Advice for Student Founders, Breaking into VC, and Pitching a Startup with Sergio Monsalve | Remote Students

Members of the Remote Students Community had the opportunity to meet Sergio Monsalve this week and ask him questions about his experience as a VC and angel investor. Apply here to join our invite-only community and meet our amazing lineup of guest speakers, including people like Sergio!

Sergio Monsalve is a venture capital investor focused on the future of learning and work. He started his venture career as a Principal and Partner at a multi Billion VC fund, Norwest Venture Partners for 13 years and is now an active angel investor and advisor to early-stage entrepreneurs. Sergio is on the board and/or an investor of Udemy ($2Bn+), Adaptive Insights (Sold to Workday for $1.6Bn), and Kahoot! ($380M) among others. He is also the co-founder of Stanford’s Entrepreneur-In-Residence Program at the Graduate School of Education, where he teaches EDUC 295 as a visiting professor. Sergio has held entrepreneurship and leadership roles at eBay/Paypal, Portal Software (IPO during tenure), as well as various venture-backed startups he helped launch as a founder or founding executive. He holds a bachelor of science in Management Science and Engineering from Stanford and a Masters of Business Administration from Harvard. Sergio is a native of Mexico and an advocate for Latinx community education in the United States.

How do I get in front of deals and identify who to invest in?

In order to build a pipeline of companies to invest in, I think in the “forest first, then trees” idea, where I am looking at the big picture and future of an industry before narrowing down on specific companies. So, as an investor, I think about what kinds of new areas and themes will emerge to be rich places to invest in, and then try to make myself an expert by looking at as many companies as possible within that area.

When do you decide to invest in a startup?

The question that we ask as investors is, “Why now?”. Why should this startup exist now, in comparison to 10, 20, or 30 years ago? For example, I was part of eBay, which was the first successful marketplace after the creation of the internet. In this case, an easy answer to the question of ‘why now?’ would be that there was simply no scope or capability for an online marketplace before the creation of the internet. Norwest was also an investor in Uber and Spotify, and for that, an easy question to the ‘why now?’ is that, previously, we didn’t have the frameworks of mobile computing to put in place services like these. In this case, the megadrivers were the rapid advancements in technology that allowed new services to be made. When looking at megadrivers for education, the biggest factors are the emergence of mobile, social, and AI. I apply what I know about these factors to understand the future of education and figure how we can make huge impacts through application of these three things.

How should student founders approach angel investors? How do they determine how much to ask for and how to rationalize it?

1. The only real difference between a student entrepreneur and entrepreneur is that the student is pursuing their college degree and has to balance startup and college work. Because of this, the question that I would ask as an investor is, “What is the level of commitment that you have to the startup in college and after college?” Oftentimes, the student will be working on the startup for a project, or have plans to work a regular job at a big company after school, in which case I would be unconvinced that they wouldn’t just abandon the startup after I invested in it. So, the most important thing during an interview is to explain honestly what your plans are to commit to the startup during and after school; if you’re really committed to the company, the investor will feel more comfortable knowing that someone is taking care of and using the funds they are offering.

2. The second tip that I have is to be very introspective and know what you are good at and what you are missing in the team. Another quirk about being a student entrepreneur is that you just don’t have that many years of experience, so you want to make sure you know how to open your circle and hire people that are experts at what they do. Eventually, you will need a team of specialized people that are amazing at their job, and you need to make sure you hire those people and that they are complementary to the skills you offer.

3. Personally, I spend a lot of time looking for entrepreneurs, but entrepreneurs also spend a lot of time looking for me. For example, I am super involved in the education sector, and I am looking for founders with startups in that area. If someone comes up to me with a medical startup, that’s a clear indicator that they didn’t do their homework and an automatic rejection from me. It’s really important to put in that extra work and find investors involved and related to the area you are working in.

4. Lastly, when approaching investors, I find that it’s best to reach out through a common connection, referral, networking, etc. Having someone credible to the investor introduce you to them creates a great base for continuing to talk to the investor and pitching your idea. The key factor to this is being an active and social networker.

What are some of the points that define a successful startup?

A lot of times it is also luck -being in the right place at the right time to launch or fund a company. The greatest example of this is Zoom: they had launched and had been public for a while, but now, because of COVID-19, they’ve experienced huge growth.

On top of that, the most successful companies are the ones that know how to scale smartly while mitigating deadly risks as they get further and further out in their development. However, it’s also important to take into account the things you cannot mitigate: you can’t create a market if there’s no market out there, and you can’t change a founder if the founder is not amazing. That’s why I keep going back to how if you have the right people and a sizable market, it will increase your rate of success.

How can I break into the VC space as a new grad?

There are two ways to successfully break into the VC space.

1. Break into it directly, by getting some sort of degree that will help you understand analytics, product, and all surrounding technicalities. Then, you can apply to a VC as an associate or a scout. Being a scout is really helpful because you meet and find out about a lot of different startups, and the fastest way to any VC’s heart is to give them good deal opportunities. Having a large flow of high-quality companies coming to you and being embedded in the ecosystem of entrepreneurs is invaluable experience to have when breaking into VC this way.

2. The more indirect path is where you are working in a startup and learning what an entrepreneur actually does by being close to them and being surrounded by that environment. As you work at the startup, ideally, you will get a good eye to pick companies that are going to be successful. If you do happen to pick/work at a company that makes it a little further down the line, or have an experience where maybe it didn’t work so well, you will still gain two or three experiences of having been an operator. As long as you’ve done a good job networking and building a network at that company, it’ll help you branch out and open up the VC path.

Watch the whole recording on YouTube to work through 2 case studies, understand exactly how to pitch a startup using Sergio’s methodology, and predict how marketplaces will look in the future and invest accordingly.

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