Office Hours: I'm Rebecca Kaden, Managing Partner at Union Square Ventures.
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Office Hours: I'm Rebecca Kaden, Managing Partner at Union Square Ventures.Featured
Posted in:Venture Capital Office Hours
Hi Everyone! I’m Rebecca Kaden, Managing Partner at Union Square Ventures. Prior to USV, I was a General Partner at Maveron and before investing, I was a journalist. I live in NYC with my husband and 2 year old son. I was born and raised here--but spent a decade in the Bay Area along the way. I have an undergraduate degree in English from Harvard and an MBA from Stanford GSB. Ask me about growing startups, early stage investing, building theses, different paths into venture capital, being a board member, and more!
jessicali·Jul 20, 2020jessicali·Jul 20, 2020Thanks so much for joining us, @rebeccakaden. Elphas: please reply in the comments with your questions for @rebeccakaden before this Friday. She may not have time to answer every single question, so please emoji upvote the ones that interest you most. Thanks!!
Hi Rebecca,I'm interested in joining a board. Can you share a bit of your journey around this? What skills should I look to cultivate to be successful as a board member?
The role of the board member varies pretty significantly depending on the stage of the company. For people new to boards and looking to try it out, thinking about earlier stage companies may be one way to approach it. I’d think about in two ways: 1) networking, identifying, or being identified for potential opportunities and 2) articulating the value you will bring to the board. One strategy is to start by becoming an advisor to founders who are building businesses you admire and where you think your skills can help. Unofficially offering help, advice, connectivity, and insight is a great way to show value and develop the relationship to then move into an official board member role. Many (maybe most!) of the independent board members I work with on our portfolio boards started in that capacity. Additionally, get word about your interest out there! There are official networks like BoardList that companies use in board searches and you can look to join (nominate each other!) But telling investors, executives, and others that work closely with the companies who will be looking for board members that you are interested is also a great way--articulate clearly what you are looking for (the type of company, stage, etc.--the more specific you can be, the more likely you’ll be top of mind when someone sees a fit) and what you will add.
So true @rebeccakaden: there is a natural transition from being an informal advisor to a founder to an independent director.... but how best to leverage this experience to the next level? I was a board director for a venture-backed health tech company for 4 years, supporting it from the early product-market fit/first $ invested through market launches in United States, France and UK. As a business operator/software product builder with deep experience in health services payments and health economic assessments I was a well respected "voice of the business builder" on the Board. As the company matured it required a new board composition.... and I don't yet see a natural path to the next role. Thoughts?
Thank you @rebeccakaden for offering your insights! We're in the middle of a fundraise and I'm fielding the defensibility question more than I'd like to. What is your advice to founders who are building something that established companies, with many more resources, can also build? Thank you!
I’m glad you asked this because I think is an incredibly common experience. I don’t think the goal for a founding team can be to build something that no one else can. It's not realistic and I'm not sure it's relevant. But I do think it’s important to answer: why are you best positioned to win? What can you do--whether in product, positioning, speed, etc--that others can’t, incumbents or otherwise. What I think investors are trying to say is: why will you be the one to take substantial market share in this market? Developing a strong case for that is a crucial step of the fundraise prep. With big incumbents, sometimes this can be a matter of focus or the benefits of being a small player at the beginning. Sometimes its about a strategy that involves bottom up adoption vs. large enterprise deals that incumbents often favor. It depends of course on what youre building but worth spending time thinking through. I'd think about all the forms of defensibility--structural defensibility (like network effects), brand and trust driven defensibility, team and access. They have different levels of strength at different points in a company's life cycle and the investor is probably looking for your insight there.
This is brilliant! Thank you so much and I'm going to tweak our deck to proactive address these potential concerns and stay away from the preventative Q's. Thanks again!
Thanks for sharing your time and insights, Rebecca! I just left a career in private equity and growth investing and wanted to hear your views on breaking into VC. I’ve seen so many VC fundraises that are focused on closing the funding gap, but I rarely hear about openings within those firms. Beyond networking and just putting yourself out there, how would you suggest women search for investing opportunities with mandates that feelmore impactful?
One of the hard parts about venture is that hiring is often a black box--far, far too much so and to the detriment of the industry. Organizations like All Raise, where I’m a cofounder, are trying to change this but it’s a journey and the roots of the issue are deeply ingrained. So what can you do? The thing that I always recommend is to try and do parts of the job before you have it--by that I of course dont mean writing checks, I mean developing theses and perspectives on categories that interest you and trying to surface interesting new founders and opportunities. In many ways, capital is everywhere across venture and the great investment opportunities are the scarcity. If you pick a few firms you have your eye on and where you feel aligned values-wise, get to know what they like to invest in, and start sending them perspectives and, better yet, companies they may not have heard of yet, you will quickly get on their radar. Firms are looking for people that will expand their deal horizon and scope. You can show you can do that without even working there. The reason why I like this approach is, while it's no doubt a lot of work, it’s also very similar to what you’ll do when you have that job, so its not a waste of time--it will also allow you to hit the ground running once you’re on the team. It presses you to start building your network to find these founders, practice cold outreach, figure out what you can offer to them beyond capital to entice them to chat, etc.
Hi,Thank you for doing this. Any tips how to find VCs that want to invest at seed stage? Many VC websites say they invest “early” and include "seed" but in fact seem to want millions in revenues from a startup before investing. I don’t mean to waste anyone’s time, so I’d rather zero in on VCs that don’t necessarily require that level of revenue.For reference, I’ve got organic growth, nearly a million downloads, a non provisional utility patent, and growing revenues.(I make an app that lets kids animate anything they want - their artwork, toys, friends, whatever - just by moving their body and talking. www.puppetmaster.com)Thank you for any advice on this!
Here’s my transparent answer here: sometimes investors say it’s “too early” because they mean it’s too early. Sometimes they say it because they are actually not interested for other reasons--but don’t want to close the door for future rounds or eliminate optionality. So it can be either an honest or a cop out response--which is unfair and difficult for founders, but reality so I think it helps acknowledging it. Not all investors operate this way--at USV we promise each other and founders to give as honest feedback as we can and I think do a pretty good job, though I’m sure we falter too often--but unfortunately many do. So what do you do? As a founder, protecting your time and optimizing conversations that are most likely to convert to outcomes is a core responsibility. You are looking for a set of potential investors that have a track record in both your stage and category/sector. The website gives helpful color here, especially to the latter--if they’ve never invested in your sector before, realistically the chance of them starting is very low. So cross them off. Second, try to network or get in touch with as many other founders as you can who have built and are building businesses in similar categories--not necessarily directly competitive but adjacent--and ask them about their experience. First, their feedback on investors is going to be more accurate and valuable than what any investor says about themselves. Second, if they are willing to introduce you to one of their investors, it’s the warmest intro you can get. As women founders and funders, I think it’s our responsibility to lift each other up as much as we possibly can while we climb the ladders ourselves. So let’s ask each other for help and give that help as much as possible.
Thank you for this insightful reply. Very useful indeed.
Hi Rebecca - very excited to see you participate in this AMA series. I’m an investor in the edtech space, also based in New York, and would love your take on the new products & services that need to be quickly developed (or adapted from other industries) to support learning at school *and* home. If you are actively seeking deal opportunities in this space, would be happy to share my research as well!
Would love to chat about our product, AuthentiKid, sometime with you!
Education has been a core part of the USV focus for the last several funds--our portfolio here includes businesses like Duolingo, Outschool, Quizlet, Skillshare, and a bunch of others we’re excited about. Our interest is around broadening access to education--where are the opportunities to significantly increase value while decreasing cost? We think the best way to do this is to go around the current system and go straight to learner (or sometimes parent.) So we avoid companies selling into school systems or districts and instead focus on the d2c part of education (as the portfolio reflects.) This category has been on the rise for several years but COVID has of course spiked it--out of necessity, we are seeing extreme behavior change around what learning means and how we do it. While the extent of it will shift as schools reopen over time, we think a more creative and varied approach to education will be far more pervasive in the future. So we are on the hunt for businesses that 1) drive up value and down cost 2) expand geographical boundaries 3) operate outside the traditional system to drive change within 4) are outcome not credential driven. Ive written more about this here: https://www.usv.com/writing/2019/11/the-education-transformation/.
Hi Rebecca - thank you again for taking the time! I really enjoyed your talk with All Raise's Rise Up associates and would love to better understand what you felt was most important to do in making the jump from associate/principal to partner in VC?
1) Source, champion, and help win interesting investments with your team. 2) Develop perspectives and opinions on where there’s opportunity, particularly ones that not everyone would believe. 3) Gain trust of the founders in the portfolio--there’s a lot of talk about “adding value.” But what does that really mean to you? The more you can figure that out by being someone that some of the founders come to, the better. But if in doubt, I think the most common way to get promoted is sourcing deals that get done and look promising.
Thank you so much!
Hi Rebecca, so glad I came across this as I'm new to this platform. I am an emerging fund manager. 10+ years experience in finance and operations at Foundations, Big Tech, and Angel investing admin. I work with startups as an advisor and earned a certification in VC from Stanford. I am interviewing for associate and principal roles and coming across the feedback that I am both overqualified for those but maybe underqualified to be a partner. Many people have also told me I should start my own fund (which is in my 5 yr plan). It feels a bit like I am climbing a broken rung here. I want the chance to bring my skills to an established fund and to be mentored before raising one on my own - if I even choose to do so. Many other Black Women I know who are partners have had to start their funds because no one could figure out what to do with them. Any advice? Thank you!
I completely hear and understand the frustration here. I think you feel like you are climbing a broken ladder because you are--the structure of the industry is flawed when it comes to creating access for new talent, particularly diverse new talent. It's up to us to change it but its painful and will take time. I love the idea of women raising funds--we need more women founders of all kinds, including in venture funds, and the more we can be deploying the capital the better. But in my experience there is also a lot of value to get from joining a firm in a junior capacity--there isn’t one right way to go, but in my career I have found venture to be a real apprenticeship business. The opportunity to work with and learn from investors I hugely admire is something I really cherish. It’s let me learn from both their achievements and mistakes and understand nuances of an industry that no doubt would have taken way longer to digest on my own. Taking a step down or a title that’s lower than you believe you deserve is not an easy thing to do so I don’t suggest it lightly--but great firms acknowledge talent when they see it and often let them rise quickly once they prove themselves in the role. I’d consider potentially joining as that Associate or Principal and showing them what you can do. If you build the network, source deals they aren’t otherwise seeing that get done internally, and build trust with founders, that Partner title will likely follow if you are at a firm that respects talent--and if you’re not, you’ll use that track record which the platform will allow you to build to go somewhere that does. I'd prefer the industry grant talent the role it deserves off the bat--but when you are in that Partner role you can help make sure it does for future people (which is how we'll create change!)
HI Rebecca -- Is there a path into Venture Capital from management consulting? I specifically come from tech consulting where we do both strategy and implementation work, design think innovation workshops, etc.
One of our current analysts, Hannah, came from management consulting. She’s fantastic and I think she’s finding her experience really beneficial in diligence deep dives and thesis mapping, two things we do a lot of. I think there are quite a few VCs with management consulting backgrounds out there!
Fred Wilson just said: "A Company should have a Board the day it is formed. The Board should contain one Founder (or possibly two) and at least two independent Directors."(https://avc.com/2020/07/when-do-i-create-a-board/) How does USV support founders in bringing on independent board members?
We are big believers in the value of independent board members from early days. Not all investors believe this because there can be benefit to keeping a board small but we’ve found it can be really instrumental. Independent board members bring expertise and different perspectives--they also often let a founder reach a level of experience beyond what they could get or afford in a full time role in their current stage. They are also fully the founder’s ally--on the board because they are a believer, want to help, and have relevant insight to do so. While we try hard and care a lot about being aligned with founders--and in practice very often are--by definition investors have their own interests, too. So board members will full alignment are important. We help founders think about the profiles that might be appealing, source candidates, vet potential board members, and close. It’s often a process in which we work very closely with the company.
Hi @rebeccakaden I am a early stage founder of an edtech startup called HomeRun. Just a couple of questions for you- what is your thesis/mantra on early investing and what spheres do you invest in? What are your favorite parts of being a board member and what is most rewarding about it? Thank you for your time in advance!
Our current thesis, which we call thesis 3.0 (https://www.usv.com/writing/2018/04/usv-thesis-3-0/), is focused on broadening access to capital, knowledge, and wellbeing. Where are the areas to build networks and platforms that drive up value and down cost in areas that matter most to end users? In terms of being a board member, getting to work closely with founders who create ubiquitous products and services that will fundamentally change the way we think and live, are passionate team builders, and are deeply committed to creating the future is a pretty awesome thing to get to do. On a Board, you get to dive into the meaty problems and often be a gut check for the founder and the business. I stay acutely aware of the relative value of that position--we’re the ones advising and not building, and we all know where the real value sits--but the role is a real privilege, even in the tougher moments.
I work on the Product team at a blockchain project. What are some of the skill sets (both specific to Product and otherwise) that I should hone to pave the way to a future career in VC?
One of the things I like most about VC is that it doesn’t require or follow a set career path. Partnerships are best when made up of people who come with different sets of experiences and perspectives (which is why we’re trying to create more of that--it’s a true competitive advantage!) I think the commonality with early stage VC, however, is a deep curiosity and interest in people and ideas. First, I’d work on developing perspectives on where you think behavioral trends are going--what are you passionate about and how will that look different in the future than it does today? Second, I’d build your network of entrepreneurial thinkers and builders who are also thinking about these issues. Figure out where they are and how to find them, spend time with them, and think about how you can help--maybe its product insights, making introductions from your network, or helping roadmap. Maybe its something else entirely. That way, when you decide to enter venture, you’ll bring with you very valuable perspective and network that’ll let you hit the ground running.
Hey @rebeccakaden, thank you for being so open to questions! I’m really curious about your time at Stanford GSB, what was your most influential class or professor that helped you in your VC career?
My glib answer would be the Benihana case because it came with a side of fried rice :) But in all seriousness--I was in a completely different profession coming into GSB and the community there broadened my perspective, built my network, and introduced me to new ways of thinking. Professors like Joel Peterson challenged me to put learnings to work and think about them practically. But by far the most meaningful part of the experience and the reason I recommend it is the people I met there--many of whom are cherished friends and also now people I invest alongside or in with frequency.
I am surgeon in independent practice for over 20 years, I am also the founder of a disruptive tech startup in digital healthcare. My journey opened my eyes to the huge disparities in business, not to say surgery is any better but at least you have a path to success, however challenging. You train well, you have good outcomes, you are rewarded with the next patient. You get bullied and have to work harder, be better just to stay on par, but you have a path. But in the startup world it’s different. There is little to no mentorship, there is a casual indifference to professional experience, and however well intentioned, most investors have no interest in those outside what is familiar. It’s no wonder only 2% of women are funded. Just like in medicine, we change the system by admitting we failed. Women should not have to be outstanding all the time, it’s exhausting. Why can’t we just be given the same chance as a mediocre man? At the very least a little transparency, so we don’t waste time, resources, and confidence applying to an all male institution with zero chance of admission.
I would love to have you as a board member! 😁 but I’ll reach back out when there is a funding opportunity attached ✌🏼Thx for doing OA.
Yes please!
Thanks for having Office Hours, @rebeccakaden I enjoyed hearing you speak at an NYU panel with a group of other women VCs. How do VCs handle public relations for their portfolio of companies? Do they ever use freelancers for that or is it all in house? Any insights would be much appreciated. Thank you!
Hi @rebeccakaden! Do you invest in female founders? How would you suggest getting in touch with yourself/the company or your portolfio companies to pitch?
Hi Rebecca!Thank you for your lovely introduction. I'd like to pick your brain about whether you've seen people making their way into VC through a perhaps less traditional background of Software Engineering. I have a Bachelor's from Berkeley in Computer Science and I'm increasingly curious about starting a career in VC. Do you think an MBA would be a must?
HI @rebeccakaden! It's great to see you here since our Zoom ER event with ERA back in April. Thank you for offering your time to answer questions! <3
Thank you for doing this Rebecca! Your All-Raise webinar was very helpful so I am excited to see you on this platform as well. Did you, at any point, think about starting your own company or joining one? Some VCs have mentioned feeling “founder envy,” so was curious if you ever navigated that. Really appreciate your time and attention!
@rebeccakaden Business is about relationships, how do you teach others who to best identify and nurture relationships strategically? I do this naturally, yet this is not scalable. Because it is not scalable, I want to teach others how to do the same, what have you send work when it comes to teaching the skill set of business development?
Thanks for hosting office hours with us, @rebeccakaden! I’m curious about your path into venture capital. How did you move from journalism to VC and what made were you interested in this pivot to investing?I work in strategy and innovation right now with 8 years of healthcare experience, but no finance or business background. I’m interested in VC because I see immense opportunity to positively impact people’s health and ultimately, help them live healthier lives. What advice do you give to those interested in VC coming from a completely different field/background?
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