Leah Edwards of Pegasus Tech Ventures: 5 Things I Need To See Before Making A VC Investment

An Interview With Orlando Zayas

Customer engagement: I look for enthusiastic customers, even at a startup’s early stage. Customers caring about and advocating for the product or company is a good indicator of future success.

As part of our series about “5 Things I Need To See Before Making A VC Investment” I had the pleasure of interviewing Leah Edwards.

Leah Edwards is a Partner at Pegasus Tech Ventures with a focus on U.S. investments. Leah started her career in management consulting then launched new products for Intuit, Oracle and Taligent, a joint-venture of Apple and IBM. She then joined the founding team of an enterprise SaaS company called Post Communications, which was acquired by Netcentives within two years for $380 million. After advising and serving in interim leadership roles for other startups that were acquired by major companies including the U.S. Green Business Council and SolarCity, she co-founded another marketing technology company, Overstat, which was purchased by Tealeaf Technology (now IBM).

Leah’s deep involvement in higher education began in 2012 when she became the Director of the Center for Entrepreneurial Studies at the Stanford Graduate School of Business. She is an active angel investor and serves on the Board of NameCoach, which serves both higher education and enterprise markets.

In addition to being a lecturer for UC Berkeley’s Engineering Department, Leah regularly conducts workshops for visiting corporate innovation teams and foreign investors, and she serves as a mentor in several Silicon Valley accelerator programs.

Leah holds a B.S. in Business Administration from the University of California, Berkeley and an MBA and Certificate of Public Management from the Stanford Graduate School of Business.

Thank you so much for joining us in this interview series! Before we dig in, our readers would like to get to know you a bit. Can you please share with us the “backstory” behind what brought you to this specific career path?

I started my career in management consulting and later worked in arts organization management. Although the latter work was mission-driven, I found being on the administrative side less creative than working in business, so I took advantage of an opportunity to help corporations launch their first Internet-enabled products.

A dot.com founder then recruited me to join his founding team, and I truly found my place in an environment blending creativity with business, building products, and creating value. I’ve worked with startups ever since as a serial co-founder, as the Director of the Stanford Center for Entrepreneurial Studies, and now as an investor at Pegasus Tech Ventures. This latest chapter is helping me apply my learnings from corporate intrapreneurship and then corporate acquisitions to help global companies innovate by investing in and collaborating with global startups.

Is there a particular book that made a significant impact on you? Can you share a story or explain why it resonated with you so much?

My latest favorite book is The 15 Commitments of Conscious Leadership. Although I don’t normally enjoy self-help books, I’m a strong believer in coaching. I consider this book a valuable guide to coaching yourself to be your best self at work and in life.

One of my favorites of the 15 commitments is: “I commit to seeing that the opposite of my story is as true or truer than my original story.” This commitment helps you be aware of your own blind spots and question assumptions that might be unconscious. It’s a great tip for all aspects of life but is especially valuable when investing others’ money in startups.

Do you have a favorite “Life Lesson Quote”? Do you have a story about how that was relevant in your life or your work?

One that I like is attributed to the writer George Eliot: “It’s never too late to be what you might have been.” This reminds me that people can and should make changes and try new things, no matter what their age.

It’s a common myth that most startup founders are in their 20s, but in fact the average age is 45 according to the Harvard Business Review. Experienced founders have not only had the chance to assess opportunities and/or understand unmet needs, but also to build a large network; as a result, they have the ability to recruit an outstanding team. They also have plenty of practical experience, which helps in bringing products to market successfully.

How do you define “Leadership”? Can you explain what you mean or give an example?

I believe that leadership is a mix of being inspired, communicating it to others, and supporting people to do their best. A leader needs to find talented people and enable them to do their jobs well versus telling them how to do their jobs. It is a subtle but important difference. If you understand in what areas your team members need to grow, you can help them directly or provide access to learning those skills. This way you’ll have a stronger team, and you’ll have a more motivated and committed team.

How have you used your success to bring goodness to the world?

Aside from my work at Pegasus Tech Ventures helping startups live their dreams and bring valuable products and services to market, I’m involved in education and am a lecturer at U.C. Berkeley. I love to help people reach their potential, which includes enabling students with STEM backgrounds to add leadership and business strategy to their skill sets. Doing so ultimately helps them bring technology and science innovation to the world, therefore improving people’s lives.

Ok, thank you for that. Let’s now jump to the main part of our discussion. The United States is currently facing a very important self-reckoning about race, diversity, equality and inclusion. This is of course a huge topic. But briefly, can you share a few things that need to be done on a broader societal level to expand VC opportunities for women, minorities, and people of color?

One thing is simply to listen more. When I worked at Stanford, we used design thinking techniques to create more access points for people of all backgrounds. It was important not to presume to know how to create change for other people. By asking students from under-represented groups how they viewed our entrepreneurial offerings and what they consider a welcoming experience to be, we were able to make significant changes and dramatically broaden participation, dramatically improving our female participation.

It’s always good to be humble and it’s really important to understand that the expertise to address diversity and inclusion may lie elsewhere. My role is to help provide the connections and resources to create the change that is possible.

Can you share a story with us about your most successful Angel or VC investment? What was its lesson?

Although I don’t yet know what the financial returns will be, one of my successful angel investments in terms of impact is in EdConnective, a teacher coaching company. I made the investment based on my belief in a visionary founder from an under-represented group who realized that coaching teachers is an effective way to improve the classroom experience for both teachers and their students. The founder, Will Morris, is much closer to the problem of teacher improvement and retention than I am, but I had the ability to invest myself and bring on larger investors. I already consider this a successful investment because the company has made a tremendous impact, according to teachers and principals, and it is growing fast.

Can you share a story of an Angel or VC funding failure of yours? What was its lesson?

Yes, I made a small investment in another edtech company that simply could not survive the pandemic. The startup offered a project-based learning solution for schools that did not translate well to the online learning environment. I encourage people to be angel investors but remind them that they must expect some companies not to flourish. I’m still very supportive of this founder and look forward to supporting her future business ideas.

Can you share a story with us about a problem that one of your portfolio companies encountered and how you helped to correct the problem? We’d love to hear the details and what its lesson was.

A common problem that founders have is recruiting the right people then finding out how to work well with them. I believe in coaching, training, and helping well-meaning people sort out their differences. This enables them to become well aligned so that they can build products and ultimately create a successful business. I won’t violate anyone’s privacy by describing any specific situations but will encourage every startup founder to create a culture of open and frequent communication and to get coaching if they are not able to do that now.

Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that story?

Yes, in a sense. I worked on the initial branding for Tile as a consultant, but unfortunately, I did not take equity as compensation. I admire the company’s success and wish I had invested more of my time and capital.

Super. Here is the main question of this interview. What are your “5 things I need to see before making a VC investment” and why. Please share a story or example for each.

• Market traction: It’s critical to see initial interest and positive feedback about any startup’s product or service.
• Customer engagement: I look for enthusiastic customers, even at a startup’s early stage. Customers caring about and advocating for the product or company is a good indicator of future success.
• Business model: No matter how creative the idea or innovative the technology is, each startup needs an appropriate way to charge money for that. Because Pegasus invests primarily in deeptech companies, we see too many that focus almost entirely on the superiority of their technology but don’t have a proven business model. The founders might say they have decided on a business model, but that is not the same as testing customers’ reactions to the model and proving that it will be both efficient and profitable.
• Smart team with emotional intelligence: It’s easy to mis-communicate, so I look for startups with experienced yet humble management teams who listen to one another and to customers. It’s critical that the team is open to new ideas and willing to change their minds.
• True competitive differentiation: Competition is fine, but it’s critical that any startup has a clear understanding of how to differentiate itself and stand out from existing solutions and other emerging competitors.

You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)

I wish that we could all live without fear. When we’re more open-minded and resilient, we’re in a better position to change society and businesses. What’s more, I believe that everyone would be happier along the way.

We are very blessed that some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might see this. :-)

I’d love to have lunch with Melinda Gates. I’m impressed with what I’ve seen from Pivotal Ventures and the fact that she’s both supporting female leaders and addressing the issues that keep women and girls from participating fully in society, business, and government. I’d like to hear firsthand what it is like to be in such a powerful position to support change in the world.

This was really meaningful! Thank you so much for your time.