Part 2, My Path to Venture Capital: Austin Clements of TenOneTen
In Part 2 of our talk with Austin Clements of TenOneTen, he shares his perspective on working with startups and how VC will evolve in the coming years. TenOneTen led Pluot’s seed round, and Austin is one of our favorite people to talk to about how new technologies are changing the workplace.
- In Part 1 of our conversation, Austin described what led him to venture capital, including his experiences at Morehouse College and NYU Stern.
- Below he talks about his daily work at TenOneTen, and also trends in venture investing.
You invest pretty broadly at TenOneTen, but are there certain kinds of investments that you personally get most excited about?
I should first explain a little bit about TenOneTen Ventures. We’re an LA-based $18 million fund that invests in early stage technology companies. Typically when companies first come to us, they’re just a few people in the early stages of developing their business.
We’re open to investing in most industries, but what excites me most is when a team uses data in a unique way to rethink an industry. We believe data is the raw material of the future. So I love seeing companies that are creating unique data sets and using them as a core component of their product development and strategic thinking.
I also get excited by founders that have clarity around what they’re trying to accomplish and how they plan to accomplish it. I recognize that even the clearest visions evolve, but there’s a big difference between an adjustment to a plan and a shift of focus to the next seemingly good opportunity because you don’t have a plan.
Could you describe what you do on a typical day?
Generally, I spend about 50% of my time evaluating new investment opportunities and 25% working with companies where we’ve already invested. The rest of my time is some combination of relationship building, fund operations, and reading/learning.
On a typical day I look at pitch decks and take meetings with entrepreneurs — sometimes face-to-face, sometimes over the phone, sometimes over Pluot. Whichever is most convenient. In addition to having those conversations, I also do a lot of independent research to get up to speed on industries I previously knew nothing about. Genetic diagnostics? Satellite imagery for agriculture? I need to be able to ask directed questions that can help me evaluate the investment opportunity.
One of the things about VC is that your network is your most valuable asset. Typically if it’s an industry that I’m totally unfamiliar with, I’ll have somebody I can reach out to so I can get at least an initial opinion about the validity of the entrepreneur’s claims. This is one of the reasons why allocating time to relationship building is very important.
Time spent working with our portfolio companies is equally fun and challenging. It’s almost like being a consultant, except you have a vested interest in the outcome. I can’t send founders high-level plans that won’t get implemented. I have to deliver work that is immediately useful or suggestions that are actionable. Working with our companies is also a constant reminder of just how hard running a venture-backed startup really is, irrespective of the industry or geography.
Even though you and your partners are based in LA, you invest in companies all over the country. Do you see differences in how companies in the various “startup hubs” operate, or is there a national shared startup culture these days?
Certainly. I think each of the startup hubs have their own strengths.
Silicon Valley I don’t think will ever be replicated. In the Bay Area, startups are such a part of the culture. As a founder, if you’re running into any particular challenge with your company, you’re inevitably one degree away from someone who’s dealt with a similar problem and can advise you. That means the cycle for creating, learning, and revising most aspects of your business are a lot shorter.
One of Los Angeles’ strengths is that companies have proven a bit more when they go out to raise venture capital. They will often have a viable, sustainable business model and a path to profitability that is understandable. Couple that with the fact that LA graduates tons of engineers, it’s not a surprise that the ecosystem is garnering a lot of attention from VCs across the country.
One of New York City’s strengths is that they have so many huge industries based there, and they partner with industries very well. If you’re doing something in fashion, you can find everybody there — same with media, and finance as well.
There’s some benefit to being in an established startup hub. Still, for people willing to do the work, you can find diamonds in the rough in places you would never have thought. For example, we’ve invested in Descartes Labs, which is in New Mexico, and Cofactor Genomics based in Missouri.
Not long ago, it was fairly unusual for investors to work with companies farther away from them than across town. That’s changed a lot, lately. Do you find it different to work with companies that are “down the street” from you versus companies in a different city?
There’s definitely a difference, but I think that’s changing. When you have face-to-face meetings you’re able to talk to someone and work through problems quickly. We spend most of our time in LA and visit the Bay Area frequently, because that’s where many of our companies are and face-to-face time is important for us. A lot of communication is body language and subtlety. In person, I can see how upset someone is by a particular issue or that I might need to explain further. If something really isn’t a big deal I can tell that as well. That extra information is lost when you aren’t able to see someone.
The reason why I say it’s changing is now we’re seeing platforms that drastically improve the communication between people working together. Slack is a great example that has built a massive business addressing team communication. Pluot also is an example of something that’s growing out of this need; now I can easily reclaim that face-to-face time.
You and David Waxman have thought a lot about “evolution of business” — how technology is changing both what we work on and how we work. What are your most interesting takeaways from the last couple of years of your thinking about the evolution of business?
I think it’s about efficiency, which can come in various forms. We just talked about communications efficiency, and there have been game-changing products that really impact how work communication is done. Think back to Blackberry in its heyday. It was the beginning of people using email on mobile regularly, and typing and communicating on the go, outside the workplace.
Fast forward to today, our firm sees a new startup every single day that offers an impressive solution to increasing efficiency for a particular type of business. Much of it is driven by the effective use of data and the application of machine learning. Computers are now able to extract new insights from volumes of data a human could not possibly digest, then apply those insights to make real world decisions. Over the last decade this data has been commonly used in a couple of industries like finance and digital advertising, but we expect to see almost every industry transformed by machine learning and artificial intelligence in the next several years.
Another aspect of how businesses are evolving is by looking at how labor is evolving. “Sharing economy” companies like Uber blur the line of producers and consumers. But more recently I’ve become excited by businesses who are challenging all of our notions of what it means to work for a company. Hiring is becoming ever more efficient, and knowledge transfer more fluid. Workers will seamlessly find new opportunities where their skills are valued, while employers will optimize for efficient use of human capital as needed. My dad’s generation worked for the same company for 30 years; I wouldn’t be surprised if my son’s generation [he’s now a toddler] never works for the same company for more than 3.
Keeping to the future of work theme, how do you see venture investing changing over the next ten years?
It’ll become more democratized. More micro VC funds, sub $100 million funds, will be established. It was previously thought the economics wouldn’t work out on a fund that “small,” but now we see lots of these investors are doing quite well. Even after an inevitable market correction and brief consolidation period, I expect the overarching trend will continue. There are now fewer barriers to entry, and funds can efficiently deploy smaller amounts of capital than ever before.
I imagine that the net impact of more investors entering the venture space is a positive thing. It means more diverse perspectives will enter the space. Minority groups that are trying to build businesses and are being overlooked today will soon be able to find more like-minded investors. It will create an ecosystem where new companies emerge with exciting solutions to specific problems that would not have otherwise been addressed.
Final thoughts…
I’m blessed to be working in such an intellectually stimulating environment around ambitious people whose work is not only meaningful to them personally, but often impactful globally. I’m also lucky to be working at a fund with a really supportive team of people who also happen to be some of the smartest people I’ve ever met.
There’s a quote that has stuck with me since around the time I started my first business in high school. To this day it serves as a simple personal framework for decision-making, big and small, and has guided a lot of my career decisions.
From Khalil Gibran, “Progress lies not in enhancing what is, but in advancing toward what will be.”
In other words, don’t consider it progress if you’re merely improving upon the past or current state of affairs. These changes are good, but incremental, and ultimately less important in the long run. History has shown that true progress is when you focus on a future state and start taking steps, however small, toward getting there.
Thanks for reading. Here’s the previous installment of our talk with Austin. Follow us here on Medium, or @pluotco on Twitter, for more interviews with VCs, founding teams, and others in the startup ecosystem.
Follow Austin and TenOneTen on Twitter.
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