And you know, one thing that I've been really looking at and made an investment recently in a Buy now pay later pretty well known company. So how do you think that's going to impact E commerce? And do you think that's going to unlock a lot of capital for people to just kind of pay for things much more frequently or I guess, you know, any, any thesis you have on, you know, buy now, pay later, buy.
- [11:55]
A
Now, pay later space, it's really interesting and I think any opportunity that you have to remove any friction in the, in the sales process and the transaction process, the higher likelihood that you have that you're going to have some positive conversion for the end customer. And so I think from the retailer perspective, it's a great strategy and we've seen it's incredibly effective. Right. The data doesn't lie. One of the areas that I'm really interested in, I'd actually be interested to know if you have any strong opinions or perspective about this is that I think it's been probably, I want to say not less well regulated, but the barrier for applying for Buy now pay later credit is not as stringent as applying for a traditional credit card. And so I Think I saw an article, maybe it was about six or seven months ago, saying that in the UK they were starting to require more stringent review for how you're extending credit to consumers and making sure they understand exactly what that means. Right. There's always a ton of emphasis on consumer education. Do people really understand the products that they're using and what they're consuming? And so I'm interested to see what the future for regulation of buy now, pay later looks like and if that impacts its effectiveness as part of a retailer sort of E comm and conversion strategy. It's definitely easy to embed on the site. It's easy to sign up and, you know, and get going with it and purchase product. I'm not yet well versed in sort of what the downsides are for that for the consumer. So I'm really interested to see how the space evolves. But I definitely think most sort of winning retailers, it's something that they've implemented and they're actively using on the site and they're definitely, I think, a handful of winners in the space.
- [13:35]
B
Yeah, because you can, you know, I think from integrating, you know, I think it, it's down to the point where it's a couple lines of code like stripe, right. To be able to enter, you know, add that interface and then. I didn't know that. I mean, it, that is great if, you know, getting the credit is much easier because I mean, typically, right, getting a credit card, it's like they pull your FICO credit score, which is just such a legacy process to build credit. Right. I mean, you could be someone that pays your bills on time and is trustworthy, but you just move to this country, right, and it's impossible to get a credit card or even like, maybe even get a loan for an apartment. So I think that needs to change. I mean, I was inspired several years ago with Tala, you know, that startup that was based in Africa. You know, they could take, you know, some of the interesting stats that I still remember from like the founder is if your phone is always charged in general, like you're more credit worthy because that just shows you're more tech savvy and you're on top of stuff. But like they triangulate that through just looking at, just processing tons of data. So I think like integrating in with some system like maybe your email or something in a secure way where it can pull in like your, your records or just your bank, right? Like analyzing your, you know, connecting with like plaid with your bank and just looking at your Direct deposits that are coming in from your salary and then like your spending activity. I feel like that should essentially be like a real time credit score, but I don't know who's really innovating on that. But I feel like that could be a, you know, kind of a little more real time credit ranking option than the FICO score, you know, because people, people could go bankrupt or get foreclosed and then kind of get a credit card in a couple of years, right? That happened with the recession. So yeah. So I think on that end, that's what I think. I think like using some type of data or tech at some point, if you can use that to pair with like the buy now, pay later to kind of get credit and, you know, you build credibility as long as you keep on paying, paying later on time, I guess. And that's always great. So, and then, and then what are your thoughts? I mean, on, you know, I saw a video with like Hassan Minhaj. He did a whole series on like retail, right? So like, instead of people investing more in like a more high profile brand like Chanel, like people are buying like fast fashion, right? And you know, they're buying them quicker because they're cheaper, they're still stylish. So have you, have you dealt with anything on the fashion side and like any trends that you've seen with retail and consumer spending?
- [16:09]
A
Yes, I've worked with a range of brands ranging from fast fashion all the way to luxury. And I think what it really comes down to is it's really about community. And so this is a lens that retailers are evaluating, like even the technologies that they use. Right. Does this allow me to tell my story and build community? But for people who, I think it's less about the price point of the items that you're consuming, and I think it's more about what that brand and what that product says about you. And I think the definition of a Veblen good. Right. Is really evolving. And so, you know, you have celebrities who have made like fashion Nova is like a brand and it's no longer this thing that you have to like hide that, you know, you got this dress that maybe was like lower price and they're building like real community around that brand and then same things for high end luxury goods. Some people are turned off by the fact that maybe they are more closed brands and some people like the fact that these are still limited quantity goods. I think in the streetwear segment, we're also seeing a ton of innovation around limited quantity goods and drops and how that's also changing the way that people are thinking about products. But you know, I think first and foremost, if you're launching any consumer brand, people are definitely taking like a brand and community driven approach first. And that's going to be really impactful. Especially when we think about sort of rising customer acquisition costs. The most strategic thing that you can do for your business is make sure that not only are you getting a customer make that first purchase, but you're creating a hook that allows you to keep drawing them back in, that keeps them engaged with the brand and the product and the properties and other people who are also buying your products as well.
- [17:49]
B
And then what are some of the KPIs on the consumer side that you guys look from? I'm assuming probably just the rising cost to acquire a customer and then probably the just the MRR probably seeing a step up. Like are there some like quantitative KPI's that like maybe as a VC we should look at. If we're looking at like consumer products, like you know, a new, a new dress brand in Brooklyn. Right. Like it's, it's growing traction. People don't go to Macy's anymore. Right. Or the department stores are actually like tying to these communities and brands. So when we're evaluating those consumer deals, any maybe just top level metrics that would be good to look at?
- [18:32]
A
Yeah, absolutely. So Tech Square Ventures does not invest in consumer brands. We focus on B2B and SaaS platforms. But I think the conventional wisdom around like what are the metrics that really make for a healthy consumer business? You definitely want to look at the ratio of your customer acquisition cost to customer lifetime value. Also looking at like different channels for scale and repeatability of the business margin on the products margin, cash conversion cycle, off the top of my head would be like key metrics that I would ask about. And I think what the last year, year and a half has taught us is that we also want to ask really nuanced and savvy questions about de risking, you know, your supply chain. And thinking about supply chain is another sort of strategic arm that you can wield over the business. It gives you an edge on your competition as well.
- [19:17]
B
Yeah. And I'm sure a lot of those insights probably came from, you know, when you were working as an operator at some of these startups. Right. Maybe you can talk about some other learnings and then maybe some observations that you saw because you did see the cycles of actually getting acquired. Right. So what were some things that you saw? And you don't have to Name any specific examples, but just general things that you saw coming from like a company as a startup. And then now it's growing, it's becoming more mature. There's like formally ahead of HR and probably like true team leads. So you know how, how have you seen kind of like the leadership scale up too? Right. Because normally it's like the, some of the co founders did a lot of the product development, now they scale up and hire like a VP of product and there's probably like a brand marketer versus just like a regular full stack marketer. I've seen that a few times but maybe you can walk us through that and what you observed, you know, as far as like the startups maturing.
- [20:15]
A
Yeah, I mean I think the sort of two key takeaways because every startup is different and I always am very hesitant about saying like here's one size fits all rules you should follow and you'll absolutely be a success. I think first it's never too early to invest in people, especially as leaders. If you take care of your team, your team will take care of your customers. And so really an emphasis on people is a great thing. And it's never too early to think about your people strategy. I think looking in hindsight I've always wished that we sort of doubled down on people strategy earlier. And then as a leadership team and as you're hiring your heads of the different departments, specialization just becomes so important as you scale. And the trick in that is not so much hiring. I think it's really in the delegation and being able to fire yourself from your role. Right. Every 12 to 18 months and say I'm going to continue to work on the business and now need to hand this off to someone who's going to work in the business. And so that's why I think team building is paramount because developing that culture of sort of trust and collaboration and accountability. Right. That's the foundation that's going to allow you to turn to someone and say you should own this and I'm going to go focus on the bigger problems that we have to solve now.
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B
Yeah.
- [21:23]
A
And then in terms of successful outcomes, whether you're going to IPO or you're going to be acquired or maybe you're going to continue to stay private. Because I think any number of those things, like there's no one definition for what it means to have a successful and scaling business, the best thing that you can do is I think not optimize for any one of those giving yourself the most, most number of I guess the greatest optionality possible. I think when we all talk to portfolio companies who are all looking at a potential acquisition, maybe they've hired a banker. Like where they are in the best position to have those conversations is when that's not the only outcome that they have to drive towards. They have some timeline against which they're working towards to have this sort of like exit or liquidity event for business.
- [22:05]
B
Yeah, one thing that you know, talking about firing yourself, you know, one thing that I learned, I think I watched a talk on sales strategies for like CEOs and scaling a sales team and one thing that you know, I think I saw in like a 500 Startups video was you know, a lot of times the CEO, they will kind of lead like a new business vertical and like they'll actually do the selling first and then eventually when they felt that hey, this actually can work and I, I can sell it like now I can probably hire like a salesperson to kind of like to train and then have them lead it and then have them build a sales team around that. I guess. Any insights on you know, just building, you know, from your experiences just building sales organizations and. Because that's really the chasm.
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A
Right?
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B
You got like, you got like 55k in MRR and you just kind of hit a speed bump. Like it's tough to get to like the 100k in MRR. Right. So at that point you need to really kind of do the, do the, the, the math and the, the calculations on hey, you know, this is our cost acquired customer. To get to that 100k mrr, we need like this enterprise, you know, this, this additional, you know, headcount to be able to take those many more calls and then hopefully convert those leads into sales. So any, any, you know, with that in mind, I guess just kind of scaling to like the next level of revenue, you know, any, any you know, takeaways.
- [23:30]
A
Yeah, absolutely. So the shift from founder led sales, now handing it off to a sales team, I think the trick in there is also making sure that you're professionalizing your sales practice and motions because if not you have to mention, you have to realize that like they don't have. It's not the same optics when a customer is talking to the CEO versus the salesperson and maybe they've been relying on their network or their Rolodex and so making sure that you've professionalized the sales motion such that it is a really seamless handoff. And I think if it's something that you're personally struggling with and this is something I've had to do as organizations have reached those inflection points is like look at your total cost of sale for the deals and also the opportunity cost of what you're not focused on. And that will pretty quickly illuminate the fact that they're right, that your focus is needed elsewhere. But having also what we see is for founder led sales, especially for those early sales, these are probably opportunities that are entering your funnel sort of middle of funnel. So I think also taking the opportunity to develop a practice around top of funnel customer acquisition again. So that way when you have that handoff, you're not seeing your business stall for a few quarters and then trying to restart. Now a professionalized sales motion.
- [24:41]
B
Yeah, that's really helpful. And I've heard some other helpful advice around. You know, when you hire SDRs, you know they should essentially do the prospecting as well. So that way you know, they're not really just kind of waiting for. So do you think that, do you believe that too? Like, do you think it's good to have like the salesperson also do prospecting or do you think you should just have like a close or be ready?
- [25:05]
A
It really, it depends on what you're selling and who you're selling it to. Right. I think there are certain categories. For example, I would say the media and entertainment vertical, especially if you're selling into enterprise in the media entertainment vertical, that's probably going to be largely network based sale and an SDR is just not going to be that helpful. You probably need some sort of account executive who already has some experience or network within that space. And also channel partnerships. Typically as we think about more enterprise opportunities, where you would think of your SDRS is really facilitating top of funnel. It's actually probably going to be your partnerships team. Right. Because that's where a lot of your opportunities are coming from. Now for more like SMB and mid market sales, SDRs can be incredibly helpful. I think it's really about how you deploy them in an effective way that is always helpful to your brand. And I believe pretty strongly that SDRs belong within the marketing organization because that's part of the top of funnel net that they're casting and they're giving that iterative feedback to the marketing team around the type of research they need to do around the key customer and what's resonating and what isn't. So there's a lot of dependence on the nuance of your business. Again, what your product is, who you're selling to, what your average sales price is, but I think just being really thoughtful about not so much what your sales process should be. I don't think that's the first way to lead into it, but it's rather what is your customer's buying process. And that will eliminate sort of the key inflection points that you need to resource against along that journey to them, hopefully becoming a customer.
- [26:40]
B
Yeah, that's really helpful advice. Yeah. And I just think that just you kind of living, you know, in those ecosystems, you just kind of saw it firsthand. So it's just super valuable to hear from you. And then you're an operator for some time and then what kind of was the catalyst to have you start thinking about venture and getting into the investing role?
- [27:02]
A
Yeah, so as part of having a pretty broad mandate as an operator, I'd also started to be more responsible for finance and legal, started interacting more with our investors. And then I think as I started to become more familiar to people who themselves were in the venture roles and so I would help them with diligence or sourcing just informally. And that was a great way for me to understand what is venture really about? What does it take to be a good vc? What's really helpful for founders. And after I'd had these experiences and had worked with companies at different stages of growth and different funding environment and it also built these financial skills and it also got my cma, it felt like a really good time to make that transition because I was already informally doing a lot of venture like activities and I think serendipitously at the time that I had sort of decided that's what I wanted to explore next, that's when I'd met the team at Tech Square Ventures and there was a really good fit and alignment of needs. I think what makes me really helpful to our portfolio companies and just generally founders that we talk to is because I've had those operator experiences. And so I'm not pontificating at a high level about strategy, but I, I think more importantly have a lot of war stories and war wounds about where things just didn't, they didn't go according to plan because that's the reality of startups. Right? You sort of make plans and sometimes it goes right. But more often than not there's all sorts of complications and things that you have to pivot around. And so having that experience and that tactical support and advice and I think the recency of a lot of that knowledge as well has also been super helpful and it's allowed me to bring together the things that I love about being an operator and also the finance and quite frankly the execution part of investing. So that's made it a lot of good fun. And again, I think the two things that founders need most is access to markets and access to capital. And so for anyone who's interested in pursuing a career and venture, it's really about how do you help check off those two boxes. Especially as capital is increasingly becoming a commodity. You're now hearing founders increasingly ask as they engage with potential investors, like what else is it that your firm is able to provide in addition to funding? Because now they're in a position where they can choose between firms. They're probably getting multiple term sheets. And I think that's a really good thing for VC as an industry, that each firm is really being forced to clarify what their value proposition is.
- [29:46]
B
Yeah, no, that's really helpful. And I think you hit on a couple important points. I think one thing is that you decided that you wanted to be a venture capitalist. So it's probably something that you discerned for some time. Time. And then you're like, hey, you know what, I think this is an avenue. But you know, you made another earlier point that made sense too, which is having optionality. Right. So it's like I could continue to be another operator and maybe do some angel investing or I could just kind of be a full time professional vc because I think you. Yeah, go ahead.
- [30:16]
A
I was going to say and I think there now there's so many different ways to participate in venture capital. Right? You can be an angel investor, you can participate paid as part of a syndicate. In addition to investing in a company, there's also really valuable ways to get involved, like being an advisor, being a board member. I encourage people to really explore what it means to have that responsibility to support a company and also to have that fiduciary responsibility to focus on returns. But there are so many ways to lean into that role and that experience. You don't have to do VC full time to be an investor and truly exploring like what that means and how it aligns with your interest and what you like to do. Because I think very often people also get caught up in like it is a very special thing to be able to call yourself a VC because it's a small industry. There are limited roles. I think I read an interesting stat was like there are more people recruited to the NBA every year than there are new roles available in venture. And so I think like making sure that it's something that you really want to do and you understand the responsibility. And quite frankly, maybe talking to a few friends that you might know who are founders and asking them, like, what does a great VC look like for you? Even if you haven't met that, even if they haven't found someone yet, like, what is the archetype of a wonderful vc? What kind of investor do they want on their cap table?
- [31:40]
B
Yeah, And I want to pull back the analogy that you brought up for product, right? So if you want to get into product, build a product, right? If you want to get into VC, you could invest $100 in Republic and build a small portfolio with the capacity that you have. You can spend a couple thousand dollars and just launch a syndicate with one of these platforms that they do all the accounting and everything. So that's almost like a mini fund, right? If you got like a really hot deal. And then there's the whole trend now that we've talked about in the past of just emerging managers. You know, I mean, that's the perfect combination of a startup plus being a vc, right? I mean, there's no other, there's not, there's no other startup that I would say that is, you know, as, as taxing as, you know, starting your own fund. Right? Because it's kind of the business and the brand and, and then you're, you're raising capital just like an entrepreneur, Right? So exactly. You can do that too.
- [32:37]
A
I think that's exactly it. On the other side of like founder support and understanding what it means, like really think about what it means to have to like, fundraise and get potential LPs on board. That is a process that if you haven't thought about it and haven't gone through it, there's, there's a lot of nuance there. And so it's even worth, like reaching out to potential LPs that, that you might have in mind to understand, like what they are looking for when they make an investment. Because that's also, you know, in some, in many ways that's also a sales process. You're selling yourself to LPs and you're selling yourself to founders.
- [33:09]
B
We have a few, you know, few people here that are, you know, growing in their career, trying to transition into vc. So any tips for like the interview process? Right, so it doesn't have to be anything specific, but like, if you're an operator and then now you're, you know, I think that was a really good superpower that you had probably something that you really had to carry weight as, like one of the best candidates, right. That you did go through those operator workflows. But you know, and I think another thing that you hit on was sourcing deals, right? So kind of definitely, you know, you could probably find a template on the Internet which is like a checklist of hey, you know what, here's the, here's the market size, here's the team, the tam, all that stuff, right. The competitors. So you could probably put together some type of memo and bring those, you know, really great deals that are a good fit for the fund that you're joining. Right. Because you did some, you know, you did a lot of, you know, E commerce and you know, the new fund may have a different focus. So you want to kind of tailor the deals. But like any other, you know, tips that you would recommend as far as pivoting or trying to kind of outperform in the interview because it is pretty competitive.
- [34:21]
A
Absolutely. I. So two things in a firm, there's like a variety of roles, right. Whether you be on the execution side, portfolio support side sourcing. And so I think really being thoughtful about what the need is and maybe even asking questions about how they do those things today and it'll give you a really good sense of where there are opportunities for improvement or where they've made deliberate choices. And I think also really understanding what the fund's values are and making sure that aligns with your own. Because if you source a deal, your fund ends up investing in them there. Yes, the fund will be on the cap table, but that founder is going to know that you were that sort of first point of introduction. And so you want to make sure that the way that you are going to support that company and how you'll participate, that there is a good alignment of values between you and the fund. And then I think, you know, wanting to learn more about first sourcing. We almost seem to think that sourcing is this like serendipitous thing that happens. You're like, I was walking down the street and I met a great startup. In fact, that's not how sourcing works I think at top tier funds. And so there is a deliberate process around that. So I think the more that you can try to understand what the actual motions, daily activities will be about, the better being really thoughtful about what those responsibilities are. And again, I think that will help stand out again across a sea of candidates who maybe are just so excited about the opportunity for participating just in an industry. It's all about innovation and maybe haven't peel back those layers if you're Going to focus on the execution side. I think there are so many great resources, both like paid and free, that you can look at to understand, like what is the financial foundation that I need to have in order to do this? You know, one of the greatest resources out there, in addition to some of these, like paid communities like nbca, the National Venture Capital association, they have so many great free templates on their sites. Around here is the best practice for term sheets and different models for contracts. And they do lots of great events and programming. And that's a great way because they do set, I think that the standard for the US for investing here. Right. They do set the standard and bench line for. Here's what these different formats should look like. So I always think finding a way to in part familiarize yourself with or do the job before you're in the role is always going to be your best option because it's going to just help you ask better questions. And I think that's a big part of what being in VC is about. It's about learning how to always ask better questions.
- [36:56]
B
Yeah. And you know, for the audience, do you think you can take a moment to maybe unpack some of the roles and responsibilities for like an execution person versus portfolio support? And I think you mentioned a third one too, so maybe you can unpack that a little bit. So maybe the audience can kind of keep that in mind as they're thinking about it. And then, and then maybe also just sourcing versus screening and best practices at like the bigger funds and how they're done professionally.
- [37:24]
A
So around sourcing, it's really around defining what the fund's thesis is and then almost creating as if you were going through a sales process. Right. So where all the places, like if this is the firm's thesis or one of their theses, where should I be looking for these sorts of founders? Understanding sort of the size and stage of a company as well is really helpful. So creating these parameters, understanding like what are the metrics, what's the criteria that the fund is looking for in their investment profile. And this will vary for fund like they look for different stages, different sort of proof points for traction, milestones that have been met, so on and so forth. So that's quite a bit around sourcing and I think spending lots of time both getting smart in your target industries, in your target verticals, as well as understanding the profile of what is a great investment opportunity for that fund. And that's not sort of one size fits all. And in fact, many funds, they do publish this information because they also want to help founders who are reaching out to them know whether they should be self selecting in or out for execution. You know, it's really thinking about going through the diligence process and putting together the memo. And so it's things like if you, when you ask your founder and the founder for access to data room at the appropriate, to their data room at the appropriate point in those conversations, like what are you looking for in their pro forma on their cap table? Does your firm have any requirements around like the types of equity or debt that they want to see that they've previously taken? Going through product demos, customer discovery, really making sure that you're rigorously scrutinizing all these different facets that make for a solid business. There's also a bit of like founder interviews and team interviews as well. Because in addition to the product and the customer, this is also a team that you know, you're investing in the team and then doing a lot of the scenario analysis and probably probability weight analysis to understand potential outcomes for that, for that business. And so that diligence process is great because one, it makes sure that you've done thorough work to meet the fiduciary commitments that you're making to the LPs when you tell them we're going to, you know, we're going to take your money and we're going to make really good decisions with it. But it also going in depth also helps you build that muscle long term to kind of know what you're looking for and what you're, what you're hoping to build is some sort of ability to recognize what a great startup looks like, be able to differentiate between a great enduring business versus something that just might be marketed really, really well. And then memos, you know, I think memos, like any other writing exercise, it really helps you clarify your own thinking. It helps to memorialize why you've made a decision. And I think even I know some funds do this, but even when they decide not to invest, they will similarly go through a memo writing process if it's a company technically could fit within their, their target profile. And that's really helpful to allow them to look backwards and say did we make the right decision? Or just understand how their clarity of thinking is evolving over time. I encourage everyone to write, write about anything whenever you can. It's such a great muscle to build for yourself. And so, and then there's like the legal part of execution. So putting together the different legal docs and term sheets and things like that and there's a bit of like negotiation that happens especially, especially in this environment where we're seeing all sorts of movement related to multiples and valuations. Right. Just, it's definitely an exciting investment environment right now. On the portfolio support, this means different things to different funds. It can tactically mean working with founders on things like their sales strategy, marketing, maybe product. Very common. It can also be hiring. And so that's why we're seeing like for example, a lot of firms now have like a head of platform that can be an HR specialist because we know that startups, one of the biggest needs that they have is hiring and recruiting great talent. So portfolio support can mean different things. Sorry, different things for different funds. And it'll also probably vary a bit depending on the profile of the companies that they're investing in. So if they're investing in like capital intensive companies, maybe the portfolio support includes some sort of like R D advisory, like grant writing, something like that. So, and that's also starting to be a key point of differentiation, how they think about doing things. Portfolio support, let's see. And then in terms of different roles that outside of that, you know, there is, there is absolutely fundraising is a huge focus for funds as they're thinking about raising subsequent funds, sort of media branding and marketing. Increasingly we're seeing funds are thinking of themselves as media entities in addition to being these like vehicles. I think injuries. And Horowitz is a great example, like they launched a massive media arm as well. And so thought leadership is very important to them, being able to syndicate that across channels. And so, you know, I think like any company, we like any industry, we're at a space where we have just such a tremendous volume and capacity of different ways to participate. And so now it's really all about differentiation. And I think as you're talking to funds that you want to join, also having a perspective on what it is like not only being able to support, support their activities, but what is it that you can uniquely add that makes their value proposition as an investor more defined and more pronounced and more compelling in a market that's increasingly competitive?
- [43:05]
B
No, it's really helpful. And I think there's also a couple different dynamics I think based on the size of the fund and then kind of the organizational structure. Because sometimes I'm assuming like a associates can also be empowered to set the terms and negotiate. And then I feel like sometimes when there's a lot of hierarchy, it's like only reserved for like the principal, like after, like an investment committee. Would you agree with that too. It's like kind of just dependent on the organizational structure.
- [43:35]
A
I think it depends on the organizational structure. You know, I think smaller size in terms of amount of like capital under management number people, smaller funds can be scrappier and have more generalist roles and like any company and as you become bigger you have more specialization and more rigid structure. And so it's really about the environment that you think you're going to thrive in.
- [43:58]
B
Yeah, no, it's really helpful. Well, somebody had a question here. Have you started to see ESG in some venture funds? I guess that was a question, I guess. Is that the right question, John? Like ESG and. Because I've seen, I've seen clean tech funds and I've seen some funds that are doing like climate tech but you know, and I've seen mostly ESG and like more of the private equity space for like impact investing. But have you seen any of that kind of like now get into venture where people are?
- [44:28]
A
Absolutely. So ESG and climate tech are definitely important areas. They're top of mind for all of us. Right?
- [44:36]
B
Yeah.
- [44:36]
A
We're currently facing the realities of all sorts of environmental changes and I think it's an important point that you mentioned that we've primarily seen that in the private equity space because to date when we think about clean tech like this is largely like capital intensive, like physical product. I myself couldn't off the top of my head think about a ton of innovation in that space that's not like hardware enabled. Well, actually one of TSC's portfolio companies has recently announced Cloverly is doing incredible things in sort of the carbon credit carbon offset space. But I think by and large, right, they tend to be hardware and very capital intensive. But I think we'll start to see the evolution of different types of businesses who are looking at ways of solving these challenges in new and novel ways. Some funds are generalist and so they will adopt ESG as part of the broader spectrum of things that they're looking at. Right. It's definitely a key priority and we have lots of specialist ESG funds. I also think for a lot of corporate VC arms, as enterprises start to think about their environmental footprint, I think it will also increasingly be a priority there personally, and I'm happy to be wrong about it, but I think what is going to accelerate investing in this space as well is a lot of the laws and new regulation around sustainability and around sort of managing your environmental impact and footprint that will be a forcing function for innovation in this space. So John, I'm not sure if that entirely answers your question. Like, let me know if there's anything I can clarify. But that's a bit of how I think about it. And I would say climate, tech and sustainability is absolutely a focus for Engage.
- [46:27]
B
Yeah. And I'm looking at your website here. I wanted to double click on one point that you said earlier, because when it comes to sourcing, you know, the typical strategy that, you know, you would assume is, hey, people go on Crunchbase and they go on like Eventbrite and they go on PitchBook. Right. But I'm looking at your website here. You're looking at university spin out. So you made a really important point to kind of like really map out that sector and like also think about the communities. Right. Because there could be some like unique Slack channel or like some conference where like all those experts attend. And you know, I, I've, I've been involved in some deep tech and some of the insights and knowledge and even deal flow has come from like universities. So when you guys are looking at university spin outs, I'm assuming like.
- [47:11]
A
Yep, Georgia Tech.
- [47:13]
B
Yeah, yeah.
- [47:13]
A
Georgia Tech is one of the leading research institutions in the country, definitely in the South. And you know, I think universities are a great source for, for innovation. We see a lot of technology being spun out of these sort of research labs. And so I think that goes back to creating a sourcing strategy around the thesis. So if this is your general perspective or the problem that you think you're trying to solve, where are all of the places that people who are also interested in solving this problem, like where do they live? Where are they thinking about what the future of these things look like?
- [47:45]
B
Yeah, and with the universities is essentially also like the tech transfer labs. Right. Because they have like the IP and then they have a vested interest to also try to commercialize that as much as possible. So for them partnering with you, that could help to accelerate that. Because they have the tech, they have the ip. They essentially may not have the team, but as you guys are company builders, you guys are helping to kind of find a CEO, find someone to run growth. And then I think that the strength that the university has is they have those labs and they have the scientists to kind of build that tech up, but then really to kind of scale it and get, you know, generate revenue from that, you need kind of some additional key people which I think you guys can help kind of like insert to, to take to scale and turn into a profitable company at some point.
- [48:34]
A
Yeah, absolutely. Cool.
- [48:37]
B
Oh, it looks like there's one question Here, I guess John and Bandar, do you guys just want to yell out your questions and then, you know, I know we got a few minutes left so maybe we can get those final questions. So I guess John, you want to just shout out your question or I can read it too? Yeah, no, thanks Lyssa and Joel for doing this. Appreciate it a lot. My question is basically if this has already been covered, I apologize, but I've made a lot of investments into venture capital funds as an LP or as an angel and I'm looking to make investments now more directly with the startups. I was just wondering if you have any advice or suggestions for that.
- [49:20]
A
Yeah, absolutely. I mean it sounds like you need a really solid sourcing strategy. It's clear that you're coded, you've got good ability to deploy capital. But I would say getting in touch with founders, right, very often we make assumptions around what size check is going to be their limit or is too small and especially if there's other strategic value that you can offer. So figure out what is the niche that you're passionate about that you want to focus on. And I would say similarly coming up with a sourcing strategy about how you're going to meet these founders. And it's really as simple as asking. I think founders love to hear especially from individuals, right, because you're not going to be the lead investor, which is where they start to have to make these trade off decisions and choose a bit more. But you can say, I love what you're building and I think this is how I can add value. And you know, I'd like to participate, I'd like to invest in your, you know, in your next round. And again you can sort of say like, this is how much I'm willing to invest or like what are the, what size checks are you accepting from individuals? And that's a great way to go about it. I think it's also a wonderful way for you to think about what a more formal career in B.C. looks like. Right, because that's the same problem they have. They're like, we have all this capital to deploy and we want to figure out how we deploy it. The other thing that you can do is if you find other sort of like minded individuals who are interested in the same spaces that you are, you can also set up like a syndicate on Angellist and use that as a way to have a larger volume of capital that when you reach out to founders you can invest if, you know, if you find, depending on your focus industry that the capital requirements are a bit larger than what you might independently be willing to do.
- [51:01]
B
Thank you so much. That was awesome. Thanks a lot. Appreciate it.
- [51:04]
A
Yeah, my pleasure.
- [51:06]
B
And Bandar, you had kind of a portfolio question. You want to just elaborate on your question? Yeah. Hi. Hi, everyone. Hi, Melissa. Nice to meet you. I'm asking about the portfolio. I have seen it yesterday. It had more than 62 startups and a lot of domains. And so you have something in bee and honey and batteries and laundry. So the challenge to mind like this diversify the portfolio or it's something or there is some strategy to manage this kind of portfolio.
- [51:46]
A
Yeah, absolutely. So some firms are generalist, others focus on a specific industry. So maybe they just focus on batteries or laundry. And at Tech Square Ventures, we focus on business model type. So B2B mostly because we think that the challenge that startups are going to encounter at the stage that we're investing, typically seed and series A, those are the challenges that we have the experience to help those entrepreneurs with as they think about strategies of scaling that go to market machine. And so again, our. And our role is not to be the expert in their business because that would be problematic if we knew more about their industry, their business than they did. But it's really about being equipped to support them and so. And being very clear about what that looks like up front. So part of the value proposition and so our value prop is that we can absolutely help them with the challenges that they're going to encounter as they seek to scale for the specific type of business model that they selected.
- [52:45]
B
Yeah, thanks. That was helpful.
- [52:47]
A
Okay, awesome.
- [52:49]
B
Great. Well, hey, Melissa, I know we're like three minutes away, so wanted to, you know, just be mindful of your time and if anybody else has a really quick question, feel free to shoot it out. But, you know, if we don't see anything else, just want to personally thank you for coming in. I know you're super busy, so it just means a lot for you to make time for us and share your journey. There was just a lot of really helpful nuggets in here.
- [53:13]
A
All mine. This has been excellent. Thanks so much for inviting me to be a part of this with you guys. This is great now.
- [53:19]
B
This is great. Well, hope you have a great week and hope to catch up soon. You know, keep in touch and let me know if you're in New York. Do some coffee or something?
- [53:28]
A
Yeah, let's do it. All right, thanks.