I'm a Tech Entrepreneur Turned VC Investor and Co-Founder of Fifty Years, a seed-stage VC firm. – Ela Madej
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I'm a Tech Entrepreneur Turned VC Investor and Co-Founder of Fifty Years, a seed-stage VC firm. – Ela MadejFeatured
Posted in:Venture Capital Office Hours
Hi Elpha!I'm Ela Madej (“mah-dey”), a tech entrepreneur turned VC investor. Four years ago I co-founded Fifty Years, a seed-stage VC firm based in San Francisco backing founders using technology to solve the world’s biggest problems. I love food tech and technologies that can help positively impact wellbeing. I have started my first software company when I was 21 and it became one of the largest Ruby on Rails development shops in Europe. I also co-founded a sales platform called Base CRM (acquired by Zendesk in 2018) and ran a few large events for software developers in Europe. I am a Y Combinator alum (S12) and was a partner at SaaS focused VC firm before starting Fifty Years.I am a Vipassana meditator, skier, diver, and I love contemporary dance. I am also a food lead at a sustainability-themed Burning Man camp, Hotel California. Ask me anything about raising capital, starting a VC firm, transitioning from a founder/CEO to an investor, managing stress levels while pursuing hard things, Burning Man, plant-based diet, Y Combinator, or something else!
kuan·Oct 06, 2019kuan·Oct 06, 2019Thanks so much for joining us this week, Ela! Ela will be answering your questions before the end of the week. Please note that she may not have time to answer all your questions, so be sure to upvote the ones you most want her to answer with emojis.
elamadej·Oct 10, 2019elamadej·Oct 10, 2019Thanks for the opportunity, Kuan!
Thanks for taking the time Ela! My question would be around the differences of ecosystems (europe VS US). We just started raising our Seed round and we are seeing there is a huge difference between most US-based VCs and the European ones. In the US they ask us about product usage, user behaviour, retention etc. We track and use them to determine if our tests are making any sense and are super happy to share and discuss what we want to prove/achieve next with the capital we are raising. In Europe (most) VCs will ask for financials at meeting #1. This is something that we struggle to understand. Financials are definitely important to understand what are our assumptions and where we want to deploy capital but we got answers like "your financial model at 5 years is not something we are confident investing in", making it feel like they are investing in an excel sheet (that we all know is likely going to be wrong) and not in us as founders/startup. Is this a normal thing? is it an ecosystem "issue"? What is the main thing you look for when vetting potential deals? thank you so much again for doing this :) Best
I am struggling with the same issue, too much focus on months to profitability rather than user behaviour. I had thought it was due to sector (fintech) but perhaps not?It almost feels like they would prefer a smaller vision in return for a quicker win. Do you think its a good idea for us to contact US VC's rather than the closer to home ones?
That's cool! I see you are based in London as well we could definitely grab a coffee also with my other founder, we are often at the Google Campus. I saw Reitly and looks cool, have you launched yet? how is traction? Usually us VCs care a lot about traction and how you are building your growth engine. Happy to chat more :) re: reaching out to VCs in the US and aborad in general -> some do not invest internationally so don't waste time going after them. Others do, so it makes sense to reach out. Usually we look at their portfolio and see if they invested in London or if they are fine with investing in a London team that would then move to the US.
Would love to have a chat in person, Im in Campus most days!
Definitely good to talk to US VCs who invest internationally. Generally, a waste of time if VC is not actively investing outside of the US. Most firms are pretty transparent about it.
Hey Lise! Yes to European VCs being, unfortunately for the ecosystem, a bit more conservative. From their perspective, they see less of the crazy-growth type of startups so they need to balance their portfolios with companies that -- in silly investor talk -- have a bit more "downside protection" (i.e. when things don't go extremely well, there's still some solid business there). There's also a cultural difference -- VCs in the US are commonly recent operators at high-growth tech companies. In contrast, many VCs in Europe come from more traditional business backgrounds. But there are some good funds out there (Atomico is a great example!). What do you do exactly?
Hi @elamadej Thank you for the reply! Really appreciate it and really resonates with the experience we are having :) Yes atomico is amazing and so are others but the ratio between "real" early stage VCs and SMEs investors feels like is very different than in the US. As for us, we are a crowdinvestment platform in collectibles. There are a lot of people that want to invest in what they like but they simply have no access. We started with art, allowing people to buy shares of art. We built a network effect on the supply side (like patreon) where artists refer their followers, we then use blue chip art to increase their avg spending (we just closed the sale of a Banksy yesterday!). We have been growing ~20% MoM on users with a portfolio over the past 12 months and we now reached 18% returning users. We are trying to raise a ~$1.5m seed to automate and start scaling the supply side acquisition as well as integrating with digital banks and other financial advisory tools on the demand side (we have financials for that :D). I may come across as too direct but... I would love to share our deck with you if you think we could be a fit for 50y. We strongly believe that Goal 8, about inclusive economic growth, is at the core of what we are building, empowering people to deploy capital in the way they want, giving them access to assets they never could benefit from :) Again, thank you a million for taking the time to reply and do this AMA. Bestp.s. on 50y website (which is super cool), in the first text there is a broken link (https://sustainabledevelopment.un.org/?menu=1300) with the anchor "Sustainable Development Goals." hope this helps :)
Thought the last message did not post so wrote a but more on this subject:[1] Less VCs in Europe were operators in successful, fast-growth tech companies. Many European VCs are used to non-tech business environments (and metrics) and/or have prior experience in other asset classes (PE/trading public securities) which are much more metrics-driven.[2] Less mature funding environment in general, means that the later stage/follow on investors will be more conservative which only strengthens the conservative bias for early-stage investors.[3] Less massive exit opportunities means many European VCs have to think a lot about a silly think VCs call "downside protection". Essentially, they know it's less likely that they will pick unicorns so they want to know that more of their portfolio companies have a solid business, even if they do not grow huge.I would not talk about the financials during the first meeting. But -- as the conversation progresses -- I would want to see a "back of a napkin" cash projections including monthly burn projected forward, revenue projections, and the general use of funds. What I like to understand is: why are you are raising X and is this enough to get you to the next important milestone? Having a model -- even if it's a "best guess model" -- shows some level of discipline and structure in thinking. I really only care about 12-18 months forward and I know those models change often so it's just your plan for now. These do not have to be pretty spreadsheets.Hope this helps!
that is so inspiring!I would love to know more about setting up VC firm!
First of all, thank you, Ela, for taking the time to answer our questions. Your story is incredibly inspiring!I would also love to hear about this topic! For example:How was the process of raising your funds? What difficulties/challenges have you faced and how have you overcome them? What has surprised you the most? I look forward to reading your answers 😊
Hey Marianne! I am sure there must be exceptions but raising our first fund was hard. In my experience, raising a seed VC fund is harder than raising a seed round of funding. It takes 12-18 months and there are few levers you can push to get potential investors (in funds called "Limited Partners") to move faster. Everyone is incentivized to wait :). The way we went about it is we talked to a bunch of friends who understood VC, and talked to our past investors. They gave us advice on preparing materials (deck, executive summary), on porfolio construction (i.e. how many investments to make with Fund I, initial investments to follow-on ratio, ticket sizes, pro-rata strategies, whether we should be taking board seats, etc). They also helped us understand how to talk the LP talk -- we had to read up on things like IRR, IM, what's a fund vintage, what are capital calls etc. We did not know any of that stuff going in! And, I would say, still, we started raising our first fund with some false assumptions on who an ideal LP (investor) would be. We talked to institutions we knew invested in other VC firms. We soon realized that because our Fund I was very small (less than $10M), and we are "first time managers" (it's a category in the LP lingo!), they would have never invested in us. So we wasted a lot of time. We asked everyone we knew for intros and had hundreds of meetings and conversations with a very low conversion rate (investment = conversion). Finally, we ended with a great group of people who were not afraid of deep tech, and loved our thesis that the world's most valuable companies will be the ones solving the biggest problems. Our fund I LPs are mostly friends, successful tech entrepreneurs who had massive exits, and entrepreneurial family offices. We love working with them and are quite happy that we scared off a lot of people who would not have been a good fit. The relationship between the LPs and fund managers (in this case Seth Bannon and I) lasts ~10 years so it's important to get the right partners on board! Fund II fundraise was a very different story given that we had some track record, reputation, etc. In fund II we actually have founders of 17 $B+ tech organizations as LPs (think Skype, Cruise, Baidu, and more). Hope this helps!
Thank you so much Ela, for such an insightful answer and for sharing your fundraising story 💗Just wondering if the last part of your answer has been left out from the comment?
Click "more" -- is that what you mean?
Yes but then your answer ends "We soon realized that because our Fund I was very small ("or at least that's how it shows up for me 🤷🏻♀️
Hi @marianneosterlund! I just fixed the issue – now Ela's entire post is viewable. Sorry for the trouble!
Yes, now I’m able to see Ela’s entire comment 😊 Thank you, Kuan 💗
Hi Ela; I am a woman non-tech founder of a tech co with tech co-founders. We want to raise a small amount of capital ($50-100k) to pay developers & to test our MVP. F&F wanted either half or 25% of the Co! And VC's / funds are saying we're too early and too small. We all have track records. We're solving a big complex problem so will need more funding but it's premature. Do you know a quick & easy way to get past this and raise this capital? Both Macy's and Nike are contacts that we are talking to about testing with but we have to get the MVP coded and tested. Tysm. Jo
Hey Jo! Sorry to hear you are having a hard-time raising. What are you making? Some sort of software product? VC funds generally want to see something built. It can be a crude MVP but being able to deliver something is how early-stage investors distinguish between "people with great ideas" from "people with great ideas who can build". If you need capital to start building (i.e. you and your co-founders need personal cash-flow and there's no way you can build the MVP without some money in the bank), I'd say that you probably need to talk to more angel investors, pre-seed funds, and apply to incubators and accelerators. I know it's not the type of advice you'd want to hear (fundraising sucks, I know!). You could also consider improving your pitch, your fundraising materials (deck, etc), and getting LOIs from the companies willing to work with you to make the fundraising meeting more successful (i.e. improving conversion). You could also consider offering the first $5-$10k of the raise on preferential terms to just get it going. Once you get the first check in (validation!), other people generally start moving and you can raise the valuation cap. If you can, do not sell more than 10-15% of the company in pre-seed.Good luck!Ela
Thx so much-maybe I can simplify the pitch for sure...I was focusing on the LT vision and it's big. Maybe too big to imagine being executed (or for an exit, etc). Tysm
Jo, have you looked into some of the nocode platforms? There are a lot of tools out there that let you build your MVP without developers. Start with makerpad.co and explore from there -- there are a ton of resources out there. Best of luck!
Tysm- will look into this!
Hi Ela! I love that you love contemporary dance - very cool. I am curious about your VC's firm interest in technology solutions for the arts + culture sector. I have a SaaS for Arts Organization, based in Canada and U.K. What are your thoughts about seed investments for solving some of the world's biggest problems combining tech and arts, are VCs interested?
Hi Nina, Super sorry to comment out of the blue but we are in the same space and would love to learn more about what you are building as there could be potential synergies :) Feel free to drop me a DM or a line at [email protected]
Sent you a DM :)
Hey there, nice to meet you! While we love arts at Fifty Years, with our investing we tend to focus on basic human needs (food, shelter, air, water, access to healthcare & information) and planetary health. However, there definitely are investors focused on arts, just look at the Artsy list of investors: https://www.crunchbase.com/organization/art-sy. I think using art as a communication tool to solve the world's biggest problems is a separate question -- and an intriguing one. How exactly do you see it playing out?
Hi, Thanks for your response! We've created a technology solution for Performing Arts + Culture organizations and their outreach/engagement activities - DAYA DAYA enhances the management and reporting of the Arts Sector’s initiatives and activities by tracking the organization's achievement of results in both quantitative and qualitative terms. It enables the sector to make more strategic, informed and effective decisions."Outreach" in Performing Arts + Culture sector is defined as activities effecting one or more of the following:1. Fostering physical and psychological well-being2. Engaging or involving specific segments of society3. Promoting healthy development of children and youth4. Promoting intellectual enrichment5. Fostering cultural/linguistic understanding6. Community vitality, energy, civic engagementOur motivation stems from our commitment to the sustainability of a healthy social ecology through the arts, and a deep exploration of artists and cultural organizations’ role within communities - on all levels. We are passionate advocates for arts and creative placemaking. We seek to capture the data to empower cultural exchanges that inspire, define and change communities for the better.
Hi Ela! Thanks for doing the AMA. I'm very excited about your PhD to VC event as I am finishing up my PhD in biomedical engineering and the content is extremely relevant. Are you involved in this specific program and if yes, do you plan to expand it beyond events and into fellowship or associate style roles?
Hey Andrea! Yes! I am involved in organizing the PhD to VC event. The event is aimed as a beginning of a series -- we hope to have many meetups and formats to help PhDs transition to roles in VC OR to become better CEOs/CSOs/CTOs. This event is a place to start while we explore what's the best way for us -- and for other firms -- to train/hire/support more PhDs who can diligence and support deep tech companies. Have you applied yet? :-) (typing late, sorry for typos!)
Thanks for your response, I have applied! I am located in North Carolina for school and would be excited to come to SF to attend the day long event. The speaker line up is awesome, as a PhD candidate in biomedical engineering, each of their paths resonate so much with my own.
Hi @elamadej,I am equally interested in the PhD to VC event, also in the PhD to better CEOs, CSO's/ CTO's.How do get info as to when this begins.Thanks
No question. Just a thank you for doing what you're doing. I'm a big fan your innovation & entrepreneurs to make world positive change thesis. #rolemodel
Thank you Gentry!
Thanks for sharing. Keep shining your light bright, our world needs more women leaders like you.
Thanks for the kind words, Nini! Jiftip seems like an intriguing idea, are you working in it full time?
Yes, it's been full-time since Nov 2014. When you're having fun, obsessed with your passion, the time flies quickly.Being frugal with the dwindling personal savings account and living at home with mom and her cooking has helped a lot in the first 2 years before there were any paying customers. The customers provide all the helpful feedback to learn along the way. "Do what you love and the money will follow." ~Marsha Sinetar
I LOVE how Fifty Years focuses on the SDG's. They are the basis in which we founded our startup, Down to Donate. Would you be willing to expand more on what your team means when you say "some" market validation, per your site's FAQ? Does this mean by metrics of people already using the product/service? Or facts and stats showing there is indeed a market? Thanks so much!
Hey Monica, great to meet you and thank you for the kind words! You are right, while we very rarely invest at a pre-seed stage (team with just an idea), we are a seed investor so we like to see something built and early stages of a product-market fit. We are sector and technology agnostic so "market validation" can mean very different things. In many of our deep tech investments the market validation is almost implicit -- i.e. if you can produce industrial chemicals sustainably below the commodity cost of current chemicals, the market is there. In most of our software investments, we want to understand why X has not been done before, who is the customer of X, is the offering at least 10x better than their existing way of dealing with the problem the X is solving, who would pay for X and would they be willing to pay enough to make the product worthwhile. The best type of validation in this scenario is an early pilot or an early paying customer. Sometimes an LOI is enough. For user-driven apps, consistent usage is a better metric. We understand that all those numbers will not be impressive in the early days, and we are still very much betting on a trajectory. We like to know that the founders -- while targeting the world's most important problems -- are also business-minded, critical, and realistic. Hope this is helpful!
This is incredibly insightful! Thanks so much for taking the time to give so much detail.
Hi Ela! I was wondering if you could talk more about making the transition from tech to VC. As an engineer right now, I'm really interested in eventually making the transition myself. But I'm curious if I would have to start my own business as a stepping stone into the VC world? That is how I've seen most people do it. Thanks!
Hey Isabel, nice to meet you! As with everything, it's hard to generalize but I'd say having some start-up experience is extremely beneficial if you want to join investment teams. The way "I did it" was that I was first a founder/CEO of a software development business, then launched some -- both successful and unsuccessful -- product companies (all software), getting valuable experience and building my network in the process. Because of my experience, I was able to join a good VC firm in Europe (Innovation Nest) as a Partner from day 1, learn what investing is all about, and get enough experience to launch my own firm, Fifty Years. I know it might seem like it's would be longer journey to go to VC via starting a company BUT (1) you get an awesome founder experience, you "walk the walk", (2) you might stumble into a phenomenal business, and (3) I actually believe you control your destiny more this way. Why? It's hard to advance in venture capital since most firms are small. It's also easy to get pigeon-holed to ops and analyst roles. That basically means that you either build your own firm (my entrepreneurial bias is strong!), or join a firm with a lot of momentum. I also recommend investing on the side, can be tiny amounts via WeFunder or AngelList. This way, you learn the hard lessons of investing [1] and start building a "good picker" case for yourself. [1] Like the one that we usually get overexcited with initial investments, and then the tendency is to be overly conservative -- the goal is to stay at the excited and open-minded side of the spectrum!
Hi Ela, thanks for your time ;) I'm French and I got some questions for you. Currently, I develop a big project from scratch. In the Entire world, most people which made food shopping in supermarkets got the same problem. The food poisoning us (increase obesity, cancer ... with chemicals products), the meat production torture animals and we have to buy products filled with plastic (inconsiderable pollution), we waste 1/3 in our food at the global level. It's absolutely abnormal !!! It's really important to value the local organical production and help them grow.So I work on a real solution, with highly requirements. I failed my first startup (disrupt the gas lighter industry and propose a better solution for the planet) https://www.indiegogo.com/projects/techline-first-sustainable-lightersMy questions;What's your advice to raising money to create a first MVP ? (A mix between a supermarket - Food industry - farm).I also need to create a new business model and a best repartition of the capital between customers/ farmers / investors. It's compulsory if we want protect our planet, our animals and our people. Do you know people specialized in international legal structure who can give me advice too You are a developer, I'm a non Technical but I need to build an powerful architecture. What's your advice to start code, what I need to read or lessons I can take online ?Thanks for answering :) :)
Marion, nice to meet you. I am not sure if I understand what you are trying to build. Can you explain in the format of "I am building X to help Y to Z" or a similar format? I do understand your problem statement but I am not clear on the solution. Being able to express what you are trying to make in 2-3 sentences is the first step! In your situation I would recommend getting a technical co-founder, ideating together on what the product should be, and then deciding on what's an MVP of that product. It's all very case-specific, unfortunately. Sorry I can't help more!
Hi Ela, what do you believe were your top 3 traits that you possessed which attracted and brought investors, advisors and mentors on board with your startup/s?Thanks for sharing your knowledge and wisdom with us.I'm a Vedic meditator and LOVE dogs.- Sheryl
A great question! Went for a walk to think about it. I think my current and past business partners appreciate my strong people skills (no BS but gentle communication style, solutions-oriented, appreciative, very good intuition), growth mindset, and a track-record of getting stuff done.
Thank you so much for doing this, Ela! I am the Co-Founder and CEO of Tempo -- a direct to consumer feminine hygiene brand for high performance women. We are coming out of the Stanford BioDesign and StartX program and have a patent pending redesign of the tampon. Would love to hear your take on women's health trends right now, and how a consumer goods company can establish a strong and clear multifaceted brand.
Hi Ela, thank you for doing this as its so helpful. We achieved with Abodoo.com an early seed round which got us to MMP, 8 Enterprise customers, 22,000 subscribers but like the others ladies have highlighted in Europe the focus is on MMR. So we have decided to agile raise (I think they call it) and are doing a late seed of just under $1m where we have allocated a % on Crowdcube in London (went live last week!). We would really like a US/connected VC to close the round. However how is public/crowd raising perceived? Should we just stick with angels to close? VC is preferred as we have big plans Thanks very much Vanessa
Hi Ela- Thank you so much for taking the time to do this. I know that I speak for the community when I say that we really appreciate it. Do you mainly invest in software? Or are you also interested in hardware that can solve a huge global problem?
Hi Ela, thanks so much for taking the time and energy to be here and support the community!What I am interested - since I am not an entrepreneur nor a CEO - is in what you mention "managing stress levels while pursuing hard things". I currently find my self in a very challenging role as the bizdev person of very successful bootstrapped startup and the curator of a large south European Tech-conference. The stress levels are really high and I strive to make my projects successful. I also exercise every day trying to reduce the pressure but I find myself anxious and stressful every day! ah..! Please tell me, HOW do you manage yourself while out there ??!!Looking forward to your response!
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