This is what a path to VC looks like
Welcome to the inaugural edition of our new limited series, Meet the Crew, where we highlight Backstage Capital crew members’ journeys into venture capital and shed light on what drives them.
Chacho Valadez, an apprentice-turned-Principal at Backstage Capital, didn’t have the most traditional path into venture capital. But his “hungry, not thirsty” mindset, a phrase coined by Backstage Capital founder Arlan Hamilton, helped get him to where he is today.
Growing up in rural Wisconsin, Valadez’s first job was washing windows for his cousin’s window cleaning company. In his free time, he would listen to podcasts and soak up as much information as he could about tech investing, he told Backstage Capital’s Green Room.
It wasn’t until 2015, when Stanford released its State of Latino Entrepreneurship report, that Valadez began to potentially think about venture capital as a career path. The report, which highlighted the opportunity gaps in Latinx-owned businesses, made Valadez want to help increase the average amount of revenue that Latinx entrepreneurs generate, compared to non-Latinx entrepreneurs, when they launch companies, he said.
“And so that really sort of led me down the path of learning more and more about venture investing,” he said. “And that’s how I really came to learn about it firsthand.”
Below is an edited and condensed transcript of Green Room’s conversation with Valadez detailing his journey to Backstage Capital, what he looks for in a startup before investing, why the Great Resignation excites him and his North Star.
Right place, right time
I remember I was getting ready for work one day at a retail Sprint store. I had just finished listening to a podcast of this VC and I honestly felt really discouraged. His story didn’t map to mine. I had no parallel. I think the guy said it was super easy to raise a fund and all you do is go out, create a private placement memorandum, talk to limited partners and then boom, you have a fund. It was as ridiculous as it sounds. And I remember them talking about their backgrounds and how one of them studied college math when they were 12 years old. And I was like, well, that’s not me. I just really felt out of my league, like there’s no way I can do this.
I prayed about it and said, if VC is what I really need to do, I need a sign from God. Later that day, I was helping this guy with his phone at the Sprint store. He ended up asking me what I wanted to do with my life. I said I wanted to get into venture capital. He then told me one of his best friend’s owns a private equity firm and that I should talk to him. Literally the next day, I went to the University of Michigan basketball game with this guy and his best friend who owned a PE firm in Michigan. I don’t even remember their names but that was a sign. I saw investing as a calling.
Through a conversation with my friend who was in business school and the experience with the private equity guy, I just made a mental switch to just go for it. Shortly after that happened, that’s when I met Arlan, the founder at Backstage Capital. I wasn’t even necessarily looking for a job but when the opportunity presented itself to join the team, I was elated. It was kind of the right place, right time sort of scenario. I was curious and learning. And I had that hungry but not thirsty vibe for Arlan’s vision and work.
Chris Sacca also has this phrase where it’s like, “it may be lucky but it’s not an accident.” And that’s kind of how I feel about getting into venture capital.
Picking the right startups: He’s not interested in an “Uber for toothpaste”
I look for really audacious goals from the founder and strong visions for what they want to build. So, not just Uber for toothpaste or something silly. What I’m really looking for, since we’re investing in pre-seed and seed, is understanding how founders are thinking about the problem they’re trying to solve, how much they know about the problem and their vision for the future for what they’re trying to build. When I’m looking for companies, it really does boil down to the founder and the founding team. And there’s not a whole lot of data to go off of. Of course, there’s the typical market size, market timing, and overall opportunity but businesses ebb and flow, and business models change. Companies pivot but what really stays tried and true is the founding team and the founders. So I put a lot of emphasis on that. It’s more of an art than a science.
I think the first investments I led or co-led were in Beyond, Suma Wealth, and Shop Latinx, all Latinx founders. But we very much invest as a team. We don’t make investments in silos. When I think about Backstage and my investments and the investments we make as a firm, we’re making investments as a team and on behalf of Backstage as a firm. It’s not necessarily a way for me to have another notch on my belt as an investor.
Putting people before profits
The Great Resignation is the most exciting thing happening in the market right now. COVID has really taught us to take a look at what we truly value. There’s a lot of people who were put in difficult work situations and once they got out of those due to COVID, they realized they didn’t need to take it anymore. Some see that shift as a negative, but I think it’s a positive because people are starting to live more fulfilled lives.
As a result of that, I think there’s more conversation around creating great company cultures and how investing in your people and caring about your workers leads to great business results. When I think about people living fulfilled lives and founders thinking about company culture from the very earliest days, it really excites me. If I look at my entire life and think about the relationships I’ve had, people have been at the center of that. My North Star really does just boil down to creating relationships with folks. I don’t think about legacy but if I want to be known for anything, like if heaven forbid something happened to me, it would be a kind and empathetic person, sort of like the people’s VC.
Thanks for tuning in to the first edition of Meet the Crew. Be sure to check out Chacho’s podcast, Running In Public. Be on the lookout for the next installment of Meet the Crew later this month.
