David Goldberg, Principal, of Corigin Ventures
Corigin Ventures is an early-stage venture capital firm supporting founders who are impacting the future of consumer behavior and daily living. They are led by Ryan Freedman and David Goldberg. David founded a company called FreshNeck in 2011, and joined Corigin Ventures in 2014. David began his career as an Assistant District Attorney in Brooklyn, NY, before transitioning to finance, first with Merrill Lynch, then at Jefferies & Co. David holds a JD/MBA from Fordham University and a Bachelor of Arts in Marketing from the University of Miami.
Please give a brief description of the company and yourself.
I’ll start with our organizational structure because it’s unique. I run Corigin Ventures which is the early stage venture arm of Corigin Holdings, a privately-owned real estate company based in New York City. On the real estate side, we’re an owner, developer, operator, and lender. On the venture side, we invest in early stage technology enabled companies. That’s anything from real estate technology to consumer and mobile. Personally, I started in law, transitioned to finance, and finally starting my own company, Freshneck, in 2011. It was a consumer facing collaborative consumption mens’ accessory rental business. I sold that in early 2014, met the chairman of Corigin Holdings who was doing some investing on the side out of Corigin’s balance sheet but didn’t have any full-time employees or long-term plan for that business. We got together and our visions were aligned. We’ve spent the past 22 months executing on that vision.
Can you explain how and why you invest?
At its core, it’s all about people and markets. That drives 80% of our investment process. We ask: is this market big enough so that you can have a really big company here? Is this industry ripe for innovation or is there an area where someone can steal large market share or create new market share? Are these founders really smart and of the mental and emotional fortitude to take on this kind of endeavor? One thing we focus on, that for whatever reason others don’t consider as important, is not just should a founder be smart, motivated, passionate, etc. but: why is this founder the right person for this specific market? Some people call this founder market fit. To us, it comes down to domain expertise. Do they have relationships in this industry? Do they have years of experience in this industry? Have they suffered a personal pain point in this particular market that allows them to have a competitive advantage over a Harvard Business School student or Stanford engineer that wants to tackle this market.
Do your investments tend be in more early stage or late stage startups?
For now we see real opportunity in seed rounds. You read a lot about how later stage rounds are getting harder and harder to do. You need a lot more capital, and they are potentially getting a bit over-saturated and overpriced right now. There’s still real opportunity in the seed rounds. You can make more bets with lower dollar amounts and potentially get those 50–100x returns, which can drive an entire portfolio. Whereas later stage you need a much higher average and you could be limited to that 10–20x return.
How important is it for a company to have some form of seed financing before pitching a VC?
Ironically, in the market, it has become less important. We are seeing more people raise a lot of money on ideas, especially repeat entrepreneurs. There is something to having skin in the game, and that means something different to everybody. It could mean sweat equity, hundreds of hours someone spent on it, or putting in some capital. $5,000 to a college student could be the equivalent to of $50,000 or $100,000 to someone coming in later. You’re trying to understand if this person has so much at stake that they will battle through the highs and lows of their business.
How does not having a traditional fund structure or limited partners allow you to operate differently than other VCs?
It allows us to be really flexible. Traditionally, when you have a fund (and LPs), you need to have somewhat of a mandate. Your investors need to know what you’re investing in, for example “we will be seed investors focusing on b2b”. Whereas we can do things outside the box, perhaps some pre-revenue seed deals and then if the opportunity strikes do a series A, B, or C deal. We can do some deals that are more private equity based, and don’t have the traditional venture risk/return profile. Another advantage is that we are not subject to the cycles of fundraising, and going out and having to raise our own funds. Understanding how much follow-on capital is available based on fund I vs. fund II. It also allows us to be more aligned with founders. It’s our own capital. It’s the same real risk return profile as a founder, whereas venture funds really need to think about dynamics like time horizons and showing returns on paper. For us paper returns are meaningless because we have no one to show it to other than ourselves.
What’s an example of something one of your portfolio companies did that was unique or innovative?
One of our portfolio companies that we are really close with through their seed and A round, is Zeel. They are an in-home on-demand massage company. They were one of the leaders in this single vertical. They were going out to disrupt the spa experience. They could provide that experience cheaper, better for workers, and more convenient for customers. They did a really unique play by partnering with spas and hotels to be the outsourced provider for them. Those spas and hotels are seeing the value in what they are doing, and saying “we don’t need to have our own internal workforce that we are paying, so we will just be the brick and mortar face”.
Why do some say it is necessary to be a founder in order to be a VC?
When I was at my startup, I came out of that saying “I learned more in 3 years operating this company than I learned in the 7 years of college, law, and business school”. Now, 20 months into VC I’ve actually said “I’ve learned more in these past 20 months than I did at the 3 years operating the company”. That’s because with one company you can spend a lot of time digging into specific weeds, but now I get a bird’s eye view exposure to just so many people that are smarter than me tackling so many different industries. That being said there are just some things very hard to learn by observing and you need to learn by doing. Those years spent operating provide valuable insights.
The one take away, of what is so important about building an early stage company, is the importance of building out a high level team early on. The product won’t just speak for itself, and a great core team helps you scale exponentially.
How did you become interested in starting your startup after going through traditional paths of law and business school?
I was working in private wealth management, where I was targeting startups and founders. I was helping them deal with some personal finances, as well as their businesses. I was one of those people who was obsessed with startups. Then I had my own personal pain point dealing with the problem of fashion. I really started understanding my customer first through myself, and then just talked to every possible person I could. I found there were so many people suffering from the same pain points and I thought I could solve that.
How did you balance working a full-time job while running a startup?
It was really really hard. I was waiting to take the business far enough to have validation, as well as financial reasons in order to not be reliant on outside investor capital just to validate it. It was a lot of sick days, phone calls, text messaging, and emails in the bathroom at work until it got to the point where I needed to make a decision of whether I’m all in on this or I’m not. You just know when you are at the moment, when it’s all you think about. When you eat, breath, and live that startup idea. I said “it’s time, it’s now or never”, and I resigned shortly thereafter, and here I am now.
What is it about university-born startups that are interesting to focus on?
We really focus on founder-market-fit, and understanding your customer. Many technologies today are focused on younger demographics. Think about Snapchat. I was certainly not an early adopter of it, and it didn’t make sense to me. If you speak to a bunch of college kids they will understand those technologies. They are early adopters. They grew up in a different way than most investors. They become the eyes and ears for us into those new technologies and how they are being used by the largest demographic growing in the world today.
Since students often don’t have much experience, how would you find proxies for experience?
It’s about getting to know them personally. What you do in the first 2 to 3 months of starting a company is somewhat irrelevant, but the questions are: is this person smart enough to figure it out? Do they have the passion and perseverance to get through the emotional and financial highs and lows of starting a business? The average young college person has a lot of those personality traits of taking a little bit more risk and not having such a big opportunity cost of starting a business. A lot of these traits are what makes universities such a breeding ground for amazing founders and companies.
Have you started looking at any university particularly or partnering with one?
We haven’t partnered with any officially, but hired our most recent senior analyst right out of Wharton’s MBA program. We just brought on an intern who is a current Wharton MBA student, who is acting as a liaison to all of the founders there. That’s a bit of a pilot test case for us, and if that works there’s a very obvious college ambassador program where we can have scouts at all of these different universities. I don’t have the time or the bandwidth to start visiting universities myself, but having people with boots on the ground could be really beneficial.
Since many startups fail, do you look at founders who have failed, with a previous company, positively?
100%! So many of our decisions are based around people. There’s only so much research, analysis, and diligence I can do on someone when I meet them. But now when I track their business whether it’s a success, failure, or somewhere in between for 6–9 months or 2 years you get such a better idea of who that person is and what their capabilities, strengths, and weaknesses are. If most of those things are positive I’ll just have so much more conviction for that person the second go-around. Plus, you then add to that all of the learnings they’ve accumulated going through that experience. Also, they’re still hungry!
What advice would you give to entrepreneurs just starting out?
Work on something that you really believe in, and that you know you are the right person for. Being a startup founder is very in-vogue and sexy right now. There’s a lot of people saying, “let me find a market that seems like it’s trendy or I can build something in”. I will tell you that data will 100% show that in the first scenario outcomes are so much better than when you think you’re just finding a blue ocean opportunity that you can be successful in.
It is 100% necessary that you are building a product or service based on your customers. It is a constant feedback loop. You build, you get feedback, you iterate, you change, and you build again with more feedback. That never stops.