Why Do Some Startups Get Funded While Others Don’t?

Well, hello everyone. Excited to be here wherever you are in the world. My name is Chris Foltz, one of the Global Entrepreneurs in Residence at Founder Institute. You know, for those of you that had— this is the first FI event you've been on, we have, we have a good one, right? Like, I think for most founders, the most important thing that's always on their brain, like they're, they're at home at night sleeping and dreaming about investments, right? But there's actually a pathway to get investment, probably not what you imagined though. So at Founder Institute, we bring people through our core program for 13 weeks, and they learn a lot about how to launch a business. So I encourage all of you to go to fi.co, check things out, core programs all around the world, but also some of the new things that we're doing. I'll say, to adjust to the state of society rapidly, we have an amazing set of boot camps. Matter of fact, we start one this week all about integrating Open Claw into your business and actually being a founder of one and doing things with a bunch of team members that are agents. Matter of fact, I think our guests and I will probably chat on that a bit because it's interesting. The whole world is changing so fast, and we have a brilliant person with us tonight. Um, Keisha— I mean, so many people look at this name, right? Keisha Theobald von Gans, right? And like, at the end of the day, everyone's probably like, how do you pronounce the last half? Right in the back room, I'm like, listen, Keisha, I've heard your name, the first name, pronounced 50 different ways on videos. So I validated this, Keisha. So So happy to have you here with us today. You know, Keshia spent, I would say, a pretty prolific career, right? When I look at everything that's wrapped up into this, you know, of course, not only mentoring in the startup ecosystem, but actually being an investor, leading investments of more than 50 companies. You know, and I believe one of the most important things as an investor, she has a background understanding operations, even leading a nonprofit. So it's not often that investors have this kind of diverse background. Which, trust me, makes life easier for you as a founder when you get investment, when they actually understand the dynamics of running the business. So, Kiesha, so thankful to have you here. Why don't you tell everyone a little bit about your background? I've got so many questions. I'm going to address some elephants in the room, but you're awesome and I look forward to this conversation.

Thank you, Chris. I could not have paid for a better introduction. Thank you, sir. I'm super excited to be here. My name is Kiesha. Well done in the pronunciation. I always joke, and this is so corny, but I promise you will not forget it, Kiesha, like the key to success. Silly, but memorable.

It's ingrained in my brain forever at this point. Thank you.

So I do have a unique background, I think, for venture. Like many people in the startup world, I enjoy learning, and that has taken me down a few different paths. Originally grew up between Kentucky and Indiana, so very different world, and then had the opportunity to live and work in Southeast Asia before finally heading to the Netherlands to do my graduate work. Had a small business there, kind of got the bug for being my own boss, and then I moved to Silicon Valley about, God, 10, 12 years something like that, quite a while ago. I've been here for a while. Started a nonprofit among other things. And for me, that was about, it was about literacy. And I really, I'll be honest, initially I think all of us thought, you know, this could be a business and a big business. This was when edtech was really exciting. Remember when like Coursera was just getting funded? Turns out there's not a ton of money in helping underprivileged elementary school students.

It's a shame, right? But it's so true, right?

There should be more money in it. But we set it up, it ran for a really long time, worked with some really amazing organizations like Playworks and Boys and Girls Club and some great schools. I, from there, set up a lot of partnerships as a part of that. And we had initially explored raising money. And got connected with, through one of my board members, GSB Capital, which was at the time one of the largest edtech VCs here in the Valley.

Definitely a big deal. Definitely a big deal.

Yeah. They had an early stage arm called GSB Labs. If you are old enough and you were in Silicon Valley at the time, you will remember they had this amazing office in Redwood City with these crazy slides and beanbags and beer and wine on tap, which—

and probably water for those of you that are scared of the priority drinks.

I sometimes— occasionally water. Uh, it was, it was really fun. Um, they ended up hiring me. I was the director of strategic partnerships for them, and it was a really good fit for me, kind of combining that education piece, partnerships piece. Um, you know, I did study business in grad school. I wanted to— it was something I really wanted to lean into. And then from there, I got recruited to run a startup accelerator. So kind of left that venture side of things and went back to the more operational helping founders.

Now, was this the German accelerator? Was that the one that I saw? Interesting. So, so what, tell me a bit about the German accelerator. How did this all go down?

Yeah. So German accelerator, if you're a company in Germany and you're incorporated in Germany, it is a free program. They have a pretty healthy operating budget from the German government and they work with other governments through different programs. It's actually quite a bit bigger than just German Accelerator, but German Accelerator is a 3-month to 1-year program where founders can come in, they get to work with mentors one-on-one, they get some classes, they get a lot of exposure, they get free office space in both San Francisco and New York. It's an incredible organization and they've launched some really amazing companies. I think Salones in New York is probably one of the biggest. If you're in the B2B enterprise space, you should be familiar with them. But yeah, I did that for about 3 and a half years.

So, was it trying to get out of the accelerator? Like, what brought you into BDEV where you're at here? I mean, obviously accelerators are fun. I do this for a living. I think it's amazing. But, you know, you got the calling, right, to go over to the VC side of things. What actually inspired that transition for you?

So BDav Ventures was a brand new fund. They, when I joined, had only been investing a couple months, really, really new. They needed someone to come in and build a lot of systems and build structures. And for me, that was exciting because it wasn't, I think joining a fund where you're kind of, you know, going through the cycle that someone else has created is super interesting. You still get to learn about companies, like you're still doing really cool work. But for me, it was really important that I got to come in and still feel like a builder. And I got to do that. So, and I've done that, I think, in every role, even at the accelerator, we completely took it to its studs and rebuilt it up during my tenure. So I think for me, building was important. I've been here now 4 years, something like that.

You've done big things though in that short period of time, right? You know, if you've led some of the funding rounds for some of these amazing companies going in there, you know, so would you say that when you got into the venture landscape, was it as you imagined it would be, or was it some different secret thing that nobody tells you until you're there that exists?

So similar to probably most professions, I think that there is around investors and anybody who's ever been a junior employee at a company and you look up or in any role, right? You look up and you're like, wow, they must really know what they're doing up there. Um, or maybe you don't, that's also fair. But I did. I always thought like, oh wow, there's some real secret sauce that I just don't get. I don't think there is. I don't think there's any secret sauce. I think, you know, we're all humans working, and there's some very clever humans, uh, inventors, sure. Um, but yeah, there's no secret behind the door society.

Well, I'm going to get into some of the nuts and bolts of what I think you can help founders. I mean, we have people from all over the world that are tuning in right now, and thousands more will ultimately watch this. So if you do have any questions and you're in the room, please get them into the window. We'll make sure we address them. You know, one of the things that we're noticing, right, you know, Founder Institute's been around for a while. We went through kind of all of the ups and downs of the venture landscape. And, you know, we have great leadership. And one of the things that we're looking at is how do we stay in the position to actually help people in this new landscape, right? AI has just the changes that have happened in the last several months, epic. So we're to the point where I've seen some single founder companies, right, with an entirely vibe-coded product that looks better than some things that I've seen come out of dev shops. Now, of course, there's some things that are missing, there's some tech debt and all this, but the belief and dream of a single founder that's vibe coding or using agents to get somewhere— I want to upgrade vibe coding to using proper agents to get somewhere. Becoming a unicorn company, that, that's a viable thing now. So we're seeing a lot of change towards this, right? We just saw major layoffs from companies, um, some of which were due to agents taking over the roles. And then we've seen the stock market react to this in favorable ways. As an investor, has the AI and agent landscape, this ever-changing things, has it changed anything about the way that you invest, the way that you validate founders and companies? Any changes thus far?

Certainly. And I think we can talk about that probably in two different ways. So we can talk about that from operationally, how we invest is changing. And I'm happy to share more there, but maybe more interesting for founders is how are we thinking about founders and how are we thinking about companies? And today more than ever, we are asking ourselves, about, I would say, defensibility and disruption. So, you know, how do you defend this? And what is stopping Anthropic or OpenAI or Google, you know, whoever might be the big incumbent in the room from creating this? Because today products, we can make products. Let's be frank, we can copy features in days, weeks, Soon, hours, minutes. So there's this big question in the room of how do you build something that is durable and what does a moat look like in that space? We hear data a lot. I'm actually, and this might be a less popular opinion, I don't think data is a great moat. I think it can be a monetization mechanism. I think it can be It can inform a good moat if you're able to use data in a way that truly creates value for your customer. But data itself, I would say, is not a moat today. I'm thinking about— when I'm thinking about a moat, I'm thinking about distribution advantages. I'm thinking about customer value. I'm thinking about customer value more than I've ever thought about it. Because it's no longer, you know, good enough. It's what are you doing that excites your customer when features are easy to build and the cost of switching between organizations and providers is much cheaper now because an agent can switch, right? If I need to switch CRM systems, it's no longer hiring a team and it's going to be 6 months. It's hiring an agent and it's going to be 6 weeks. So these are all things that we're considering. I think it's harder today. I think it's harder to build a moat today than it was in the past. And you have to truly integrate with your customer in ways that weren't necessary before. And I actually think it's exciting. I'm a venture capital investor. I'm a partner at a venture fund. That is my job. BDEV's awesome. And if you're raising venture money, let us know.

Yeah. Awesome.

But if you are a single, you know, if you're a solo founder and you're building something and you have real revenue, venture capital may not be for you. And I think sometimes that we get caught up and founders have heard me say this before. I think sometimes we get caught up in this, the prestige of raising money, but raising money is not traction. Fundraising is a tool to get traction. It's not traction.

That's a very interesting, you know, and I think, I don't think I've ever heard anyone just say it so straightforward. It's so obvious when you hear it that way. But when I go back and look at pitch decks and you get to the proverbial traction slide, and it'll be like, I met with this investor, or I got this friends and family round donation, whatever the situation may be, and they're accounting it as an element of traction. But I've never heard somebody say that, that it's the precursor, uh, that helps you get I think that's very prolific. And you also mentioned the idea that, you know, when we're looking at the companies that are coming in, you know, you put a lot of emphasis in every interview I've watched of you, put a lot of emphasis on the founder, right? And the team. So if you put a lot of emphasis on the team and understanding that things like founder market fit, evidence that you've talked to real humans versus just AI archetypes of potential customers.

Yes.

How do you know the difference? Nowadays when people are able to churn up an amazing pitch deck that's AI perfect, you know, an amazing set of archetypes that makes it seem like they've talked to— I talked to 400 agents and they say I've talked to 400 customers. How can you tell the difference nowadays?

Kind of an interesting question. Um, I would say in a few ways, or let— I actually, let me rephrase that. I hope we can tell the difference. And I— there is probably going to come a time, and maybe it's already here, where we can't. Where I don't know. For me, what's really important is that you're getting at that customer value. And I, maybe there's an argument to be made that I can do that by talking to agents and I don't need to talk to real customers. If in the future agents are the buyers, maybe I could follow that potentially.

That's a good point. If it's AI to AI doing things here, if it's an AI VC fund talking to an AI customer product, I guess there's fair playing ground. Go ahead. That's so fascinating, your approach.

No, but I think for us, it's still business fundamentals. Like we're still looking at ultimately, who are you building for? Do you understand your ICP? You know, what is the real value prop here? And we're not investing pre-seed. So we're investing, typically you have a couple of customers, so I can call them and I can talk to them and I can say, and that is a very standard part of what a VC is going to do in diligence. They're going to want to talk to a few of your customers. That can be uncomfortable for founders.

I can imagine so. But one of the things that I think is fascinating that I know you guys do over there, I think this might be rare, is the idea that you, you more or less send some customers the way to, to these companies, right? So if you're somebody, it's like you don't have enough customer experience yet, your, your VC fund will actually get you some customers to see how you actually do with them. Talk a little bit about that. I think that's a fascinating approach and it's so brilliant for so many ways.

Thank you for letting me talk about how cool BDEV is. So BDEV, we invest in B2B software. We're fairly agnostic, nothing heavily regulated. And I would say our biggest value add as investors is that we have a platform that our founders built that is really what they— so our founder is Nacho DeMarco. That's the founder of BDEV Ventures. And he also built a company called Buyerstiff. Which is a LatAm tech unicorn. And he, as a part of building that company, built a few different go-to-market tools, um, that we've kind of, you know, taken out and put in our own little sandbox. Um, and those tools are what he ultimately believes helped him build Buyerstuff. And it's not necessarily reinventing the wheel. It's lead generation. Um, it's pretty sophisticated in the machine learning algorithms, but lead generation. It's introductions at scale. And we take that and we apply that to our portfolio companies. So not necessarily every company in our portfolio, but the vast majority are using those tools today. And we make up somewhere between— this is a little dated cuz it's from last year, but to my knowledge, nothing has changed dramatically— somewhere between 6 and 65% of all new revenue. So it's really effective, especially in that first year or two when we partner with a company. We actually use it as a part of diligence and we're asking ourselves, can we add value to this business? At the same time, we're literally testing these companies out in the market. Do you know your ICP? Because you need to understand your ICP to understand who we should be reaching out to. Do you know how to talk to them? Do you understand their deepest need? Because if you do, then you're able to construct language in a way that people are going to get that email or get that LinkedIn ping, whatever it is, and go, oh, I need this. They're going to start responding. And for us, that's been really valuable. And for our portfolio companies.

Well, you know, I think a lot of people, they look at, okay, we've got our first customers, hundreds of them, thousands of them. And they look at this as the badge of honor, which I mean, it quite frankly, it is. But what I've come to realize in all my years mentoring It's how companies and founders react to their first customers, right? Like what information are you getting from them? You know, what has changed in your product, your approach to market and everything? What are some indications that, or any kind of evidence that you look for that they actually know their customer?

You know what? I, one of my favorite things when I see a pitch deck or when I'm talking to a founder and they say something to me, when they're able to break it down into this very simple, easy-to-understand language, and they're able to say that back to me, and I go, oh my God, you know what? Yeah, I've never thought about it like that. That's brilliant. It's so simple. It's so basic. Makes total sense. As an investor, that's the moment that I want to have. Makes total sense. And I think for the most part, you can't get to that place unless you deeply understand your customer, and more importantly, you deeply understand their problem. And when we talk about founder-market fit, that's usually what we're talking about. Oftentimes people deeply understand these problems, not just because they're talking to customers, but because they've experienced those problems in some way, shape, or form, right? Typically there's some deeper connection to that problem.

I think that's so interesting. You know, I've noticed some of the most successful companies, or at least the ones that that to me seem like they have good pathway to success, they face the problem themselves, right? So oftentimes the solution that they're developing is something to solve some core problem they face. And I know when, you know, when I have some sort of problem, I'm doing a goal journal right now and my business partner's like, let's, let's handwrite this using some PDF file and all this. So I built an app, I vibe coded an app just because I knew that I would never do it unless I could interface a certain way. So it solved a problem for me. I wouldn't go to market with this app, but I know that it solved a problem. So at least I can trust that. You know, I saw one of the questions, I believe it's from Saeed in the audience. You know, he mentioned, you know, obviously when you know a customer, you're looking for traction. They'll have traction now. You gave them some leads. What type, what is the minimum level of traction that you actually are looking for that validates? I mean, is there enough? Is there not enough? What is the amount you're looking for to actually take a meeting with one of these founders?

So what we're looking for at BDEV, because again, we're not investing in pre-seed, and if you are a pre-seed founder, there are, we can talk about how you get in touch with funds that are focused on pre-seed. But we typically, our first investment is gonna be in that seed round. And what I'm looking for is an indication of a repeatable sales process. I want, right, because there is a big transition between founder sales, where it's you as a founder selling your product. And oftentimes founders have that lived experience. They can relate to customers in a different way, but can you build a playbook that you can hand to a team and the team can replicate what you're doing? And that speaks to a level of, um, especially in enterprise sales, like that is what's going to get you to that hypergrowth stage, right? Typically founders can't continue to do founder sales forever, even though Sometimes they try. So for me, it's about that, which can look a lot of different ways. It can be revenue. It can, I would say, we used to say product market fit was a million ARR. I don't think that's true anymore. I think in the days of AI, we can see revenue, early revenue spike just incredibly. Today we're looking at NRR, we're looking at churn a lot more. Than we used to, even in early stage companies, because we have seen this willingness for enterprises to adopt something and play with it, but not keep it. So I would say that's on a quick side note, but for us it can be revenue, but it can be also number of users. It can be cohorts of users and engagement statistics. It can be even distribution networks, right? It can be, hey, we've not monetized this yet, or we've not maybe flipped that switch, but we are, and we're leading with product-led growth, but look at all of these accounts that we've created and look at the engagement across these accounts. That can also be a form of traction. And that's perfectly legitimate.

I mean, there, there were so many times during your answer where I just wanted to interject with some side question or something, but it was just such a prolific package of information that you just shared with people. Um, so I think all of you literally, you need to go and take a listen to what she just said here, right? So the question was specifically about— I'm sure that Sayed was looking for a specific number, right? But it's not about a specific number. But more importantly here, the answer that came out of Keisha's mouth was it was a process. They're looking for evidence of a repeatable process, right? And, and I thought here for a second, I was like, I've never heard anyone answer a question like that in this category. But I, I've, I've never thought that somebody's been more accurate, right? Because, you know, a lot of the companies I work with, people don't realize that there is, especially if they don't do vast customer discovery. If you're just asking your family and friends, boy, you're gonna learn some hard lesson because, you know, I even have ex, uh, relationships that would probably get a product of mine even if they do not like me, just because it, it was something that came from me, right? So that's not necessarily evidence of true market. Right? You really need to show that you understand these people because when you need to hand that sales process off, you need to make sure that they're not buying just because they think you're cool, you know, or that they like your idea and you have so much passion. There's been so many things I buy on passion. Trust me, whenever I go to the lobster roll cart that they have that tours around, the guy's so passionate at the window, I get two, right? And, you know, so I buy things on passion, but that's not strong enough. Now, somebody else brought up here, Maria, She asked the question right after this because you do emphasize that you're in these kind of seed stage companies, right? So there's a reason why you chose that sector of the investor landscape.

Yeah.

Maria asked, are there still any pre-seed investors out there? Right. Once that really— people that actually invest in pre-MVP or pre-revenue stage.

Yeah.

What is your opinion? Is there?

Very much so. And if you want another process for me, Love it. I am a very systems thinker. I encourage founders, I am, and this is something that I talk about a lot. My team at this point is probably like, oh my God, lady. But I think what I, the mistake I see a lot of founders making, something I've personally done, so I recognize it, is treating fundraising like a networking activity. Treating fundraising like a who-do-I-know activity. And I think that's a mistake because you end up in a lot of conversations, which can— again, like, it feels like traction. You're like, oh, I'm having all these conversations and, you know, I'm talking to all these people, they're asking for my pitch deck. Um, but then you, you struggle to raise. And I think that comes from a ultimately a mismatch between you're not, you're just not talking to the right people. And, you know, assuming that the business is interesting, and if you're getting calls and you're having conversations, it probably is. So what I always tell founders, if you want to fundraise, fundraising is a sales process. You are literally selling equity in your business in exchange for growth capital. It is sales. And you are gonna treat it like a sales process. In its most basic form, get a list of every investor in the world. ChatGPT is really good at this. Claude is probably better. They're floating around as well. I don't know if Founders Institute might have one.

We do. I mean, and the Decile Hub, the VC lab side of this has an amazing tool to process and systematize starting a VC fund similar to what you're describing.

Yes. So take that list, eliminate anyone where you're not a fit. I will not change my thesis because your company is so amazing. That generally doesn't happen, um, unless there's some special relationship already. And so if you are raising pre-seed and you are talking to me and you expect me to invest in pre-seed, you are wasting your time because I categorically don't do that. And This is why it's important for founders to understand the venture capital business model, right? I, this is not my money that I'm in. I mean, maybe a little bit of it is my money, but it's not my money. I go out, I raise money from LPs, and then we invest that money. And for most VCs, when you're raising LP dollars, you're pitching a very specific thesis and you're required to invest within that thesis. So get that giant list, eliminate anyone where you're not a regional thesis fit, where you're in the wrong industry, where the check size is not a good fit, it's not a good match. And then send whatever's left, which shouldn't be hundreds, it should be 50, 60, 70 funds. Send whatever's left to every single person you know and say, hey, we're a really good fit for this fund, would you be willing to make an introduction? And I think that is taking fundraising out of that networking nebulous Am I making traction into a true process?

You know, I think another prolific set of advice from you. And what's interesting in there is just like we encourage people to spend a lot of time understanding your customer, knowing them thoroughly, put yourself in the customer's seat, you know, actually ask yourself, would you buy this product if you were the customer? Hopefully you would. But also to learn all of these things about the investment landscape. If you're going to be spending the next 10 weeks of your life pursuing investment, You know, you, you've been able to get a product up, you know, you proved it in the market that it's good. Now you're gonna seek investment. If you don't know how venture capital works, or even angel investing works, boy, you have a disadvantage. And you know, one, one thing I can say is this, you know, I come from, I'll call it the mainstream world. Like I didn't come from the venture landscape at all, right? I came from politics and then public relations. So it was shocking the things I didn't know when I got to Silicon Valley. Like the idea I did, you know, I'd always see Founder Institute put AMA on their flyers, and I'm like, why is the American Medical Association so involved in the Silicon Valley landscape? Not realizing that's Ask Me Anything. And it wasn't until I went to VC Lab, right? Adeo's got an amazing program over there, Mike Supervecchi, the team, that's a spin-off program that I, you know, you're supposed to already know about venture capital before, before you go. I, I acted as if I got in there. Now there's programs for people like me me, and I started hearing words that I've heard but I didn't know. So thesis, you bring up thesis, I obviously know what that means now. Explain to— because somebody, people come to me like, oh, this investor said no, and they're just heartbroken. And then I go look at the thesis of that investor and I'm like, well, why did you even try to get the meeting, right? You know, explain what the thesis is, what went into that, and why you won't budge from that no matter how awesome the company is.

So your thesis is, it's typically a little different than investment criteria. So your thesis is more the philosophical, this is what we invest in and why. Sometimes funds will share the why, sometimes they won't. Sometimes it's just, this is what we invest in. So BDev, you'll hear from us a lot, B2B software, seed through Series B. You know, we prefer to be minority investors. We prefer not to lead rounds. We're not investing in anything heavily regulated. If you can, you know, if you think about, we're not typically sharing this, but if you think about, well, why wouldn't they invest in anything heavily regulated? Well, one of our biggest value adds is that we're helping generate leads in regulated markets. That's a unique process. Exactly. Right. So there's some thought that goes into that. For most funds, the thesis is what you go and you fundraise on. So my customers, in a sense, are my LPs. And when I go to my LPs and I say, hey, I have some, I have a unique insight around B2B software. And I believe that through us, through our tool, we believe that we can identify winning companies better than other VCs. We go out, we fundraise on this thesis. And then when we start to invest, if I go into my, I mean, very simply, if I go into my yearly or, you know, quarterly, whatever, LP meeting, and I'm like, hey, we invest in this amazing medtech company. They're gonna be like, what? We didn't give you money for that. We gave you money for B2B software because you told us you have a unique special win, right? Some right to win there. And I think very similarly to a founder, if I invest in a founder and they're building, you know, an AI productivity tool for enterprise, and they come back to me in 6 months and they're like, hey, we're, you know what, we discovered this really cool soda and we're gonna build that and we're gonna disrupt Coca-Cola. I'm also gonna be like, what? That's not what we gave you money for, right? That's not what we, that's not what we invest in. That's not what we thought we were investing in. And LP relationships, just like investor relationships, are important. Typically, you know, you're going to go back to them again and again. So these are not things that you want to disrupt. And I think what is one thing I would encourage founders to do, it is always appropriate to ask an investor, what is your investment criteria? And they should be able to give you a very clean answer.

It may not always be on the website. Some, I'm sure, probably publish things like this just as a gatekeeping method, you know, and I think What I'm trying to avoid is just, you know, of course, in my opinion, if you can spend the next 100 hours doing anything, in any 100 hours, it's going after customers, right? De-risking yourself for an investor. And then when you go after investors, it's important to understand what the reasons are that they're going to say no to you, right? And if you can immediately get rid of the ones that are easily shareable. I saw Shayna, I believe it's pronounced, in the audience. She mentioned that she's based in the US. But the company that she's starting is in another country, um, to, to solve a problem, fill a gap over there. And I'm thinking about this question she asked us, like, how do you appeal to investors? You know, I, I know right away that there are some investors that their thesis and everything, they're jurisdictionally specific, right? So here you have a founder based in one country, but the company is in another. If you're just doing US-based companies, do you base it on where the founder's at, or do you base it on where the market is? How do you look at things like that?

For most investors, um, so we invest in the US and LATAM. We actually are, I would say, more unique in that we will look at international companies. We do have a few investments in Europe, um, but generally speaking, it's where you're— it's where you're incorporated. And that is, from an investor perspective, oftentimes that is not— it's a very practical thing. Investing in a US corporation, especially if you're, you know, a Delaware corp, right, Delaware C-Corp, is— it's something that I know, I understand, I understand the tax implications of that. I have a process by which I can invest in you. I'll be frank and say we had a company come up in a country that we had not invested in before, and it cost us a significant amount of money to ultimately not make the investment. But we had to hire local counsel. We had to explore, you know, what would be the implications of this. Do we— oftentimes, you know, we had to set up our own corporation in that country so that we could legally invest. And those were steps we just weren't willing to take. Because at the end of the day, you know, our business is about returns. And so especially early on, if an investor tells you, I don't invest outside of the US or the UK or wherever you're focused, you don't match their criteria. So unless there's, you know, some existing relationship, it is very unlikely that they're going to change their thesis for you.

Interesting. You know, and I know sometimes, you know, there's a lot of statistics out here and You know, we try to keep our benchmarks, fi.co/benchmarks page updated. But, you know, there's a statistic I saw one time that says that investors that invest in companies that have Harvard MBA founders, right? The amount of Harvard MBA founders are, is directly correlated with the performance of the portfolio. And I can sit here and imagine a bunch of reasons why there's a bunch of correlations there. Do things like whether a student or whether somebody has a college degree, does that play a role? Like when you're looking at a founder or is there a certain amount of education or proof that they understand taking a business class, going to a boot camp? What are you looking to validate the founder with?

That is a really interesting question and admittedly one that doesn't come up as often as you might think. I would say when we are evaluating a founder, what I'm ultimately looking for is, do they understand the problem? Do they have some unique access here through customers, through distribution, maybe through partnerships? And are they gonna be resilient? Are they— being a founder sucks. Like, it sucks. We all know this, right? It's really hard. I mean, don't get me wrong, there's some real big payoffs, but It's really hard. Are you going to be someone who at the end of the day has the grit to keep going even when you're having that low point, right? Whatever it— maybe it's a low day, low week, low month where everything just feels like it's falling apart. Are you going to be able to keep it going? And I think that does come down to, you know, are you mission-oriented? Are you passionate, passionate about what you're doing? I, you know, as far as education, I think that would probably be on a case-by-case basis. I do, I will say that as a founder, you are expected to wear a lot of hats. So making sure that you're someone who can, you know, interact with the product, interact with the customer, but also manage your finances and understand where, how money is being spent and how it should be spent. Those things are important. A lot of really amazing organizations exist to help first-time founders. Founders Institute's a great example of this where I know you guys have a few programs where founders can kind of learn some of those basics, which is a good sign, right? If I see that a founder went through a strong accelerator, like cool, I know that they have some strong fundamentals.

But yeah, we're seeing the founders actually changing as well, right? Like when you look statistically, you know, you see, There was a period of time that was people fresh out of college, right? And then there would be a period of time where it was slightly younger, some people in college. Now we're seeing probably as reactions to the market, people are getting laid off, people are retiring early, people's jobs are disappearing in some categories. So you're seeing this new kind of influx of founders that may have not spent their life in an entrepreneurial venture, but maybe first-time founders of a company maybe their startup has something to do with the industry they spent 20 years in as a professional. Does that change the dynamic at all when you're looking at somebody that doesn't necessarily have the entrepreneurial experience but has strong subject matter expertise? Where does that play a role in founder evaluation?

Greatly. In fact, I— and forgive me, this is dated, this is at least a few years old and I haven't looked at it more recently, but I know at least a couple of years ago, the average age of a founder who was able to raise a Series B And ultimately, hopefully go on beyond that. But Series B, most companies don't get to that stage. Many sell before that stage. It doesn't necessarily mean that they all die, but the average age was 40. And I think that says something, right? I think there's often this belief or feeling that most successful founders are 22, and that's not statistically true. And for us, experience, if we're going to give millions of dollars to a person because we believe in them, having years of deep experience and connections, it's a huge value add.

I couldn't agree more. You know, at Founder Institute, we've kind of reacted many different ways, right? So there was a period of time where if you didn't have a co-founder, you know, you weren't taken seriously, right? So we started making co-founder boot camps and co-founder programs and matching and awesome stuff, right? And I noticed John asked a question in the chat, and he more or less asked, is, is a solo founder good enough, right? Or if, if it— do you, do you look at some company with co-founders? I'm not talking about a massive team, but with co-founders, do you look at them more favorably, or does that not play a role? That's the question that I got from John.

Um, So I think YC maybe started this, or they certainly championed the whole co-founder thing, right? Because they won't accept the solo founder. Statistically, we know that having two founders is the path to the most success, right? Statistically, two founders are the most successful, and then I think it's three, four, five, and then one. And ultimately, I believe the correlation there is nothing more than you have someone to call at the end of the day. Like you have a partner who you can cheer with, celebrate with, cry with, whatever you need. We have several investments in solo founders, and I think that's totally fine. We're not closed off to it. But if you are a solo founder, I will ask, I'll probably dig in more to your team. So how is everyone on the founding team complementing your skills? None of us. I've yet to meet a founder who has all the skills. Typically, maybe they exist. I don't know.

I just pray for them that they have some skills to start with. Right. You know, that's a good thing. But I would agree with you on that. Interesting, though. You talked about— and I didn't know about the statistics, right, where co-founders and then several other mixes before it's down to one. But with the world changing so much, right, you know, I know in the past you may want to have a technical co-founder if you have something technical, then you have the business one, and then you may have the marketing one, you know, it's like putting together the big band, right? But the simple fact of the matter is, with agents now entering this landscape, not that agents could do everything, but right, if you have an agent that's fine-tuned to build the best go-to-market strategy and one that knows how to build the best, you know, business plans or the product requirements, documents, whatever the situation is. Do you think that's going to change that statistic about co-founders and numbers of leaders and team members?

I think it could. And I think it feels— let me rephrase that— it feels inevitable right now that those numbers will change, but not today. And today, actually, we're still— we have run diligence on a few companies where it's totally vibe-coded. We've even invested, I can think of one instance where the product was mostly vibe-coded, but actually a stipulation of our investment was that they had to hire a technical lead.

Interesting.

Because at least today, for most founders, you still need someone technical because when you vibe-code today, and this could be different in 3 months, but today, there's a lot of technical debt there. And to build something that's truly enterprise-ready, if it's a true digital product, typically you're still going to need someone in that technical seat.

That's so important to know. And that's what a lot of people come to Responsible Solutions, my company, responsible.com, shameless plug. They come to it because they, you know, they've built something awesome, right? But my business partner, he's an MIT computer scientist, right? So you can't get more by-the-book, plus than somebody out of MIT. But he went to Berkeley as well, which means he knows how to talk to humans, right? So that's good. But the simple fact of the matter is we spend a lot of time doing that, basically human validating that what they've done, removing bloat, getting proper tests in order, some things that are just generally missed, right? It's so funny when you get to something that's marketed as, well, this is ready for commercial use, and you open the README file and it's empty, right? You know, it's just things like this, right? Now with that, Interesting point. You're also a little bit later, you're in the seed stage. So I would imagine that the company that's going from idea to getting an MVP propped up is pretty much before they get to you, I would imagine, right?

Usually, yeah. Um, typically I would say that's pre-seed, right? At pre-seed you've probably got some MVP. And this is a bit of a misconception. Most founders don't raise money until they have some MVP. It is very difficult to raise on an idea unless maybe you're a second-time founder or, you know, there's some— you have built something very unique. Generally not happening.

So I think what's going to ultimately probably happen is, and that's why, like, for those of you that want to— we saw a lot of people come into Founder Institute through the years that were at different stages, maybe a little bit later than they should have been in an FI program. And they have so much team debt. And I don't mean that in any negative thing. I love team, but there's, there's a point where there are things that just make you risky and it's not necessarily from an investment standpoint, but it's not necessarily that the market's bad or the product's no good or something. What are some of these things that immediately cause red flag or warning light or things that may cause an instant rejection that you've learned through the conversations you have with the founder pitching their brand?

Yeah, that's a good question. That don't necessarily relate to fundamentals, but are more founder-driven. You know what? The number one thing for me, and I'm always a little surprised when it happens, if you tell me something that is not accurate, we're done. And I don't mean like you told me ARR was 2 million and it's actually 1.95. Fine. You know, like, I'm not— I'm a human, you're a human, it's fine. And I expect founders to be pumping things up a little bit. But I have had a few instances where founders have said things to me where it's just, it's just not accurate, where they've presented pipeline as revenue and not been fully honest about that. And, or, you know, whatever it is. For me, it's an automatic no. Being a founder is, it's difficult. I am giving you a lot of money and I need to know that I can trust that you're going to do with that capital what you say you are. Trust is for me vital, not just in investing, but actually we were talking about moats earlier and I firmly believe that you can build a moat through trust.

Interesting. And that may be a new era. You know, people often come to me and they're like, oh, we've got this disruptive idea. We're going to change the world. I'm like, well, there's rules to change the world, first of all. And I personally believe authenticity is the new disruptive, right, in companies, right? If they're just able to be authentic, right, about their intentions, about the reasons, their why. You know, I believe in mission-oriented business. That doesn't mean everybody has to be an apologist or a nonprofit. But if you have a mission, right, as a company, it should be to best bring value to your customers, to all your stakeholders. You know, we had a conversation in the green room in the past about the importance of impact. And, you know, how is this measured in the US, right? Because a lot of people at Founder Institute, they come to us, they tell us what sustainable development goal that they care about, etc. But then you see the world of social enterprise, this kind of trend, and it wasn't necessarily the most investable space. Then you see people's DACs where they have something like, we impact all of the sustainable development goals, which is highly unlikely. What are things in the impact world that stand out to you as an investor? Because oftentimes people are fearful that they're spending too much time doing good and it may turn an investor off because it's less time towards customers. What do you look for in that realm?

That's a, that's a really interesting question. Um, I think that those should be aligned. I do think there should be customer and sustainability alignment when your customer cares about, right? Like, you should find that sweet spot of we serve this customer, we are sustainable, we, we have, um, you know, impact goals, maybe social impact goals. And these are things that our customers also care about, because I do think if there's a mismatch there, you're, you're going to struggle because there's a, there's a tension in your business. Um, one example of this that I think has popped up recently, um, of just a company. I'll be honest, I don't think this is sustainability or impact goals, but Anthropic kind of standing up and saying, hey, these are our terms of use and the US government is violating that and we won't allow it. This is our terms of use. We're not like, we just don't accept anything else. I think was very powerful. And a lot of, and we've seen that reflected in their user base. Their revenue has spiked pretty significantly. The stocks are, you know, they're not in the public markets, but the secondaries are doing very, very well. I think it's a good example of a company that built trust with their particular customer segment by kind of standing up for what they wanted. I think another company that does that well is Apple, or at least who has built a bit of reputation around that with security, right? Apple's just like, nope. We stick to our security. Um, I think that's where we've seen companies build reputation and trust through sticking to policies that are more for social good than they are for returns, because Apple could certainly monetize, um, as Google has, right? They could monetize your phone data, etc., but they choose not to, and, um, it's been a good choice for them.

It's amazing information. You know, I'm sure like, like me, you get tons of people just cold pitching you on LinkedIn, right? I mean, every single— people ask me to introduce them to investors and I've never even— I don't know anything about their company whatsoever. Right. So, I mean, there's reputation at risk, but also just logic at risk. What is the proper way to approach someone like you?

So I have people reach out a lot and that's fine. Like, cool. So if you, I'll be honest, if you are introduced to me by someone that I know, I am many times more likely to take a call than I am otherwise, right? Because there's already some social proof or social validation that like, oh, okay, there's something here. I should double-click on this. I would say in general, when people reach out to me and I get a lot of, hey, do you invest?

Yeah, worst question. Just like on dating sites, it's like, hey, how are you? Like, you know, there's certain rules that we have to move beyond in society, and that's one of them with investors.

Yeah, um, I think my advice would be, if you're gonna cold reach out to an investor, keep it short, keep it polite, um, share us, you know, a brief overview of your business. Um, I have a kind of an canned answer that I often will send to founders, which is like, thank you for reaching out. These are our investment criteria. Is that a fit today? And in my opinion, the best founders respond to that. Assuming it's not a fit, the best founders will say, hey, you know what? We're not a fit today. Can I come back to you in 6 months? Absolutely. Let's stay connected. And I have invested in companies where they've had this kind of like, I hear you. We're not a fit today. I'm going to circle back. And then they do. And I think that is— it shows conviction. It shows follow-up, right? You're organized. You're also being respectful of my time and yours.

Just that word today changes the whole dynamic of this. Like, I'm sitting here like, well, I would— being a politician, I would remove the today, right? But then I'm like, wow, that is so needed and so smart because the Founder that says yes, but they not actually are, they're gonna learn the hard way, right? Because that goes back to your kind of trust thing. But for the one that actually takes that advice to realize that it's not a no, matter of fact, it's actually, uh, something to set your, your sights towards.

Yeah.

These are the goals that they're looking at. Now that's interesting. When, when somebody reaches out, you, you mentioned that it, it shouldn't be some long drawn out thing. Sometimes I get these long things, 100-page pitch decks. Notes, appendixes, DNA results. You know, it's crazy. What is in that short message to you that you care about?

So I'm looking for a few things. I'm looking for like a brief description of who are you, right? What do you do? What are you building? That's going to tell me a lot about the industry. It's going to— for me, it's going to immediately give me some context, probably on competition. Do I like the space? Not every investor, even though we're B2B software, Different investors at our fund are going to be excited by different things. And this is a tricky one for founders. Sometimes you do need to do that extra homework on, like, not just the fund, but the investor. Is there someone who's really, like, prolific in the space that you're, you know, they're writing about it, they're talking about it, they really like it. For me, I'm not a big fan of martech. I've been burned a few times in martech. It's just not an industry that I personally get really excited about. One of my colleagues does. He made some really strong investments in MarTech years ago and really likes it. So there's some individual differences there. Sorry, that's a total side note, but I think—

No, it's important to know because what it goes to show is just if they're reaching out to you, that doesn't mean that BDAV doesn't care about this. You know, maybe somebody else does, right? So, but it's still worth noting to the person For all of you that just heard this and have a martech company and you reach out to Keisha and you don't acknowledge that she's not a fan of martech companies, you're already starting in the wrong direction. Right.

But I'm looking for, I would say, 3 main things. And I actually didn't coin this. I'll have to find out who did. But it's Team Traction, Team TAM Traction, which is I wanna understand a little bit about the team. Is there any indication of founder market fit here? Traction, where are you guys at? This also speaks to investment criteria heavily. And then TAM, is the market big enough? And I think that's one that a lot of founders misunderstand. When you think about the venture capital business model, we're operating on something called power law. And so at its most basic, basic form, like every 10 companies that I invest in, I'm somewhat assuming that 9 of them probably aren't going to do much for me. Um, 7, 8 of them are probably going to return $0. Um, you know, I'm just going to lose my money. Maybe 1 or 2 will return my money, and then 1 is going to return the fund. And that is that power law. And so every investment that I make I have to believe that it can be a fund returner. And that's really important because the market size has to be big enough. And this is something I think founders hear a lot in venture is like, oh, the market's too small or the market's not realistically being represented here on this slide. If you're telling me that your market is like bigger than, you know, the entire US GDP, is it?

I've seen it. I've seen multi-multi-trillion-dollar markets. Yeah. Even in a SAM before. I mean, it's wild. Yeah.

But I think it's important to understand why we care about the market. And I will also say on another quick side note, focus. If you send me a note and you say, and this is a little personal to me, but if you say anyone in the world is gonna want this product, it's the best product in the world and every single person's gonna use it. Are they? And is that who you're going after today? Because if you're selling to everyone, you're probably selling to no one. I want to— there is nothing wrong with saying, hey, our beachhead market, we believe ultimately every person in the world is going to have an account. Cool. But our beachhead market where we're going after today is X, Y, and Z. And here's why we have a right to win there and why it's the right entry for us. That shows me focus. And it also shows me someone who operationally understands go-to-market.

That's brilliant. You know, I mean, you have just been such an amazing wealth of information. And if you have a little time after this— I mean, I'm just, I'm so impressed. But I had— I was impressed before I came, so you even raised my level of impression. Um, I believe if you have a little time after, there's networking table available if anybody has direct questions that they weren't able to address here. I've got one final question. You know, you've just gave so much information, and it may be hard to distill it down, but For the founders that are just starting down their fundraising journey, right? If you could just give them one bit of advice that they should just keep in their mind, forefront, back of the mind, whatever, that's going to make their life a little bit better here.

Stay focused and feel comfortable saying no. Stay focused on the customer base. That's your focus. You know, you may like— you're selling a product that is really interesting in healthcare and financial services and a few other things, but you're going into healthcare first and you have some traction there, stay focused. Fidelity reaches out, we would love to work with you. I'm going to circle back in 3 months. We're focused. Um, it's same, that's true for fundraising, right? If you're fundraising, stay focused. I reach out and I'm like, hey, I think what you're building is really cool. Like, we don't invest in pre-seed, but happy to chat. Hey, Keisha, I would love to talk to you. We're really focused on closing this round. Let's schedule something in 6 weeks. I'm not— I'm going to say, okay, sounds good. You have my email address, right? There's no harm in that. But let's stay focused.

Absolutely amazing advice. And I couldn't agree more. You know, we learned a lot today. And, you know, we know now a founder in student boot camps, you can go from literally idea to MVP. MVP pretty much as a solo founder and get things done right. But we also know that as you grow and you get beyond the MVP, you get to production level commercial grade stuff, there's going to be some standards that are needed there that you have to make sure. So start building right at the beginning. And you know that investment firms like Kieschus and everything, they're looking for technical co-founders for various reasons to make sure your stuff has longevity. These things are all just brilliant to me. For those of you that tuned in with us today, please take a moment. We, I believe, Cassia or one of the team members put a feedback form in. So any kind of feedback you have for events like this. I know that I have nothing but glowing reviews for you, Keisha. You've been such a fantastic steward to the industry, for that matter. And I mean that truly, because it's one of those things where a lot of people, they just say a lot of bloated words, right? Or they may, they use buzzwords too. But you actually tell it like it is. And I know I told you this when we first crossed paths. You tell it like it is, but you do it in a way that I learn something every single time, every single video. Right. So I appreciate you in this industry. And for those of you that ever have the opportunity to cross paths with Keesha or get to the investment criteria, look at her thesis, right? We know she'll send you the investment criteria today if you send a LinkedIn message. Right. So take this advice. Learn about the other side of the table. Learn about the investor just as much as you learn about the customer. If you're going after an investor, and you're going to go far. Again, this is Chris Foltz with Founder Institute. Check out our programs at fi.co. Join afterwards if you want to spend a little bit of time with Keisha at one of the tables, and we truly look forward to you joining our programs, and have a great rest of the day. Thank you.

Thank you, Chris.