Chad Byers, Susa Ventures: Starting a VC, Robinhood’s Seed Round, & A WFT Exclusive Announcement!
“Someone was going to build a beautiful, mobile-first fintech product. And we didn’t really know what the right wedge would be. But when Robinhood told us brokerage was the wedge, the lightbulb went off.”
In today’s episode, I sit down with Chad Byers, Co-Founder of Susa Ventures. Chad focuses on investments in marketplaces, fintech, and healthcare. He was named to the Forbes 30 Under 30 for VC in 2015.
Susa Ventures is a sector-agnostic early-stage VC investing in areas like Enterprise Software, Fintech, Logistics, Healthcare, and more. The firm was founded in 2013 by Leo Polovets, Seth Berman, and Chad.
They’ve produced an incredible track record of early-stage investments. In Fintech alone, their portfolio consists of:
Let’s break down some notable moments from the episode:
A Natural Hustler From a Young Age
“As a kid, I collected everything. Baseball cards, Beanie Babies, pins, etc. I realized on eBay that Beanie Babies prices were all over the place. And I met a kid at summer camp from China, and I had this kind of Kelly Blue Book of pricing for Beanie Babies.
I figured out the most expensive one at the time was this purple elephant, but in China, he could get it for really cheap. So one year, I paid him money to bring me back 10 the next summer. And I listed them on eBay! That experience of using the internet to exchange goods…was incredible for me and I had so much fun.
That story ended quite strangely, where I ended up selling each one for $350, which for an 11-year-old was all the money in the entire world. But it ended up being that all of them were fake!”
Chad’s interesting hustles continued in the future…check out the below Tweet thread, which he breaks down further on the show.
Moving to NYC and Cold Emailing His Way Into VC
Eventually, Chad settled into NYC and started doing what he seems to do best — hustling.
With almost no network or value to add, Chad started cold emailing everyone in the small NYC tech ecosystem. He seemed to have a knack for it:
“I cold emailed folks that had a big impact on me. One was David Tisch. David was running TechStars New York at the time, and TechStars was a force of nature for tech in New York and still is…he answered a cold email and I went over to TechStars. I met with him and he gave me not only the lay of the land of NY tech and everyone I needed to know, but he made intros and continued to meet me on a regular basis. I had zero value to give to him, although I tried my hardest!
One of the takeaways is that people in this community are so welcoming. I’ve definitely been a benefactor of that, And I’ve tried to pass that on and do so whenever I get a well-written cold email.”
What made his cold emails so successful?
- Make it really personalized and show that you’ve done your research
- Offer ways to help without expecting anything in return
- Do the work for them. Make it easy to say yes and to make the meeting happen / choose a date
Reminds me of our episode with Anand of CB Insights and Jonathan of Blockdata, which CB Insights bought just a few months after Jonathan sent Anand a cold email.
Susa Ventures and a Wharton Fintech Exclusive Announcement
“We invest $1M to $2 million checks in rounds that are typically between $2M— $4M at the seed stage. Then we aggressively follow on into those businesses as they build. We’ve done this about 130 times since 2013. When we started, we were the first institutional capital in stuff like Robinhood and Flexport and other unicorns.
But we have so many other exciting businesses that are building great technologies with teams that are marching toward big company stage (Stord, Newfront Insurance, Build, Stedi, Viz.ai)…
The new update for us is we’re now raising a larger opportunities fund to invest into our existing best companies.”
For further detail on the announcement, tune in at the ~15:00 mark.
Crucial Advice for Raising Your First Fund
“When you raise a first-time fund, it makes complete sense to me why everyone passes on you. I always joke our [first Susa fund] pitch probably couldn’t have been worse. We had no track record, we were a new team, and we were all living in different cities!”
Chad lays out 4 crucial pieces of advice for starting a new fund:
- Don’t sweat your fund size. It’s more important to get in the business. If you’re in VC for the long haul, Chad discusses how it’s much more important to build a good portfolio and reputation that will set you up for your next fund, rather than solving for the perfect first fund size. A <$10M fund with amazing investments will pay dividends. Be able to show LPs that you have access to great companies, can win allocation in those companies, and can work so well with founders that they’ll be references and help you in the next deal.
- Frontload fees. He argues you’ll need that 2% management fee much more in your first 2–3 years for marketing, administration, etc. It’s better to jack the fee up to 3% in the first years, then steeply trickle down that figure as your fund progresses. Ideally, you’ll also have a second fund by year 3 or 4 that will help you budget.
- “Get into great, name-brand deals, which is more important than having some elaborate portfolio construction or discipline. When you go to raise a second fund, or you’re trying to build credibility as a fund manager, getting in a Robinhood or Flexport was far more valuable to us. Just the fact that we were even associated with a great company, right? It was worth more than anything around being an actual VC Portfolio Manager. By the way, as you build your firm and you get to your third and fourth fund, actually everything LPs care about switches to how you’re thinking about portfolio construction and risk management. How are you thinking about liquidity and the number of portfolio companies and the vintages and your deployment cycles and all these types of things!”
- “Network with as many great investors as you can…Susa is of the opinion that you should have your own conviction, your own opinions, but signal matters. And this is in the data. If you look at the performance of the top funds, if you’re co-investing with them, on average, you’re probably going to perform slightly better. Care about who you’re investing with, care about the group of people around the table…Develop your own conviction, but we leaned on some amazing partners who were invaluable to us. And it helped us get into great companies early that at the time, we may not have said yes to!”
Fintech Trends Chad Has His Eyes On
There are many, but specific ones he dives into:
- Fintech outside of the US (they just invested in Okra, the Plaid for Africa)
- Infrastructure APIs (they just invested in Railz)
- Alt assets like NFTs, sports cards, and collectibles (shoutout former Wharton Fintech guests Otis and Michael Sidgmore)
- A “Mint 2.0” concept that integrates the many many finance apps people are aggregating. Think Personal Capital but better
- Insurtech (a slept on sub-vertical)
This episode is loaded, loaded, loaded with great checklists, bits of information, anecdotes, and more. Out of the 75+ episodes I’ve done, this will be one of the first ones I recommend.
We dive much deeper into the above sections and also discuss:
- His seed investment in Robinhood — the serendipitous way it came about, how he feels about the Gamestop fiasco, and the road ahead for the company as it preps for IPO
- 4 crucial bits of advice for becoming an angel investor
- Susa’s founding story
- And a fun rapid-fire round including the best skiing in the world, the best advice for founders, and more!
Some quotes have been lightly edited for brevity or clarity.
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Ryan Zauk is a recent graduate of the MBA program at The Wharton School, where he led the Wharton FinTech Podcast. He recently worked with the US International Development Finance Corp looking at technology impact investments in developing markets. He will be joining Morgan Stanley in Menlo Park after graduation.