VC Spotlight: Mercedes Bent of Lightspeed Venture Partners

We continue the series featuring Black Venture Capitalists this week with Mercedes Bent of Lightspeed Venture Partners. Mercedes brings a unique perspective to VC, with a background as an operator, and deep expertise in education. We enjoyed hearing about her career path, how she anticipates the venture capital industry is changing, and her words of wisdom for those looking to pursue a role in VC.

So, let’s start from the beginning, what was your first role in Venture Capital and what led you there?

My first role in venture capital was an unofficial non-full time role with the Stanford Impact Fund. I started working with them in 2017. For me even though this was a student organization and part-time, and more similar to an investment club, I consider this my first role in venture capital because we were deploying real money. We did check sizes of about $75K-$100K. We went through an investment process over the course of a year, where we sourced companies and evaluated them. I was on the EdTech team.

What other VC roles did you have or professional experiences before beginning at Lightspeed? What led you to these roles?

I worked in Owl Ventures, an EdTech fund, for an internship, before I started working full time at Lightspeed in the fall of 2018. My first 2 experiences in venture were focused on education. For me that was strategic, because I had an operator and academic background. I did a Master’s in Education and was an operator at 2 Edtech startups, General Assembly and Upload. So for me, even though I was new to venture, I could go much further in my diligence and sourcing abilities because I had such a deep network in EdTech, as well as a deep understanding of the field, so that it was easier to define what separated a good company from a bad company. I was intentional in focusing first on investing in the education space, so I could more quickly ramp-up on all of the areas in venture that were new to me.

Before you decided to pursue your MBA, did you know you wanted to pursue VC? What attracted you to the industry?

I first started thinking about it and getting exposed to venture while I was working at General Assembly. I had a role where I was Head of New Ventures. It was a new role where I was working with the CEO, Jake Schwartz, to identify new areas we could expand into. The CEO basically said, “you can be the founder and I will be the VC, and anytime you pitch a new business, think of it like a VC. What is the cost of capital? What are the returns going to be?”. That experience was really helpful and opened my eyes to how he as a founder thought about fundraising.

If you could prepare again for the venture recruiting process, what would you do to best prepare? Would you do anything differently?

I don’t think I would do anything differently. I ran a process that was very efficient, that showcased my work experiences and demonstrated that I was already doing the job of a VC. Regarding my background, I worked at the Federal Reserve and I also worked at Goldman Sachs. Those experiences primed me for how to think about capital, how it moves and how it is allocated, as well as how to think about venture as an asset class and the larger economic shifts that impact the venture industry. My operating experience gave me empathy for founders, as I better understood what they are going through on a daily basis and what company building looks like.

When I was looking for roles in venture, I had the most success in interviews when I pitched them on the sectors that I was interested in. I pitched them on edtech, multicultural consumer products, and AR/VR. I came with theses for each of these sectors, and, sub-theses I was interested in within each of these fields. I then wrote, investment memos for a seed company, Series A company, a Series C company, etc. It took a lot of time, but I was able to do it in tangent with my work at the Stanford Impact Fund work, and other various activities I was doing on the side. This enabled me to walk into the room and say I already have investment memos and pitches. This changed the conversation to become more about the feedback on what I did well or not, versus a high level discussion on my background or interests.

Is there anything that you think has changed in pursuing a role in venture capital today since you entered the industry?

There are a lot of changes happening in the venture industry and some of them were underway before I joined. One trend that is really reaching a peak now, is the emergence of solo GP’s. There are a lot more resources to help emerging managers get started. That is a trend that I think is good for VC, because as much as people talk about how much capital there is available there are still so many good companies that don’t get funded.

Another trend I have noticed is the idea of influencers and creators as VCs and redefining who can be a VC. In terms of “who can be a VC”, I think that there are a good number of operators and people with finance backgrounds in VC. I have noticed that increasingly people with an operating background tend to be successful in VC (I am biased though). One thing that I would like to see more of is the diversity of educational backgrounds within VC. Harvard and Stanford grads account for 70–80% of VCs. So I do think that this could diversify.

How would you describe your day-to-day as an investor at Lightspeed?

There are four things I do as an investor: I source deals, I evaluate deals, I win deals, and I serve as a board member for my portfolio companies. So my day-to-day is split between those four things — though I do them at varying levels of frequency. I am sourcing 1000–2000 companies a year, I am evaluating one in ten of those to dig deeper. I will do a couple of those a week. In terms of deals, I am taking them in front of the investment committee, getting approval from the partnership, and trying to go win the deal, a couple of times a year.

Being a board member, I have 4 deals that I serve as the lead board member on and then another 6 where I am the backup person. So I spend a good amount of time thinking ‘how can I help this company?’. For instance, right before this I had a call with a founder discussing the regulatory environment. I was trying to think ‘who can I connect them to and help them with their strategy?’. If I had to quantify each day this looks like: 5–6 calls a day on new pitches, 2–3 calls a day on second stage evaluations per week, and probably 5 calls a week with my founders.

How do you think the landscape is changing and how (if at all) do you think the Black Lives Matter movement has had an impact on the industry? Do you think these changes will be lasting?

I think that people are starting 1–2 funds focused on underrepresented minority founders, but I don’t know if they will go onto a 3rd or 4th fund that is just focused on under-represented groups. They will probably broaden out the scope of their focus over time. I don’t think it will be quite as concentrated as just Black or LatinX founders as the recipients of these few funds.

One of the ways that we differentiate at Lightspeed is focusing on the pipeline of investors — under the belief that if there are more diverse investors, there are likely to be more diverse founders funded. We have something called our Scout Fund. We are on our third iteration of the Scout Fund now and because of George Floyd we focused on having only investors of underrepresented US ethnic groups in the program. It was a great program for us. We have already seen the first thirty deals of the fund and over 50% of the founders we invested in are racial minorities. This is huge and proves out the point that if you have more diverse investors, you will have more diverse founders. I think this has the ability to generate lasting positive impact. There is a lot of research backing this cause and effect — even with women. Women are 2X more likely to invest in women founders, than males are.

Lastly, if you could give one piece of advice, now that you are in VC, to those that are looking to enter the industry, what would it be?

Act like you are already in VC and go out there and source companies. Figure out which ones you find interesting. Don’t email asking someone about the job, email them asking about feedback on the companies that you have selected and the theses that you have written. If you are doing this in a targeted way, reaching out to people you know have an interest in the category, you are going to get good feedback and they also get to test what it would be like to work with you.