178. The Gen-Z Consumer, Real-Time Health Data, and Persistent Top Fund Returns (Cheryl Cheng)

178. The Gen Z Consumer, Real-Time Health Data, and Persistent Top Fund Returns (Cheryl Cheng)
Nick Moran Angel List

Cheryl Cheng of Blue Run Ventures joins Nick to discuss The Gen Z Consumer, Real-Time Health Data, and Persistent Top Fund Returns. In this episode, we cover:

  • Cheryl’s background in retail marketing and innovation while you were with Clorox and The Sharper Image.
  • How did that lead to your career in venture?On your website it says, “WE HELP ENTREPRENEURS BUILD MAGICAL COMPANIES,”… how specifically do you help?
  • Talk to me about about the Gen-Z folks… this is part of your focus at BRV… what are the high-level characteristics of this coveted consumer segment?
  • Are founders adjusting their approach to tech to better serve this group?
  • How the evolution of mobile apps and real time data has influenced the health and consumer industries?
  • You recently spoke on a panel about acquisitions… can you talk a bit about what it takes to build a company that’s well-positioned for an exit?
  • Talk to me about Equity Summit coming up in January… what is it, what was the genesis and what are you hoping to accomplish?
  • This year Prequin reported that BRV is one of the most consistently high performing firms in venture… I know that you’ve been at this for ten years now at Blue Run… what are some of the key factors that have led to your sustained success?
  • I came across your recent article on succession planning and it had me a bit worried… are you planning leaving the industry anytime soon?

Guest Links:

Key Takeaways:

  1. Being an early stage investor, Cheryl takes the approach of doing a little bit of everything for her founders including the sourcing of candidates, getting their first customers, creating a pipeline for follow on rounds and guidance with product and pricing. 
  2. When interacting with your founders, it is important to understand that the journey of an entrepreneur can be a lonely one therefore providing consistent communication and support on an as needed basis is key.
  3. Part of Blue Run’s strategy is maintaining a small firm along with tapping out at 7-8 boards each partner is on. This allows them to manage portfolio diversity while also giving enough time and attention to each of their startups. 
  4. Gen-Z is the first “mobile native” generation and are not held captive to the large social network platforms like past generations. These characteristics open up a lot of possibilities and a possible platform disruption that will give smaller tech and mobile companies new opportunities. 
  5. Elements of Gen-Z that Cheryl finds most interesting are the non social elements, specifically from a work and productivity perspective. 
  6. When approaching Gen-Z, founders and startups will need to focus on user experience, such as shortening content length, rather than technology because mobile smartphones have been prevalent for many years.
  7. Cheryl believes the more advanced consumer behavior she has seen in China will be significantly comparable to that of Gen-Z. 
  8. An interesting point Cheryl touches on is how pervasive mobile consumer behavior has completely changed the way people experience all walks of life, specifically Gen-Z. Today there are experiences built around being “Instagrammable” that were not present in past generations.
  9. Cheryl see’s huge opportunity focused on normalizing and tracking persistent health data in real time. For the first time with mobile, consistent sensing is available which has the potential to unlock many innovations on how we treat, diagnose and manage our health and specifically chronic diseases.  
  10. The challenges Cheryl predicts for mobile healthcare are first balancing such a large market to then marry that with a scaleable business model, along with some resistance from consumers in the US being asked to pay for their healthcare. 
  11. The key elements to building a company thats well positioned for an exit include…Technology, having a strong engineering team that has built a defensible and unique IP, Growth, having impressive user engagement and Optionality, executing at various levels and stages to create multiple exit options. 
  12. Cheryl talks about the Equity Summit and that it’s goal was to create a an intimate forum for LP’s and female GP’s to discuss trends, investing and specifically venture as a business. 
  13. The importance of building trusted relationships with not only founders but your LP’s and investors as well. 
  14. Key factors that have lead to Blue Run Ventures’ sustained success include exercising constraint in regards to fund size, knowing the firms strengths and weaknesses in order to really focus on adding the most value and understanding key geographies that will implement growth. 
  15. Cheryl thinks about succession planning by building a culture that utilizes the unique skills each person brings to the firm that guarantees the best decision making and execution. 

Transcribed with AI:

welcome to the podcast about investing in startups, where existing investors can learn how to get the best deal possible. And those that have never before invested in startups can learn the keys to success from the venture experts. Your host is Nick Moran, and this is the full ratchet

Welcome back to TFR today

Cheryl Chang joins us for a transparent and refreshing discussion on venture. Cheryl is a general partner at Blue run ventures which invests in early stage mobile software services, health care and fintech companies. In today’s interview, we discuss Cheryl’s previous CPG experience, the investment focus at Blue run ventures, her take on the Gen Z consumer and why that’s a focus for BRV. We also discuss changes in mobile and the way that users interact with tech. We talk digital health and the impact of tech on the healthcare industry. Joel discusses how she thinks about exits at the time of investment. We get her thoughts on LPS in the upcoming equity Summit. And finally we discuss how b r v has maintained its status as one of the highest performing venture funds over the past decade. Here’s the interview with Cheryl Chang of blue run ventures.

Cheryl Chang joins us today from Menlo Park. Cheryl is general partner at Blue run ventures. VRV is a Silicon Valley based venture firm with investments in Paypal and Waze among many notable others. The firm focuses their investments on early stage seed and series A opportunities across mobile software and fintech companies, tailored to the Gen Z and digital health industries. Prior to Blue run, Cheryl worked in innovation and retail marketing roles at Clorox and the sharper image where she gained insight into building brands and helping emerging startups grow. Cheryl, welcome to the program.

Thank you happy to be here.

Yeah. So tell us about your experience working in Clorox in the sharper image.

Yeah, happy to so it actually started, before I went to business school, I had to have been an associate at a European based venture firm. And I was looking at enterprise software, I was looking at some consumer internet opportunities, primarily in kind of 2001 to 2003, which is a tough time to be a VC. And what I realized was I had lacked operating experience. And I’d never owned a product or run a business unit before. And so I went to Clorox mainly to get that experience. And also, I realized it’s very important to connect deeply with the user and the consumer, if you’re going to be doing investments. So at Clorox, I worked in a joint venture between Clorox and Procter and Gamble, where I focused on new to the world products. So these are products that we think will hit shelf somewhere between 24 to 36 months, and we do deep user research in the beginning, and we start to come up with new to the world products that consumers are buying today. In in in that role, I sort of got to marry a lot of the early stage venture work that I had done before business school with actually being able to launch products and, and see them through the entire lifecycle. And so if you’re familiar with consumer packaged goods, and that industry, the brand marketer is sort of a hybrid between what the tech industry calls product marketing and product management. Yep. And everything rolls up into the brand manager. So I manage 60 $80 million, go to market budget, work with sales, work with r&d, and bring these products to life. That was the reason why I did that was because I felt that was very important experience to get when you think about bringing new technologies to market. So I did that stint for several years. I loved it. And it gave me some really good discipline and rigor in terms of how to think about launching products and managing businesses.

Can you talk about any of the specific products that you worked on? Yeah,

so we launched this is so different than the tech world that you and I work in now. But we launched a product called forced flex trash bags, and it’s a stretchable trash bag. I know people when I talked about CBD products, people I was like, I know that one. So So for slicks, trash bags is a stretchable trash bag. What’s interesting is that it actually incorporates diaper technology because diaper have to stretch. And so p&g, which has one of the biggest or probably the biggest baby division had created a stretchable plastic that they used in their diapers. And we incorporated that into a trash bag. Because we knew that the trash disaster was something that no consumer wanted. It’s messy, it’s smelly, it’s just gross. And so if your trash bag can flex, then you won’t, you won’t, you’ll avoid those trash disasters. And so we were able to make a premium bag using this new technology that p&g developed, and we put into a Clorox product and sold it. So that was one which everybody you know, most people have have heard of, we also rolled out press and seal, which I don’t know, if you’ve used it’s a, it’s a wrap that you put on a bowl. And if you press around the perimeter of the bowl, you’re basically releasing these little beads of glue that make the wrap stick to the edge of the bowl, so that there are no spills and messes. So that’s another one that we that we launched when I was there. And then there were a bunch that we killed, were pretty late in the game, we realized that the unit economics were never going to tie out. And that the business while it could do well and sort of year one and year two would never become a profitable business line. And we ended up killing those efforts before they ever came to market. And that’s actually one of the toughest things to do. Because you get very emotionally committed to launching a product, your team gets very excited about it. And if you have to make the recommendation that we’re going to shelve or kill something that you’ve invested even a few million dollars into developing. That’s, that’s hard to do, especially when the company is somewhat depending on or looking forward to adding that revenue. In the future, you have to think very objectively about whether you put good money after bad, right. And so some of those lessons I carry with me into the venture world, for sure,

I’m sure. Well, I’m very familiar with your products. I’ve changed it to diapers today for my toddler and taking the trash out. So yes,

they are part of everybody’s everybody’s life, for sure.

It’s fun to be a part of some things, even in the venture space, it’s fun to be a part of some things that people recognize, you know, we we have a lot of really great b2b SaaS investments. And, you know, nobody’s ever heard of those, and that’s fine. But it’s absolutely it’s fun to have.

We. So we were very early investors in ways. And when we first invested, nobody had heard of the company, right. And while it is really based company exactly is, you know, small team out in Israel. And at the time we invested in 2008. So smartphones, were just coming onto the scene, people weren’t really downloading even that many apps, they weren’t sure what to even do with them. But as Waze became mainstream, now, we hear about it all the time. And when people find out that BRV was an investor, they always want to tell you new products and features that they wish that the product had. And, you know, not really knowing that we don’t have impact on that anymore. You know, they’re part of Google, but they always want to tell you, and there is this this moment, this magical moment, as an investor or as a product owner, especially on the consumer side, when a consumer wants to give you feedback, right, both positive and negative. When you realize, well, this, this product, my product is impacting your life somehow. And that’s a pretty magical thing. It’s always fun to have been a part of that. And that is the allure of being a consumer investor. But the b2b SaaS stuff, it makes money, it does great. It’s just it’s not it’s not a household name, right? That’s the problem. It’s not something that your average person will have thought about, even though in their everyday life, they are actually impacted by probably a dozen enterprise SAS software products. They just don’t know it.

Right. Right. Exactly. So So you spent some time outside of venture before that you were in venture and then rumor has it you’re you’re hesitant about sort of re entering the venture space, can you can you talk about your early days at Blue Ron and how you made that decision to get back into venture?

Yeah, absolutely. I was very hesitant to come back to venture. There are definitely things that I like and I don’t like about the industry. But you know, the main thing is that I love building products and companies. That was the thing I love the most about being at Clorox was you know, I got to really get my hands dirty in influencing whether a product as well launches doesn’t launch and sometimes In venture, I feel like we’re just a little bit too removed from that. Which as an operator, I don’t love. The other thing was that venture can sometimes feel transactional, right? You are hunting for new deals, just think about the words that we use, you know, you’re hunting for new deals, you’re closing rounds, like they’re all very transactional words and nomenclature. And it really belies to me the importance of the relationships that you build along the way. And I was hesitant to jump back into venture. This was in 2008, when I came to Blue Ron, because I didn’t, I didn’t get that vibe from the culture when I had done it before. And I was nervous about that. So when I talked to the guys at Blue, Ron, when I joined, I said, I would like to find a role that allows me to do the company building side that I love, and maybe focus a little bit less on the deal hunting side and the transactional side. And so they crafted this great role for me, which was on the operating team. And when I first join, my job was to work with our portfolio companies help them with their marketing and their positioning, and to some extent, the business development and recruiting. And I really got to focus on the business company building side of venture, as opposed to the deal sourcing transactional side. I knew when I did that, that that was untraditional, and I knew that it was going to be a path that would be would take a lot longer to be recognized as the path in venture, if you will. But I was I was fine with that, because I had done that path before. And I also felt that it was very important for me in the long run, to learn the business of venture. So you know, you know very well, portfolio construction is important. LP relationship management is important. Firm development is important. And I wanted the opportunity to learn all of those facets of the business. And so that’s kind of how I started or restarted venture when I when I joined, was more from from those perspectives. So definitely untraditional, I would say then what most people would have done, but I think it it played to some of my personal strengths, and definitely played to my personal and professional interests.

That’s great. That’s great. So Jarrell, I was, you know, just perusing the website. And I noticed, front and center. You guys have a quote on there. It says we help entrepreneurs build magical companies. Can you talk about how you specifically help the founders and also kind of highlight the thesis at large for blue run ventures?

Yeah, so I think that so let’s go back to the intro that you were talking about BRV. We’re an early stage investor. And that’s very important to emphasize. Because at the early stage, we do a little bit of everything. So I will help my companies, interview candidates, I will help them source candidates, I will help them get their first customer, you know, that is not a college roommate, or uncle or somebody related to that, because it’s always, you know, your first few customers, you know, we will help them create the pipeline for follow on rounds, because a lot of our founders are first time founders. A lot of our founders are not originally from the Bay Area. So it’s not like they have this built in Stanford Harvard network of VCs that they just pick up the phone and call, I will help them think about product and UX, and pricing, all of those things. Now, it’s not that I want to own those things, but it is the journey of an entrepreneur can be a very lonely one. And I think it’s very important for them to feel that there’s someone that they can, they can always talk to or contact. So I would say, of course we do our monthly board meetings, and those always exist. But I interact with my founders, sometimes on a daily basis. It’s not always a phone call. It could just be a text exchange, it could be emails, and what I want to do is we want to build that foundation of trust with our founders at the very early stage and instill in them the understanding that there’s an open door to not just me if it’s I’m the board member, but to the entire firm. And so our partnership is very small, and we keep it small on purpose. And our founders know all the partners in the firm. So Though of course, there’s one partner that’s yours and your board member, but we really make an effort to build a portfolio culture that lets them feel comfortable with everybody. And so it’s it’s kind of an intangible, if you will. But what we found is our most successful, you know, as we put it on the website, magical companies, it was never a straight path from A to B to C, it’s meandering, sometimes there are setbacks, and it is in those darker times that your relationship with your founders are really tested. And so we put a lot of work into building that trust based relationship. And sometimes it’s tactical, and sometimes it’s strategic things. And sometimes it’s personal things that our founders want to talk about. We’ve seen it, we’ve seen all of it, and we try to be that trusted, early investor that they can go to for all of those issues. I

love that because you hear from so many VCs, and I’ve come across a lot of articles lately, where they’re talking about investing all their time in the startups that are winning big, right? But but it’s a meandering journey, as you say, right. There’s there’s ups and downs. And so if you just, if you abandon the ones that are struggling, I mean, I guess I’m not a believer in that, because I feel like there’s missed opportunity. There’s so

much if yes, so if you went back to 2010 2011, that if you looked at our LP presentations, you wouldn’t see ways as a highlighted company, that was going to be a fun maker. Wow. You wouldn’t see it because it was early days, for ways. And there were a lot of things, you know, there’s a lot of infrastructure that they were building, you know, they weren’t focused on growth necessarily yet at that point. So it was, it was early, we had other companies in the portfolio that were more mature that, you know, seemed to be, but had we abandoned ways, right. Or if we had spent less time with them, it may not have been as successful of an outcome as it was, or maybe it still would have, but we So again, it is this idea of loving all your children equally, if you will, that doesn’t mean that all your children need the same amount of attention at any given time, right. But you have to make yourself available. And so part of our strategy is that we try to manage the number of boards that we’re on. So even though our fund is relatively small, in today’s, you know, VC scale world, we do it on purpose, so that we can manage our portfolio construction, and also our board responsibilities. So we really kind of tap out around seven to eight boards per partner, because we think that that allows us to manage portfolio diversity, but at the same time give enough time and attention to each of our, our startups. Yeah, love it.

And in reviewing the thesis, you know, one of the elements that that you call attention to are these Gen Z folks, Gen Z consumers and startups focusing on that segment. It’s an exciting group. It’s a high profile group. I think we’re all familiar with the demographics. But you kind of give us an overview of the way you think about the characteristics of this group, maybe the psychographics, and why it’s such a focus for BRV. Sure.

So I’m interested in this group for a few reasons. One, beer V has always invested in mobile software. And this is the first generation that is mobile native. This generation started with mobile before anything else, right, this is what they know. They know it almost better than TV. Yep. And, and that’s fascinating, because the mobile device is the edge of the network. And one of the things that we believe in a B, or V is looking at technologies that are leveraging the edge of the network. And so when you have an entire generation or populace that does everything at the edge of the network, that opens up a lot of possibilities. So So that’s interesting, number one, number two, while this generation doesn’t necessarily have a lot of purchasing power, they are a generation that is not captive by some of the calcified social networks that, you know, you and I grew up with, you know, like the Facebook’s of the world in Google. And so there’s a there’s an opportunity for platform disruption, that you would have found much harder with millennials. Be because those large social networks were already there, and they were so dominant, they don’t have the same hold on Gen Z. So as an early stage investor, that’s interesting to me, right? Because I can, a small company actually has a chance. Whereas, seven years ago, that would have been much harder. And then selfishly, you know, I have to say, I have children that are in Gen Z, I want to know what they’re doing. I don’t know what the trends are. I mean, I’m like barely holding on to like the vernacular and the lingo Gen Z, like, I have to at least find some way to get some get some scale in my personal life. So. So I’m interested in understanding, not just I think right now, companies are looking at Gen Z from an entertainment consumption, shopping type of way, but I’m also interested in it from a work and productivity perspective. So one of the companies that I’m an investor in is a company called Zimi. And it is all about helping students find and apply to the best colleges for them. And it has a lot of social feel to it. And it uses a lot of the tech mechanisms of a social network and chat. But fundamentally, the mission is that 35% of college students drop out of college. And that number is unacceptable to me, personally, and a lot of that some of it is financial in some of it is that I got to college and realize it wasn’t a good fit for me, well, we should be able to solve that problem. And so one of the core pillars and tenants for Zimi, is, well, let’s help you find the best fit for you. And so it feels social, but it’s really more professional, if you will, and it’s in its mission. And so I’m interested in all facets of Gen Z. And actually, probably more so the the non social elements, because I think that those will be deeper roots into this generation as they grow up. In

Do you see the founders and entrepreneurs responding and sort of adapting their approach for, for this segment? from

a technology standpoint, not so much more, because mobile smartphone has been a platform for the, you know, over 10 years now. And so there, there isn’t a lot of things to change. But in terms of the user experience, yes. So what’s interesting is that five or six years ago, people were doing things, you know, native mobile apps to download the app, you signed up like bubble bubble, you know, all of that user flow. Now, what I’m seeing is that people want to be able just to use text messaging, sometimes they’re, they’re going lighter and lighter, if you will. And only in certain circumstances are they thinking we need you to to download an app, right? They’re also looking at increasingly shorter content lengths, because they know that the attention span is getting shorter, which is concerning to me, as, as a parent, I’m like, you can only focus for 90 seconds. So there is some adaptation for sure. The other interesting thing about Gen Z to me in one of the reasons why I am looking at it is we have a sister fund in China. And we were very early in China, investing in mobile software, specifically for consumers as well. And China. Well, it’s not about Gen Z, or Gen Y or whatever. Mobile was a leapfrog technology for most Chinese consumers. And so the consumer behavior from in mobile in China is actually much more advanced than what you see in the US. And so what Chinese consumers are doing, in general, is more akin to what I think Gen Z is going to be doing. So I’m trying to borrow a lot of the lessons that we’ve learned from our Chinese investments and seeing where there are analogues to Gen Z here in the US. And I think that there, there are some, there’s of course, cultural adaptation and things like that. But for example, their willingness to do microtransactions or, you know, small payments, that’s very different than what you would see me do or my generation do. We’re used to buying things on Amazon, right? So the way that people consume products and services, Gen Z is is different than Millennials or Gen Xers interesting,

and you think that that could be a leading indicator of behavior here in the states then amongst this this Gen Z group.

I do I do think so because this January Asian grew up with social networking as a norm, they grew up with mobile as a norm, how they ascribe value to themselves, to their friends, to products, to brands to experiences, is all influenced by mobile. So for example, you know, this is not a big investment. But if you look at places like the Museum of ice cream, the whole thing is designed, it’s an it’s an offline, you know, experience completely designed to be Instagrammable. And so you go in there, and you take pictures of you diving into pools of sprinkles and whatnot. And I brought my kids and I was just amazed, because the whole time my children were there, they were like, take a picture of me doing this, make sure this one is a short video, you know, they had very specific requirements of me as I’m, as I’m leading them through this, you know, this museum of ice cream. And when you think about like us as children, I didn’t go to Disneyland being like, oh, make sure you take a picture of me with this background doing this, like I just stood there in front of, you know, whatever, it’s a small world and just let my dad take a picture. But my kids are very prescriptive. And a lot of that is because they are mimicking a lot of the behavior that they’ve seen on YouTube and Instagram and things like that. And that we saw very early in mobile consumers in China, like we saw this seven, eight years ago. And we’re seeing a lot of that now happen with Gen Z. Kids here in the US. Yeah, even

though the selfie stick I remember many years ago. Yeah.

Everybody in China.

Right? It’s funny. It’s like mom and dad is as personal assistant now for the children. Right? I see. You go around all these theme parks and whatnot, they’ve, they’ve got you doing this and that. And

you’ve seen the memes of you know, the boyfriends of Instagram. Like all those all those things where, you know, you’ll see, young women have their boyfriends take like 1000 pictures of them so that they can pick the right one, they want to post on Instagram. So whenever we were in Europe, we saw people doing this, it’s very, really interesting when you travel to see how pervasive mobile consumer behavior has changed the way people experience, you know, all kinds of normal walks of life, including just standing in front of the Eiffel Tower, for example. So it’s fascinating. As a marketer, I’m fascinated by it. All right.

I wish I had that kind of time. Can you can you talk a little bit about how mobile in some of these new tech movements has influenced health. You know, you guys have this focus on digital health. You’ve also done a lot of consumer investments. And I’m curious kind of the way that you frame up and think about opportunities in in health and digital health.

Absolutely. So health, healthcare is huge market, super hairy, very broken. We know all of these things. The opportunity that we see in mobile is, is incredible. A lot of it is around data. So one of our investment thesis areas is around real time data. And in health in particular, there’s an opportunity for mobile, and I will use mobile more generically in this case. So it can be the phone, a wearable, it can be even IoT, especially in healthcare, you could have things that are in the home or in a medical practice that are connected to the cloud, that are not just your mobile phone. And all of these are sensors that are capturing persistent pieces of data, and in aggregate can tell you a more consistent picture of a person’s health. And so we have a number of companies ranging from application layer down to more like data infrastructure layer that are all around aggregating, normalizing and tracking persistent health data. And the reason why I think it’s so important is that traditionally, you go to a doctor, once a year, maybe twice a year, sometimes in between if you get a little bit sick. And so you’re getting these very punctuated insights into your health. And each time you know, it goes into your EMR, but you’re not getting any continuous syncing for the first time with mobile. You can have consistent and persistent data syncing, which is actually creating more data than the medical community is used to having so it can unlock a lot of possibilities in terms of How you treat diseases, diagnose diseases. And more importantly, and one area that I’m really interested in is managing chronic diseases. Because we can’t necessarily invent a pill that’s going to reverse diabetes, or change your ability to go from being hypertensive to suddenly not hypertensive. We know from a science perspective, that behavior and diet can change those things. So that means that you need persistent nudges every day, right? To change a little bit of your behavior, take a walk, don’t eat this, eat this, don’t forget to take your meds, you know, all of those things. Sure. And, and the one thing that everybody has in their pocket all the time is your mobile device. So I, I like that it’s really complex. The challenge, I think, for me, when I look at the space is balancing what is a big market, generically, healthcare, and then picking the wedges that a startup should go after, which is not going to be tackle all of healthcare at once, you have to find the tip of the spear that is the best for your business, and then marrying that with a business model that’s actually going to hunt. Right? So going after big health plans, small startups will die on the vine waiting for one of the big blues to sign a commercial contract with them. So what are creative ways that they can go to market and show strong unit economics that can allow them to scale to a big enough business. But I do think that there’s so many areas, and there’s also, so many areas that self insured employers are starting to take a look at and say, Alright, if we’re going to be self insured, then ROI for us looks very different. And what are the things that we can be bringing in house so that our employees are healthier, right, and the in the translation to cost savings is, is very, very clear. So that’s what I’m, I’m interested in in again, you know, it can be the mobile phone, it can also be IoT, it can be wearables, ultimately, I think that the intelligence is going to be in the software layer, and in that data aggregation. So that’s where I think the long term value will come from.

It’s amazing, just for me to think about, you know, what’s possible, if the feedback loop were better, right? If I have that glass of wine, and I know immediately, like blood sugar impact, and maybe how it affects my sleep, and, and variety of other things. I, I can’t imagine it wouldn’t change behavior. I think it absolutely would, it

will, and you’ll just become more conscious of it. Right. But right now, the only things that like the most immediate feedback loops that we have as human beings, is if I eat something, and I have a massive allergic reaction, that I’m like, okay, eating that again. But to your point, like, Alright, I want to enjoy a glass of wine, well, how does that impact my sleep, right? And if I sleep really badly, over time, I’m going to make the choice have the wine or not have the line. And when you think about, you know, right now, thankfully, you know, we’re young, we’re healthy. But when you start to think about more complex cases, like how do I manage hypertension? How do I if I’m pre diabetic, how do I make the right choices so that I don’t cross the line into becoming diabetic? And then there’s a whole host of chronic illnesses, that if you only had the information, most of us want to make the right choices. And so help me make that easier. If you make it very painful for me, I’m not going to do it either, right? So if you had to do a blood test, every time you drink a glass of wine, you wouldn’t, you wouldn’t do that. But if it’s easy, then you hopefully, you know, make make good choices. And then again, there’s the issue of who pays for all of this. And in the US. We’re not used to paying for health care. And so there is a lot of resistance to direct to consumer health care products. They’re just hard to be successful. And so you have to get creative as as a founder and as a startup in terms of what’s the right go to market strategy.

I’ve got a really interesting deck to send you. It’s early. It’s precede but founders awesome. And I think it would be that would be love for you. Yeah,

I would love to look at it. Yes.

All right. So shifting gears a little bit chair. So you recently spoke on this, this panel about acquisitions. Can you talk a bit about what it takes to build a company that’s well positioned for an exit?

Sure. So I think the most important thing is having technology. You know, my partner, John Malloy, he started our firm, he always says, you know, if you build good IP, we can always find a home for it. This doesn’t mean it’s going to be a billion dollar exit. But there’s always value in a strong engineering team that has built some core IP that is defensible and unique. And so I think that that is one factor that is a must. And is very important. Of course, growth is important. And here’s where, you know, if you’re dealing with enterprise software, as you know, is going to be different than consumer at the early stage, what we look for, is there’s a kernel of user behavior and engagement. That is impressive. And if if it starts small, and we know that users are engaged, delighted, you know, if there were in a net promoter score type of thing that they would it would be really high, then we know that there’s something there that has the potential to scale, or that someone would, would want to acquire, what we don’t do. And I know other people will do this analysis is they’ll look at the field of buyers. And they’ll say, All right, you know, XYZ startup is building a product that Salesforce is going to want one day, but the time between when you fund in the seed or series A and to the point where you’ve gotten some level of scale that’s going to generate a venture return, you’re looking at years, right? So it’s very difficult to predict like Salesforce is still going to want this five years from now, when I’m writing the first check today. So you really can’t make that bet. And you really don’t have that crystal ball. Now, if you’re a later stage investor, you have, you’ll have more, you have a higher likelihood of making that correct prediction. But then you’re also looking at a lot of other metrics. So I really, I really can’t look at a business that worth thinking about investing in and saying, Alright, if I invest in you, I know that like, you know, you can be bought by this company. I think about it more as there are multiple exit opportunities for you. If you execute at various levels of, you know, stages of your business, and at each stage, there’s an opportunity for acquisition or exit. And if that is true, then you have, you know, I guess you could call it like checked one box. If we think that what you’re building, there’s only one buyer in the whole world that might buy you one day, if you reach like 100 million in revenue. That’s going to be a little bit more challenging, right. But what so so it’s all about optionality. You know, founders and startups and their investors are always trying to maximize optionality and, and hopefully get to a place where you can kind of control your own destiny and that, but that’s how I think about acquisitions.

Cheryl, talk to me about the equity Summit coming up in January. What is it, you know, what was the genesis? And what do you hope to accomplish with the summit?

So the equity Summit is started by a couple of my peers in venture, Trey Vassallo over at defy and a few other folks, and it’s really kind of born out of the desire for LPs and female GPS to have a forum to discuss trends in investing, you know, venture as a business, not so much like specific startups, but, you know, the venture, the venture business and, and I think there’s also increased appetite among LPs to get to know diverse teams and venture. So this is the first time this summit is happening in the past, there have been the women in private equity summit that is in New York and halfmoon Bay, but those are very generic to the asset class and they’ll have like buyout and all these other things in in private equity. This one is specifically in venture and so my understanding is that it’s almost 5050 GP LP, what I’m hoping Yeah, so it should be a I believe it is an off the record, you know, discussion, more intimate group of folks that can really kind of share objectives and And, and what I want to understand is, I know a lot of the other GPS well, and you know, we’re always looking for opportunities to do deals together. I’m really interested in understanding how LPs are thinking about the space, how they’re thinking about diversity and inclusion. And you know, as we start becoming the stewards are the main stewards of a lot of this capital, what can we do to make sure that this movement that has started, continues to build momentum and sticks, and that’s, that’s important to me. So I want to hear what the LPS have to say, I do believe that, you know, just like we want to build trust based relationships with our founders, we have to do the same with our investors and our LPs. And so I think forums like this are a starting place to do that.

Well, you know, while we’re talking about LPs, and in fund performance, I noticed that this year, frequent reported that BRV is one of the most consistently high performing firms in venture. I know that you’ve been at this for for 10 years now at Blue. Ron,

can you talk about some of the key factors that that you think have led to your sustained success? Sure.

So you know, a lot of the credit goes to John and Jonathan, who, you know, are the managing partners for our firm and, and I think that one of the things that in you, I don’t have data on this, I can just tell you, from our perspective, one of the things that has helped us is we have held ourselves to always raising what we think are the right size funds. And so our fun sizes are constructed with a bottoms up view of what we think our team can deploy, and what we think the market really needs for our stage in sectors. So that’s our approach, I’ve been told that’s not always the approach that everybody takes. But we think that that allows us to have the right level of capital constraint. And the reason why I think that’s important is that, you know, as you know, we’re comparing apples and oranges every day, right? Every partner is bringing in new deals, different deals, we’re looking at all of these different segments. And we want to hold the bar really, really high in terms of where does our firm as an entire partnership want to deploy not just our money, but our time. And so having some constraint on fun size forces us to do that. You could say it’s an artificial constraint. But we’ve done that, so that we have the constraint because we’re human. And, you know, everyone gets excited about about new opportunities. So this, this forces that. So that’s one thing, fun size. The second thing is we took a really hard look at where we were good as investors, where we added the most value. And over the years, we have refined our thesis, fund over fun to really kind of hone in on things like mobile software, FinTech, real time data, because we know that we’ve built kind of muscle memory as investors on how to best help companies in this area. I don’t know what to do with the life sciences company, I have no idea what to do with a semiconductor company, I will honestly tell entrepreneurs, we’re a bad investor for you, right? And they always look at me like, I can’t believe you said, You’re a bad investor. I’m like, we can’t add value to what you’re doing. Right. And I am happy to introduce you to other people who I think can add value. And I’ve done that, like numerous times. But I think knowing where your strengths and weaknesses are, are really important. And then also over the last 20 years, we have kept a very open mind to which parts of the world are going to be the best to generate returns for that fun, vintage. So in 2008, when we first raised fun four, and I was I was just joining VRV I remember sitting in a meeting, and John was telling our investors that this is going to be the mobile fund. And everyone thought, you know, wow, that’s very specific. And then he also said we’re going to focus our efforts on US and China and somewhat Korea. And, and that meant that we took resources and took mindshare away from Europe, from India, from Israel, although we had we had ways but we weren’t doing a lot of we weren’t going to have an office there anymore. And so we really right side As the team and we really focused on key geographies, because we believe that those were going to be the growth regions for at that time, what would be the next five to six years. So being willing to go through those changes, kind of morph your, your team and your fun. It’s not like you do knee jerk reactions, but you know, looking at it constantly, I think that that is important to consistency. And then, you know, we also have only invested in the early stage. So we look for opportunities where we can get meaningful ownership and companies that we invest in and build the portfolio accordingly. So that, you know, when we have exits, like Waze, or you know, when we have really successful companies like cabbage and Koopa, any one of them has the potential to return the fund. So, so it’s not, I wouldn’t say it’s a secret or you know, there’s any secret sauce to it, but we we try to hold ourselves accountable to those elements as much as possible.

You know, Jarrell I came across this article on succession planning at the firm, and it had me a bit worried. Okay, are you planning on leaving the industry anytime soon? Or what

was No, no, it’s not. Funny. No. So the reason why I talked about this, because as I mentioned, I have a very untraditional path to venture, right. And a lot of people have asked me had, you know, how does somebody who comes from Clorox and Procter and Gamble, even find their way into a venture firm forget becoming, you know, a general partner or somebody who’s been, you know, tapped to be part of the succession planning of BRV. And so, part of it in a large part of it, I have to say, has to do with the culture of your firm. And, you know, again, you know, John and Jonathan, I remember in my interview with John, when I, when I first was talking to Blue Ron, he said, let me get this, right, you want to come to blue? Ron, you want to do an operating role. You don’t want to come in in like, you know, guns blazing, you know, be an associate or principal and go look for a bunch of deals. He’s like, why would you do this, you’re going to be so bored. And I said, No, no, no, I’m not going to be bored. Because I remember what that was like when I was an associated another venture firm. And I realized that I was just glossing over all of these different elements of the venture business. And I really want to learn how to take you know, a series a company through an exit, and I want to focus on that I don’t want to focus on just meeting 1000 2000 entrepreneurs a year hoping to do one or two deals like that, you know, I really want to focus on the building. And he really helped me do that. And he created a culture in the firm that gave me a path to develop into a GP that way. And that culture that, you know, he’s instilled here at Blue Ron, and that, you know, I hope to carry on, as the firm continues to mature, is something that I think is important for succession planning, because I do think just like the diversity conversation that we’re having, in the industry, I think that there are a lot of different types of VC investors. And we are not all cut from the same cloth. And you need to take the strengths of everybody that you meet and figure out how to build the team that is like the SWAT team, right? Like everyone comes with a different skill, a different perspective, and how do you get the most out of that, to generate the best decision making and execution for the whole firm. And when I think about succession planning, like, that’s what I think about like, I don’t, we don’t need everyone to be, you know, deal Hunter, we don’t need everybody to be, you know, awesome marketer or, you know, financial genius, like, you know, it as a team, we need to be all of those things. And so when I think about succession planning, I think about the culture that our firm and all firms can develop, so that you can get the most out of all the people that you bring it in, because it is a partnership, and a lot of times it’s a long term partnership. It’s it takes a long time to to get there. So that’s what I mean.

It’s a great way to look at it. Cheryl, if we could cover any topic here on the program? What topic do you think we should address and who would you like to hear speak about it?

Well, you know, I would love to, I would love to have some of the more prolific LPs, you know, on your on your or show some time, you know, I’d love to hear how they are thinking about the venture environment. You know, I think some of the conversations we’ve we’ve seen and heard, you know, people are cautiously optimistic, but always nervous, I’d love to kind of peel that back a little bit and understand that. I would also, you know, I also always love to hear from founders who have become VCs, and VCs, who have become founders, I think it always helps to, you know, have both perspectives. And so those, those stories, and those insights are always, you know, always super valuable to me, I think it’s always good to understand the people that you work with. But yeah, I think those are, those are the things and you know, I think, from where you are in Chicago, it’s always interesting to hear what’s happening outside Silicon Valley. Sure.

You spent a couple of years here, right?

I did, I did. I’m glad I’m not there in the winters. But you know, I was just talking to somebody I think of Chicago ahead. San Francisco, whether it’d be the biggest city in the US for sure, because it’s such a fun place to be. But, you know, I’m, I am actually really interested in, you know, what some of the tech communities outside of the Bay Area are doing, because I do think that increasingly, companies will pop up all over the country, like cabbage, one of our companies, is based in Atlanta. And it’s not by accident, you know, it started there, you know, is in a part of the country that was really affected by the contraction of banks and small business lending and, and, you know, the acute problems that small businesses were facing when there’s no working capital, became really obvious to the founders. And so they started a company to address that. I don’t know if people here in Silicon Valley would have had that insight as quickly as you know, Robin Katherine did at cabbage, because they were deep in that market. So, you know, I think there’s a lot of insight from places outside the Silicon Valley. And, you know, I think 40% of our portfolio companies are not based in the Bay Area. And you know, we’re perfectly happy and fine with that. So I always love to hear from founders that are not based here. Well,

great companies will be built outside of San Francisco. That absolutely,

yes, totally. I mean, without a doubt they will. They face different challenges, but they absolutely will be. Okay. Qualtrics, right.

Yeah. Yeah, Utah, right. Yeah, absolutely.

So, yeah, that’s so those are some of the topics. And you know, definitely if there’s stuff that, you know, we can work on with you in the future, you know, we’d love to that we can take that offline some time.

Awesome. I’ll be in touch. And then finally, sure, what’s the best way for listeners to connect with you?

The best way is probably just on email, you know, we’re really easy to get a hold of Cheryl at VRV is the best way. And we we absolutely try to get through our inbox every day as much as we can. But But yeah, I think that’s the best way we’re and you know, I think people who know our founders, I would say our best deal sources are, you know, from our founders and having invested in, you know, almost 200 companies. Now, over the last 20 years, we you know, we really do trust and rely on our founders a lot. So, you know, through any of our founders or directly is perfectly fine.

That’s great. Well, Gerald, thank you so much for absolutely transparency. You it’s been refreshing. I appreciate you, you coming on and sharing a little bit more about Blue Ron and the way that you think about investing? Yeah,


That we’ll wrap up today’s episode. Thanks for joining us here on the show. And if you’d like to get involved further, you can join our investment group for free on AngelList. Head over to angel.co and search for new stack ventures. There you can back the syndicate to see our deal flow. See how we choose startups to invest in and read our thesis on investment in each startup we choose. As always show notes and links for the interview are at full ratchet.net And until next time, remember to over prepare, choose carefully and invest competently. Thanks for joining us