347. Lessons from the Largest Latina Solo GP, Being Impactful Without Being an Impact Fund, and How to Use Sales Tactics for Success in VC (Samara Mejia Hernandez)

Samara Mejia Hernandez of Chingona Ventures joins Nick to discuss Lessons from the Largest Latina Solo GP, Being Impactful Without Being an Impact Fund, and How to Use Sales Tactics for Success in VC. In this episode we cover:

How Authenticity Benefits the Bottom Dollar
Tips on Raising a Fund While Facing Adversity
Maintaining Mental Health in VC
And more!

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Transcribed with AI:

0:00
Samara Mejia Hernandez joins us today from Chicago. She is founding partner at Chingona Ventures, a pre-seed stage venture fund, investing in overlooked growth industries, specifically within FinTech, female tech, health and wellness in the future of learning. Prior to Cingona she was an investor at MATH Venture Partners and worked in business strategy and asset management sales for Goldman Sachs. Samara, welcome to the show.
0:27
Thank you for having me. I’m excited.
0:29
Always a pleasure to see you. The office mate, just across the hall from your room, which was kind of funny, but Samara walk us through your background in your path to venture.
0:42
Yeah, so starting all the way back. So my, my life started in Mexico where I was born. And that’s relevant to today. But I was born there. I came to the US when I was six years old. So grew up in a dual language, multicultural, low income household, that’s a lens I’ve always brought to my investing style, picked up math because and I picked up English. So that’s what led me to study engineering at the University of Michigan. And I fell in love with Wall Street. Goldman Sachs was at a conference, an engineering conference. And I was like, What do you guys do? This is back in Oh, four. So I had no idea and was able to do two internships there. I worked in the public markets, it was a great time to be in that industry at the time. And then I joined full time, right as right in the beginning of the last financial crisis. So that was an interesting time to sell financial products during one of the worst markets. And when we were in the news every single day. So it taught me a lot about sales. But essentially, it’s still solving a problem what I basically what I did an engineering, and then I was there for the most of my early career, went to Northwestern for my MBA, and then did an internship at an angel group here in Chicago, fell in love with early stage investing. And then when I graduated, I convinced Mark Achler and Troy Henikoff to hire me. And they did. And so I was able to spend time with them across from one fund to and then really helping build the firm from the ground up in a taught me a lot that now is applicable in launching my own firm. So I was there for about five years. And then I launched Chingona Ventures in April of 2019. That was a fund one. And then just this year, we launched fund two.
2:23
Amazing, amazing what was the angel group that you started out with, out of curiosity?
2:28
So West Suburban Angels,
2:30
West Suburban angels. Okay. All right.
2:32
Do you know them?
2:33
I used to have an office in Naperville and I used called Naperville home. So that’s the HQ for West Suburban. Yeah, well, very good. Well tell us more about the thesis at Chingona.
2:42
So we aim to be the first and largest check into any company. We’re true pre seed investors. And we’ve gone free product pre revenue, pre name pre, pre pre, so we’re not afraid to go super early. We like to go into industries that we know that are growing that are massively underfunded. So sectors are FinTech, future of work from tech Foodtech, health and wellness and future of learning, we call it and so and I like to invest in next generation badass founders founders that don’t fit your traditional mold. And so that’s the thesis we’ve gone with. Because we saw an opportunity in the market. When I started in venture capital, I saw an opportunity to go in earlier, especially in areas like the Midwest that don’t have huge Angel networks. It’s growing, and it’s getting better, but certainly not like Silicon Valley going industries that were growing up and not getting funded, where consumer demographics were changing. And then founders that didn’t fit your traditional mold.
3:34
Amazing. So it sounds like you’re leading deals if you want to be that first check super early. Do you have ownership requirements as well?
3:41
Yeah, we try to target when I’ve modelled it out a few years ago was 10%. But obviously, the market changed valuations were all over the place. So we’re looking at five to 10%, equity, ownership, entry, equity ownership, but we pretty much buy it back to be pre Series A. So we’d like to target like to build it up, up to 10%. pretty seriously.
4:02
Got it. You know, I want to talk more about the market later on. This might be a good time. What are you seeing in the precede seed landscape? Are valuations coming down? Or are they about the same as they were during the peak of the hype cycle in 21? I’m curious to hear your thoughts.
4:19
Yeah. So we actually did a, we collected data on this. So we have an inbound submission where anybody can submit their business. And so we collected valuation expectations for founders that submitted their their business to us the last four quarters, just to see if the market has actually corrected in the presidency. And so we pulled out all precedency deals. We looked at about 3000 deals per year, and over the last four quarters up until about two or three weeks ago, not only have valuations not gone down, they went up slightly in the second quarter. So what that was showing was that valuation expectations for founders was necessarily coming down, it was absolutely coming down in the growth markets as we were seeing because they’re directly tied to the public markets. But it usually takes about nine to 12 months in the private markets to see it. And so we hadn’t necessarily started to see the valuations go down. However, we are getting a ton more inbound c plus deals because series A funds have slowed down essentially, or companies are raising an additional seed round or bridge round to get them through to the Series A. So we’re seeing a lot more of that. I do think we’re going to start to see a correction in valuations this quarter and into the fourth quarter. And I’m even from investors, we’re starting to make sure that company has enough runway, call it a year 18 months to really prove out that initial thesis, we’re no longer overpaying. Right? Basically, what the what does that mean? That means like, a $10 million cap with a deck and nothing else, which was starting to become common in the last few years. And you were not closing as fast, you know, like deals were closing after a 30 minute meeting last years, which is crazy. And so we’re, it’s nice to do due diligence. Again, it’s nice to get to know the founder, again, both for them to get to know us and for us to get to know them. So it’s a needed correction. It’s a needed, you know, deep breaths in the industry, but it’s still something we’re watching, especially with our portfolio companies.
6:23
So are you pouncing on some of these opportunities at seed extension? Or c plus when they’re coming back to market? Or are you kind of forgoing those?
6:32
Yeah, you know, there was actually Gail Bowman from Vitalize VC here in Chicago posted something on Twitter, and she tagged a bunch of us. And I think it was only one that said, No, a lot of you were like, yes, we’re finding opportunity. Like I did start to look at some of these, right, because it’s not that they’re bad deals, they’re really good deals. And even some deals that we looked at, we just passed on, that are getting a lot of traction with the conclusion I came with was that that’s not the money that we raise. That’s not the thesis we’ve raised off from for our LPs, right. We also it’s an area that we know, we’re less comfortable with, I mean, bullpen, you know, basically raised our whole fun off of this, and they know it and they’ve made money off of it, you know, where we like is we’d like to be the first check in, we’d like to be the first institutional check in but I’d be very involved with the companies. So C pluses, you know, we’d be a smaller check, it’s a bigger round wouldn’t be as involved, our entry price would be high, we’d have a hello equity ownership, we can’t buy equity pre Series A. So there’s all these things that just don’t make sense for our fund. But you know, like with any, anything that’s hot in the market, you kind of look at everybody on Twitter, saying that they’re that they’re looking into it, and the kind of like, you know, should I be doing this, but ultimately, I decided not to and to focus on what we know best. And that’s the precede market.
7:48
Yeah, how did you decide on preseed, and to stay at preseed with a new fund.
7:54
So when I was at MATH, actually, we did see to some growth. And I personally just love getting in so early. I love love working with founders super early, when they have the idea stage, and I am very comfortable with it. I know, it’s very risky. For a lot of people, I know they’re going to change a couple different times, hopefully not too much, because pivots are expensive. But I love that stage a lot, because they’re in the early stages of building. And that’s where I saw the biggest need. There’s very few founders that have friends and family capital, that have access to Angel networks. And so to be able to have a VC, who can lead the deal, who can set the terms who have done, who’s done all the diligence, who’s helped catalyze other VCs or other investors is something that I saw really helped the company grow and get to that next stage, we help the companies also get institutionalized. So what does that mean? That means just creating a board, having, you know, incorporation docks, right and have your legal structure, right. And that’s something that people wait until the seed stage and for many seed investors, even, you know, they will, some will do that, some won’t. I mean, just just even just the basics that you need to become a venture backed company is something that is often not put together and it can be expensive later down the line. And especially with a lot of the founders that we back, they may not know that or understand that. And so they have all these other things, their way of you know, having to have more traction than many other people have have more attractive valuations than the others. And so getting that right, getting that together, helping the company, institutionalize helping them raise the next round, put together their deck, helping them think through the different revenue streams, help them with their pitch, all the things, but I love that stage. Not everybody does, right. There’s some people that like need to have data, want to use that to make investment decisions that are uncomfortable with the risk. I personally love it and that’s why I’ve decided to stay there and also right I mean, there’s a higher risk Turn profile a lot riskier. But if you can get an AED a 3459, our cap and get acquired for anywhere 400 million plus, that’s that’s not a bad exit, depending on how much they raise.
10:13
Yep. 100% Yeah, I noticed you’ve taken a number of directors seats and observer seats with startups, what’s kind of your approach to boards and when to form them, and you know how many you feel like you can sit on?
10:27
Yeah. So right now I have nine board roles, four with board directors and five observers. So the goal is to get off of a lot of these right, once the company gets past precede. And I won’t go past nine, essentially. So what I feel grateful about is that many times when I’ve gone to companies to get off the board, they’ve said, we’d just like you to stay on for one more round, just because hopefully, I provide some value. That’s the goal of the board, besides representing the shareholders and all other things. And so I’m grateful for that. And many times, I do join the board, because I’m the only one that represents the customer base, I’m the only one that represents, you know, who they are, who they’re targeting on their cap table, they want a different perspective across the cap table. And so I’m grateful to be able to provide that. But they took a lot of time. And, you know, but I personally love it. I personally love being so involved with the company, and that’s where I truly enjoy. But the goal is to really get them institutionalized to get them and to get to that next point to get them to just create, you know, financial models understand how to approve things, understand how board meetings are run, understand how to put a deck together, oftentimes, literally, I’m saying, This is what you we talk about at the board meeting, people don’t even know, this is what we need to approve. And so it helps the company get more structured. Now, that being said, I know not everyone agrees with having a board of the precedes sometimes people can say, you know, it’s a distraction. And my goal is not to be that, you know, if they want to do monthly calls, when our calls great if they want to do a quarterly calls, that’s the minimum that we do. It helps them set a structure and provide even just something basic as regular updates to their investors. We’ve talked about this on Twitter, we talked about with investors, but just something as simple as sending regular updates to investors can preempt term, she can get them off her back and basically say like, Okay, you’re doing well. And more importantly, have you asked them what you what you need, and have your network help you. And so that’s something that is overlooked, I think, in a lot of these early stage startups, but we help them kind of, you know, think through that. And then once they get to the next point, it’s not this heavy lift of putting together a data room putting together you know, financials, because they have that all there already. And you know, we fundraise, too. And I’ve done that for my fundraiser as well. It’s like, what, what can you do that you can control? Many times you can’t control the market, you can’t control if someone’s gonna like, you can control all the things, but you can control Are you prepared? Do you have a process? Do you have your story down? Do you have your data room with everything in there, the less you have in terms of traction, the business, the more you should have in terms of what you can control and look like you’re a buttoned up company, because you want to reduce the reasons why someone’s gonna say no cheap.
13:05
100% Yeah, there’s, there’s a difference between starting a company and becoming, you know, institutionally fundable. And there’s a lot of structure involved in for the first time founders out there, especially the ones that aren’t on the coasts, and don’t, you know, go for brunch once a week with a bunch of other founders. Some of these, you know, base level habits are just, you know, it’s a new thing for them.
13:28
Yes, exactly. Exactly. And so for us is we wanted to reduce as much as possible, the things that we can control and the things that we can structure around that. And then they have enough thing is their way of trying to find their first customer launch their product, hire all that. And so that’s the goal. And and so far, we’ve seen it work.
13:48
Amazing. So some are earlier this year, you finished raising your second Fund, which closed at an impressive $52 million. You did this as a solo GP as a woman of color in what is still a male dominated space. What was the greatest challenge you faced in building this firm and raising this fund?
14:08
Well, besides the fact you’re so so GP, you’re raising, you’re doing all the calls, you’re doing all the requests for data room stuff or information. It was also during the pandemic and it was also as a mom of a three year old toddler whose school kept closing down, write it all the things and one of the best stories I know is, is when I pitched an LP, and my son, for some reason, just wouldn’t have that day and I scheduled a call during nap time and was just screaming off the top of his lungs. And I ended up just like thinking okay, do I just let him cry, but it’s my pitch or do I just get up and excuse myself and get him and I did. I ended up doing that and look, is an LP is anybody that’s going to be involved with a firm, that’s my life that especially during COVID they intersect right? And everybody saw that. And so they ended up the LP ended up investing, which I was very grateful for, but Yeah, that’s just an example of like, Hey, this is just what we do. And I was very grateful for them to do that. And just to be able to show my full self at work, and so having to manage all of that was rough. And also, there’s a lot of reasons why people are gonna say no to you, and every fund manager has a has a hard time raising unless you spin out from a big firm or, you know, people. So I had to learn what was authentic to me what was real for me and know, my people, basically, the people that just loved it, and then the people that it just wasn’t going to be a fit, instead of going down this rabbit hole, and you know, spending time on both sides, just being able to, to qualify LPS early on. So, you know, there’s obviously a lot of bias, there’s a lot of all the things that we talked about, but really, it’s like, getting to know who is excited about what you are uniquely doing, who is someone you want to work with? And who is someone that you know, can write a big enough check and really believe in what you’re building? And, you know, I know some I talk to my, some of my GP friends, and I’m like, Well, you know, you can choose your LPs, you can tell them no, and they’re not going to come the next one. I’m just like, I’m not at that point, yet. Certainly, you know, have that swagger what I love. Right? Right, exactly. But you know, I fundamentally believe what I’m building it and look, and part of that is, you know, we don’t just invest in women of minority, just we have 80% of our fun one CEOs are women or minorities. And we can’t wait, we track all founders, but particularly CEOs. But in fun, too, we had a lot of people that wanted to either donate or one just to be impact or wanted us to just be focused on that. And that’s just not what we do. We don’t consider ourselves an Impact Fund. Although we do impactful things. We don’t just invest in women and minorities. But it just so is what happens when you have, you know, a network in this space. And so that was a big challenge early on. And when I just kind of was able to just say, No, this is what we’re doing. And here’s why this is where we believe we’re going to get the best returns, when I changed from that perspective that was authentic to me is when I think the fundraising changed. And so I’m very grateful to have a bunch of incredible LPS that came in and that support us for what we’re building.
17:22
Amazing. When you were pitching LPs, did you find certain things worked really well, and other things didn’t work? Were there some lessons there that you could share?
17:31
Yeah, I mean, it’s kind of like I think maybe, with anybody raising quitting founders, but But you know, within the first few minutes, if somebody is really excited about you, right, and so what worked while I think was I told my story, I didn’t use a deck, because I, at least in the first meeting, I just use the story and other people are investing in you, right, the team, because I have a track record of investing in 27 companies and fund one, I have a track record of investing through math, but it’s in venture as you know, it’s still early. And so they were still investing in me as a person. And so when I told my story, and and then obviously dove into the portfolio and my thesis and how I was gonna make the money and all the things when I saw them engaged and excited. And I was able to preempt the questions that I knew I would always get. So why sold up? Right? That was the number one question I sold up my time. Why am I on so many boards? What do I do with my time? How do I assess companies because they’re precede they have no traction? So what do I do? And then you know, why not just women and minorities? Like, those are like the top four questions. And so you kind of get in your groove, and you just say, alright, you just addressed them upfront. And so then you can get into like, the good meaty stuff. And if those four questions, were still questions in the beginning, you know, it kind of like, well, I’m sold up. So if you absolutely need someone that’s not sold up, this is just not going to work. And again, it’s not the swagger thing, or whatever. And I potentially might bring on a partner at some point. But it’s just getting through that and understand being just very clear as to why this works right now. Why it works for my stage, why it works for me why it works for my experience of being in larger teams. So that he that’s what worked well, I think, you know, one of the things that I wish I would have done is ask for more intros. So I everyone comes in and asked me for intros, you know, to people that I barely know, and I never did that and that even with my closest GP friends, or even LPS i Yeah, and it was just like, that was silly. Why didn’t I do that? But I was grateful that a lot of LPs that knew me, well just did it on my behalf. And those are the best introductions when other LPs introduce you to their LP network says extremely grateful for those LPS that did that and obviously that will change and fund three. But that was the big thing. I think one last thing I just what worked well, which I think is something that is overlooked. And in the fundraising process is a process. So when you go out to raise it’s a sales process. I was in sales at Goldman Sachs for many years. And so I built out our tech process, you know, in my territory, I suppose we have a target. And so you’re in and that takes time away from investing in new companies that takes them away from hiring. And so I created my data room, I had my pitch buttoned up, I had a, we’re gonna spend three months putting that together, I had my whole list, my air table, and the follow up and like, on my calendar, I color coded them red in my LP meetings. And if I didn’t have enough red for the week, I’d cancel some others and try to build the top of the funnel. You know, I booked 30 minutes afterwards in case we went over and or if I did follow up immediately, people forget about the follow up. So I treated it like a true sales process as well, even though it was still hard because I was still deploying out a fun one. And I was trying to hire and all the different things, but it takes time. So I say, you know, those are things that worked well and didn’t work well. And also, you know, it takes a toll. Personally, I will say this, and I don’t think enough people talk about it. So I want to make sure I’ve mentioned it. It’s a grind, it’s rough, especially when you’re going through the pandemic. And so and it’s lonely, it’s lonely in BC, but it’s even lonely hours and sold up. So I relied on my network of other GP friends just be like, just talk through it. And just, we have one of my friends we had like, what do you call it like a bee session and just like complain session of what’s going on, like how we’re frustrated with this and that, and then we would just complain. And then like, Alright, now we’re now we got, let’s, let’s talk about how we can do this. And so that helped a lot and and now I’m grateful to finally close and make sure I recalibrate and take a vacation with my family and actually not work or fundraise and spend time really thinking about what I know the deals, I want to do the thesis, we want to build the hiring piece of it. So I don’t think we talked enough about the mental toll it takes on fundraising as a sole GP to or just in general. But I think it’s something it’s important to address as well.
22:01
Yeah, it’s a common misconception. I think people don’t realize the sacrifice and the effort that goes in two running an investment firm in raising capital in BSL GP, I was interviewing for position recently in this nice young gentleman, you know, I asked why do you want to be an investor and not a founder? Well, I, you know, I don’t want to do all the work. And I don’t want to do all the late nights, you know, I want to pick and choose the people and I was like, oh, no, I understand this is a business as well. You know, yes. Especially during the fundraising, as you mentioned, late nights, seven days a week, you know, a lot of family time that’s missed and hobbies in even fitness, you know, every everything in your life that create some balance, all the things are really tough.
22:46
After Yeah, yeah, I mean, like, it just didn’t work out as well. All the things, you know, I’d would wake up at three or four in the morning, instead of working out like I normally do is just start emailing. So yeah, it’s it’s rough, but we got through it. And I think now’s a good time to focus on that piece of it before the next fundraiser.
23:05
Awesome. So how did the strategy change during the fundraise, right? As you took the fundraise target up and you thought about portfolio construction deployment, you know, walk us through how the strategy evolved.
23:17
So fund one, we targeted 30 companies, we invested in 27. And fund two, we were targeting 30 companies, we were targeting a $25 million fund size, and we were still gonna focus on pre seed, how that adjusted was in our first closed last year, we got 80% of the way there of our of our initial target. So I was grateful that there was market interest. And also valuations were increasing aggressively, we had modeled out three to $5 million pre money valuation proceeds were going up to 20 million pre money or caps. And so we wanted to make sure we still were the largest check and we had our equity ownership. And so we want to increase our cheque size, we increase our fund size slightly from 30 to 40, targeted investments, where we will lead about a third of those, and we have follow on capital now, we didn’t have much in fund one. And so we did our whole model to get to the you know, the return that LPS need. But that was the biggest thing is increasing our cheque size, slightly increasing our portfolio fund size. And that was the biggest thing. So we’re grateful to over double our initial target. And especially in this market now where we we close and it provides us capital to be opportunistic, and to deploy and to continue to, to double down on investments that are working, especially in a market when it’s hard to fundraise. And because we have inside information. So that’s another reason of getting on the board and being so involved with the companies because you have that and so I’ve have examples of companies that came to us and said, Oh, we’re gonna go out to raise because we need this capital for this and I’m like, wait a minute. I saw that. I know exactly what they’re building. I know exactly how much they need. Why go out? Raise, we can give them a term sheet, we can give a breakdown, literally the next day, they can get back to business. So it’s a win win for both parties. So again, that’s what we really what we did to slightly make changes. But our strategy of being the first and earliest investor was always our strategy from the beginning.
25:18
Yes, Samara, I think, to date, you’ve inspired many in venture and beyond with your story and everything you’ve been able to build it and go into. Can you talk about the vision three years from now and then more of the long term vision for your firm?
25:34
Yeah, like I want to build an enterprise, right, I want to have as go beyond the small dollars, my founders need the big checks. And there’s a lot of funds that were raised the last few years, especially for some of the earliest are checks that precede the seed. But there’s less on the growth side, there’s less on the series A and B, we still rely on the traditional players and the bigger players to for those checks. And so my goal is to build that entire funnel the entire caps capital stack, and to build an enterprise, I need to prove out fun one, and I need to prove out fun, too. And, you know, one of the things that we talked about internally as fund managers, but also Henri mentioned this, I think on LinkedIn, or Twitter, Andre from Harlem capital is that a lot of people have invested in in groups like ours, and When more women more minority minority women even less, right, but but like we’ve we’ve started funds we’ve been raising, and you know, there’s a lot of failure in venture capital. Most VCs don’t do well, and they fail. But we just feel like there’s a spotlight on us. Because, you know, we, we need to make sure we get the returns, but people are gonna say, Well, this is why we don’t invest. Right, this is why we don’t get a lot of the funding. And so there’s, I think there’s an increased pressure. And I appreciate you saying that, that people have reached out and looked up to what we’ve done. And I’m very, very grateful for that. But it’s also something that we need to prove and to be able to open the doors for a lot of other people to get more capital. I don’t want to be the point 1% of women, Latina GPS in the country, we need to open that up and open doors for people. So I’ve been involved in some of those efforts through certain organizations just through the committee network, mentoring, guiding, helping through that. But ultimately, it’s returns that we need to prove out. And so that’s what we’re working on.
27:25
Okay, so in light of that it’s all about the returns, it’s all about investing in the right startups. Let’s talk about that. So it begins with the sourcing, and then we move on to selection, you know, how are you sourcing deals today? You know, where are they coming from? And how do you filter all the volume? I mean, we get substantial volume and the press and everything else, you know, around you go and I imagine your volume is off the charts. So you know, how do you weed through it?
27:50
Yeah, so like, my background is Industrial and Operations Engineering. So I like process. I like structure. I like using technology tools to automate things. It also I think structure and process allows for removal of some bias. And I got that that concept early on. With a venture fund in San Francisco, that wasn’t a lot of cap tables of founders, I was looking at a lot of women and minorities. And I was like, does this firm have an initiative to invest? Like, why am I seeing them on all these cap tables, and it was like, no, they don’t take any warm intros everything to their website, they make a decision pretty quickly and they get back to a founder. And it’s like you have to have a minimum MRR, you have to have a minimum, like all these different requirements. And what I realized is that a lot of founders that are in this space, or many times that reach out to us do have more traction than other people do have all the things there’s just this added layer of bias around, I don’t understand your market, all the things founder, CEO background, all that. So for me to be able to process a lot of inbounds but then also to be able to reach founders that won’t necessarily have access to a venture capitalist. And to try to remove some bias in the process. We have a structure that most people love, where anybody can can submit something through us it’s a it takes five minutes to submit your online application. And this is whether you find me on Twitter, on LinkedIn, you send it Nick, you know, whoever it is, everybody goes through the same process. And it allows us to quickly assess, alright, this is a founder based outside of the US. Does it make sense take a meeting is outside of our thesis is outside of our evaluation, round size, all the things and so we look at every single submission that comes through we can clearly see yes or no. It allows us to be transparent. Give it to founders very quickly. People are surprised that we’re a team of two full time people and the rest are kind of hard time we’re hiring. But we’re able to process up to 100 inbound submissions per day which we got in May which is crazy. And also your its founders time as well. So I make sure that the founder is outside of thesis outside of valuation all that I have a whole process that that people can see online in terms of what we love, what questions we’re going to ask. And founders have said to me, Wow, okay, we’re outside of your thesis, and I just read all the things that you like, or what you’re going to ask. And thank you, thank you so much for just being transparent and not wasting my time either. So in general, I would say people love that. There are a few that, you know, thinking might not be personal or don’t like to submit online form. But I think I would more than not, I would say about 80 to 90% of founders can appreciate it, especially founders that have been going through the process for a long time, because they can appreciate the quick yes, is the quick nose and kind of moving on?
30:40
Well, especially if you’ve been at this long enough, you realize time is the most valuable resource, even more so than capital in for an investor to save you the time, you know, the 30 minutes of Oh, this isn’t a fit, right? You’re raising at too high a cat, or, you know, you’re off thesis, some people just don’t get that, you know, they get a little offended that you don’t want to take the meeting? And the clear answer is, look, there’s no way that we could ever get there. You know, there’s just not a match on this one. Right? You talked about what you love, and what you look for, you know, some of those key questions that you’re going to ask, can you give us some of the highlights on your diligence process, you know, some of these key factors that you select for and the must haves to make an investment?
31:22
Yeah, so we have a framework called the five P’s: people, product, profit, potential, and portfolio. People’s the biggest one, because that’s precede that there’s that much on a lot of other stuff. But there’s definitely a lot around people. So there’s three types of founders. One is a kind of an experienced founder, that, you know, maybe started a venture company before back company. And it’s not differentiating, but we’ve invested in those two, everyone’s going after that, there’s a second type of founder that’s experienced, but may not have started, a venture backed company may not have ever raised money may have worked at a large tech company or large company that has run teams, but not have done a true startup. So we’ve invested in those because they have a great network, great founder Market Fit understand a market and the infrastructure around that market that fundamentally broken. And so we’d like that, but they need help with being a venture backed startup. And then the third is non traditional. Think about somebody from Nebraska who, not in an ecosystem that has a lot of startups, doesn’t have much experience, maybe younger in their career, but has found a unique problem in the market, and is getting some early validation. And these are founders that nobody I don’t think is targeting me. Because when I talked to them, they don’t geography founder type problem, all the things. So that’s an opportunity for us. That’s what we really love. There’s actually one right now I’m looking at an El Paso, Texas with an LP of mine, that she’s a founder that started at a university that basically had a problem that she wanted to solve herself. And she just hired an intern to build the tech. And so she’s built this product that we’re universities want to pay 30, a minimum of $30,000 per year to us, and she’s getting early validation. And is someone in Silicon Valley targeting know someone in LA targeting or no. So it’s a great way for us to dive in deeper and and get those unique deal flow sources. So that’s where the being in the Midwest really helps as well. Yeah, and then the other Ps product with for a real problem that people really want. And that’s just nice to have. But I need to have profit being in the Midwest. It’s also nice. We’ve always liked good union economics, we’ve always liked path to profitability and revenue. But it’s just become like that thing. Now, again, which is good potential. Are there other funding sources in this space, exit potential, and then portfolio how it fits in with our portfolio, it might, you know, make sense, and it’s interesting and find a market fit. But if it’s something in the pet care space, like we saw yesterday, it’s not something we know, or our focus area. So we’ll pass on that. But those are the five P’s. And then we have our process of first meeting, second meeting, third meeting legal diligence, and then gets it closed, we typically try to do around two weeks of really good full diligence, and then a little bit longer if we wait.
34:08
Wow, that’s pretty quick. That’s good. Before we close out here, I want to talk a bit more about the market. So we talked about our own efforts in being an investor and how that’s changed sort of seed valuations. Want to get your take on series A and beyond and then LPs, as well. Maybe we’ll talk about the A investors first. So what are you seeing from the follow on investors right now? And how does that inform the way that you work with the portfolio?
34:34
Yeah, I mean, it’s a lot slower. For sure that there’s a lot of people pausing Yeah. And so like many of our many investors, we’re working with our portfolio companies to extend runway you know, cover and all that but think that the one thing that we’ve talked a lot about is that there’s no blanket feedback for all your portfolio. I can’t just say Alright, everyone get to two years of A runway, everyone gets a three or two runway, I was on a board call last week that the founders like just focus on getting to default the live. And I’m like maybe that’s not necessarily what you need default to live right maybe just getting really attractive to the next set of investors because you do have profitability, you do have revenue, you do have crazy growth and good unit economics. So let’s work towards that. And so I think there’s a lot around just back to fundamentals of building a product that people want, getting to the point where you have enough information to say, yes, we continue this, or no, we don’t. And that’s another conversation. One of my GP friends said this, he’s like, it’s hard enough being a founder, but it’s going to be a lot harder being a founder in this market. And so how do you want to continue this? What do you need to prove to get to that next point, and even if you have a year runway is this is it going to work, and if not, let’s figure out that now, right versus waiting another year and trying to raise and all and all that instead, figure out what we can do for the company instead of waiting a year. So there’s a lot of conversations that are around, okay, not just cutting burn and extending runway, but getting to a good point for that next stage, deciding if there is a next stage. And then another piece of conversation we’re having is around, you know, the managing the growth and the burn. So it’s not just about cutting costs, because you still have to grow. Sometimes flat growth is going to be good, especially in you know, certain markets or certain types of startups, sometimes 40% month over month, growth is going to be really good. And we you can do it in this market. And so I haven’t found the right formula, but it’s really understanding the business understanding that piece of it. Another thing from the growth side, one of our LPS is a growth investor. And we had a conversation with him recently to the topic about managing burn and revenue growth is focusing instead on current customers may wouldn’t necessarily new customers, but upsells and contract expansion and what that looks like. And if you have a working product that people love, focusing in on that, stalling some product development features and building out the engineering team, but focusing on a product that people love. And then being able to to potentially change the way you compensate your salespeople. So like, for instance, I worked in sales during the financial crisis, and we got paid on AUM that we brought into certain products. But then during the financial crisis, there was no new money coming in. And it was how do you just maintain and retain the assets that you have in each product line? And so that might be what will fit in a startups environment, right, necessarily growing new customers, but keeping the current customers and just maintaining that with a little bit of upsells? So just giving a few examples of there’s no right solution, right. But we’re uniquely understanding of company’s business model and what makes sense for them? And does it make sense to continue to operate the way they are operating? So that’s, that’s discussions we’re having?
38:10
Well, I hope everyone in the audience hears that loud and clear. It’s not one size fits all. Because if you turn to Twitter or LinkedIn, you might think it is. It certainly is it you know, many of the startups that we deal with that are off the radar, their growth fundamentally has had to be creative. And you know, if you’re making more money per customer and moving toward profitability, you know, versus the investment or the customer acquisition cost, then that is something that scales well, and you can continue to invest in, right. It’s these heIp wild experiments that turned into sort of a cash burning exercise that we probably don’t need more of in this environment. But I hope that the audience thinks that well, tomorrow, if we can feature anyone here on the show, who do you think we should interview and what topic would you like to hear them speak about?
38:57
I feel like you’ve had so many amazing guests. I like trying to think of who you haven’t had on. Have you had Charles Hudson on?
39:06
I have, but it’s been a long time. It’s probably been six years.
39:09
So speaking of solo GPs, speaking of loneliness, speaking of be able to cater your pitch to be authentic to you. I mean, I attribute that all to Charles Hudson. He’s basically the first person I talked to in 2017. When I was about to launch my fund. He was the OG soldier up, he opened the door for many of us. He is way over allocated with his time and still find 30 minutes once a quarter to meet with me and to help me with these crazy things, and to be vulnerable. And so I would have him on. It’d be anything you ask him. I think he just drops bombs. But I think it would be important to hear right how the landscape has changed how he thinks about it, how he’s been able to be contrarian in San Francisco, right where everyone’s techniques The contrary, but he was the first of its kind and and he’s he could raise much bigger funds, but he’s been intentional about keeping it, you know, 50 60 million. And his reasoning why he has like 90 investments per portfolio, which is not right. And a lot of people tell him no, and you’re not going to be able to get returns, but he’s been able to show a track record around that. So yeah, I guess the big topic is being the first out of many and leading the way for many of us and finding time to give back. I think that would be a good topic.
40:27
He is amazing. We’ll have to revisit that and get Charles back on the show. Yeah, absolutely. Samara, do you have any tools or hacks that are a secret weapon?
40:38
In venture capital or just in life? No hacks per se, I think, you know, for me, it’s not necessarily a technology hack or anything like that. I think it’s something that I used early on my career when I was in sales. And what I realized being in venture capital spaces is essentially is sales, you’re convincing LPs to invest, you’re convincing other investors to co invest with you or to get you into a deal. You’re convincing founders to take your term sheet or your capital, you’re convincing people to come work with you. So it’s so easy, especially as a venture capitalist, to just fill up your calendar with all the things and not have time for yourself. And what I really found important, especially this last year, in fundraising, one of the largest funds for I think the largest first sold up Latina, which is insane, right, like, especially in 2022, is to be able to focus and to be able to set your calendar your every technology tool you use to focus and that includes getting off social media, that’s what it means that it includes, you know, blocking your calendar, that includes saying no to literally everything, which for me sucked, because I love helping other venture capitalists, I love one another. And I would love to reach out or anybody reaches out to me, and I just did not have the time for that. But being able to have that one focus. And the best founders, I found this the best, you know, people building things, you they focus, there’s only so much time in the day. And so to be able to do that, and to then really think through what are my priorities, and the first thing is family. So I don’t do many evening events, I’ve just cancelled like five this past week for, you know, Hispanic Heritage Month, because it falls on a Wednesday or it goes past 7pm, where I can’t see my son go to bed, and I travel a lot. So if it means that I’m away from my child, if it means that I don’t get sleep, if it means it’s on the weekends, it’s not going to happen unless it’s super important. And so that’s my first priority. And then for the last year was fundraising. So anything outside of fundraising I just didn’t take right now. It’s first and foremost portfolio companies and deploying and then some other initiatives, family first, right. And so for me, it’s like, Alright, I need to get my workout in, I need to take care of myself workout in I need to do all the things for myself first met it, I’ve been meditating. Now, reading, until it’s like on the plane, put a mask on yourself first before you put on anybody else. And I’ve learned that as a parent, parent, being a parent has taught me a lot. I’m sure you know this. And you know, that’s where I try to do further. So if I if I’m not feeling well, if I’m not focusing and being able to do what I need to prioritize, then I can’t be there for other people. So I’ve done a lot of that. And instead of back to back to you know, you taking breaks, making sure you you in the summer now we you know, going for a walk and just releasing a lot of that energy and making sure like I digest what just happened in that meeting. There’s specific hacks that I don’t have time for, but maybe I should write a blog on, on all the things that I do, because people have been asking me for that as well. And I think we could all share because I’m learning to how to better optimize my time, but prioritizing and making sure you focus on the things that are most important to you.
43:46
Oh, good lesson for investors and founders alike. And then finally, here’s tomorrow, what’s the best way for listeners to connect with you and follow along with Chingona?
43:55
So on our website, chingonaventures.com, we have our full process, we’re very transparent. We if you’re a founder that wants to tell us about your business, and potentially have us partner with you, and we’d be grateful to do that. There’s a Submit Form, you tell us your information, we look at every deal that comes through. We also have a document that explains our entire process, and basically what we’re going to ask you throughout the process. So we have that there. And then you can sign up for a newsletter, where we have regular updates on the website, so that’s the best way to contact us.
44:26
Perfect. The firm is Chingona, she is Samara Mejia Hernandez, the largest Latina solo GP in the country, as far as I know. Samara, congrats on all the success and thank you so much for sharing a bit about your story today with us.
44:40
Thank you for having me. I really enjoyed it. Always a pleasure.

Transcribed by https://otter.ai

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