Behind The Curtain: My Transformational Time @ Chingona Ventures
“Highway robbery, that’s what you’re doing!” exclaimed my grandmother in disgust. “Excuse me, what did you just say?” I retorted back in disbelief. “Aren’t you just taking people’s jobs away from them and contributing to capitalist corruption?” she responded.
I couldn’t believe the misconception my grandmother held about VC. But how can I fault her, when all she has seen are shows like Billions, where she thinks I am another Bobby Axelrod? To be fair, just one year ago, I too was skeptical what the world of Venture Capital would entail.
I was initially attracted to Chingona for the mission and industry focus — focusing on undercapitalized markets at the pre-seed stage and “investing in the next generation of badass founders.” In addition, Chingona’s portfolio boasts a diverse set of founders (38% women, 77% POC, 31% immigrant, and 73% outside of the Bay area). While I knew I could get behind Chingona’s mission, I was unsure what I would come to think about the world of investing. Luckily, I quickly discovered early-stage investing is the perfect career path for me.
I can confidently say that Kellogg’s Venture Capital Lab allowed me to explore, and now love, the world of VC. Without the support of Kellogg’s faculty/staff, mentorship in the space, and time at Chingona, I wouldn’t have found a job that I view as a long-term career. As I reflect on my last few months, I want to share my experience to encourage others to step into this seemingly untouchable world with insatiable curiosity. Below I will share the specifics of my internship (the what), the background/skills necessary for success (the why), the typical VC process from inbound to investment (the how), the past, present, and future landscape of VC (the where), and parting encouragement on breaking in and next steps.
Internship Accomplishments (the what)
I have conducted 40+ meetings with founders, created four investment memos/one-pagers, attended/contributed to one board meeting, and gained significant communication and investment skills required to succeed on the job.
I came into VC lab with five goals, which I’m proud to say I’ve successfully accomplished:
- Gain Exposure: Gain exposure to all parts of the investment process — see at least one deal flow all the way through to legal diligence
- My Chingona experience: I have been the lead associate on four deals we have seen go through to investment — Kudos, Beni, Hologram, and an InsurTech Deal (yet to be announced)
- Flex my Leadership Muscle: Feel comfortable conducting first and second meetings by myself (take ~8 meetings a week)
- My Chingona experience: I have taken over 40 first, second, and third meetings
- Enhance Communication Skills: Ask good questions to extract key details, create concise summary write-ups to adequately inform team, and structure meetings with clear agendas
- My Chingona experience: I have produced write-ups, one-pagers, emails, and investment memos for 30+ startups
- Build Network: Develop relationships with at least five of Chingona’s Portfolio Companies (PortCos) and other potential investments; exhibit an executive presence
- My Chingona experience: I attended Chicago’s Venture Summit and the All Raise Walk to meet entrepreneurs and venture capitalists — leveraging Samara’s network to connect with the SF VC ecosystem
- Seek Post-Grad Clarity: Leave with an understanding of whether I want to be at a VC or startup post-Kellogg
- I’m excited to pursue a career in VC after Kellogg!
Now that I’ve gotten the experience, I’ve taken a step back to evaluate why VC for me — the next section showcases the key components. Feel free to also evaluate if it’s right for you.
Background/Skills Necessary for Success (the why)
While I didn’t realize this coming in, early-stage investing is a mix of having the ability to discern unique insights and to cultivate those insights into breakthrough innovations. To successfully invest and grow your portfolio companies, the most important quality to possess is curiosity. Curiosity to research new trends. Curiosity to understand potential investment opportunities. Curiosity to then understand business models, go-to-market strategies, expansion opportunities, etc. to develop the portcos into future unicorns. Curiosity, passion, and an underlying entrepreneurial resilient spirit underpins VC success. Of course, you need to learn the financial component and how to operationally shepherd the portcos, but at the end of the day, if you lose the fire that sparked your interest in the career, it may be difficult to succeed.
Here are some of the primary responsibilities and components of the job:
Source Top Talent (you will have the opportunity to choose the entrepreneurs who are well-positioned to bring an innovation to market): In college, I started to build my sourcing expertise as a recruiter. My role as a recruiter was finding the right candidate for various tech company jobs. It was there that I developed my interviewing and candidate discerning muscle. At Accenture, I continued to refine recruiting processes, as the North America Consulting Development Program Recruiting Lead. And even at Kellogg, I’m an admissions interviewer and a Marketing VP for the Entrepreneurship and Venture Capital Club helping to create venture capital marketing resources for the admissions committee. Recruiting and sourcing as a venture capitalist is similar — you will need to develop a keen eye for who the right founders are to bring a solution to market. As a VC, it’s beneficial to have a network of candidates to bring talent to your portfolio companies — being able to both recruit successful entrepreneurs and key hires for those entrepreneurs is crucial.
Conduct competitive analysis and in-depth research on leading AI, Cloud, Enterprise SaaS Trends: Last summer, I decided to gain industry-specific knowledge in the programmable cloud space. I joined VMware’s End User Computing group as a technical product marketer, where I sat in between sales engineering and product management to articulate the competitive differentiators against Amazon’s, Microsoft’s, and Google’s cloud products. Understanding the ins and outs of the technical world has helped me to better vet potential AI/Cloud companies to invest in. During my last project with Google Cloud, I created and published thought leadership about how our clients could build their future systems with Google Cloud — around decoupling the IT stack, creating next generation app development platforms, integrating AI and blockchain, and better understanding customer data. This kind of research is important to stay up to date on changing trends in your investment areas. Chingona’s focus areas are financial technology, female technology, food technology, health/wellness, and future of learning.
Enhance Portfolio Company Relationships through Analysis: My background is in venture consulting, so portco operations is my bread and butter. Through a career in VC, you will have the opportunity to help portcos build pitch decks, conduct market analysis, complete customer/sales forecasts, and lead design thinking session that will help to build roadmaps and envision what’s next (i.e., project management + strategy).
Now, I have VC experience: After giving VC a trial run at Chingona Ventures, I can confidently confirm that I enjoy and am deeply passionate about venture. It combines my background in recruiting, consulting, entrepreneurship, and technology. For all of you who are in the same position as me and have decided you want to be a venture capitalist, the next question is how — what does the day-to-day look like?
Typical VC Process — from inbound to investment (the how)
Sourcing: The General Partners will have a robust network of other VCs, Entrepreneurs, Limited Partners, and Accelerators that will feed them a pipeline of deals. There are also cold inbounds that may come from an entrepreneur having heard/seen the GP at conferences, on podcasts, on social media posts, etc. Assuming the VC firm receives a significant number of inbounds, an associate would first go through all the inbounds and decide to either pass or take the first meeting. When determining whether to take the first meeting, I typically ask questions like:
1. Is this company within our industry/vertical focus area?
2. What are the deal terms? What is their valuation cap? Any commitments so far? Are they looking for a lead?
3. What is the problem statement and solution? Is the market there?
4. What is the product/service traction? Who is the target customer?
5. What is the founders’ background? This is to determine founder-market-fit.
If we take the first meeting, we then evaluate the 5 P’s (People, Product, Profit, Potential, and Portfolio fit) or within Accenture’s Digital Ventures Team we would evaluate the company’s desirability, viability, and feasibility. If we move the company on to the second meeting, we have them do a product demo and elaborate on its go-to-market strategy. If we decide to do a third meeting, we do an investment memo — including things like investment recommendation, market analysis, competitive analysis, business model, go-to-market strategy, and risks and considerations. Then the third meeting is a combination of the first and second meeting with the Partner. At that point we decide to invest. We usually make 1–2 investments every month.
Introducing the 5 Ps:
People: Look for founders that have a unique perspective or insight on a problem/market due to experiences both personal and professional. What makes these founders uniquely positioned to create innovation in the space?
Product: What is the key problem or pain point? Are customers willing to pay for the solution? What’s the early traction and go-to-market strategy? How do you acquire customers?
Profit: What is the path to revenue and profitability? What are the unit economics? What are their capital needs and ability to raise?
Potential: What are the expansion opportunities? Value creation and capture? Market size? Competitive advantage?
Portfolio Alignment: Are we excited about the space and share similar values? Does this fit within our area of expertise?
Diligence (at a high-level) — components of an investment memo
Company (overview of the company we are considering): 1–2 sentence overview of the company, Business Model, Merits (pros), Risk / Additional Considerations (cons), Additional Questions you’d want to present to the CEO of the Company, Recommendation (Pass or 2nd meeting — provide a recommendation summarizing your findings)
Overview of the Market: Market Size (top-down is fine), Trends in the market
Startups, Competitors, and Investors (data largely comes from Pitchbook): Funding in the industry (e.g. Venture Funding for this type of company), Investors (List of the top 5 most active investors in the industry), Competitors (includes an overview of the competitive landscape and differentiating factor for the company you choose), Recent Funding (list of the 3–5 recent fundings in the space being analyzed — company, funding, stage, and notable investors)
Quick Entrepreneur Tips (when choosing the right VC):
- Tell a compelling story — VCs are humans too. The numbers only matter if the why is understood first.
- Money talks, but mentorship matters more.
- It’s all about who you know — get the referral, GPs trust the source. Chingona is unique in that we take cold inbounds because not every has a network of VCs and we want to ensure equal access.
Past, Present, and Future Landscape of VC (the where)
Luckily, in 2011, cloud computing, particularly initiated by Amazon Web Services (AWS), spawned the micro-VC movement, and allowed a massive increase in the number of companies to be created with fewer dollars. This created a new breed of GPs focused on very early-stage capital and lowered the age of the average startup (Source: The Changing Venture Landscape, Mark Suster).
The main differences in VC between 2001 to 2011 (see graphic below) was that in the former entrepreneurs largely had to bootstrap themselves (except in the biggest froth of the dot com bubble) and by 2011 a healthy micro-VC market had emerged. In 2001 companies IPO’d very quickly if they were working, by 2011 IPOs had slowed down to the point that in 2013 Aileen Lee of Cowboy Ventures astutely called billion-dollar outcomes “unicorns.” How little we all knew how ironic that term would become but has nonetheless endured.
Many of the best exits are now routinely 12–14 years from inception because there is just so much private-market capital available at very attractive prices and without public market scrutiny. Because of this there are now very robust secondary markets where founders and seed-funds alike are selling down their ownership long before an ultimate exit.
Post-Pandemic, society is reorienting to a new norm — even before the pandemic itself has been fully tamed. And the loosening of federal monetary policies, particularly in the US, has pushed more dollars into the venture ecosystems at every stage of financing.
VC-backed public listings have eclipsed previous annual records and generated $513.6 billion in exit value YTD for limited partner investors, founders, and employees. While the total value of investments is up from 2019, the total number of deals is down, meaning that investment capital is higher per deal (Source: Pitchbook NVCA VentureMonitor).
While there is more money in early-stage capital and more money per deal, this is not widely distributed. The capital often goes to serial entrepreneurs who have a strong network, while women and minority founding teams get only a fraction of the funds. Therefore, funds like Chingona need to exist — to give equal opportunity to all founders and look after the overlooked and underutilized. Chingona’s Founder, Samara Hernandez, has continually emphasized the mission of Chingona, while also becoming hyper focused on her niche investment areas. With this influx of capital, it’s more important than ever for VCs to double down on their expertise and know their competitive advantage. Samara has added more guard rails (i.e., sourcing criteria, valuation/equity targets, etc.) to ensure Chingona plays within its wheelhouse and adds significant value to its portfolio companies.
As the VC landscape is changing it is important to be prepared, so here is my parting encouragement, tips on best practices, and tools for success.
Parting Encouragement & Next Steps
Dear aspiring venture capitalist — this is a note of encouragement. To your grandmother who doesn’t think you should, the venture capitalist who tells you that you can’t, and your inner hulk who makes you doubt…tell them you can, and you will. I didn’t initially have a successful investment history or a strong VC network, but I did have the hustle and curiosity to make my dream a reality.
Next for Me: After being accepted into Kellogg’s SF Winter Immersion Program, I am off to Silicon Valley to work for Benhamou Global Ventures (BGV). I’ll be focusing on investing in the next generation of cloud-native startups out of BGV’s Fund IV. I’ll also be working on SPAC activity for a later stage transaction (closer to $1–2B).
Practical Tools & Best Practices
· Networking Log: Firm, Person, Referral, Date Reached Out, Date Connected, Status
· VC Log: VC firm, Overview, Investing Stage, Last Fund Amt, Last Fund Close Date, Employee Count, Location, Primary Industries, Website
· Personal Branding: Continue iterating on how you want to be known through reflection and make these qualities well-known through action.
· Follow-up is Key: 80% of networking is consistency of contact; handwritten thank you notes are preferred follow-up.
· RESEARCH Connection Points: OneNote every networking conversation to reference.
· Feedback Sessions: Conduct weekly feedback sessions with boss and set goals at the beginning of the internship to have a benchmark of where you want to be.
· Practice Vulnerability and Understanding: With the prevalence of zoom and working from home, the lines of your personal and professional life will blur. Practice understanding and vulnerability and others will hopefully extend that same grace.
Resources
Books: The Business of Venture Capital By Mahendra Ramsinghani, Venture Deals By Brad Feld, The Entrepreneurial Bible to Venture Capital by Andrew Romans, Mastering the VC Game by Jeff Bussgang, Raising Venture Capital For The Serious Entrepreneur By Demot Berkery, Innovation Blind Spot By Ross Baird, The Startup Playbook by David Kidder, Zero to One by Peter Thiel, The Hard Thing About Hard Things by Ben Horowitz
Newsletters: StrictlyVC, CB Insights, Pitchbook, a16z, John Gannon’s Blog, Union Square Ventures, Fred Wilson’s Blog, Gary’s Guide
Podcasts: a16z Podcast (audio), Acquired (audio), Bootstrapped VC by Backstage Capital (audio), eCorner by Stanford University (audio), Greymatter by Greylock Partners (audio), How I Built This by Guy Raz (audio), MASTERS of SCALE by Reid Hoffman (audio), The Full Ratchet (audio), The Twenty Minute VC (audio), THIS WEEK IN STARTUPS by Jason Calacanis (video)
Templates: Startup Evaluation Guide, The VC Partners Meeting (includes the Startup Snapshot), The Investment Committee Memo
