Simeon Iheagwam of Noemis Ventures joins Nick to discuss Starting a Fund w/ Life Savings, Why it Takes More than Just Performance to Find Success, and Sticking to Your Framework. In this episode, we cover:
- Walk us through your background and path to VC
- What’s the thesis at NOEMIS Ventures?
- What is your process for investing?
- Are there any must-haves?
- Like Brad Feld… you are syndication agnostic… don’t care about who else is in the round and you’re willing to be the first yes. How do you get to conviction — especially not having worked for a large VC fund?
- Where do you help your portfolio companies the most?
- In your words… why is it difficult to launch a fund as a diverse manager?
- What were some of the most unexpected and challenging aspects of launching a fund?
- Strangest question you’ve received from an LP?
- What’s your approach to investing in diverse founders?
- You were recently highlighted by Grasshopper Bank and Left Tackle Capital as an extraordinary funder. And I believe you joined their inaugural cohort called the Future Funders Institute? We’ve seen a few different accelerator-like programs spin up, targeted at emerging GPs. Tell us a bit about the program.
- 3 data points…
- Let’s say you are approached to invest in a Fintech SaaS business with $5k MRR, and 20% MoM growth for the last 3 months. The catch is you can only ask for 3 data points to make your decision.
- What 3 questions do you ask for?
- Simeon decided to launch his own VC fund by taking his own life savings and building a pilot fund of 10 investments in 2016. That is when Noemis Ventures was launched.
- Simeon has built an investing framework that has yielded excellent results. His finance experience inspired his investing framework that consists of eight parts, and every startup seen must check off each box for an investment to be made.
- Staying disciplined in the investing framework is key. It’s critical to “Trust the process.”
- To identify high potential opportunities, Simeon leveraged his corporate finance experience and immersed himself in VC.
- For companies seeking capital, add more value than just the check.
- Being a fund manager is different than just investing. Future fund managers should research and know the space they are playing in.
- Three Data Points: Background of the founder, key differentiating factor to the competitive landscape, and traction
Transcribed with AI:
Welcome to the podcast about venture capital, where investors and founders alike can learn how VCs make decisions and reach conviction. Your host is Nick Moran, and this is the full ratchet.
Simeon Iheagwam joins us today from New York City. He’s Founder and Managing Partner at NOEMIS Ventures, an early stage venture fund investing in FinTech, ai machine learning and marketplaces. Prior to NOEMIS Ventures, he was an investment banker at Wells Fargo and JP Morgan Chase Simeon. Always a pleasure, man, welcome to the show.
Thank you for having me, Nick. Appreciate it. And how are you doing?
I’m great, man. I’m great. This is the first interview of the day. So I’m fresh for you.
I like it. I like it. Let’s have fun today.
Let’s do it. So
yeah, let’s just start out with your background, man. What’s your path to venture?
Yeah, yeah, sure. Awesome. Appreciate it. Thank you for having me again. So I was my path to venture. You know, it was an unconventional route. So I started, you know, I’m born and raised, we’ll take you back. I’m born and raised in Brooklyn, New York, to Nigerian parents, youngest of four children, two sisters and an older brother. My path started right out of undergrad. So went to Brooklyn College for undergrad in the CUNY system here. started my career at JP Morgan in New York, did two internships while I was in college at JPMorgan, and then signed on full time in the finance analyst program, in 2006. So did a variety of CFO type roles and market risk functions for various divisions at JPMorgan. So I was there pretty much six, seven years from 2006 to 2012. And so you can imagine, you know, the timing, dealing with financial crisis and other things going on, like London whale scandal at JP Morgan, and so forth. So, definitely an eventful time. Um, one of the roles and divisions that I was on was the global technology group. So that was sort of my first step into tech. We were on a team that managed the firm’s entire tech spend globally for JPMorgan. So did that did a variety of other roles and then decided to transition and get my MBA full time, sort of wanted to add more development to my career, so went to Cornell University, on a on a full scholarship leadership scholarship called the Roy Park fellowship. So did that full time for two years in Ithaca, New York, and then transition to move to North Carolina, to do investment banking, specifically leveraged finance at Wells Fargo for almost three years. So basically did advisory debt, capital raising and origination for large, non investment grade cooperation across different industries. And one of the industries I did cover was technology, media, and Telecom. So professionally, have touched tech. And then outside of that, I’ve been following the tech startup ecosystem, pretty much my entire professional career, and always had a passion to sort of get into venture and, and help founders at the early stage. And so I attempted honestly, to do just that. And so the landscape is, and Nick, you can attest to this. But it’s just, it’s just hard to get into VC in general. Yeah. For a variety of reasons, right? We will talk about spots, right? Even for some of the bigger funds, they’re only managed by, in a lot of cases, five to 10 people, so there’s not a lot of spots. And then when you talk about smaller funds, the economics of a VC fund doesn’t really lend to want to hire more people. So what I attempted, I attempted, I talked to GPS at large funds, small funds, mid size funds, ultimately was hitting a dead end. And so a series of events happened. I first resigned, I resigned from Wells Fargo moved back up to New York to help out with family matters. And then I was actually helping startups and advising startups on the side. And so as I was advising startups on the side, and going through a process of doing some soul searching and figuring out what the next step is, I ultimately decided that I was passionate and enjoyed helping founders at the early stage that I wanted to do this on a larger scale. And so I did just that and essentially decided to launch my own VC fund by essentially taking my own life savings and building a pilot fund of 10 investments starting in 2016. So did that and that’s when NOEMIS Ventures was founded.
That’s awesome. So it was your It was your own money at the beginning. So it was a kind of like Angel checks.
That is correct. So I did Angel checks writing check sizes, anywhere from 10 K to 50. I made 10 investments, but built it around the thesis for nomas ventures. So we focus on pre seed and seed stage funds, seed stage startups and FinTech marketplaces in AI machine learning. So I built the pilot fund around that, and built that with the goal of raising a fund, and a fund with outside capital in two to three years. And so I decided that I wanted to give myself an opportunity, because the landscape is already hard as is, but wanted to give myself an opportunity to build a track record. So at the time that I started to raise, I would have something to show for it to show my capability. And then I also built sort of our own internal proprietary framework for investing in early stage pre seed and seed stage companies. And then started to build sort of to build what the team is going to look like started to add structure. advisory board, added three members on my advisory board, have experience managing funds, operating companies, and advising startups, as well. And then also started to add Venture Partners and subject matter experts to the team as well.
Awesome. Awesome. So in, you started out with 10 checks. I believe you said early on. So it’s a you know, it’s a portfolio of 10. And you’ve had some successes already do you want to just touch on a couple of the without going too deep on each just a couple of the the early wins that you’ve experienced?
Absolutely. We’ve been blessed. We were blessed to see some early success. So high level we’ve had two exits. So we’ve been operating three and a half years. So we’ve had two exits via acquisitions, $2 billion companies, we had a company called trigger in the FinTech space, they were acquired by circle, billion dollar crypto exchange. And then we had a company get links, dye got acquired by infor multibillion dollar enterprise software company. And then we’ve had five more companies that have gone on to raise almost 530 million combined and follow on rounds. And so seven out of 10 companies have had an event or multiple events. Indeed, in the three and a half years that we’ve been doing this, of those five, just to take a step further, we came in at either the pre seed or seed stage, we have one that has since closed their series C, we have two that have closed a Series B. Wanda has closed a series A and one that’s closing a follow on seed round as we speak. Amazing. So yeah, we’re excited. We’re excited about what’s to come. We believe in our process.
Well done, sir. So how did you find these startups? Right? You’re kind of new to the game, you’re throwing your hat in the ring with some Angel checks, you know, how did you source and, and identify these high potential opportunities?
Yeah, absolutely. So sourcing came from a variety of ways. So when we started, I was essentially cold calling founders on LinkedIn, after reading about them in different blogs, I then started to immerse myself once I decided this is full time. And this is what we’re going to do. And we’re going to build this started to immerse myself in the ecosystem. So started building relationships with other VCs, forming partnerships with accelerators across the US, and then started creating a network of deal flow. And so we put our website out there. So we started getting a lot of inbound. But ultimately, what evolved into sort of like, a sweet spot about deal flow is our founders in the pilot fund had been the best source of pipeline of founders, because they’re already immersed in the ecosystem. And so because they’re immersed in the ecosystem, they also will identify high performing founders that they will put in front of. So we’ve been able to create a strong pipeline of deal flow, because
you mentioned your you kind of put some structure around things. And you and I have talked a few times in the past about sort of your process and, you know, whatever rubric you have, and yeah, no, it’s proprietary. But you know, can you share about, you know, what this is that that used to evaluate that? Yeah,
absolutely, absolutely. So we essentially, again, coming from finance, we love frameworks, and systematic ways of doing things. So I said, Look, as hard as it is to identify a early, you know, winner at the pre seed or seed stage. Let’s do it in a methodical way. So essentially, we came up with sort of eight checkboxes that we feel are the important things that identify early winners. And so we essentially decided to say, Hey, we have a set of questions to get us comfortable with each box. And so this is my investment bank that I’m putting in because we’re doing diligence as an investment banker on different deals that we’re going to originate loans to so taking the same approach, when going through diligence and for us I pilot one of 10 companies, we said, we made the decision, our decision to say, okay, they must meet all eight, for us to invest. And so it’s something that we stayed disciplined to. It’s hard, because of course, you have situations in which maybe seven out of eight are checked. But there’s still that eight that, you know, we want to see happen. So we would wait in those situations, we would wait to see if maybe that a checkbox gets checked. And so we pride ourselves in using our own process, we were not really the type to sort of, you know, wait to see who’s in first, we have full conviction and saying yes, after all process. And so again, all 10 companies in a pilot fund went through the same framework,
in all eight of these are must haves, these are must haves? Are they market factors? Are they founder factors? are they related to traction?
Yeah, so it’s related, all three that you mentioned. So it’s built on pattern recognition of startups that we followed our entire professional career. So when you talk in terms of the founder, the team, you turn in terms of traction, in terms of partnerships, we take a look at all of that, in determining who we want to put our money against and who we want to support down the road. And so for one example is so one of the boxes is founder and T, for example. So we definitely want to take a look at the hustle and the grind of the founder. What are you able to do with minimal resources? Because in a lot of cases, at the pre seed or seed stage is not heavy marketing. And there’s also little capital. So what kind of traction Are you able to build? as a founder? What kind of team are you able to build with complementary skill sets? What kind of culture Are you trying to build? And, and so we take that very seriously. And founder team is one of the biggest boxes, but he’s like, for example. Yeah. Yeah, for example, if somebody is telling me that they’re using artificial intelligence and machine learning, in their business thesis, but they themselves are not a data data scientists, or they don’t have a data scientist or a PhD scientists on our team, I’m gonna question you know, how effective your understanding the models and algorithms are going into this, to your business these, how effectively Are you using the AI?
Got it makes sense? Or some of the factors purely quantitative? Or are they all kind of? Do they require some qualitative sort of assessment like like that one? Do, you have to kind of look into the details of the team and
I have? Absolutely, we look into the details, and we take time to do our research, we take time to do our research on the industry, and the competitive landscape. And so again, you know, I pretty much put my hat, you know, my investment banking hat on, these are the similar things that we were doing when we were, you know, evaluating an underwriter across any industry. And so we would do the same thing here. So I do take, take time, and that’s why I have a team. So for example, one of my venture partners is a data scientist. So he can come in and fact check some of the algorithms they’re doing and so forth. And so yeah, we feel good about the process that we put in place.
Is that, is there a factor? I don’t want you to give away your secret sauce here. But is, is there one factor that’s maybe not obvious to other investors, that is kind of unique, that you could share a little bit on?
Well, it’s a combination of sodas, qualitative and quantitative factors that we, that we look at. And all say, there’s anything to, you know, secret sauce, per se, that’s different from any other investor. It’s just how we use it, and how we think about the and, and, and making sure for us being comfortable, somebody else may look at my own framework and say, you know, what I’m comfortable with if they meet 60. And so for us, we just stay disciplined in making sure that we meet all eight. And, and so I don’t understand, you know, I don’t necessarily know what other investors or what their secret sauce is. But you know, it’s just a matter of, this is our process process that we take a look. And we deep dive into diligence. And we have several conversations with the, with the founder to get comfortable for us. Understanding if this is the team, and this is the company and this is the problem that we want to solve and this is the problem and the solution that we want to be behind. So that’s what we pride ourselves in. So it’s a mix of qualitative and quantitative factors. Understanding financials at the early stage are hard, but we still have an approach when looking at financials from for a seed stage and a piece pre seed stage company.
Got it? Got it. It were there. Was there a particular resource? Or was there maybe individuals or, you know, where did your a lot of your approach and thought process came from your your background in banking, but was there a resource or some playbook that you started with on the venture side to, to begin to get comfortable with? What it means to invest it like these super early stages?
Yes. And so yeah, so once I started, I completely immersed, immersed myself into, into VC listening to different podcasts, you know, meeting different GPS at different funds, other seed stage funds, and just learning, building a mentor base, and just adding to the toolkit, so I started from doing that, but then also started from just actually doing the work and, and making sure that I created a process for doing diligence, which ultimately comes back to my experience, essentially, as a corporate finance, professional and investment banking. We’re doing just this, we’re playing the hat of a CFO, when advising companies are looking to scale as a leveraged finance professional, I am looking at non investment grade companies, these are triple B, or lower rated. And all startups pretty much fall into this non investment grade category. And so we’re looking at the business model the team, what we think about the market, what do we think are the inherent risks? And how do we mitigate those risks? We’re thinking about, you know, do we see this? What are the exit opportunities down the road? What are potential synergies and even potential pivots? So it’s a combination of, yes, my background, played heavily to me being a better investor. But I also took the time to build relationships and for mentors in the space.
You know, Simeon, you’ve mentioned me before that your syndication agnostic, so to speak like Brad Feld talks about? In other words, you just don’t care who else is in the round? And you’re willing to be the first? Yes. Was it? Was it tough for you to get to conviction? Yeah, you know, on these early stage deals, when there wasn’t, you know, VC lead in place. And I assume it goes back to this, this framework that you created, but you know, how are you able to get conviction on an early stage deal that has, you know, little pedigree and no institutional capital committed?
Yeah. So, it so it, this goes into Yeah, this goes into the framework, again, it goes into how comfortable we feel about what the companies are able to do. So for example, give links was one of my companies who got acquired, they were actually my first investment. Now, they were my first investment. I believed in the founders. It’s two co founders, two founders of color. One of the co founders was a female, black, female and CTO, or amazing smart, met them during the sort of Cornell Tech, my interactions with the Cornell Tech Community, and then had several conversations about what they were building. Now, they were essentially building a tool to allow anybody who use any type of open source code to sort of manage it manage the vulnerabilities automatically. Sometimes you don’t realize that there’s a new version of the code that comes out. The problem with using old code is it leaves yourself open to hacks. So if you recall, a couple years ago, Equifax hack happened. And that was a big thing that happened because of old open source code, right, that people were able to hack into. So So again, they were movers in the space engineering backgrounds, they were able to have strong traction and strong pilots, they were building a strong advisory board, and strong partnerships, they were also going through strong accelerator programs. So they had strong partnerships in place with that and understanding who the founders are, and looking at their hustle and grind in a space that they know that one of the first sort of movers in, that got me comfortable, in addition to doing my research about the space that got me comfortable to stand behind, and then again, you know, being my first investment, and this was October 2016. You know, I got completely comfortable on our other investors ended up coming in as well. You had the likes of Cornell invested in them as well. And, and Morgan Stanley, they went through the Morgan Stanley, multicultural Innovation Lab as well. So there were strong partners, partnerships in place to help them get to the next level. So that’s what made us comfortable. And then, you know, we’re excited two years down the road, they end up getting acquired by by info. Awesome, awesome, great success there.
You know, talk a bit about how you work with these companies. After you invest.
Yeah, so we try to be helpful. We try to be we try to add more value than just doing the check. We can help given that I come from 10 plus years corporate finance investment banking experience, I can advise them on strategy and their financials, when they’re thinking about raising another round, happy to advise them as well. I opened my entire network to them as well. So for several of our companies, we have made introductions to potential customers and clients, we have made introductions that has has led to additional capital infusion at the follow on rounds from a largest seed or series A investor. And in other cases, Series B investors as well. We have placed people in our networks on advisory board, advisory boards or board of directors of similar companies where synergies made sense, we understand that there are larger funds who have more reach and more access, and are smarter and in other areas, but we pride ourselves in being being helpful down the road to founders.
So are you you know, are you primarily merrily backing diverse founders? Is that part of the thesis here? Or, you know, are you pretty open minded about the background and the path as long as you know, they have some of these fundamental characteristics of successful teams and startups?
Yeah, we are a sector focus fund. So we focus on the three sectors I mentioned, we have had success investing in minority founders, we don’t feel that we have to be a minority fund to invest in minority founders. So everyone, regardless of where you are, and your background has to go through this same framework. So we’ve had success, I mentioned with the two exits, the other exit being triggered, that was a female CEO, we go on to the five companies who have raised follow on rounds and got into series C, B, and a, we have another female CEO in there as well, we have two black co founders in there as well, that’s on their way and raised a Series B, and so forth. So we’ve been bested in every type of founder, and using our process. We’re open to investing in anyone
got it? And, you know, in your words, why? Why is it been difficult to launch a fund as a diverse manager?
Yeah, I mean, if we, if we go back to this to the story is a number of reasons. And we could talk about this one topic for an hour to be here, for sure. I think I boil it down to this access to capital, launching a fund is is about raising capital. And so it is hard to find access to capital as a diverse fund manager. So if we go back to the beginning, if I decided to sort of raise a fund, without the track record coming from 10 plus years of investment banking and corporate finance experience from large firms with great reputations, JP Morgan, Wells Fargo plus, having Brooklyn College, undergrad finance degree and an MBA from Cornell, I still would have hit a dead end, I had all the accolades and the background to be successful in VC. But I still would have hit a dead end. And the dead end would have been, well, you haven’t done anything in venture capital. You haven’t done an investment, you haven’t built a track record, track record track record track record, is what I would have heard. And so that’s part of the reason why I decided to go my own route. Now, if you talk about today, there are more opportunities. Now. Now there are scout programs, larger VC funds, have scout programs where you could gain experience, and maybe not have to do what I did, in taking my life savings to sort of build build a pilot one, which I did. I’m happy I did it in hindsight. But I think ultimately, it’s just access to capital is one of the reasons why it’s hard for us to launch funds. And And again, if we want to talk about the reasons for the lack of access, you know, several articles, there are several articles out there that have touched on this. And there is a perception that’s out there that diverse managers are more risky or underperforming. And so of these two topics, these are some of the things that you’ve heard in a variety of articles and studies that are out there. But there has been no correlation at all in any of these studies that link diverse managers to underperformance and so, you know, there are several managers and diverse managers out there that are that are high performing, and take into my case, we’re just going to talk about myself. Again, I would have never thought That in three and a half years that I’ll have seven out of 10 of my companies be promising and, and high performing at this point, right? Typically you hear in VC. And as we both heard you hear one out of 10, or you hear two out of 10. And so and so again, it’s just another example, to prove that, you know, diverse managers can find returns and add value.
Are there ways that you’re, I mean, this is a industry that’s controlled by a lot of white males, right? Yes, there’s far more white males in power positions, then, then women or, or diverse folks from a variety of backgrounds. So you know, are there ways that you’re trying to sort of break through and expand your network to amplify the success of your portfolio and yourself?
Yeah, absolutely. And I build relationships with, with all types of different funds, as well, as funds ran by, you know, majority, white male. I have partnerships with female fund managers, and fund managers of color. So I build a network of, of everyone. And again, I think the biggest thing for me is just proven another example, just providing another data point, that here’s a diverse manager that has managed to build a strategy and execute his strategy and find returns. And so we’re talking about, you know, IR, and we’re talking about multiple invested capital, into three and a half years, I’ve hit three x multiple of invested capital, and a 40% IRR, which pretty much puts me in top quartile when you talk about seed stage fund returns. And so, yes, there are a lot of initiatives supporting diverse fund managers now. But I think the emphasis needs to be on just looking at people from just the work that they’re actually doing. Because there are a lot of diverse fund managers doing great work, doing great work and finding returns, and, and finding returns that are outperforming the benchmarks. Right, so my my goal is to continue to just continue to serve as an example, and continue to be a better investor and surround myself by other investors who sort of share the same same sentiments.
What, what advice would you give to folks considering launching their own fund? Right? There’s, there’s a lot of challenges to raising capital, there’s a lot more to running a fund and running a firm than just investing, you know, do you have any advice or words of wisdom for the crowd that aspires to do what you’ve done?
Absolutely, yes, being a fund manager is totally different than just investing it is. You’re now managing a fund and you’re managing, you know, limited partners, and investors who ultimately want returns, and, and once and once you see that, and so, yes, the best advice I’ll give is to do the research to the research and understand, you know, how do you want to play in the space? What do you want to invest in? Why come up with your thesis, and to the extent that you can, I think it’s important for emerging managers to start investing in their thesis, even if it is a small check. When you’re thinking about being a fund manager, you are essentially trying to prove to limited partners, that you can essentially find deals in this space. And you can also find returns, because that that is what they care about. Are you able to find these deals, it’s better to say this is my thesis, but if you can say this is my thesis, and I’ve already done X, Y, and Z investments in this thesis, I think it definitely helps. In the long term.
It’s good, that’s good. What’s the strangest question you’ve received from an LP? prospective? LP?
you know, maybe it’s, you know, I’ve received interesting questions regarding just, you know, like, understanding that I didn’t come from a, you know, VC background. So it’s, you know, the strange questions that I get is, when people see that I’ve done, and I’ve had seven out of 10 events in such a short period, you know, I get the question of, well, how do we know it’s not luck? And so, which is, which is interesting. And I’d say it’s not luck. You can maybe say luck of timing, and so forth. But I still did the work to have the conviction, to do the work to get into the deal. And to add value. And so it’s not just today where you can just wave money and say, Hey, founder, I’m willing to write this check. Take it founders care about smart capital, and how can you help us get to the The next level. I think another question, you know, some people tend to ask age older you, which I think is a little weird, but a little weird, but you know, we go we go with the we go with the punches.
Yeah, I just turned 40 last week, I’m not sure if that’s a good thing or a bad thing in the LP
is, who knows? it all? It all depends on on the type of LP and so forth.
Right. Right. Are you primarily investing in the New York City area in, you know, the Greater New York State? Or are you kind of agnostic?
Yeah, we’re agnostic. So for the pilot fund, given that I was that I’m from Brooklyn, New York, it was important to invest in in New York City ecosystem, I think there are a lot of high performing companies in this ecosystem. So seven out of my 10 companies in the pilot fund or New York base? Well, we did two in Texas and and one in LA. So as we’re thinking about the next one, we’re opening to different markets. Atlanta, Chicago, New York, of course, LA, San Fran, Minnesota, Tulsa to name a few.
Nice. Good, have you found. I’m curious, have you found any difference in sort of the founder mindset or the founders approach in these different cities and regions?
Yes, I think there’s a different hustle. Especially when you talk about New York, there’s a different hustlers mentality that I think drives drive success here in New York, that you’ll you’ll you’ll find is different when you talk about the markets. And so that’s why I’ve been bullish on New York and the New York ecosystem.
I like like it. So Simeon, you were recently highlighted by grasshopper bank and left tackle capital as an extraordinary funder. And I believe you join their inaugural cohort called the future funders Institute, we’ve seen a few of these different accelerator like programs spin up that actually target the the GPS. So the investment side, can you tell us a bit about this program? And you know, what, what their their focus is? And your involvement?
Yes, absolutely. Yes. So left tackle capitals started is yet some in the cohort with 11 other funds. And these are funds made up of female fund managers, or fund managers of color. And so the goal with the program is to create a community essentially create a community that fosters collaboration, and growth, and helping all of us sort of tackle the blind spots and the biases that prevent us from raising capital. And so it’s a 12 month cohort, we started it in March. And and it’s been great getting to know some of the other funds. You know, the left tackle team has been great and supportive in, in all in all of our needs, just helping us by providing different speakers and trainings on different topics. And so it’s been helpful. It’s been it’s definitely been helpful. And it’s also important to sort of surround yourself by other funds, or going through the same pains with with trying to raise their respective funds. Sure.
Is it? Is it mostly on the back office side? And the sort of the strategy and the structure? Or is it also helpful when it comes to fundraising?
As far as these programs? Yeah, so it’s helpful. We’ve done modules on storytelling, and advice training, but then we also done modules and sessions on funded ministration, and portfolio construction, and, and all stuff to think about and being a better fund manager. And so, and also, yes, as far as the fundraising, we’re all sharing ideas on on how to best fundraise, and all sharing stories, and ideas and typical questions that we get. So it’s a it’s a collaborative community.
So Simeon, I’m going to give you a hypothetical, this question is called three data points. So I’m going to give you three data points. This isn’t how investing works, but based on these three data points, you can ask me three questions for three specific data points. And in order to make a decision on investment,
so make a decision. Okay.
So you’re not gonna have eight unfortunately, but
I’ll take it
semi and let’s say your approach to invest in a FinTech SAS business with five k of MRR and 20% month over month growth for the last three months, the catches here again, you can only ask for three specific data points to make your decision. What three questions do you ask?
I wish I wish it was this easy. I would probably first ask about background on the founder the team. I would want to understand the key differentiating factor. To the competitive landscape, so what is their key differentiating factor? Yep, then I would want to see traction. I want to see what the current traction looks like now. And so that would be the three data points.
What extra traction Do you want to see besides sort of the EMR and the growth rate?
Yeah, absolutely. I’ve done investments with companies pre revenue. So we want to see users traction on users, how many users is understanding how many users are signed on to the platform right now, and what has been the user growth month over a month, we would want to take a look at that. I can give you an example with one of my companies with these three questions that I invested in that was actually pre revenue, that would help. Okay, yeah, yeah, so one of my companies pedal card, their consumer credit card that is built on cash flow, underwriting, determining your credit worthiness, rather than, like old school. So traditionally, any of the big credit cards, from the big banks or American Express, they’re all bikal score is the number one data point that he used to determine whether you’re approved for the card or not. And so this has been historically for years. And so here’s a company that saying, instead of FICO score, let’s take a look at what your cash flow is what cash you’re bringing in, let’s use machine learning to understand the banking data and determine who should apply for credit card. So when I met the founders, I invested in their seed round. And the founders were amazing hustlers strong background, they had backgrounds in financial services, they had backgrounds in cards, they already had sort of, you know, trifecta already CEO, CTO, CFO. Usually the time now is the best day not many companies had a CFO. And so you know, I like that they had that already early on, they built a strong advisory board, made up of mentors who had been in the financial services and credit card space for many years. And then they also started to build strong bank partnerships. So that was the founder and the founding team. They also had a team of complementary skill sets. So that’s one bucket, you want to talk in terms of the key differentiator is the fact that they’re using cash flow underwriting to determine credit worthiness. And so that’s new in itself. It’s very risky, because they’re one of the first movers in that market. But I also believed, you know, going from my background, and just seeing my friends who had hard times getting credit, I viewed that as a key differentiator. And something that’s definitely going to revolutionize the way we see credit down the road. And then the third bucket if you want to talk about traction, at the time with very, very little limited marketing, they did their research and talk to several millennials about this. And they garnered a waitlist of over 100,000 people who wanted to cart this is a situation in which in which no revenue at the moment, and they’re taking their time to make the back office operations of the card work perfectly. They were a visa branded card web bank as a bank partner, and they were using a tool to help people, you know, increase their FICO scores, and getting access to responsible credit. And so honestly, on those three was one of the biggest reasons why we decided to invest in
that is a huge waitlist 100,000
that is that is hugely weightless,
what Simeon what happens when you find, you know, an amazing founding team with great functional skills, but there might be a mismatch in the domain, or, or even the sector. So it’s, you know, a group of people that are smart, capable, out there kind of moving into a sector where they have no background.
Yes, yes. Again, it all depends on who they’re adding to their team. And I’ve done a situation with that as well. Smart, smart guys, smart founders, you know, had strong working backgrounds. But they had no experience in the space. And they were particularly in the direct to consumer furniture space. So they didn’t have manufacturing experience or furniture experience. What they did was they hired a strong interior designer, and were able to, to find a factory that was able to manufacture the design that they wanted, and they were able to make it work. And so if you want to talk about, again, the same three buckets with that situation, it was the founders strong backgrounds, undergrad and MBAs both of them. They hired a very impressive of interior designer, then when you want to talk about the second bucket of key differentiating factor, it was a direct to consumer furniture that pretty much shipped in three boxes, it allowed you to assemble it yourself in less than 10 minutes. And it was a quality of luxury brand, and not sort of a cheap quality of the furniture. And so they have been running and they have gone on to sort of raise a Series B. And then if you want to talk about traction, they had somewhere between, again with very little marketing, somewhere between between 708 100 pre orders of the furniture, again with very minimal marketing. And we came in and there Seabra
amazing. love seeing those, right, they’ve, they’ve sort of created something out of nothing with very little capital to start.
Absolutely, absolutely. There’s
a way we talk about the hustler than the mentality of the founders and the team 100% Simeon, what resources have you found particularly valuable that you would recommend to listeners?
Yeah, um, you know, I do a lot of books, I do a lot of podcasts, as I mentioned, you know, I love listening to other GPS, talk about their stories and, and share their path to success. So, of course, you know, was listening to the full ratchet before you and I met and listening to other VC related podcasts. And then several GPS have medium accounts and medium articles. So I do find those very helpful, touching on different topics in in the venture capital community. Awesome. Simeon, what do you know, you
need to get better at,
it’s about constant improvement. I can always be a better investor, I’ve had success. And so that’s not clouding my judgment, given that I’ve had early success. So I know there are things that I can do today to be a better investor. And so there are other ways that I can continue to probably add to the framework or evaluate companies. There are other ways that I can maximize the use of my network, to help company. So you think about, you know, just being a better investor, and being better at helping founders, I can always improve it.
You take a lot of pitches from founders, what what words of advice would you have for them on getting better at, you know, articulating their story in their vision and in making a compelling pitch for for a VC?
Yes, I would say make sure that it’s clear and concise in their investor decks, what problem that they’re trying to solve, and why and why it’s a big problem worth solving. And then it’s important, I think, where some, some may get lost is being able to articulate what your business model is. And ultimately, how you make money is usually in those two areas where you see can can use the most improvement, and just being able to articulate why their product is differentiated from other competitors in the landscape, or bigger enterprises that can easily create the problem. It’s, it’s about them articulating that and also articulating how they intend to build to build their team.
Very good. And then finally, here, Simeon, what’s the best way for listeners to connect with you?
Yes, I do get a lot of inbound. I do talk to founders from cold outreach, so you can reach out to me on LinkedIn. I also get the emails directly from my website at NoemisVentures.com. And also feel free to email me at Simeon@noeminventures.com. I’m also active on Twitter as well, @siheagwam.
You’re the man Well, thanks so much for doing this to me. And every time we we speak I learned something and it’s inspiring to me in here. You know myself, I kind of I didn’t come from VC and I built a firm, but I’ve got a lot of advantages right in in this industry that that others don’t necessarily have. And I’m just you know, privileged to get a chance to talk with you about it and, and continue to watch your your rise to success.
Yeah, thank you, Nick. I appreciate what you’re doing. And in and our stories are quite similar coming from unconventional backgrounds. And I appreciate you giving me the opportunity to sort of tell my story.
You got a man looking forward to chatting again. Thanks so much.
Yes, thank you have a great one.
That will 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 us 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 dotnet and until next time, remember to over prepare, choose carefully and invest competently. Thanks for joining us.