Sydney Thomas @ Precursor Ventures, Peter Boyce @ General Catalyst, Rob Pegoraro @ Freelance, and Allison Williams @ Newark Venture Partners
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Startup Grad School Stage
Ascent Conference 2020
Allison Williams [00:00:00] Eco-System and what we say it MBP is. Thank you, Newark, for allowing us to kind of by being outside of New York, it allows us to think about investing differently. And we we make our own rules. And a role that we’ve had since the day the firm was founded is that there are great entrepreneurs everywhere. You don’t have to be in one of the hub cities or to be a really excellent founder. So from the beginning of our fund, we really have had a strong outbound marketing effort. We do a lot of reach out to founders. A lot of that’s through email, cold calling. And sometimes it is when we find a great entrepreneur actually educating them on the venture ecosystem and showing to them, showing them the opportunity. And many times we were the first VC capital into the company and we’re really proud of that. And we have a very are we invest in firms all over the country, all over the world. We want to be one of the top seed funds in the world. And we know we need to invest in founders everywhere in order to do that. And some of our best investments are in places that are really considered out of the ordinary. And it’s proven our original thesis is true, that there are great founders of the world.
Rob Pegoraro [00:01:24] I grew up in New Jersey, I am not unfamiliar with the notion that New Yorkers regard the Hudson River as a very, very wide body of water. It’s an ocean.
Allison Williams [00:01:33] Yeah.
Rob Pegoraro [00:01:34] Peter or Sydney. Who would like to.
Peter Boyce [00:01:39] I’ll hop in for a minute, you know, we our firm is founded in Boston, you know, and so, you know, kind of that we can talk about that kind of incredible ecosystem of founder talent and how that’s evolved over the last few years. So I think it’s kind of been in our fund’s DNA, that part of why we have multiple offices. We’ve been doing partnership meetings over Zoome, you know what I mean, for a very long time. Right. And so so I think that’s one. So it’s, I think structural to our firm. And I think the second piece is a number of our portfolio companies have had either satellite offices in addition to their existing headquarters, wherever they may be based, and also just fully distributed teams. And so, you know, we’re investors and companies like get lab and remote dotcom and others kind of prior to the last six, seven months. And so I think it’s been interesting and exciting to hear the way founders of basically kind of been invited into this notion that, oh, by the way, now that we are not thinking about geographic barriers in the way that we were, we can actually make that engineering higher in Bogota, Colombia. We can make that higher in Austin, Texas. We can put someone into business and in Charleston, South Carolina. And so I think that the rise in the merits of distributed teams, I think it’s also something that’s just been kind of amplified in this moment, but it was something that was preexisting. So it’s really just accelerated.
Sydney Thomas [00:03:01] I would I think the thing I have to add is, you know, we had been investing in companies that we thought we haven’t met before. I think, though, that where we’re still finding it difficult is, you know, I just got off a call with somebody in Minneapolis yesterday whose company I really love, but we had no luck, no type of connection to him. And so we didn’t have any other founders who were in Minneapolis. We didn’t have any other investors who we knew who are in Minneapolis. We I’ve only been to Minneapolis once. And so I think like four founders who are building in places that are so far removed from anybody at a firm. I do think that’s still a structural challenge because for us, what we want to make sure to is that once we invest in the company, that because we don’t do traditional background checks, we think those are kind of just what’s the point, people? It doesn’t really show us that much, frankly. And so what we were what we’re still trying to figure out is how do we make investments sight unseen with people who have that removed from us? I mean, we’ve made investments in other founders who we’ve never met, but who may be a founder in our portfolio or maybe an investor who we know knew. And so that kind of like bird, I guess, like. Two to three people removed, but never like five, six person that lived in that, I think is where where the chasm is that we’re still looking at. We’re still trying to figure out how we how we close it.
Rob Pegoraro [00:04:38] If it makes you feel any better, I have not been in Minneapolis either. I do feel bad about that. Any city that has given the world, both Prince and the Replacements, clearly some place I need to check out at some point. So I’ll try to get to it. Twin Cities next question I have may upset my Bay Area in-laws a little bit, but what is actually so bad? They they usually have pleasant weather. The skies have been kind of orange lately. It’s a nice place to live. Bagel supply is not quite as good here. What are the competitive disadvantages that we think other cities can take advantage of because they have something different to offer? US one on one certainly comes to mind. I hate that highway.
Peter Boyce [00:05:22] Totally. You know, look, I think there are two things that I think are interesting, maybe compliments to the way folks are thinking about company building right now. And I think I think it’s, you know, ends up being anchored in just the ways in which, you know, personal and professional, everything’s kind of gotten blended. I think one is the you know, is the cost of living, you know? I mean, like, I think there are some toggles on that front or just, you know, the set of lifestyle factors that I think everyone is trying to integrate right now, whether that’s space in your home to help educate your child, you know, so that’s the priorities that you can get that done. I mean, like in Wyoming or wherever you want to go as opposed to where you may have been before. So I think that’s one which is just the cost of living calculus, which I think is really important. And then I think second is, you know, there is this notion around, I think, proximity and access to diversity in industries that you want to have a relationship with that I think are interesting right now. Right. And so, look, I think that’s one of the things that’s been so powerful, the company building in New York, which is you’ve got you know, if you were interested in building at these intersections, which I think, you know, so many great technology companies do, whether it’s education, fashion, financial services, places like New York and kind of offering you that talent, offer you those commercial relationships. And so I think in areas where, you know, beyond just beyond kind of engineering talent, beyond software, but how that remix intersects with some of these other industries I think is getting kind of, you know, kind of uncoupled right now, becoming much more available. And I think that’s one of the things that’s gotten us always excited about as New York is an ecosystem because you have so many of those industries here.
Rob Pegoraro [00:07:05] We want to make a case for particular cities, I know Alison does, as where startup types and investors should be taking a look at where maybe they had overlooked before.
Sydney Thomas [00:07:22] I think, you know. I’ve gotten really excited about Austin. I know that’s actually not actually even like weird to say anymore, actually think Austin is becoming one of those other ecosystems that is just as built, just as built as the, I’d say, some of the ecosystems outside of San Francisco. So like in Oakland, I would say that Austin feels like Oakland to me. I also obviously keep for Oakland. I think it’s just a really amazing city with a lot of talent. And, you know, we’ve also done investments in Baltimore, we’ve done investments in Florida. And so I think what’s been so interesting to see is how different I think ecosystems, particularly under the pandemic kind of to Peter’s point, because they’re surrounded by different industries, they are sometimes getting some really exciting tailwinds from kind of like this all e-learning stuff. So the investment, for example, in Florida was a is a tech company and they are just booming right now.
Rob Pegoraro [00:08:39] Where In Florida.
Sydney Thomas [00:08:40] They are in oh, my gosh. It’s not it’s not like a Miami or Fort Lauderdale. So that’s why I can’t.
Rob Pegoraro [00:08:46] Orlando?
Sydney Thomas [00:08:47] Its not even Orlando. It’s a tiny town. But there’s but what they’ve been able to do is take advantage of because they’re kind of a small fish and also a small pond. But then Florida itself is a larger pond. They’re the only folks within maybe 50 hundred miles from these huge universities that are looking for support with their e-learning programs. And so I think that has been really interesting to see there two.
Allison Williams [00:09:18] So my answer to this question is a bit obvious, I think, but, you know, Newark, New Jersey is an amazing city and we feel that it offers many advantages to our founders. I mean, for one, cost of living is is much better than what you find in Manhattan, where else? Only an 18 minute train ride from New York City. And then I want to also mention that there’s actually incredible corporate space in Newark. It’s kind of a little bit of a hidden secret. And it’s because of these corporates that New York venture partners exist and where we have one hundred million dollars under management and we’re mostly funded by corporates based in Newark Audible and our W.J. being two of them. But a variety of others you find on our website and across our LPs, we actually have five hundred mentors who have volunteered their time to support our founders. So it’s a bit of this big fish in small pond. You get a lot of attention and there’s so many resources that are provided to our founders and they’ve added has added a lot of value to our portfolio. The thing I’ll add to that is, you know, we don’t mandate that our companies are based in Newark. We expose our founders to Newark, and we hope that they see the benefits and perhaps some amount of their team based in the city and out of our portfolio of eighty six. Thirteen of our companies are based in New York and we think that that’s great. I think with covid, it kind of has made that question a little bit of a moot point. And I think that’s really interesting. So, you know, a founder can be based wherever and, you know, it just it’s less of a topic, I think, today because of covid. And I think that’s that’s really interesting. And I’m curious to see how that changes the venture portfolio makeup going forward.
Rob Pegoraro [00:11:05] I will put in one personal plug for Newark. When you get out of Newark, Penn Station, walk into the Ironbound neighborhood, go to the Portuguese bakery, is going to pass the not so good. So, Peter, what’s your nomination?
Peter Boyce [00:11:17] You know, it’s interesting. Look, I go down to Austin for board meetings, for our voices. We got great companies there. So I love that. You know, we were investors in jet dotcom. You know, you can create a few billion dollars of enterprise value in New Jersey. So I miss going to those board meetings in Hoboken. So we love both of those cities. We’ve been so unbound in our evolution as a firm precede through late stage financing across verticals and across geographies. Now, you know, if I would say that we’ve been really excited to see talent, I mean, across the country, you know, and honestly across the globe, you know, I mean, that would be maybe part of my answer here, too, which is just, you know, if I if I look at the roster of companies that we’re spending time with, I mean, they are you know, they are in definitely in Oakland. I would agree. You know, we’ve been seeing definitely interesting talent in Florida. And my little brother lives in Orlando, so I wouldn’t mind being on the board there to see him. That would be fine. Toronto has been really interesting as well. There’s a good community. There were investors in a company called Flash Food that scaling really, really well there. You know, I also think that, you know, I think we’re in the early innings of seeing what the next cluster is going to become. I’ve been really intrigued by what’s going on in the Carolinas, you know what I mean? Like, I think that it’s not getting talked about a lot. I mean, but it’s like so I’m excited about that. I think Atlanta, you know what I mean, already has an existing thriving ecosystem. You’ve got companies that have scaled there. So you’re going to have talent that’s going to be able to recycle. You’re going to have angel investor community. So I think Atlanta is going to get enhanced. But but if I’m being honest, I mean, we’re just we totally kind of uncoupled our lens and our aperture. And I look at my calendar. Look, it’s it’s this is the most varied and diverse ever. And it’s it’s so exciting to not I mean, in a way, exciting, maybe not too exciting. There’s no there are no travel budgets, you know. I mean, there’s a calendar, right. Like I mean, there’s there’s none of that. So you can basically take the pitch from the entrepreneur that’s in DC or Virginia and that’s what’s taking place.
Rob Pegoraro [00:13:34] Yeah. Toronto is definitely interesting case to watch because I’ve heard people there say we have an advantage because we don’t have U.S. immigration policy. So the people you won’t give visas to, we tell them to come here. Ivan Watson is not about.
Peter Boyce [00:13:48] Yeah its a whole lot more story. So true.
Rob Pegoraro [00:13:53] so Sydney’s comment about the start up in a small town in Florida, is there a reason that cities have to win this? Because in theory, any place, as long as you have a fast broadband, no data cap, it could be small towns wherever, where I guess you maybe can focus a little more. Is this automatically something where a city still has a built in advantage?
Sydney Thomas [00:14:19] Oh, that’s a really good question. I think it’s one that I think about often and I’d say kind of like taking out kind of the founder or like investor. It’s just when I talk to my friends who are talking about where they’re going to live, all of their questions are around. You know, is this just a blip? Is this is is are things going to go just back to back to what they were like maybe like a year, I guess six months ago, nine months ago? I don’t even know how long in maybe another year or two. And so should I take the big leap of buying a house in maybe Wyoming or Minneapolis or, you know, a small town in in North Carolina when like maybe in two years I’ll just be on the plane again to San Francisco or just be on the plane again to Atlanta. And I think that’s kind of what we’re all in right now. There’s not really we can’t as much as we’re trying to we don’t really know, you know, the future. That’s why this stuff is so. But you don’t really know what the heck is going to happen in the future. You just kind of make guesses and make your best hypothesis. And so I think that’s the eternal question. But I think regardless of whether or not somebody from Oakland moves to West Virginia, which is where my mom is from, I still want to find other communities in West Virginia of people who are interested in building tech companies, who are interested in getting some sort of support from technologies that could help them switch jobs for maybe they were a coal miner and they lost their job. They need to figure out how to get how to get trained on each back. Like those are communities that I am deeply interested in, regardless of whether or not, you know, like my best friend who moved to Oakland decides to move to West Virginia.
Peter Boyce [00:16:19] Yeah, my quick thoughts. I spent time with a early stage New York founder this morning, we were talking about how invigorating it feels to be here in New York because there is this sense of kind of mission and alignment and togetherness, you know what I mean? That we feel. So I’m really excited about that. What that’s going to hold for for all of us on this call. You know, one of the things that the way that I think about that question, Rob, is every town in every community is going to be a software community that is the world that we are heading in. It’s not it’s not going to go in any other direction over time, like in twenty one hundred, you know what I mean? Like, every city is going to be a technology city. So I think it has to do with just like the time and the acceleration. And that’s what density affords. Right. And I think what we’re talking about in a way is that San Francisco has 20 plus years of density kind of ahead of where New York is in any of the other cities that we’re talking about. So I think it’s almost like just where are these cities in these communities, like on the timeline in a way, and just realizing that we’re all heading in. What’s super clear, though, is we’re all heading in one direction, you know what I mean, which is software is our universe that we live and operate in. And so so I think it’s just almost just like a matter of time and how quickly these cities in these communities evolve. But I would say you I think wherever you’re choosing, you know what I mean, to be in business today, I think it’s kind of been proven that you can do really great business. I mean, from wherever you may be sitting in the world, whether you’re sitting on the beach in Mexico, you know what I mean? Which is something we can talk about how fantastic Mexico is and like how great the engineering talent is there. Or, I mean, whether you’re in Virginia or New Jersey or anywhere. So I think it’s just a matter of just time and speed and density.
Rob Pegoraro [00:18:10] So as a Virginian, I have to ask I’m speaking to you from Arlington, where, of course, we have we’ve placed a large civic bet on Amazon HQ, too, in the hope that not just will have a lot of jobs created by Amazon, but all the companies that will rise up around it except Amazon types will start their own startups to have a sense of, you know, have we have we spent our money wisely in our civic capital?
Sydney Thomas [00:18:40] That’s a hard question, maybe Alison or Peter can answer it because New York was the one who decided not to
Allison Williams [00:18:47] Yeah, no I think I think it’s really wise. In fact, Newark was really trying to get the second headquarters in the city of Newark, which we felt made a lot of sense for for many reasons. And you see, with with covid, it’s just it’s accelerated the growth of Amazon. And we’re seeing we had we had been investing in the theme of the death of brick and mortar and the rise of e-commerce and the technologies that power that. And it has been an acceleration of that trend. So, I mean, I think having Amazon or Amazon headquarters is great will bring a lot of jobs and create an ecosystem around it. You know, and it’s unknown about the future, too, you know, as things things open up, you know, geography will mean more. So, you know, I think it’s kind of a little bit of unknown time right now. Yeah. It’s great for someone to move to wherever and work remotely with their team. But, you know, there is a benefit of being close to your team and communicating face to face. I know new venture partners. You know, we miss working in the same space together and there is some benefit there. So, yeah, I think it’s obviously a huge win for you guys and it’s very exciting.
Rob Pegoraro [00:20:02] So last question I have here policy, are there any policy moves we should steal from California? The one I’m thinking of is they don’t hold non compete clauses enforceable. Anything else we should steal from our friends in the Golden State.
Sydney Thomas [00:20:18] OK, well, there’s one that’s not a California local issue, but this is I think it just actually is getting overturned today where insurers are no longer going to support telehealth, essentially like appointments. And so you can’t use copay for telehealth equipment. So if you’re if you’re communicating with the doctor, I’m in Oakland and I’m communicating with the doctor who is not licensed in California. They’re licensed in Virginia or New Jersey or somewhere else. Previously, there is a law that actually would not count that doctors visit. Like I actually need to meet with a doctor who is licensed in California for it to get kind of like credit to my insurance. And that’s currently, you know, that was completely dismantled at the beginning of covid. And now we’re seeing it kind of like go back to previous to what was said previously. And that scares me because I think that was ridiculous. I should be able to talk to any doctor and they all went to the same schools. My dad is a doctor. He went to school in Colorado and now he practices in San Diego. But he why does it matter? Why can’t he why can’t he practice on patients who are in Colorado? And so that’s one of the things that I think is really silly. And we’ll just continue to erode access to health care.
Rob Pegoraro [00:21:44] That sounds like a good thing to fix. Hopefully we can come back next year and talk about how all of our cities are doing that much better as startup hubs. Thanks, everybody, for watching.
Allison Williams [00:21:55] Thank you.
Peter Boyce [00:21:57] Thanks again for having us.