VC & Funding - Audio Compilation (S1+S2) - POLISHED

Speaker 21: [00:00:00] Capital likes to tell a clean story about itself. It says it's rational. It says it finds the best ideas. It says the market decides. But [00:00:10] anyone who's built something from the outside knows access is never neutral. Who gets the meeting?

Who gets believed? Who gets the benefit of [00:00:20] the doubt? Those are precedents, too. In this episode, we hear from people who are not just investing differently. They are changing the assumptions underneath [00:00:30] who gets funded in the first place.

Samara: He grew up as an orphan. And so he had literally three outfits his whole life. Three outfits.

Leah: Wow.

Samara: Three shirts, [00:00:40] three pants, one pair of shoes. And we also grew up with, not a lot. And during the beginning of the school year, I would choose three outfits for the entire [00:00:50] school year. Wow. And three outfits for the summer, and that's all we got.

That story basically is kind of how my whole life early on was limited [00:01:00] resources, limited clothes, limited money, limited. Everything. And even my first chalkboard was from a garage sale [00:01:10] my mom bought for me and only half of it worked. But what I used it for was for math. My sister would teach me math skills that she learned as she was three years older than me [00:01:20] and we would use half of the chalkboard and do math problems.

And we were home a lot by ourselves 'cause my parents were always working and we didn't have a babysitter. So that's where I got my early [00:01:30] start in excitement for math. That's where I got, I guess, the homework. I didn't have a tutor. I didn't have, you know, somebody telling me to do extra workbooks. I just [00:01:40] did it because we had it available to us.

And so whether it's clothes or whether it's chalkboard, having this limited resources, but doing the best with what you [00:01:50] have,

Leah: Latinos are certainly inevitably the new majority. I mean, that's not just a demographic shift, it's actually an economic one. And I read somewhere [00:02:00] that Latinos start businesses six times faster, but are the least funded group. Right? So let's talk about investing in the new majority [00:02:10] as a strategy as the alpha, right?

And I think so many people will put it in the bucket of social charity work, not [00:02:20] actually something that a venture firm can be built around. So let's talk about that and that focus.

Samara: Yeah, so in many calls an impact [00:02:30] fund, we've never actually called ourselves an impact fund because we'll invest in a lot of different types of businesses, and we don't have a checkbox for a particular demographic or [00:02:40] gender or anything like that, even though the name is Chin Ventures.

But the way we talked about this superpower, being able to come from one of the [00:02:50] fastest growing populations in the United States, being able to come from a demographic that builds new businesses more than any other group and be able to uniquely understand them, I think [00:03:00] is my superpower.

Speaker 21: Samara's point is not that the system needs to be richer.

It's that the system has been mispricing talent. And once you understand [00:03:10] that, Stacy Brown-Philpot's story becomes the proof point. The pipeline was never empty. The door was just closed.

Speaker 13: Everybody was [00:03:20] outraged. And I remember around the time the opportunity fund was being established, I was also transitioning out of TaskRabbit.[00:03:30]

Speaker 15: Mm-hmm.

Speaker 13: At work, dealing with the emotional trauma that's been caused by this horrible incident. Mm-hmm. On everybody in [00:03:40] the company, regardless of your race. Then hosting conversations. We were doing these because it was COVID remember. So we were doing these [00:03:50] virtual crucial conversations to really bring people together.

Speaker 14: Mm-hmm.

Speaker 13: And separately, I had this conversation with Marcelo and this other man [00:04:00] named Paul Judge, who were my Henry Crown Fellows class. And we were on a WhatsApp and we were outraged. And the question was, what [00:04:10] else can we do? How do we show. People that there's a different side. Mm-hmm. To black people.

Mm-hmm. And why is it [00:04:20] that our news is this kind of news that makes global news? Like, why can't it be something else? [00:04:30] Mm-hmm. That's closer to what we do every day. How do we elevate the stories and the lives of people in a [00:04:40] positive way? So Marcelo was the COO at the time at SoftBank and was able to get a hundred million dollars for the three of us, me, [00:04:50] Marcelo, and Paul, to set up this fund that focused on investing in black and Latina entrepreneurs who were building software companies in the us.

And at the time, a hundred [00:05:00] million was the largest fund that was dedicated to that population of people. Yep. And it was intentional and a lot of people said, oh, we don't, are you [00:05:10] gonna find enough companies to invest in? Are there enough? Yeah.

Speaker 14: Tell me, tell me

Speaker 13: founders. Tell me about

Speaker 14: that

Speaker 13: building, these kinds of companies.[00:05:20]

And we were like, I think so. Like, I mean, it was not a question.

Speaker 14: Yeah.

Speaker 13: So I remember launching this on the news and Marcelo gave out the, his [00:05:30] email and we got tons, hundreds, I bet of people that day. Yeah. We saw 2000 companies. We invested in 70 companies in that first fund. [00:05:40] So there was no pipeline problem.

Speaker 14: Yeah.

Speaker 13: And the fact that people questioned were we gonna spend all the money? Mm-hmm. Was crazy.

Speaker 14: Yeah. On that [00:05:50] note, that is sort of the excuse we constantly here, diverse talents. It's so hard to find. Are you gonna find it? What are the [00:06:00] structural excuses that still need to die before capital can actually flow fairly

Speaker 13: sometimes, and I certainly [00:06:10] got this when I was raising my fund.

Speaker 14: Mm-hmm.

Speaker 13: Well, is this impact, is this charity and like, just because you see a person of color doing [00:06:20] something. Does not mean that we are a charity. We are in this to make money and generate returns for our LPs and the founders that we invest in [00:06:30] are in this to build global multi-billion dollar businesses.

Mm-hmm. And so there's an, there's a bias there of like, oh wow, this [00:06:40] is what a cute idea, what a wonderful idea. Oh wow. This is gonna have such a big impact. We know. Mm-hmm. Because we're gonna generate. A lot of money. A lot of [00:06:50] money, and be profitable and employ thousands of people around the world, and we're definitely gonna have an impact.

So I think that's something else that's [00:07:00] there, which is this. A charity is not concessionary at all,

Speaker 14: I love. That you have now started your own fund, cherry Rock [00:07:10] Capital, where you're channeling that vision, that optimism into this vehicle. You closed what, $180 million? [00:07:20] 172

Speaker 13: million? Yes.

Speaker 14: $172 million to invest in black.

Founders.

Speaker 13: Yes.

Speaker 14: I mean, this [00:07:30] is probably, if SoftBank at a hundred million dollars was the largest fund at the time, like 172 million, that seems like a pretty huge fund for this [00:07:40] population.

Speaker 13: And that was something that we learned, which was once I figured out there was no pipeline problem, yeah,

then

Speaker 13: we just needed to understand.[00:07:50]

Now, where is the gap in the market? It's not a pipeline issue.

Speaker 14: Mm-hmm. Mm-hmm.

Speaker 13: We had a number of seed stage firms that exist and were being established to focus on that [00:08:00] population. But when you looked at Series A, there was a gap where you got the big multi-asset class firms that very hard to penetrate and get into.

So [00:08:10] we wanted to fill that gap at Series A where we could lead rounds. Write larger checks and really be catalytic to some of the most [00:08:20] promising startups that are led by black or Latina founders. And we wanna lead the round and join your board and be helpful and bring our operating [00:08:30] expertise. And that's what Cherry Rock Capital is all about.

We're looking for underinvested entrepreneurs who have. Incredible ideas who are [00:08:40] outstanding at execution and have the audacity to put themselves out there and make it happen.

Speaker 21: Access cuts both [00:08:50] ways. It's not only for founders trying to reach capital. It's also people with capital trying to understand where to put it, who to trust, and how not to be taken [00:09:00] advantage of.

Ryan Nece saw that up close with athletes, and what he built next was not just a fund. It was a way to make access more [00:09:10] thoughtful on both sides of the table.

Ryan: By far the hardest thing that I've ever done. You know, two guys and a napkin. Yeah. Shout out to my co-founder, Jeb Terry, who runs an- Yeah ... [00:09:20] amazing company now called Cosm. But- Yeah ... I mean, really, really hard. And-

Leah: Harder than football?

Ryan: Oh, yeah.

Yeah. I, I was working at a family [00:09:30] office after I was done and trying to learn the, the ropes of being in business. Mm-hmm. And my, uh, business partner comes to me, Jeb, and says, "Hey, I got an idea. I think you could help me." [00:09:40] We decided to take that idea and turn it into a business. I, you know, took the leap of faith.

You know, I didn't have any... I was a single guy. I could do, live, be wherever I needed to be. Let's do it. Mm-hmm. Let's [00:09:50] make it happen. Yep. And we decided to start doing that. And, you know, for four and a half years, all we did was that, 24/7, 9-9-6. Yep. You [00:10:00] name it. Yep. We were cranking. Yep. And it was so hard, and I would much rather run down...

To answer your question, was it harder than foot- I would run down the football field and hit [00:10:10] 300-pound linemen over and over again than- Wow ... have to deal with those early days of building something from scratch because- Hmm ... you gotta know how to be the accountant and the [00:10:20] marketer and the l- legal team.

You're doing all these things that have nothing to do with your expertise or why you were even building the business, but that's the minutiae of what's needed to build [00:10:30] businesses and while you're building and hiring and figuring it out. I think it was Reid Hoffman that said, you know, when you're building a startup, it's like a plane going off a cliff that's unassembled, and you're trying to [00:10:40] assemble the plane to- Totally

get it to fly before you, you know, hit bottom. Yes. And- Yes ... you're scrambling. And-

Leah: Yeah And most of those planes crash.

Ryan: Most of them crash. Yeah. [00:10:50] And you know that, and yet you- Yeah. And you know that ... despite that, you keep going. Yeah. And, you know, we were stubborn and relentless, and- Yeah ... we found a way to get a soft [00:11:00] landing for our investors and for our team and-

Leah: Yep

Ryan: that was really what brought me back into the world of tech. Mm. Because part of it was You know, we'd go up and down Sand Hill Road and talk [00:11:10] to investors or talk to people about raising money, and they would, you know, politely say, "Oh, that's a great idea. Well, come back to me when you get to this benchmark."

Or-

Leah: Yeah ... "

Ryan: You know, this wasn't our... This isn't our sector," or, [00:11:20] "That's too early for us." Whatever all the things- Mm-hmm ... excuses we gave- All the things ... in polite ways, but not to burn the bridge.

Leah: Yes.

Ryan: And when we got acquired, all of a sudden those same people are like, "Man, [00:11:30] congratulations."

Leah: Mm-hmm. "

Ryan: We know how hard that was."

It gave us some street cred. It gave us ability to have a conversation about like, oh, we had an exit, and wasn't easy, [00:11:40] but we got money back to our investors, and no one got retired. And I learned a ton, right? And we learned a ton. Yeah. And so-

Leah: Yeah. Right ...

Ryan: and it's helped me too to empathize now with founders- Yes

that [00:11:50] are doing things at the beginning and saying, "Hey, look, I know it's up into the right. I know everything's great, but when you wanna take that mask off and talk about some real stuff,

I had a blueprint, you know. [00:12:00] Fortunately, my father and Joe Montana and Harris Barton created a firm called HRJ Capital that was the foundation and f- really the first movers in, of athletes [00:12:10] transitioning into the world of finance and venture. And so I got a chance to be around that, so I drank the Kool-Aid early about what was going on in the in- innovation economy and, and [00:12:20] venture.

And I also started to develop the taste buds of who was elite in this industry, right? Okay. Who were the best firms? Who were the best investors? Mm-hmm. What were the best companies? [00:12:30] What do great founders actually look like and sound like?

Leah: Yep.

Ryan: And so as I was playing in the league and watching, you know, friends with a lot of money start to invest in [00:12:40] things, I go like, "This doesn't add up right."

And I remember guys would ask, "Hey, Ryan, will you invest with me in this?" And I would always go, "Hey, are the owners gonna invest?" [00:12:50] And they would look at me like, "What are you talking about?" I'm like, "Those guys got billions of dollars. They have entire family offices and teams to due diligence." Hmm. Like, "If they're not in the- Mm-hmm

in the deal, why should we put our money in the [00:13:00] deal?"

Leah: Right.

Ryan: I just knew that there was a difference in the quality of opportunities that existed. And so after selling or getting acquired, our startup getting acquired, we [00:13:10] were working with a lot of athletes at that time, and a lot of them would be, you know, w- would come to us and say, "Hey, Ryan," like, "I wanna invest in this company.

I [00:13:20] wanna invest in this fund. I wanna start a company." And, you know, in the world of sports, everybody has their guy, their accountant or their business partner or their tech guy, and I must've been some [00:13:30] people, some of them's guy. And it was crap. Yeah. It was crap. It was embarrassing. I'm like, "Don't put your money in that, please."

Wow. Yeah. Oh, I put my money into... Oh, just light it [00:13:40] on fire. Oh. Run.

Leah: Yes. Yeah.

Ryan: And I knew that we could do something better. Yeah. And it was a very simple thing of let's figure out how to give [00:13:50] athletes and individuals that historically didn't have access to the best- Mm-hmm ... managers access, and we could find a way to build a very meaningful way where it was not [00:14:00] just about capital, but it was about bringing value across the value chain on both sides.

And so we worked really hard at doing that. And so that was the impetus of, [00:14:10] hey, how do we find a way to give our community of individuals an opportunity to have a seat at the table to invest, to learn, to engage, and connect with the best VCs and best founders in this [00:14:20] ecosystem?

Yeah. That's probably what I did to perfected it. But one of the things- Yeah ... I was thinking about as well is, could I sum up what greatness and excellence looks like in [00:14:30] founders, in chefs, in leaders, in- Mm-hmm ... authors and entertainers and athletes, all the people that I've been around?

Could I sum it up? Could I sum all those things up into [00:14:40] one word?

Leah: Yeah.

Ryan: And what I landed on was- thoughtful. They are so thoughtful about their craft. If you [00:14:50] think about when somebody's given you a gift, you're like, "Wow, that was really thoughtful." Like, you know that they went above and beyond, the attention to detail, the impact that it had.

And I think [00:15:00] about greatness is it is so thoughtful. There's so much care that goes into it that it's just undeniable. And so I say that when I'm around [00:15:10] founders and people that you're trying to read between the lines and how they operate. Mm-hmm. You're trying to get a sense of... You're trying to... The sniff test of trying to find, do they have that [00:15:20] essence of greatness in them?

Mm-hmm. Mm-hmm. Because I think that's where the, you know, the, that delta is where the difference is made and where, you know, these men and women that find a way to get escape [00:15:30] velocity and build it- Mm-hmm ... they have that.

Leah: I think that's incredibly profound, because I think you usually hear investors talk about pattern [00:15:40] matching, right?

And like, "Oh, I meet all these founders, I meet all these people." And they get lazy, and they're like, "I'm just gonna look for, like, the Stanford grad. Like, it's probably a man, [00:15:50] right?" "He's, like, probably dropped out of school," right? And like, "That's who I'm gonna invest in, because that's the pattern." But I love that when, what you just said, [00:16:00] you distilled thoughtful down from a lot of different industries, not just business, right, not just tech.

But you talked about, like, baking, and [00:16:10] finance, and sports, and, like, music and media. Like, I think that's the key. Humans are multifaceted, right? And the color of our skin, the gender, [00:16:20] whatever it is, those aren't the patterns that matter. It's like the true essence of the human. And, like, I just love that that's what [00:16:30] you distilled it down to.

I think that's so powerful.

Ryan: It's helped me. And when I try to explain it to others, the unfortunate part is, you know, not everybody's had my experience- Yeah ... or been around the [00:16:40] people that I've been around. So for them to develop the same definition- Right ... of thoughtfulness- Yep ... that I have, because that's a relative word, it probably won't be the [00:16:50] same.

And so-

Leah: Mm ...

Ryan: um, that's the part for me, is I, where I try to find my edge, is I lean into that

Leah: What were the things that you saw [00:17:00] as opportunities or gaps when you first came into venture that kind of inspired you to launch Ana?

Samara: Yeah, so I finished that internship [00:17:10] and I started my first role in venture capital with a local fund here in Chicago. I graduated without a job, and this is where my sales skills [00:17:20] came in. I started just trying to find startups to work with for free. I don't advise anybody to do free work, but I was like, this is, you know, they're not gonna hire me.

So I did customer [00:17:30] discovery calls, I did financial models. I put pitch decks together in hopes that someone would notice, and then I found a local VC fund that gave me my first paid project to [00:17:40] work with them. Did that, and then I found the two partners of my former firm that had just launched, they barely had a website and they were looking to hire someone.

So I was a third person on this team, [00:17:50] and there was nothing, like when I joined, there was no process, no stress. It was just kind of like, let's go, and that was great. What I realized through that was that I actually like. [00:18:00] Starting things from the ground up. And I had done that in my roles at Goldman in different capacities, right?

I was like an intrapreneur where I liked building things from the ground up, [00:18:10] taking new processes, bringing it to a new city. And this was working with a fund that had just started. I built a lot of the process on how to do due diligence, how to source, [00:18:20] how to track portfolio companies. The partners were great.

They let me have a lot of flexibility and autonomy, and so I was able to start building a brand and start talking to founders and bringing [00:18:30] them in and start leading deals. And so I got exposed to all aspects of a venture firm, which led me to launch

when I thought about this original [00:18:40] Angel group and then eventually Venture Fund, I had not even thought of the name. I just thought, okay, this is. The thesis, the check size, the portfolio construction. I mean, that's what I was [00:18:50] focused on.

And then I'm like, oh yeah, I gotta think of a name. 'cause somebody asked, what's the name? I'm like, I don't know. Also any like a marketing person. Actually people think that I was like intentional about it. They're like, how did you grow your [00:19:00] brand? How did you think of the name? And I was like, I actually was not intentional, but it was authentic.

And so I was calling it all these things. And then [00:19:10] I was talking to my younger sister who's not a venture, she is a artist. She is in a very different industry. And she was the one that was like, why don't you call it Ana? [00:19:20] Ana ventures? Chingona is

Leah: brilliant.

Samara: Yeah. What? Who you are, what you're trying to build.

Leah: Yeah.

Samara: And I was like, huh. That is very different. Yeah. And bold. Yeah. And you know, [00:19:30] and I needed a name too, to try to also overcome the imposter syndrome of,

mm-hmm.

Samara: Can I do this? Mm-hmm. Can I raise a fund? Can I do it as a [00:19:40] soldier, be Latina in the Midwest?

Leah: Mm-hmm.

Samara: And you know what? It. I'm gonna try Chin, I'm gonna do Yes you

Leah: can.

Samara: Right. You, you gotta have that chin mindset.

Speaker 13: One of the [00:19:50] other blind spots is what resources do you provide when after you provide the capital? Okay. And you know, there's a lot of large [00:20:00] firms that have.

Huge teams that can do these kinds of things. But at the end of it, it's the conversation with the founder. That's [00:20:10] often the most pivotal moment for them. So one of the resources that we provide is coaching. We're calling it coaching. Oh, nice. [00:20:20] But it's really being an ear and a trustworthy ear for the founders that we back so that when they're making those hard decisions.[00:20:30]

They may not always do like we just discussed.

Speaker 14: Right.

Speaker 13: Decision A versus decision B.

Speaker 14: Yeah.

Speaker 13: But we're willing to put it out there and tell you decision [00:20:40] A is the right decision and if it takes you a while to get there, that's okay. Mm-hmm. Because you got there. Mm-hmm. And so we wanna be that hands-on firm that's there to [00:20:50] listen.

We're gonna say our piece and provide the. And we're not gonna just let you do whatever you wanna do 'cause you're the founder and you can go anywhere and raise your [00:21:00] money if you don't want our help, don't take money from us.

Speaker 14: Yeah.

Speaker 13: And we're not gonna chase you for that. Mm-hmm. Because the returns will come when we partner [00:21:10] together.

From our perspective.

Speaker 14: So looking back on that note with founders, what are some of the lessons that you learned from Google, from TaskRabbit, from SoftBank, [00:21:20] that kind of shape the kind of founder that you're backing today?

Speaker 13: Hmm. Well, just growing up, the resilience and the grit, it shows up in different ways.

For [00:21:30] people who come from backgrounds like mine, we don't have the same story of dropping out of whatever we couldn't drop out. But just because we didn't drop out doesn't mean we don't. [00:21:40] Have resilience or grit, we just couldn't drop out because somebody paid for us to be here and broke their backs to get us into this school.

So we are staying. Mm-hmm. [00:21:50] But that doesn't mean we are not gonna be a great founder and entrepreneur. And so I'm looking for that. Google was all about moonshots and [00:22:00] aiming for the moon. And when you scored 70% on your OKRs, that was a success. Right. It debunked like we gotta do a hundred percent. We have to get to perfection.

[00:22:10] We actually just have to aim really high. And so we're looking for founders who can do that. And then at TaskRabbit it was all about connection with people. Mm-hmm. [00:22:20] Who are the people that you bring around the table? Leah, you did a fantastic job of bringing me in and other people and just mm-hmm. Taught me so much about how to build a [00:22:30] great team and what's important about a great team.

And so when I look at. Small companies, and they have, they don't have 60 people yet. They have like 13 to [00:22:40] 20 people. Yeah.

Speaker 14: Right.

Speaker 13: Like, do these guys have what it takes to build a great team

Ryan: Such a great question. I appreciate you asking it, because NXPlayU was started [00:22:50] again every day, at least every week, for sure, an athlete will call me and ask me about transitioning from sport. You brought it up how hard it is. It's very [00:23:00] difficult to transition regardless of what type of athlete you've been: collegiate, professional, hockey player, volleyball player, football player.

It's not easy. And what [00:23:10] I learned Which is kind of an amazing thing. Everybody knows 99% of college athletes don't go pro.

Leah: Yep.

Ryan: Even the NCAA brags about [00:23:20] that, and that's why they get a scholarship. But what people don't realize is out of those athletes that don't go pro that graduate, two-thirds don't have a job because they [00:23:30] didn't do the internships, they didn't work in the summer, they didn't take the whatever it may be class- Yep

to help them transition into the potential career that they wanted to. And so they end up [00:23:40] wasting a lot of time looking for an opportunity. We felt that we could create a program, and so I seeded a company and helped start a company called Next Play You that helps [00:23:50] collegiate and professional athletes and actually others, any...

because so many people transitioning- Yep ... to their next job.?

Speaker 21: Anne Mirako has spent her career looking for the kind of founder the [00:24:00] market may not fully understand yet. Her lens adds something important here. Access is not just about opening the door. It's about having the [00:24:10] judgment and courage to recognize greatness before it looks obvious.

Ann: Yeah. Well, there are two points in which I got into venture. [00:24:20] So, the first was as an analyst. And so this is before my PhD, one of my friends had said, Hey, like if [00:24:30] you're into technology and you're really into business, like you should think about VC. This is when like everyone who did VC had like 10 years of experience [00:24:40] before they got into the job.

Leah: Was this like in 2000?

Ann: 2000. Okay. Okay. And I had this sort of chance encounter with this. partner, [00:24:50] Ted Dintersmith at Charles River Ventures. We were having a conversation. There were like analyst jobs, associate jobs at CRV, [00:25:00] but I thought it would be a long set of conversations and he offered me a position on the spot.

Wow. And this guy was, I mean, his interview [00:25:10] was so interesting because he did not ask me anything. That was relevant to technology or how I would analyze a deal or anything. He just [00:25:20] talked to me about books. I like to read music. I like to listen to, and we had a two hour fascinating conversation. And at the end of it, he said, I'd like [00:25:30] to offer you a position.

Wow. Almost unheard of. What do you think convinced him? So he was a English lit major and a physics major, and [00:25:40] he had got his PhD in math modeling. So we had a lot of things in common that we were interested in. Like, I loved at that point, modern American literature. And I was [00:25:50] reading E. L. Doctorow and Barbara Kingsolver.

And I was telling him some of my favorite books. And he had. Couple of other books that [00:26:00] he really, really loved and was telling me about them. And then the second piece was like, music. I still am really into classical piano. [00:26:10] Mm-Hmm. . And so I was telling him about particular artists that I really love, what composers I was really into and why.

And he was really into [00:26:20] opera. And so he was telling me about the same. Like, it was the kind of conversation that could have gone on for much longer than two hours, and it would have felt like ten minutes. [00:26:30]

Leah: Do you think that was intentional on his part to look for a chemistry fit, or do you think the content in particular, he was looking to understand how you think?[00:26:40]

Ann: I don't know, but Ted, for me, was the first person that I ever met who was extraordinary at networking without it [00:26:50] feeling like it was networking. Hmm.

Leah: Hmm. Hmm.

Ann: Because I felt like he was fairly introverted, and yet at the same time, he knew so many people, and [00:27:00] he knew he was really connected to those individuals.

And so he had this sort of magical capacity to connect. That I [00:27:10] had never seen before. I'd seen this very transactional. You go to a networking event and you're shaking hands and kissing babies and moving on to the next person. And that's not me because I'm [00:27:20] pretty introverted myself. Right. But I saw in him a model that I really like appreciated was really, how do you [00:27:30] become curious?

about that person. And I still feel like I want to work on that. That's something that I feel is something I'd love to master.

Leah: [00:27:40] Incredible. Okay. So you get the job at Charles River Ventures. You get your first taste of venture there. How do you make your way to starting your own [00:27:50] venture fund?

Ann: Yeah. So part of the, that story is also my second day of work was 9 11.

Leah: Oh

Ann: wow. So I got to Venture in a very [00:28:00] interesting spot. And so I feel like my professional life has had like really interesting waves associated with it. And this was a second major wave of my [00:28:10] lifetime, which was mass connectivity, right? So whether it was Internet and networking and broadband penetration moving into [00:28:20] mobile.

That was sort of what's happening in the early parts of my professional life. I enter back into a PhD program at Stanford studying [00:28:30] cybersecurity, math modeling. And the original intention was academia is interesting. Maybe I'll start a startup after this in this space. [00:28:40] And I was lucky enough because of my work background to be in the school of engineering, but teaching and TAing a bunch of entrepreneurship classes.

I got to know Steve [00:28:50] Blank. I got to know like Eric Ries, very early stages before they'd even named like lean startups as a thing. And so I was at the [00:29:00] forefront of that. Plus, then I got to see AWS launch in 2006. All of these pieces are coming together of like the world's changing, how [00:29:10] startups start is changing.

Leah: And

Ann: then I run into this guy, Mike Maples. And as I'm thinking about starting this company, I asked him if I could just see his deal [00:29:20] flow. Because I'd been in academia for four years, and I just wanted to see what the real world had to offer. And Mike was generous enough to let me just come in every [00:29:30] Wednesday and see what he was looking at.

And in that moment of obtaining contacts, it was clear that the whole startup world had shifted. [00:29:40] And instead of spending most people. When I was at CRV would raise 5 million and sell 50 percent of their company. That was just the [00:29:50] standard thing to do at the time. And the world is shifting. We're like 500, 000, maybe a million dollars was all anyone needed to get started.

[00:30:00] And we would have people just. lining up to, to meet with us. And we had like, we were called Maples investments. We had no reputation, [00:30:10] but we were people who are writing the right size check. Right. Right. And so that was the moment where Mike was like, Hey, this isn't the venture backed [00:30:20] startup you're thinking about doing, but maybe we could do a backed venture startup.

Leah: Incredible. Incredible. And You and I met because Let's talk a little bit [00:30:30] more about the venture industry because I've now been at fuel capital investing for about eight years post task rabbit. I've raised money, I've invested [00:30:40] money, I've seen the inside of the industry and how it all works. Still to this day, about 2 percent of venture capital goes to women, even less to [00:30:50] people of color.

What needs to change about the industry? Do you think? What's not working? What's broken in venture for the mass [00:31:00] majority of people? And what are some areas you think could change and evolve?

Ann: Yeah, I think there's, in my mind, there's just a few things. So [00:31:10] number one is, I do believe that having more people around the table that have very different perspectives, and it's not just [00:31:20] female versus male or different backgrounds, I really do think in terms of backgrounds, I think it could be as different even within my firm.

It's [00:31:30] like, are you single and in your twenties or are you caring for an aging parent or are you a single [00:31:40] parent to a bunch of teenagers? Like actually having those different kinds of. Viewpoints on your own life can actually be extraordinarily rich. [00:31:50] So I think those are the types of things that could lead to more diverse funding of companies.

I also think that [00:32:00] not all companies are meant to be venture backed, right? And from a venture capital perspective, I'm not sure we have had the best [00:32:10] imagination. When it comes to what are the toolkits that we can use to fund a lot of different types of businesses. And so [00:32:20] there are a lot of businesses that would be fantastic investments if it didn't have to hold up to a venture microscope.

Leah: It's an excellent [00:32:30] point. Absolutely. Yeah.

Ann: It would create great returns. But if you're asking it to become a five to 10 billion business. You could [00:32:40] easily like foie gras the business by stuffing capital into it, but it doesn't make sense, right? They have to spend it all on customer acquisition and [00:32:50] you end up with a ton of terrible customers.

So in my mind, like we should have more gradations in terms of risk profiles. [00:33:00] And what kind of dollars people take in and what kind of expectation we have for returns. And it doesn't need to always look like venture capital, [00:33:10] but at the same time, like we as investors who start new funds have to have the courage.

Speaker 21: To not have to be a venture [00:33:20] capitalist. Right. That makes a lot of sense. I mean, I remember you Aaron Holiday's story brings us back to the architecture of venture itself, because if the same [00:33:30] network keeps funding the same patterns, the system will keep reproducing the same outcomes. Aaron is asking, "What happens when you build a different network from the ground up? [00:33:40] One that sees founders the old system was never designed to find."

Aaron: I'm working at this early stage venture capital fund. I'm also at [00:33:50] the same time noticing a number of structural changes that are happening in the industry that I thought could create a new type of venture fund. So that's kind of what's going on in my [00:34:00] mind. And I was introduced to a guy named Greg Pass, who was the former CTO at Twitter, who was moving from the West Coast to New [00:34:10] York.

And I'm sitting down with Greg for coffee and he says to me, why don't you come over here? And help us build [00:34:20] Cornell tech. And I said, well, that doesn't make a lot of sense to me because I want to be a venture capitalist.

Leah: Right.

Aaron: I'm [00:34:30] on my way because I'm right at a venture firm doing

Leah: the work. I'm

Aaron: doing the work.

I'm in the startup community in New York. And why would I jump off the ship

Leah: [00:34:40] with

Aaron: my longterm goal is to be a GP one day. Why would I jump off the ship and come and work on a school? Right. And Greg said two things, he [00:34:50] said, come learn how to build something that's going to be around for centuries.

Leah: Oh, wow.

That's compelling.

Aaron: And then he said, and you have these [00:35:00] ideas around how venture could look. You should start your own firm. And if you do that, I'll be your first investor.

Leah: Wow.

Aaron: [00:35:10] So now I'm like, okay, like this guy speaking my language. Right. And I'll tell you another thing. So when I was in business school and I'm like talking to all of the VCs, there was a [00:35:20] guy from Kleiner.

He was also a Cornell alum.

Leah: Okay.

Aaron: And when I was talking to him. He said, listen, it's hard to get into venture capital. So my [00:35:30] advice for you is to think about venture capital and entrepreneurship as one in the same and pursue both. So if you fast [00:35:40] forward, this might be a year later when I'm talking to Greg, he is describing somewhat of an entrepreneurial endeavor, right?[00:35:50]

That is coupled together with venture capital.

Leah: Yeah.

Aaron: And so I thought back of what I learned from the guy from Kleiner. And I said, this is venture capital and [00:36:00] entrepreneurship one in the same. And so I took the leap. I joined Greg. Um, I was his first hire. Greg was the chief [00:36:10] entrepreneurial officer of the entire campus and was the managing entrepreneurial officer.

And we worked with Dan Huttenlocher, who was the Dean. Wow. And we [00:36:20] invented the studio. at Cornell Tech and invented something called the Startup Awards, which really was a part of the [00:36:30] educational pedagogy around startup formation on the campus. Because when we were looking at other higher education institutions, you saw [00:36:40] really breakthrough companies formed in and around the campus.

I

Leah: bet. Yeah.

Aaron: But the campuses were not really designed to accelerate. And foster [00:36:50] entrepreneurship. It was kind of happening tangential to the campus.

Leah: Okay.

Aaron: Okay. And so what we were saying is like, how do you actually create a pedagogy as a [00:37:00] part of the entrepreneurial curriculum where startup formation is embraced and companies can spin out of the campus?

So we created that at Coin Out [00:37:10] Tech and we scaled Coin Out Tech. We used to be in the Google. Building and now it's like multiple acres on Roosevelt [00:37:20] Island. It's, you know, it's gorgeous. It's amazing. I'm on a board now, but in the beginning it was nascent. And so we took this nascent [00:37:30] concept and evolved it into a real institution.

And so simultaneously I was in the lab. You know, just cooking up [00:37:40] six, four or five

Leah: and

Aaron: kind of thinking through the changing nature of the venture capital industry and what might a new venture capital firm look like. And [00:37:50] so in parallel to building Cornell tech, I ended up meeting my co founder Nnamdi, who was at Insight Partners and we together co created.

[00:38:00] And I was 10 years ago.

Leah: Wow. Well, let's get into six, four, five. And it seems like that time at Cornell tech was really a [00:38:10] time of seeding the idea and getting motivation around the idea. You saw a trend in venture that was shifting. Can you talk a little bit more about what you saw there and [00:38:20] how you and Nnamdi came together to create six, four, five?

Sure.

Aaron: Yeah. So when I got into the venture world at DFJ Gotham, and then [00:38:30] also started working with Greg at Cornell tech, there were these structural changes that I noticed happening. And so one of the structural changes was [00:38:40] the rate at which startup companies were being formed. We're outpacing the networks of general partners and their associate teams.

So deal volume was going up at [00:38:50] an exponential rate. But these small early stage boutique venture capital firms were not historically designed for high volume startup formation. [00:39:00] Deal flow was primarily inbound through networks. The networks are constrained by where you went to school, where you worked and where you lived.

[00:39:10] However, startup formation was happening rapidly everywhere. Yeah. So the first thought was that one, the expected value of the traditional [00:39:20] venture capital firm is going to go down if the sample space grows by order of magnitude. And those venture capital firms are not able to identify and pull in the best [00:39:30] companies that are outside of their network.

And Shiza Shahid reminds us that capital is never just capital. It carries a worldview. What you fund says [00:39:40] what you believe is possible. What you ignore says that, too. Shiza's work sits at the intersection of lived experience, conviction, and the belief [00:39:50] that the people closest to the problem often see the future first.

Can you talk a little bit about what the thought is [00:40:00] behind the fund and how you were investing?

I've loved working through the nonprofit model, and honestly, it was all I knew growing up. I didn't know [00:40:10] what venture capital was, I didn't know what startups were, I didn't know you could start a business. There wasn't a precedent for it. I couldn't even envision it, let alone build it, until I was [00:40:20] given the opportunity to move to Stanford, where everybody was building businesses.

And while I love the work that I've done through the nonprofit model, I think that there is A different impact [00:40:30] you can have when you're building a business as a nonprofit CEO. You spend most of your time raising money and ultimately a lot of that is outside of your own control. And so it's very [00:40:40] hard sometimes to focus on the solutions you're trying to build when so much of your time is spent raising donations to keep the nonprofit afloat.

You're also [00:40:50] not really supposed to pay people well in the nonprofit model, right? That can be hard. Yeah. A lot of the ranking systems rate you on how little you spend on the [00:41:00] operations. And at some level it makes sense because, you know, I'm donating money. I want to know that most of it is reaching the people on the ground, not that, you know, half of it is going into [00:41:10] operating the nonprofit.

But when you think about sort of intractable challenges, you sometimes do need to invest in great talent and great operations and scalable solutions. [00:41:20] And so those are some of the things that challenged me about. the nonprofit model. And so I wanted to think about how we can leverage business to have a more positive impact in the world.[00:41:30]

And that's really where I started my own angel fund investing in startups to immerse myself back in this ecosystem and to try and be a small part [00:41:40] of helping founders raise capital, tell their stories, build mission into their business models, and make a difference in a different [00:41:50] way. Yeah. It's amazing.

And I mean, to bring that experience in that perspective, I think is something unique, right? That those [00:42:00] founders are probably not getting from other investors as well. I hope so. I hope so. I think I have become, and you know, Leah, you are an incredible [00:42:10] investor who brings so much. And I think your story is so interesting because you became an investor after being a founder.

Yeah. And today as a founder, my most useful [00:42:20] investors. are those who have been in the founder seat, right? There is just a level of empathy and compassion, a level of realness too, right? Once you've been a founder, you [00:42:30] know what your place is and isn't as an investor. And you know that founders build businesses, right?

You really are there to sort of help and support in highly specific ways. And then [00:42:40] you have that highly specific knowledge that is actually useful versus sort of the generic pieces of advice you can get from someone who's never been in. So, [00:42:50] you know, when I was investing, I had the experience of building a nonprofit.

I had the experience of telling the story that inspired people, getting people behind a mission, a cause, raising [00:43:00] capital, building a team. And since then I've gained the experience of really scaling a nonprofit. a brand and a business, and I think that's made me even [00:43:10] more empathetic and useful than I used to be.

Yes. No, I can understand that. I think having lived the founder story and the [00:43:20] investor story, I think so many times investors can easily overstep or think that what they're bringing is maybe more useful than it [00:43:30] actually is to us founders. So I think it is. Good to have that empathy and perspective. And I think it's just sometimes our place is not part of a portfolio for me, [00:43:40] right?

It is everything for me. It is all that I care about day in, day out. And so with the investor model, where it is such a portfolio based approach, there is sort of an [00:43:50] inherent. Conflict in how much an investor can show up, right when it's one of 200 bets, and another one is maybe a little bit hotter right now.

[00:44:00] Right? And so I think it takes a lot of discipline and consistency and empathy and steadiness and true independent thinking to be the kind of investor who [00:44:10] can show up for all your businesses consistently, regardless of the highs, the lows, the markets, what's hot, what isn't hot. And I think that's a hard thing.

Leah: Thank you for [00:44:20] listening to Breaking Precedent. Remember to click the follow button on your favorite podcast app so you never miss one of these exciting conversations that challenges the status quo and inspires [00:44:30] change.

And if you know someone who is trailblazing a unique path. I want to hear their story. You can send a note to me on my website, breaking precedent. com. Until next [00:44:40] time, I'm Leah Sullivan.