Episode 6

#6 What’s Love Got To Do with It? Jessica Peltz-Zatulove’s Tough Love Advice for Entrepreneurs

What’s the stereotype of a VC? It’s someone with a computer science degree, an MBA, who ran a startup. The door seems closed to anyone who doesn’t meet those requirements.
Meet wunderkind Jessica Peltz-Zatulove, the exception to the rule. Jessica, a Madison Avenue veteran turned venture capitalist at kbs+ Ventures, a corporate VC fund, invests in transformative technologies that big media and advertising brands are seeking. Jessica answers many of the most common questions about VCs: where a corporate VC fits into the VC landscape, what she looks for in founders, the homework entrepreneurs should do in advance of meeting VCs and how to avoid the most common mistakes made with investors. Jessica puts a very human face on venture capital when she talks about the unconditional love/conditional like relationship she has with the entrepreneurs she funds. Listen to hear more of Jessica’s tough love advice: it will make you a lot smarter about the type of money you should be seeking!

Notes

StrictlyVC Newsletter

CB Insights

a16z Podcast on iTunes

The Twenty Minute VC: Venture Capital on iTunes

Good to Great on iBooks

Additional Reading

Interested in a Career in Venture? 6 VCs Tell You How by Kelly Hoey, Inc.

The FBiOS Affair: Why Advertisers Should Care by kbs+ Ventures, Medium

Machines Of Loving Grace: Messaging, Personalization & AI by kbs+ Ventures, Medium

Stanford eCorner Podcast

The Rise Of Corporate Venture Capital by Ryan Caldbeck, Fortune

Dear Investors: So You Want to Take Diversity Seriously (Part 1) by Mitch & Freada Kapor

The 104 Most Active Corporate VC Firms CB Insights

List of Female Angel and Early-Stage Investors in Tech by Mackenzie Burnett, Medium

Guest bios & transcripts are available on www.broadmic.com.

Bio

JESSICA PELTZ-ZATULOVE is the Principal at kbs+ Ventures, where she focuses in early stage investments in digital media and marketing tech startups. Prior to joining kbs+, she specialized in connecting marketers with emerging technology and spent 10+ years working with Fortune 500 brands including Verizon Wireless, Kraft Foods, and H&M. At Evol8tion she brokered numerous first to market startup and brand partnerships, and as a VP at Zenith Media was recognized an industry pioneer in the mobile space; her cutting edge collaborations were often featured in Mashable, Adage, Mobile Marketer, and Mediapost. Jessica has a global footprint with strategic relationships at over 300+ startup organizations across 20+ countries worldwide; she's been named one of NYC's 100 Most Influential People in Tech, a Rising Star by Global Corporate Venturing, and has been featured on CNBC, Fox Business, and popular podcast ThePitchDeck. Jessica has a BA from Indiana University’s Kelley School of Business, with a double concentration in Marketing and International Relations.

Jessica Peltz-Zatulove:

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kbs+ Ventures:

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Transcript

Jessica: I need to be able to have unconditional love and conditional like, for my CEOs.

Kelly: I'm Kelly Hoey. Host of Broad Mic. I speak with the most accomplished entrepreneurs, investors, and thought leaders about the issues that mattered in building a business. You will get the inspiration, as well as the picks and shovels you need to become a better entrepreneur. Be inspired. Take action think broad.

Let's address this. There aren't enough women in VC. There's a common stereotype of what it takes to be a venture capitalist. It's someone with a computer science degree, who went to business school, and ran a startup. The door seems close to anyone who doesn't meet those requirements.

Meet Jessica Peltz-Zatulove, the exception to this rule. Jessica is a Madison Avenue veteran turned venture capitalist. She's at kbs+ Ventures, a corporate VC fund that is investing in transformative technologies that the big media and advertising brands are seeking. Today, Jessica will answer many of the most common questions about VCs, where a corporate VC fits into the landscape, what she looks for in founders, the homework entrepreneurs should do in advance of meeting VCs, and how to avoid the most common mistakes made with investors. Jessica puts a refreshing and very human face on venture capital. When she talks about the unconditional love/conditional like relationship she has with the entrepreneurs she funds. Keep listening to more of Jessica's tough love advice. It will make you a lot smarter about the type of money you should be seeking.

What inspired you to get so involved in technology?

Jessica: Oh my gosh. So I first started my career in New York, in 2003. Went to school in Indiana University. Had a degree in marketing. Originally, started interviewing for jobs at large media agencies in Chicago. I had a great internship at this little boutique firm called Kelly Scott Madison. I was interviewing at Starcom. Went through the whole job interview process, knew exactly where I was going to live. Figured, "Of course, I'm to get this job. How could I not get this job?" Did not get the job. Crushed. Devastated.

I was 22-years-old my whole plan that I had for myself just completely went poof So what did I decide to do? I'm going to New York.

Obviously, I'm from Minnesota, originally. I shouldn't say, "Originally," but, I'm from Minnesota, originally.

Kelly: You just say Minnesota, again, and we'll all know you're from Minnesota.

Jessica: I am from Minnesota -- Minnetonka, Minneapolis, Minnesota. Which only comes out when I say a few errands. But, point is, all my friends from high school, all my friends from college, they're all moving to Chicago. So I had to take the road less traveled and move to New York.

So, backpacked for a couple months, thought through what I wanted to do. Ultimately, I went to media agency. So I started my career in communications planning around AOL, back in the time with the little running man. Remember that guy?

From there, transitioned to Zenith Media, which is a top global media agency. And, that's really where I first got into the world of brands. So I started my career in the print department. Print morphed into digital. Digital morphed into mobile. So I was working and running brands like Verizon Wireless, H&M, Gucci, Puma, 20th Century Fox. Started there as an assistant. When I left I was a VP.

And, reflecting back on that time. So it's 2009. And if you look at that point, it's like an inflection point in the market for mobile. Super interesting time. It was when we hated the iPhone because it was locked into AT&T.

I was a part of the team that launchd the Android device, Droid Does. It was this monster competitor that's going to take on Apple with this creative that was all weird and robotic. And we thought only men would buy it. But point being, something I really recognized is this device is going to change everything.

And our strategy really started switching away from the switchers. So, originally, our strategy was more about stealing customers between AT&T, and Verizon, and Sprint. But it became more about getting people to upgrade to their data plans. And getting people outside of the clamshell phone into these smartphones, these Blackberrys.

And I really just recognized that this was going to be huge new opportunity and a huge transformation in the market. So I naturally started gravitating more towards mobile and to marketing technology. I remember a meeting with, I think it was the publisher of Sports Illustrated. And we were talking about this magical device. This magical device that is going to change everything in digital and in print. And you're going to be able to tap the screen. And you're going to see the video of the home run that they're talking about in article. And what were we talking about? The iPad. The iPad was launching.

And that, to me, was just such a lightbulb moment of the way the industry was changing. So I naturally became, really, the point person at the agency to gravitate more towards emerging technology and really be the point person to aggregate all those different opportunities and start pushing media companies around things like, metrics and transparency around those types of things.

And, throughout that journey a I started working with startups and really started discovering startups on the side, reading Lean Startup and some different startup books, Startup Nation. And, obviously, fell in love with this space. It was love at first sight.

Kelly: Love at first sight. Well, I want to get into what you're doing at kbs. I want to get into kbs and strategic VC, what all that means?

But, before leave this initial journey of your career. Really, so much of what you've done is future proofing your career. Can you just talk about that as a trait that people need to have, in terms of what they need to do to future proof?

Jessica: Absolutely. So once I started working with founders on the side, I just really recognized that this is the direction things would be going. My clients were so excite that I was bringing these technology solutions to them. But, at the time, in the industry, around 2012, this is when programmatic was really starting to pick up. Things were shifting much more in that area. But, that's one area that a lot of people gravitated towards, in terms of something that was really moving. But, for me, I really saw this collaboration between startup and brands being something that's going to continue to be more and more prevalent. But, being at a large agency, knowing that there's these relationships with huge corporations, like a Microsoft, or a Facebook, or Yahoo, whatever it was at the time, I believed that where I was at in the agency wasn't going to allow me to explore that passion in the direction that I believed the market was going to go. So, I ultimately took a leap and went to startup myself. A startup called Evol8tion.

Talk about future proofing and [inaudible 00:06:58]. I went from a very cushy window view of Manhattan to a four person scrappy startup, which was just such an amazing experience. So the premise of Evol8tion is connection early-stage startups and brands for pilot programs, and mentoring, and partnerships. So brands would come to us and, essentially, we would provide more of a strategic context around the startup space. So brands, they really didn't know what opportunities were available. They didn't know how to look at different startups. They didn't know how to evaluate them. They didn't how to sift through the noise. So that was an incredible learning experience just not only, in terms of developing relationships with founders and technologists but, also, just really recognizing this disparity and this disconnect that startups and brands had, in terms of how the collaborate. So it was through there that I had built out a strategic partnership network of about 300 different accelerators and incubators, and investors and shared work spaces from around the world, across 22 countries.

So when we would get a brief in from Kraft Foods, we could reach out to our contact from Auckland, New Zealand, to Tel Aviv, to San Francisco. And just get a monster pipeline of startup talent that way. So having those relationships has also just been so incredibly helpful, in terms of unlocking different opportunities and also finding different talent. And, it was through that network that I had a relationship with First Round Capitol. Who, ultimately, when the role opened at kbs+ recommended me for the role, and I was recruited from there.

So I remember getting an email that's basically saying, "We know your background is more digital media and marketing. Have you thought about transitioning into venture?" At which point I was like, "Yes. I have thought about transitioning into venture."

And it's really come full circle because back when I was on the agency side at Zenith, we had a corporate venture arm called VivaKi Ventures. And I had wanted to get involved and I had this vision that...because I had been working with startups on the side, and I had this vision our venture arm should really be attached to our core business, which is media and marketing working with brands. And there's so much value that we could bring to the table, as marketers, to really help them with their strategy, help connect them with brands, help them get pilot test, commercialize their product, things like that. So, I had this vision that I wanted to create this infrastructure between the two. And the feedback I got, again, looking back. It was about five years ago, it was, "Jess, we're not even involved in the venture arm. It's completely separate. Focus on these large deals with these large media agencies." And I was just like, "This is not where I'm going to spend the next 10-20 years of my career." So that's really what we're getting to build at kbs+.

Kelly: Well, it's incredible. And, I think, for people listening and thinking about their own careers, it's being able to see and pay attention to bigger trends. Trusting your gut. Because you've done that, putting yourself in a position of taking risk. And, heck, it would be nice to have in, some ways, it would be nice to have the job that you have for 30 years. And you go in and you do...

Jessica: Yeah, it doesn't happen any more.

Kelly: It just doesn't happen. So, you've got to be so aware and see what's going on. All right, kbs+ is?

Jessica: So we're a corporate VC. We're the venture arm of MDC Parnters and KBS. MDC Partners is a large agency holding company, publicly traded. We own about 46 agencies around the world, servicing about 1500 clients. So, kbs+ is one of the largest companies under that umbrella. Our core business is we're a global advertising agency. So, we work with brands like Harman, BMW, and Vanguard. All in that capacity of their digital media, creative, CRM, brand strategy, web development. So our venture arm sits under that umbrella.

Kelly: And, why did they think they need a venture arm?

Jessica: Excellent question. So our venture arm started in 2011. Really, with the intention of investing in entrepreneurs and technologies that are changing Madison Avenue. So, Madison Avenue, in New York City, is one of the focal points of the advertising world. Things are changing so quickly that a lot of times, the companies that we see aren't going to make to agencies for another 12, 18, sometimes 24 months. So you really have to have some skin in the game to get a seat at the table with some of these entrepreneurs and technologists that are dramatically transforming the industry.

So, right now, to date, we have 15 active companies in our portfolio. We pretty much, exclusively focus on seed round investments. So, usually, we're not the first money in. So we're after an angel round. But we like to be part of the first intuitional round, inviting with other venture capitalists and other strategics. So, we look at companies typically around marketing SaaS, marketing automation, data and analytics, e-commerce, looking at more and more things around AI. So, a nice thread to think about is, how is this technology, really...does it have direct implications for brands and how they really identify, interact, and retain their customers. There are so many new ways to communicate with brands, there are so many new ways to understand your customer that we want to really be at the forefront of these technologies to make our clients smarter, which is really a differentiation point of a lot of corporate VCs.

Kelly: I'm going to stop you there. Why, as an entrepreneur, would you want...there's been an explosion of corporate VCs...

Jessica: Over 127 new cropped up, in the last two years. Crazy.

Kelly: So, why, as entrepreneur, as a startup, you may want to have your money at corporate, versus traditional VC. Yeah. So, first of all, I think it is always incredibly important to have a balanced account table. To have a balanced group of investors. Because, really, it takes a village to build a compnay. You want to have a really well-rounded and balanced group of investors that you're working with.

From out standpoint, we're really broad into the investment opportunity, as a strategic investor. So, we have a whole arsenal of brands, where our main value add is we're able to connect those startups with different commercial opportunities to help them get customer introductions, domain expertise, first to market opportunities, better understand their story for Madison Avenue. Because, a lot of the times when we meet with founders, because we invest in early stage, a lot of times they'll be more technical, or they'll have more of a product or engineering background. So, when we can come in with our marketing lines and really look at their business differently and really work as an extension of their team, we can really help position their story for Madison Avenue to set themselves up for success from a customer point of view.

Kelly: I'm just actually sitting here, thinking, as we're having this conversation. I'm thinking Mad Men and, really, we should be having a smart martini.

Jessica: How'd I miss that one? I missed that memo.

Kelly: We obviously missed that. What's the geographic scope of the investments you're making?

Jessica: So we predominantly invest in the U.S., so I would say the bulk of our investments are East Coast based. We have a couple that are in San Francisco. But one thing we love is, we love finding West Coast companies that are slowly making their way out East.

In New York City, in general, there's such an amazing vibrant startup community that is so supportive, so collaborative. But, that being said, there's obviously a ton of great talent on the West Coast. Or, also, there's some amazing startup talent coming out of Portland, and Seattle, Boulder, Austin. Anybody that think they're seeing everything just looking at San Francisco and New York, you're scratching the surface.

Kelly: I'm thinking, so Madison Avenue obviously here, in New York, clients are here.

Jessica: Customers are here.

Kelly: Any other reason for you, as the VC, that wants the startups, here?

Jessica: So, we do find that it's easier to build a relationship with them when they're present. So we like to know that they're at least going to be setting up a New York presence. Like a venture up, in San Francisco, and they're making their way out east. If it's at Tel Aviv, or London startup, we want them to be setting up a headquarters in New York. And that really comes from the relationship. And the relationship between the investors and the founders is such a unique, special, fascinating type of relationship that when they're in your backyard, you just get to know them better. You can do impromptu breakfasts. You can drop by their office to discuss. Having that face time just really helps build the relationship and build a trust, which I think is a really important foundation of startup-investor relationship.

Kelly: You are such a mentor, and so helpful to startups in this community. You were one of the VCs I really wanted to ask these questions to. So, guiding founders, what are the questions they should be asking investors, besides, "Will you lead my round?"

Jessica: If you have to ask, "Will you lead my round?" It's probably not going to work out. I, 110%, believe that founders need to be interviewing the investors just as much as we're doing diligence on them. So, a key thing that I tell all founders to do is, ask the investor to take to four CEOs in their portfolio. I think the should talk to two that are doing really well. That, either they've exited and they're a sustainable business now. And, ask them to talk to two that failed. Because, the reality is we all probably have them. And, I think you learn so much more about the character trait of the inventor learning about how they interacted with the CEO and how they treated the company when it was in distress, as opposed to...I mean when things are rosy, you're popping bottles and...founders do not pop bottles, to clarify.

Kelly: Oh yeah, it's a party. Everything's good.

Jessica: Yeah, it's definitely how things work, yeah. But I think you learn so much more about the character traits of investors when companies aren't doing well. Because, you can't fire an investor. And you have to be so careful about who you take money from. And you have to remember that this could probably last longer than a marriage. And it's not always going to be rosy, and there's going to be bumps. And, that's fine. But, it's how you react and respond? And are you accessible? And are you supportive? Or, are you counterproductive to the situations? And are you solutions-oriented? And, sometimes, the CEOs just need to vent and you just need to listen. And that's okay, if that's what they need at that point.

Kelly: That is such great advice. So, telling the entrepreneur, all right, you're interviewing the VCs as much as they're interviewing you. Talk to portfolio companies. What else should they be asking? How long does the process take? If you've said, "Yes, I'm going to invest in this compnay." From when you meet them to when you decide to go to due diligence, to when you're going to your investment committee, how long does that all take? What should I expect as a founder?

Jessica: So every fund is different. For us, we try to get it done in about six weeks. From first meeting through diligence, you want to close quickly.

Kelly: So it's about two months.

Jessica: So call it about two months. But, CEOs should allot at least four to six months to fund raise. You should never stop fund raising. You should always be building relationships. You should always be keeping investors in touch. You should be having coffee, getting feedback. They say, "Ask a VC for money, you'll get feedback. Ask them for feedback, you'll get money." So you need to constantly be building that relationship over time.

For us, as a corporate VC, our process is a little different. So corporate VCs, we invest off the balance sheet, which the majority of corporate VCs do. Which can mean that, sometimes, business conditions impact your ability to make investments. So our process, also, is we also care more about the strategic value that we can add to the company, and that our clients will get out of this technology, more so than the finial returns. Of course, we want financial returns and understand that the company can be scalable, and that there'll be a nice exit opportunity there. But, at the end of the day, looking at corporate VCs, if you look at a Google or a Dell, they own 10% equity stake in a company that sells for $200 million, Google will probably make more money before that check even clears. So, it is more about that relationship with the founder, understanding their technology. Understanding, how does it integrate and fit into their overall ecosystem? So a lot of times, corporate VCs will either, have their CEO or their CFO be approving their investments. So, also very different than traditional venture capitalists, where it's really usually just a partner decision. And we also will usually integrate our business units into our diligence process. So sometimes, if it takes longer than six or seven weeks, we'll just be at the mercy of scheduling. But, usually, if it's a data company, we'll want them to meet with our head of analytics. A social company, we'll want them to meet with our Head of Social. And that really is part customer check, to see, is this something differentiated? Is it something they're already using. Is it something that we could fit in our tech sec, or bring the clients. And part of it is, will this be a fit into our ecosystem? So I would say, it really depends.

Kelly: And on the balance sheet, that's affecting approval process? It's affecting the amount you're able to invest. Is it affecting the timing of when you can make investments, as well?

Jessica: It can. It can. I believe about 30%, based on the research that I had published with First Republic Bank and CB Insights, about 30% of corporate VCs are opportunistic. Versus the other ones, which have a dedicated venture fund. So, if you have a dedicated venture fund, you know how much you're able to deploy every year. It's carved out. But if you're opportunistic, it's kind of like, "Okay, I can make investments. Maybe I won't make investments." And it's that. It's a little bit more ad hoc, so absolutely.

If you're CFO of a publicly traded company, is it proving your investments? He's got a lot of other stuff to deal with, than me constantly being, "I need this follow-on to get done."

So it's just something to be mindful of. It's not bad. Corporate VCs earn about 20% it comprised about 14% of capitol. So it's obviously a very reliable and prevalent source of capitol in the market, but founders just need to be aware of some these different nuances that can impact their fund raising.

Again, sometimes if it's fourth quarter and we need to show more money on the balance sheet, I'm probably going to have a hard time pushing an investment through in December. And I might say, "Can we close on January 1? Is that going to be acceptable to you?"

So I think the founders need to be asking these questions. Always come prepared to know who you're meeting with. I mean we were talking before about what questions to ask. You should never go into a meeting with a VC, without knowing, number one, are they writing checks right now? Because some VCs will be raising a new fund or they might be outside of their commitment period. So, know if they're writing checks right now? If it's more of exploratory meeting? Know what stage they're investing in? Know what sector they're focusing on? Know if they lead rounds? Know a couple startups in their portfolio?

So most investors are very public. They're out speaking. They're doing podcasts. They're blogging. They're tweeting. You can get a general sense of what they're all about. So if a company emails me that's a serious biotech company. It's like, "Come on, man. This is not a good use of your time. This is not a good use of my time. Let's just keep it real. I'm sure it's a lovely company but it doesn't reflect well on you, as an entrepreneur from a time management standpoint of really having a targeted investor list, not only to know whose advice and guidance you want to listen to. But, who's going to be able to add to the most value to your business, based on their network and expertise.

Kelly: I'm always surprised by entrepreneurs who put so much research and time into their product, and how it fits in the market or solves a problem. And, how that complete diligence crashes when it comes to finding investors. It's almost shocking to me. Because, at the other point, there is a lot of information out there. And every VC does have who they've invested in. And, it's, pull the threads and figure out who these people are, and what they've done. Ask the questions.

Jessica: Definitely, ask the questions. If a founder says, what stage have you invested? I'm like, "Really? You just go to our website and its on the homepage, in one sentence." If you can't take five minutes...in fairness, that goes both ways. I try to always be prepared for every meeting of the startup, and read their deck beforehand so you can have an intelligent conversation. So it does go both ways. And, you don't always get a chance to do that because you usually will have a pile that you need to get through. But I think it's just common business etiquette, that you want both parties to be prepared for the meeting to have a productive conversation.

Kelly: You'd think.

Jessica: And it goes back to things like reputation and relationships. And the startup community is so small and, usually, it's so collaborative that chances are you're going to have some connections in common with some of their portfolio company, and whether it's asking them for a warm introduction, or asking how it is to interact with them?

People always say, "What makes a good VC?"

Kelly: What does makes a good VC?

Jessica: Oh God, was that like a [inaudible 00:24:20]? That's funny. It's obviously a combination of art and science. Also, there's skills and then there's character traits, right? And skills can be learned and practiced and mastered, and that comes from experience, right?

But then, I think there's a very human part of VC, and that's something that I really like. And that comes from just genuinely enjoying helping people and genuinely being a connector, and being able to think about your network and think about their business, and make those connection points for the founder. And it comes from being supportive. And it comes from...because I think about this a lot and I've internalized this as, I need to have unconditional love and conditional like for my CEOs.

It's a funny way to think about it but these are relationships that can last seven, nine, 10 years, again. And so there's going to be bumps. And it becomes, "Okay, I don't have to like you today, if you're behind on your revenue targets, or if the product launch is three weeks late. Or, you made up that higher. Or, you didn't pull me into something sooner because then it becomes my problem. But, I still love you. And, we'll get through this. And in two weeks we'll be fine.

But you have to be able to have. You can't have that with everybody and you have to be able to have that type of relationship to really make it a successful relationship.

Kelly: That's such a great way of putting it. Okay, let's talk about your life as a VC, because I think you've really hit on this, in terms of really wanting to help people. How many companies are you screening and looking at, annually?

Jessica: I actually just did these numbers a few weeks ago. So we screened 496 companies, last year.

Kelly: And when you say screening, what do you mean?

Jessica: Reviewed decks, or met with in person. I would actually even, if I wanted to pulse it down a little bit. Of the 496 that we screened, we met in person with about half of them.

Kelly: Okay, so you go from 496 down to half. From that half, what happened? Who went into deeper diligence?

Jessica: I would say, maybe about...call it about a couple dozen went to deeper diligence. Which I would consider as multiple conversation, spending more time with the entrepreneur. Not, necessarily going to [inaudible 00:26:53]. And then, we went into full full diligence, writing investment memos with probably about seven.

Kelly: Seven? And then, how many investments?

Jessica: Four, plus follow-ons. So we did about I think six or seven investments last year.

Kelly: Okay, so four, plus some follow-ons. And the follow-ons were companies you had invested in?

Jessica: Previously.

Kelly: Okay. And how long ago, in terms of previously?

Jessica: Probably the last 12 to 24 months. It was a hit rate of about...it was about 2%, about 1.5% to 2% of companies that we met with, we funded. Don't you think, is pretty average, which is crazy.

Kelly: I think it's an important number because I'm not surprised by that. If you had told me the number was higher than that 1% to 2%, I'd be like, "Okay, that seems usual to me." I don't know anyone I talk to, that the number for startups getting VC investment seems to sit around 1% or 2%. And of 1% or 2% out there get VC funding. And there's always this notion that VC is how companies happen.

No, companies happen, in spite of VC.

Jessica: Absolutely.

Kelly: On a weekly basis, how often are you getting inbound deals, or are researching companies you want to talk to, versus hitting demo events or pitch events, these very public facing part of the startup community?

Jessica: So I would say, for us, because we're a strategic. So the bulk of our deal flow comes through other investors. Which, again, all ties back to the reputation, your relationships. So, I would say, probably about 65%-ish of our deal flow comes through other investors. Probably 20% to 25% comes from founders. And then the rest of it I would say comes from partners, inbounds, or research that we're doing on the street.

So I probably spend about probably about 50% of my time screening new investment opportunities. Probably 30%-35% of my time with our founders. And, probably about 15% of my time with other investors talking about different market opportunities, talking about what you're looking at. The venture community is so small, it is so many fascinating...that's a whole other podcast. But, it's really true and it is relationships. And you want to surround yourself with likeminded investors, with supportive investors, with investors you know add value and, again, are supportive and add value to the company. So you want to have those relationships, and you want to be sure that the value that you add is very apparent, and that shines through for real. Because a lot of people say, "We do this. And, we do that. And, we do this." Then, it all goes back to, talk to the founders and really make sure they're putting their money where their mouth is.

Kelly: Yeah. A promise is just a promise. You need the action...

Jessica: They'll say a lot of things to get into good companies.

Kelly: What do VCs look for in a founder? Do you have a checklist? Here's the things that you look for?

Jessica: Definitely. So one of the main things that I look for is really, are they a good communicator? And that, to me, is so important, because that just shines through on so many pieces of your business. Because, you're constantly selling. You're constantly selling, as a founder/CEO. So, can you raise money? Can you really get investors to believe in your vision, believe this is a huge problem to solve? Want to come on this journey for you? Can you communicate to the press? Can you tell the press why is this interesting? Why is this something that they should care about? Can yo use it to recruit talent? Can you use it to bring on customers. Can you communicate t bring out partners. So communication is such a constant read thread that is so incredibly important to me.

So it's almost like, "Do I like you?" First of all, which sounds crazy but, again, this is a long-term relationship. Is this somebody I can work with and I want to be helpful for? And then it's, do I believe you? Do I believe this is a big problem that people want to solve and people want to pay for? Do I believe in your solution?

So you've convinced me that this is a big market. There's a need. There's a problem. But, is this the right way to approach it? Are you thinking about it, the right way to approach it? Because, you don't want to get too attached to the idea because that's just going to evolve and change and iterate.

And then it becomes, can you execute? Are you the person that can execute this? Because, sometimes you'll meet founders and be like, "You are amazing. This company of yours, maybe you're not the best fit." Or, you might see something where, "This company is brilliant. It's a bummer that it's yours."

So you need to calibrate and really reconcile these two things because you want there to be company founder fit, also. Because that's really what becomes so magical, when you find those fit. And you want to just be inspired by that person. You want it to be someone that you can learn from and know that they'll learn from you. And you can have that open dialogue and you can have these really healthy debates. But, you want them to be coachable. So CEOs, they're going got get advice from every which corner, from uncles, to investors, to customers. And it's really up to you, as a CEO to be able to internalize all that, and synthesize it, and figure out what's best for your business.

You want to be profit driven. You want to know that they're not just building a lifestyle business. You want to know they're a builder. But I think another character trait that is just so incredibly important, at least to me is, are they really self-aware?

And what I mean by that is, no founder is perfect. Nobody has the full package but, are they really aware of their deficiencies and are they okay with it? Are they comfortable with it? And, if they are, can they build the right team around them, to make them whole, and to make this the most all-star team possible, and not have an ego about it. So maybe you're just to a seller. Maybe it makes you really uncomfortable. That's okay. But, bring in a rockstar head of sales and make sure they're training you and making you more comfortable. And, helping you improve that skill of yours. So being really self-aware is super important.

Balance founding teams, also, incredibly important. Typically, you don't want just one solo lone ranger CEO. We do like to see balanced founding teams, two or three people. Personally, for me, I like to see somebody that really has a business mindset. I like to see a technical co-founder. And I also actually like to see a sales and marketing person, which is a little more unconventional but I'll tell you why.

Because, typically, if you have a technical lead as CEO or a product lead as a CEO, and they're talking to customers. And a customer's going to say, "No," 17 times, right? Which is fine. It's expected. But a lot of times, if you have a technical CEO or technical product lead...well, obviously, the product lead will be technical, but you know what I mean. They'll hear from the customers, "Oh, well when we build this feature, then they'll definitely buy it." Or, "When we make this tweak, then, for sure, we're going to close all those deals." Which is not necessarily true.

And then, you're spending a ton of money on dev resources, spending a ton of time. You're probably over building. As opposed to a sales and marketing person, they hear more, "I'm not telling my story right. I need to articulate my value proposition better. Maybe my positioning isn't right. So, they'll craft more, and really think through more, "What is that narrative to help me sell better, without over building on dev skills?" So I think having that blend of skills that really compliment each other is really critical. And having worked together, before, are also a huge plus.

Kelly: Yeah, I would say...because, knowing people can row the boat in the right direction and have worked out some of these kinks and personality traits and types.

Jessica: It's a little strange if you have a successful serial CEO, and nobody from their previous company came on this journey for their next company. It's a little weird.

Kelly: A little bit of a red flag. The New York ecosystem, I want to say, pretty diverse. But, again, we've got a nice group of woman out here who are investing in VCs and taking active roles. Two things I want to hit on. Any advice for female founders? And, you may say, "Hey, it's the same advice I give to male founders, in terms of pitching investors." But, any particular advice to female founders, in terms of pitching and pitching primarily to investors who are male?

Kelly: Yeah. I mean the story of my life is having dinner with 17 guys, so. It's changing and it's evolving, and it's moving in the right direction, slowly, but it is. You just have to be bold and you just have to go for it. You just have to be confident and own it, and recognize that you are there for a reason. Your domain expertise should speak for itself. Your business metric should speak to itself. There are a million and one stats about why woman CEOs and blended CEOs, blended teams, I should say, perform better. The research that First Round Republic did, about how companies with woman on their management team perform, what? I think, 60% better. Just, some incredible stat.

I've heard so many just unfortunate stories over the years of meeting with female CEOs. And you just got to shake it off and you just have to go in there and own it. And, again, recognize that you are in control of the situation. And, you have to be confident, be articulate. And if the product, and market, and traction is there, mic drop.

But it's just, don't let them make you uncomfortable because you're there for a reason. And you're building, probably, a phenomenal business that deserves to be there.

Kelly: And stick there and focus on it. And I was going to say, in terms of owning it and being confident, and having the mic drop, that is a good segue to elevator ride you found ourselves on.

Jessica: That was funny.

Kelly: So, the story. Jess and I were in an elevator, and leaving an event for investors at a law firm. And the male investor in the elevator asked if we worked at the law firm. So even, we, are not immune.

Jessica: Definitely. "So do you work here?" "No." "Are you an entrepreneur?" "No."

And then there was a second and a half of a look of complexity on his face. I said, "No, I'm an investor." "Oh, really?" "Yeah. Yeah, really."

Kelly: Investors can look like us. And getting that, as investors, in and of itself was so funny. But you have to be confident. And I'm just remembering that moment, thinking, "Thank God I'm going through this with you. Because, owning who you were, having the confidence, having that smart answer and not letting it either shake you or wanting to leap across the elevator and murder this twit. Who thought, "Here's two woman in an elevator, leaving a law firm from an investor event, they must be secretaries."

Jessica: Around 5:00, probably.

Kelly: Yeah, they must be secretaries. And I think the advice to female founders is, guess what? It happens to all of us. So, it's not that it's not going to happen. It's, how are you going to react to this?

Jessica: Exactly. Exactly. And, that's just it. You just to have to keep your head up and keep chucking.

Kelly: Keep moving through all of this. So looking at you, you're always looking to the next things, and trends, and keeping an eye on technology. What's getting you excited with technology, right now?

Jessica: Two things that are getting me really excited right now. One is, these new communication channels that brands now have. So, anything through push, which [inaudible 00:39:46] which is all-around push notifications for the web. So, again, creating a new CRM system, which can be for brands. And also using AI to create content, super [inaudible 00:39:59].

So there's one investment we made recently called Message.ai, and it's leveraging humanistic to the AI to manage one-to-one conversations at scale. And this was so interesting and exciting for us because we had a little bit of déjà vu, going back to my time on the agency side. And, just looking back around 2006-2007, and Facebook was really starting to take off. Everybody was starting to say, "When are you going to monetize the newsfeed we want to throw banner ads to the newsfeed."

And Facebook being Facebook, says, "No, we're going to do that. But, we're going to launch these things called brand pages. And brands will be able to create a community." And brands says, "What do you mean we're going to create a brand page? I don't know how to create this. I don't know how to manage this. I don't know how to recruit this. This is crazy." And what happened? And came Buddy Media with a very turn key enterprise solution, $800 million later, to Salesforce.

We're now seeing a very similar cycle happening on messing, where brands don't really have a messaging presence. And, Facebook Messenger is finally reaching that critical mass, when people are saying, "How are you going to monetize Messenger? What are you going to do? When can we be lat in?" And, again, Facebook says, we're not going to be throwing banner ads in the feed. But, we're going to release messenger IDs for brands." So, for the first time, brands are going to be able to interact on Messenger. They made that announcement a little bit less than a year ago. Same type of trajectory where brands are saying, "I can't manage this influx of messaging at scale."

If I'm tweeting with Delta, about my seat being bad or whatever it might be, I don't want a response 52-minutes later. I want a response immediately. Consumers want a response on messaging, immediately. And that's a very different fundamental shift, in terms of what consumers expect from messaging. So message.ai is essentially doing that same type of enterprise solution to allow brands to be able to reach those consumers at brand. A big insight is that the majority of these customer requests are repetitive scenarios that can all be automated.

Kelly: That's such a great, just having this lightbulb moment, here.

Jessica: So much clarity around that one.

Kelly: Yeah, Delta, or American Airlines, or Macy's, or whoever the brand is, their customer service department aren't being jerks when they don't get instantly back on your tweet. It's the technology and...

Jessica: It's the human bandwidth. If you think about it, how can a brand respond to thousands and thousands of people around the world, going to one central Twitter handle, or one central messenger ID. You're not set up. You don't have the human bandwidth to be able to manage that at scale. So having a turnkey solution that automates a lot of those for tracking, product availability, store hours, up sales. It makes complete sense.

Kelly: It's reminding that New York Times Magazine article where it surprised people, where offensive content on the web is not just magically eliminated. There are teams of people in the Philippines who have to look at these horrific images and take them down. Or, this horrific content and take it down, versus some technology magically erasing it.

Kelly: And it's also the other sector that so extraneous. It's just the evolution of content with the rise of influencer content, with the rise of native content. We're fundamentally changing the way that brands and companies interact with their customers. And it's becoming more of being a part of the conversation, instead of pushing the conversation. So I believe influencer marketing is just going to continue to explode. It's really crowded. There's a couple that I think that are doing it really well. Refluence is one of them, out in San Francisco.

But, it's becoming something that there needs to be this infrastructure, there needs to be this text sack to be able to better identify, manage, measure, and interact with influencers the way the they're comfortable doing it. It doesn't have to be a monetary exchange. It could be through experiences, it could be through product. But, that authentic and organic way of showcasing brands, and being part of the conversation is going to continue to really transform the way that creative is done.

Kelly: And we welcome that day.

Jessica: Absolutely.

Kelly: We welcome that day. Though, the old Mad Men ads, do make laugh. All right, I want to ask you some questions that we got from listeners and sent in some really practical stuff. So what is your advice on whether or not you need an MBA to be successful in VC?

Jessica: I don't think you need one, I will say.

Kelly: Radical answer. Radical answer.

Jessica: Things are getting crazy. No. And, I'll tell you why. It goes back to what I was saying about skills and character traits. Obviously an MBA is super helpful. I think one of the most incredible important things you get out of an MBA is the network, is the alumni network and the connections. But being a VC, especially an early stage VC, when there's not as many business metrics, there's not as many spreadsheets, it does become about relationships. And it does become, do you have domain expertise? And, do you have a network of people that you can connect them to? And, have you seen on the operator side?

Which, you don't necessarily get that skill being on the MBA side. Maybe for later stage, when there is more number crunching involved. But I'm going to say, you do not need an MBA to be a VC or an entrepreneur. This is going to get me in trouble.

Kelly: You're going to ask better questions than get sent in.

Jessica: No, this pedaling off of the MBA. Because, we'll see MBA CEOs that will follow a very systematic approach to building a business. So it's like sometimes we see CEOs on the startup side that you can tell they've been programmed in a certain way. And they've been taught a certain way to what is correct. And there's not always necessarily rules. A lot of times, it is fly by the seat of your pants.

But, for example, do not ask an investor to sign an NDA. I don't know if that's taught but just don't do it. Don't do it.

Kelly: Well, when you have an entire industry that's built on relationships and trust, you've now put a legal document in my face that says, "I don't trust you."

Jessica: Right. Not only that. But it comes down to the execution. I'm probably going to see the same idea six times. But, it comes down to the execution, which goes back to team. Absolutely, use the MBA programs for the network but not necessary for a career and to be a founder or a VC.

Kelly: Go off some of these questions that were sent in. Do you think you can teach entrepreneurship?

Jessica: So we have a program at kbs+ that we've reshaped the curriculum, called the fellows program. And, how the program is originally structured, it was teaching entrepreneurship, and teaching venture capitol.

I think you can teach some fundamental mindsets and building blocks into building a company. But you need to get out and do it. So the way that we've structured at kbs+, which this is a class we teach twice a year. It's all employees around a network that apply to be a part of this program, and we pick about 20 to 25 of them.

And how we've restructured the curriculum is more about turning ideas into businesses. So what is that process? So the first question, and this always really entertaining for me. So it'll be, "Who has an idea for a business?" And people will be like, "I have an idea." You'll be like, "Well, you're all going to fail because that is not how good businesses start. It is not about an idea. It's about identifying a problem you want to solve."

And, I think a lot of people don't realize, number one, how hard it is to build a business. And, you have shows like Shart Tank, which I think have done wonders to inspire entrepreneurship around the country but people don't realize it is so hard to build a business. And it's not about just having an idea. And founders, they wear different goggles on how they see the world. They see things that are broken. They see things that are inefficient. And then, they obsessively want to fix it. And that's the inspiration for their company. It's not about, "I have an idea that I want to get rich and have it sold at Walmart." It's, "I want to fix this problem."

So the first exercise we do in the class is we have them keep a problem log. And this is really inspired by the [inaudible 00:48:34], How to start a startup class, which is excellent, and I highly recommend everybody check it out online. So, that's the first step that we take.

And then, after they've zeroed in on a problem they want to focus on for the semester, then we take then through market diligence. How to really understand your market? How to figure out who is your customer? How much would they be willing to pay? How big of a market opportunity is this?

And then, after they go through that step and look at their competition, then we have them look at customer validation. We have them do these really cute surveys of people in their network. Would you pay for this? Is this a pain point? How are you currently solving that pain point? And it ultimately culminates with this demo day we have them pitch to our senior management. And then they get a prize. And we call it a Founders Fees Gift Certificate, which I don't make them take me with them because then that would be weird. But, one thing that's really special that we do, throughout the curriculum is, we weave our founders into their curriculum.

So, I may lecture about product market fit for 30-minutes. And then, I'll bring in one of my founders and really have them talk about, what was their journey? How did they figure it out? So it really gives them just an authentic perspective of the challenges of being an entrepreneur. It helps the relationship with the entrepreneur. It helps them see a different dimension of the business.

So we've had founders talk about how they got accepted into Why Combinator, and what that experience was like? To, how they're running out of cash and then had to figure out how to pivot the business? To, how the business evolved, and changed, and iterated? So it really brings entrepreneur to life.

So, when you say, "Can you teach entrepreneurship?" I think you can teach a mindset. And I think you can teach people the steps they need to take to tease out the idea, so to speak. And then, I think a lot of it is surrounding yourself with people and experiences to really internalize and understand, and decide if it's right for you. Because entrepreneurship isn't right for everybody. It's just like I said, one of the hardest jobs ever. And I think you have to be really mentally prepared. And really have a good support system around you to take that on.

Kelly: I think it's such a great program. What a great way, I want to say, engage employees. And, I'm going to say, because having more entrepreneurial employees is a big thing.

One other question that came in that I think would be really helpful. Because, you and I hear this a lot form female founders who have pitched rooms full of male VCs, and they get the unfortunate, "I don't get what you're doing."

Jessica: "Let me ask my wife."

Kelly: Yeah, "Hey, this sounds like a cool product but I don't know who would use it. Maybe I'll ask my wife." What's your advice to a female founder, if and when they face that reaction from a VC?

Jessica: Stick to the facts. The reality is, shame on the VC. Part of being a VC is being curious and being open minded and being able to see what those possibilities could be. If you face that, go back to the facts and go back to the market. How many woman want to use this? How many woman identify this as a pain point? How many woman would pay for this solution? How are they currently solving it?

And , take it back to, "Okay, you can ask your wife, who I'm sure is lovely, and I'm sure will have a great reaction to this. Or, you can also refer to my 2000 person focus group that I completed. Which, here's all the research from that."

So I think it's just unfortunately just naturally something that's going to happen from investors that, it is what it is. But, that's why I say, go back to the facts, and just really let the data speak for themselves.

Kelly: That's such good advice.

Jessica: But the job of a VC is to openminded and to think through, what could this market be in five years. I wish I could say, had I seen Uber in the angel round, I would have invested. But, I probably would have passed.

Kelly: Yeah. Well, we have a mutual friend who passed on Google.

Jessica: I know. Oh my God.

Kelly: And, who am I thinking of? Alan Patricof, he passed on Starbucks. Listen, we all pass on things. But, again, it's about sticking to what you know. Where you think you can add value? Where you think you have a network that can help this entrepreneur? It's not just, did you pick the right stock.

Jessica: Yeah. Exactly. And it's just recognizing what could be in five years. I remember I was coming home from San Francisco and I was getting into JFK probably about, I don't know, it was 1:00 in the morning. So, obviously, I was exhausted. Looked at the cab line. Dipterous cab line. So, I call Uber. My Uber comes. I get in the car. Yeah, it's around 1:00 A.M..

He offers me chocolate, which is the best. I love when Uber drivers are like, "Do you want some chocolate?" And I started to fall asleep a little bit. And I remember just thinking to myself, "It's 1:00 in the morning. I just got in a car with a stranger. Took candy from him. And I am completely confident that I'm going to get home safely." Which is just mind blowing to think about that five, six years ago? We're not talking about that long ago.

Kelly: You disobeyed everything your mother in Minnesota told you.

Jessica: I can see my mother saying...well, this is what my mom says. She says, "Jesse, do you see white hair? This is when you went to Nicaragua. Do you see this whit hair? This is when you did this."

So yeah, I'm sure this would have added another couple white hairs. But when you internalize it like that, and think through some of the things that are part of our daily life, now, it's just...I don't know if I would have been able to spot that shift in behavior five, six years ago. And that's what you need to be able to think through and do.

Kelly: As a VC, there it is. Your investments will speak for themselves. All right, we have this section of questions. We call it, pay-it-forward. It's kind of rapid-fire. So, you might want to have so editorial on your answers. I'm going to say, please don't provide. Zip it.

So here we go. Let's go with pay-it-forward. What are your go-to sources of information that you use everyday?

Jessica: Strictly VC, excellent newsletter. And, CB Insights.

Kelly: Okay. Where do you discover new information?

Jessica: So I've gotten really into Podcasts lately. I love the A16Z Podcast. Always really interesting. And, 20 Minute VC Podcast, and the Pitch Deck Podcast, I think are all excellent.

Kelly: And, now, this one.

Jessica: And, now, this one. Of course.

Kelly: Now you can have a new one to listen to. Add to your new information source. What book are you reading?

Jessica: I'm reading, From Good to Great, by Jim Collins, right now. Which is such a classic, and has really reframed my thinking with the way they approach business case studies. SO, I highly recommend, not only how they look at the businesses, but also how hey look at CEOs and leaders. Definitely recommend it.

Kelly: Sometime, old classic advices is good advice. What conversation should we be having that we aren't? Is there things, in terms of startup world technology investing? We see it all the time, the clutter of conversation. But, is there a conversation in the startup world that we aren't having, that we should be?

Jessica: How can startup and agencies collaborate better.

Kelly: Okay, there we go. I might look for something for you on that. Who are the people that most influenced you in your career?

Jessica: I don't know if there's specific individuals. But, anyone that I just really respect and resonate their passion in staying true to good, honest business ethics. That are passionate about what they do and really demonstrate good character are constantly inspiring to me, and things I strive to do well.

Kelly: What is the best advice you ever received?

Jessica: Be yourself, which I know sounds kind of cliche. But, I think the reality is we're constantly weaving in and out of business relationships and different business conversations. Now I'm going of. I'll keep it short.

But, you're going to be more comfortable and confident when you find that personal and professional balance. So be yourself and you're just going to be so much happier and have so many more productive healthy relations.

Kelly: I'm going to let you do that editorial because you're not the first person who's given that as the best advice, with being yourself. What makes your work fun and rewarding.

Jessica: I love seeing our companies do well. I love knowing that, in introduction, I was able to help lead them to a business. But it's very important that investors recognize that founders...we can open doors. But the CEO is the one that does all the work to close the deal. So, celebrate that. Celebrate them. And recognize you can contribute, but they're the one's doing all the heavy lifting. And celebrate with people.

Kelly: I love seeing other people succeed. So when you reach in your wardrobe for something to be bold and badass, what is it?

Jessica: I'm going to say, a good statement necklace. Something that gives a little pop.

Kelly: I don't disagree with that. And how do you pay it forward for woman?

Jessica: I try to be accessible. I try to be as accessible as possible. It might take a few days or even a couple weeks to get on the calendar but I always try to make a conscious effort to be able to carve out time. Tweeting is always better. DM me, email me, LinkedIn me, email me. But be accessible.

Kelly: You're one of those VCs who is out there.

Jessica: We're very public.

Kelly: Very public. Very accessible. If someone says they can't find you. Then, I say, they're not looking hard enough. I want to thank you.

Jessica: Thank you so much for having me. This is great. I really appreciate it.

Kelly: Glad to add to your podcast list. On the next episode of Broad Mic, we will be talking to world-class venture capital investor, and technology thought leader, Jalak Jobanputra.

General partner of her own micro VC fund Future Perfect, Jalak is one of the most sought after experts on some of the cutting edge technologies making news today, such as Bitcoin, Blockchain, robots, and artificial intelligence. Jalak will share her experience as a venture investor. Including what quality she looks for in entrepreneurs she funds.

Thank you for listening to Broad Mic. We welcome your feedback. Find us on Facebook, where you will have show notes and additional references for a deeper dive into today's topic. Please subscribe on iTunes, so you will never miss an episode. Also, review our podcast on iTunes, which will help other listeners discover Broad Mic, and grow the Broad Mic community. Broad Mic is produced by Christy Mirabal, with editing by John Marshall Media. Out executive producer is Sara Weinheimer. Think Broad.

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