7 Gains from My VC Fellowship Journey at f7 Ventures — Kellogg MBA Venture Lab
As someone fascinated by startups and entrepreneurship, venture capital (VC) always seemed like an enigma to me and I was always curious how VCs assess startups. Fortunately, Kellogg Venture Lab offered me just that opportunity. This quarter-long internship is designed for Kellogg students to immerse themselves in the world of Venture Capital, and I was thrilled to join f7 Ventures, an early-stage venture fund based in San Francisco, as the VC fellow over the past winter.
Originating as an angel fund by seven distinguished female leaders from Facebook (now Meta), f7 Ventures, under the leadership of Kelly Graziadei and Joanna Lee Shevelenko, focuses on investing in the top operators and leaders of today and tomorrow in pre-seed and seed stage now.
During my tenure as a VC Fellow at f7, my responsibilities were akin to those of Investment Associates. These included screening and evaluating deals, as well as attending meetings with founders. We conducted preliminary due diligence before meeting founders to gain an initial understanding. Subsequently, as deals progressed, we engaged in comprehensive analysis and diligence activities such as market research, competitive analysis, reviewing data rooms, and assessing financials.
While a quarter-long fellowship didn’t transform me into a venture capitalist, it significantly broadened my understanding of the VC industry, prompting me to reflect on entrepreneurship and the essentials of building a successful startup. Here are the insights and reflections I gained from this enlightening journey.
1. VC Seeks Home Runs Over Base Hits
VC strives for home runs, not just base hits. VCs aim for investments that can yield big returns. In the seed stage, VCs embrace significant risks, with only a fraction of startups advancing to the next round. Imagine being the cleanup hitter for the New York Yankees, where your goal is to hit a home run and drive in your teammates (i.e., other startups in your portfolio) to secure a positive return for the entire fund. For VCs, every investment is a swing for the fences. Missing is part of the game, but a single grand slam can offset multiple misses.
This concept was clear to me theoretically before beginning my fellowship, but hands-on experience underscored its critical importance in VC. We’ve encountered many exceptional founders with robust businesses. Yet, upon assessment, some growth projections fall short, either due to non-scalable solutions or markets too small to support significant expansion. While we recognize these as good companies with capable leaders, their potential for returns just doesn’t meet our threshold for a grand slam. Consequently, we must decline these opportunities. The hard truth is that not every business is suited for VC backing.
This realization prompted me to ponder my entrepreneurial path and the importance of aligning early decisions with the potential for VC backing. Certain industries and business models are indeed more suited for an initial capital boost to fuel rapid growth, showcasing the unique advantage of VC.
Yet, this brings to mind the words of Jason Fried, founder & CEO at 37signals, whom I greatly admire. He once noted, “You don’t need to be a tech unicorn to be successful. A profitable, sustainable business that serves its customers well is a tremendous achievement.” As entrepreneurs, we have various paths to success, including venture capital support. However, discovering your passion and selecting the right arena for your endeavors is crucial.
2. The Myth of Youth in Entrepreneurial Success
The common image of the young tech entrepreneur is more myth than reality. Research shows that the average age of high-tech startup founders is 43, with unicorn founders averaging 45 in the US. This challenges the stereotype of the youthful billionaire. Eric Yuan, the founder of Zoom, serves as a prime example. Eric launched Zoom at 41, leveraging over 14 years of experience at Webex/Cisco. His deep understanding of the industry’s needs and gaps led to the creation of Zoom, underscoring the value of domain knowledge and execution experience in entrepreneurial success.
This insight aligns with what I’ve observed at f7 ventures: experienced entrepreneurs or those moving from operator to founder roles have certain edges to secure funding. I also found that younger entrepreneurs, particularly recent graduates or students, often lean towards consumer-facing, marketplace, and social media ideas, likely influenced by their personal experiences. The lack of deep industry knowledge and experience could potentially be the reason that makes it difficult for them to identify opportunities in the B2B sector.
However, this doesn’t mean young entrepreneurs can’t attract venture capital interest. Exceptionally talented young founders often defy the odds. For example, Mark Zuckerberg was only 19 when he founded Facebook, while John and Patrick Collison were 19 and 21 when they started Stripe. Despite their limited experience, they compensated by demonstrating bold ideas, strong product traction, and presenting well-thought-out plans that addressed concerns about their youth.
3. Good Pitch Decks Are Concise and Smooth as Slicing Through Butter
Successful fundraising pitches are sharply focused, weaving a compelling narrative effortlessly. After reviewing numerous fundraising decks, I’ve observed that the best ones are not overloaded with text. Instead, they clearly define the problem, propose a solution, outline the vision for success, and detail a strategic plan, all while maintaining a fluid narrative.
This aligns with the “Pot of Gold” fundraising strategy, a concept I absorbed in the New Venture Development Class at Kellogg, taught by Troy Henikoff, Managing Director at MATH Venture Partners and Techstars. Professor Henikoff stressed that securing venture capital requires entrepreneurs to show just two things — what success looks like (the “pot of gold”) and a low-risk path to getting that pot of gold.
Maintain brevity in outlining the problem and solution, but focus on conveying to VCs the urgency of “why now” and “why you” to tackle this problem. Presenting a clear execution plan that paves a convincing path to success to de-risk for VC is crucial in winning their money
4. Idea Matters, But Execution Excellence is Key to Success
A groundbreaking idea is crucial for startup success, but winning VC funding requires more. A good idea is usually popular. A prime example is the simultaneous rise of food delivery apps like DoorDash, UberEats, Deliveroo, Foodpanda, and more in the early 2010s, driven by a spike in smartphone usage. This wasn’t a mere coincidence but a response to a global technological shift.
At f7, we believe strong execution is crucial for a company’s success. This is why we love supporting founders who are experienced operators and focus our investments on the top 1% operators. A strong operator can be identified through solid experience and a thoughtful execution plan. I have been amazed by the founders I’ve met who presented detailed financial projections, clear GTM (Go-To-Market) memos, and solid milestones for each step of their journey. Some even go the extra mile by regularly updating their (potential) investors through newsletters. These efforts not only demonstrate operational prowess but also reduce risk for VCs, significantly increasing the founders’ chances of securing investment from VC.
5. Early Stage Startup Valuation is More Art than Science
Through my experience with startup valuations and analyzing returns for funds, I’ve come to understand that valuing early-stage startups is more an art than a science. Often, you’ll find yourself without the complete set of data needed for a decision, compelling VC to rely more on qualitative analysis for decision-making.
This qualitative analysis process reminds me greatly of the OUTSIDE-IMPACTS Framework I encountered in an Entrepreneurial Finance and Venture Capital class at Kellogg. While not every criterion from this framework is always applicable, its principles have been incredibly useful in real-world evaluations. Questions such as, “Is the timing right for this idea?” “Is there an indication of market pull?” and “Does the founder live and breathe this problem?” are crucial. It’s fascinating to apply theories and case studies from class to actual decision-making in the venture capital arena. It’s equally enlightening to observe how vice presidents (VPs) and general partners (GPs) at f7 assess teams, offering perspectives that may differ from my own. I’ve learned a great deal by seeing things through their lens.
6. Time Kills All Deals — Finding a Proxy and Making the Bet
The adage “Time kills all deals” resonates deeply in early-stage venture capital, where speed is essential for startups to secure funding and extend their runway. Good deals are not only hot but fiercely competitive. With VCs reviewing thousands of deals (if not more) annually and conducting swift due diligence, the ability to quickly assess the potential for success and risk is indispensable.
At f7, our approach is to remain agile and responsive. We’re known for our rapid turnaround times for founders, often reaching investment decisions and completing due diligence within days, and scheduling multiple meetings with founders in just one to two weeks.
A personal anecdote underscores the value of efficient time management. When about to dive into a data room review, Francisca once recommended setting a time limit to focus on key insights. This constraint proved invaluable, preventing the all-too-common pitfall of endless information searching, which can derail the process. By applying a time constraint, I was able to concentrate on the most crucial information, allowing us to make informed decisions quickly.
7. Adding Value and Standing Out as a VC Fund
The relationship between founders and VCs is akin to dating: it’s essential for both sides to enjoy and benefit from their interactions, given the potential for a long-term partnership. It’s often the case that top founders choose their VCs, not the other way around. Therefore, it’s crucial for VCs to find their unique strengths and the value they bring to founders.
VCs can add value in numerous ways, such as facilitating additional investments, aiding in talent acquisition, offering deep industry insights and connections (for instance, sector-specific VC), or boosting a founder’s profile (like being backed by YC). At f7 Ventures, what sets us apart is our deep operational experience and extensive network of industry operators. f7’s General Partners, Kelly and Joanna, have transitioned from operators to investors, offering insightful guidance and valuable connections. This resonates deeply with founders who have embarked on a similar path from operator to entrepreneur, positioning us as a preferred partner for those in search of experienced and well-connected allies. It’s in this context that the importance of a strong founder-investor fit becomes clear to me.
One additional thing that truly impresses me is the strength of our inbound pipeline. The operator network not only draws high-quality deals but also enables us to engage with exceptional founders and operators, showcasing a distinctive aspect of f7 that sets us apart — a benefit I would never have thought of before.
Last but not Least — Tremendous Respect for the Founders
During my tenure at f7 Ventures, I had the opportunity to meet numerous founders whose passion and energy were deeply embedded in ventures that mirrored their missions, and many of these founders came from underrepresented groups or were immigrants. What excites me about venture capital is the ability to empower these incredible individuals to realize their dreams and leverage technology to make society a better place.
In the meanwhile, I hold immense respect for Francisca, Joanna, and Kelly for demonstrating the essence of a commendable VC. Their approach towards every founder — treating them with dignity and maintaining humility in every interaction, followed by a considerate email, even in cases of rejection — was exemplary. They have always offered constructive feedback when needed and strived for transparency with founders, sincerely wishing them success. The journey of building a venture and fundraising is undeniably challenging, filled with hurdles and rejections, but the compassion and humanity displayed at f7 were profound lessons for me.
Thank you again to Francisca, Joanna, and Kelly for giving me this VC fellowship opportunity. It’s been an exhilarating journey filled with invaluable lessons. A special shoutout to Anais and Rahul, my fellow friends from Kellogg! This journey wouldn’t have been as enjoyable or smooth without you two. I hope our paths cross again soon! :)
