97. Student-Focused VC Funds, Part 2 (Peter Boyce II)

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Today we cover Part 2 of Student-Focused VC Funds with Peter Boyce II of General Catalyst & Rough Draft Ventures. In this segment we address:

  • One of the biggest issues I’ve encountered at university is that schools and their students have been siloed. How have you considered bridging the gap between business, engineering, cs, and other schools?
  • Are you employing a sector or technology-driven thesis within this approach? Why or why not?
  • Why do you think that the returns for this model can be attractive for LPs?
  • How do you measure success of your efforts w/ Rough Draft? Is it the same set of financial KPIs that you’d traditional use or do you look at success differently?
  • Any missteps or mistakes you’ve made that you’ve learned from and has driven a change to the approach?
  • For those investors that have or want to focus on dealflow in university environment, what advice would you have for them?
  • For young entrepreneurs that are at a university and are interested in building a venture-funded startup, what advice do you have for them?

Guest Links:

Key Takeaways:

1- Growth Drivers of student-focused funds and student entrepreneurship
Universities are increasingly playing a role in supporting entrepreneurs where historically that has not been the case.”
  • Entrepreneurship focused classes
  • The rise of Computer Science
  • Innovation such as AWS, Github and Stripe have significantly reduced the cost of starting up and getting products into the hands of customers
  • Developments around university infrastructure allocating more support, classes and space for startups
  • Students were increasingly trying to understand; what are the sources of capital, where can we find mentors, how can we connect with VCs
  • Much more content available to help entrepreneurs navigate what it means to start a company
  • Lots of resources unique to universities that make them advantageous to starting a company
  • Outlier success of companies coming out of universities… driving even more students to become entrepreneurs
  • Alumni network support and angel investment has always been there but more recently they’ve further organized into angel groups and created funds to help in a more systematic way.
2- Process & Mechanics of the Student-Fund Model
  • Students are the core of the program
  • Rough Draft recruits students leaders that become representatives of Rough Draft on campus
  • Student leaders are running clubs, hackathons, informal social events and identifying companies to work with.
  • Every Monday the students invite in the best 2-3 startups to pitch.
  • Decision occurs the same day of the pitch
  • Rough Draft invests up to $25k and, in certain cases, they’ve partnered w/ First Round’s Dorm Room Fund, when the startup needed up to $50k to reach the next milestone
  • Uncapped Notes
3- Major Learnings from going through the process
  • More offline opportunities for people to come together in a low stakes, non-transactional sort of way. And many of these offline events are inclusive of all schools, which allows people to be brought together in a more social environment first before considering working together which, to Peter, feels like the right order of operations
  • Side benefit is they get exposed to what’s in vogue on college campuses
  • When initially considering this effort, they feared that a lot of the best CS talent might just go to grad school. They may just quit the startup and decide to get a masters. Yet, they’ve actually seen the opposite. Many strong teams have persisted with the startup despite great internship, job and advanced degree opportunities.
  • They didn’t anticipate how quickly some companies could accelerate to the next level. Never imagined that they’d make a $25k investment and have a team raise a $1M-$2M round a month later

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*Please excuse any errors in the below transcript

Nick: You know, in my personal school experience, I did a lot of coding in undergrad and then I went to business school. And I noticed for both of those experiences that a lot of the schools on campus were, were pretty siloed, including their students, you know. How do you think about bridging the gap between the cs school and maybe the business school and the engineering schools and, and many of the other schools to get, you know, the right combination of folks working together?

Peter: Yeah. This is, this is one of my favorite problem spaces. I’m so glad you mentioned this. This is, I think I, I picked up a secondary or you know, I think I picked up a minor in this when I was graduating from school. I’m so fascinated by this dynamic. So I think for us number one it starts with the way we compose the, the #Rough Draft student team for example. So this is business school students, PhD students and undergrads, all kind of coming together on our team. So that’s one of the ways that we kind of, you know, take the, the diversity and chemistry into our program. Number two is, you know, we, when we think about hosting events, when we think about offline community building which is not as scalable but can be very, very, very powerful, we are always, you know, as inclusive of all these different schools as possible. And I think if you bring it together, if you bring folks together in an informal environment thats social where people can get to know each other first, and then second, they can kind of figure out what they’re working on and figure out if there is, you know, an opportunity to collaborate or something like that, that’s I think the right order of operations. And so, you know, we’ve seen teams come together at these kind of informal, informal gatherings that may have otherwise never crossed paths. And so I think one of our big kind of, you know, goals and missions with #Rough Draft is to, to try to be that connective tissue across all these different universities. So, you know, our work building teams, our work bringing the other student communities should be the one that sits across hps, and the, you know, the engineering school at Harvard. It should bring together Owen, very computer science focused, and Babson, very entrepreneurship focused.

Nick: Yeah

Peter: And so this is something we’re, you know, in one of our early metrics of successes, you know, we, we looked at the composition of the teams we back. And we see how many of them actually have this kind of co-mingling of different schools. And what’s really exciting to see is when you have, you know, a medical school student together with an engineering student and a law school student

Nick: Yup

Peter: And I think we’re going to see more of that as you would, you create more and more offline forums for folks to come together in a low stakes, you know, non transactional kind of, kind of space, which is what we’re always trying to engineer.

Nick: Is there any sector or, or technology driven thesis or, or focus within this approach, within the, the #Rough Draft approach, and why or why not?

Peter: No, you know. We are, you know, our kind of, our, our metric, you know, we’re just, we’re looking to back the best and brightest kind of young, you know, product focused founders across schools. And so we see robotics companies, we see healthcare companies, we see drone companies, we see VR companies, we see consumer software enterprise software. I think we would be, you know, doing ourselves a disservice if we you know picked any kind of one particular theme on and just focus on that. I think the, you know, we are, we are always encouraged by the, the diversity and the creativity of what these entrepreneurs are doing. And I think, you know, I, I know, I learn a ton by seeing what, what the smartest kind of young people are doing spending their time on campus doing. And so it’s, it can be mobile software for social networking with their friends, or it could be software for, you know, leveraging VR to help with some kind of, you know, some kind of medical solution. And so it’s, it’s, I think it’s amazing for us to be able to kind of see the, the, the cross section of all that creativity

Nick: Sure

Peter: And so yeah no. But if anything we see the different ebbs and flows of what’s kind of, you know, in vogue so to speak on campuses. That’s, that’s one fascinating thing that we get exposed to, which is, you know, there’s certain dynamics, there’s certain kind of companies that get built virtually every year on certain universities, right. And so one of them is like they have marketplace for text books, or the market place for, you know, like used items amongst friends. And so it’s amazing. Or, you know, a marketplace to find roommates. And so it’s amazing to see, you know, some of them are kind of persistent. But what’s also nice is we’ve seen AI companies, we’ve seen more bot companies recently. And so I learn a ton. I think if this is like, this is like the, one of the best kind of science fairs I think we can get access to.

Nick: #Peter, why do you think the, the returns for this model can be attractive for LPs?

Peter: Yeah! Look, I think if you, you know, I kind of mentioned some of these kind of outlier companies. But, you know, I think if you, if you ask anyone if they could have been very early investors and supporters in #Dropbox, #Facebook, #Snapchat, #Warby Parker, #DoorDash, like if you were, you know, early collaborators with any of these companies, you know, I think you’d have amazing stories to tell. I think you’d have, you know, amazing returns. And I think this is only going to accelerate, right. And so I think this, you know, you look back at the past 5 or 10 years and, you know, if you were to use that to kind of predict the next 5 or 10 years, I think we would probably grossly, you know, probably underestimate what I expect to see. And so, I think we’re going to have more game changing companies come out of universities. And so I think the returns come along with that. Because I think what young people are able to accomplish on small dollars with all these amazing services and the encouragement of the universities are going to be just these powerhouses. And so, you know, I hope that we can be involved with as many of these companies as possible. You know at #GC we’ve been lucky to be involved with, you know, we’re investors in #Stripe, we’re investors in #Snapchat. And so, you know, the exposure to what 20 something year olds can accomplish and do is something for which you just, you just, you hope you were there for the, the early stories, because what unfolds is, can be legendary.

Nick: You know, speaking of that, are the KPIs in the ways that you measure success for #Rough Draft, are those the same as a traditional fund or are they a little different? I mean, do you think about follow on funding and, you know, IRR and a lot of the other traditional fund metrics or are you looking at success a little differently?

Peter: Yeah, you know, we spend a lot of time thinking about number one, just how many, how many kind of ideas do we get to see on any given campus in a year. And so we pay attention to that. You know, we definitely pay attention to the follow on funding that our teams are able to raise. And so, you know, we’ve backed, you know, over 70 teams. Our companies have raised over $225 million in follow on capital. These companies have created, you know, hundreds of jobs in a very short span of time. And so these are definitely, you know, metrics that we pay attention to. I mean, I think ultimately all this kind of, you know, flows from having the, the best student team on and, and making sure that we’re seeing , you know, the, the highest potential, most motivated, you know, student founders. And so a lot of the metrics we look at are the, the same. I, I spend a lot of, of time, you know, working with our entrepreneurs and, you know, helping them think through fund raising, helping them think through, you know, applications to accelerator programs. And what’s nice is in a short span of time we’ve seen a lot companies go into #YC, #The Thiel Fellowship, #Techstars, you know, and make it to the next level raising seed, Series A, Series B rounds. And so, you know, as our program kind of matures and grows, I think these are definitely, definitely the, the kind of KPIs we, we, we need to, to track and measure against.

Nick: Any missteps or mistakes that you guys made maybe with the original hypothesis that you’ve kind of learned from?

Peter: You know, that’s interesting. I, well, I mean, you know, we, we make countless mistakes on a weekly basis. So I, I can tell you that much. And I think, you know, with #Rough Draft what’s nice is because we basically kind of created this model from the ground up, you know, I consider it an ongoing experiment where it’s like, you know, on a monthly basis, weekly basis, we can take pieces out, put pieces in. And so I really, really like the, the evolution and, and, and kind of like the flexibility. I think it helps to stay nimble and helps us, you know, flex to support student entrepreneurs in, in the ways that they, that they need to be encouraged. And so I think, you know, when I think back to our original kind of frame and, you know, when we kind of got #Rough Draft started, you know, with my, with my colleagues at #GC Natasha Bellot, when we were, when we were first kind of brainstorming about this, you know, I think one of the things that we, we, we suspected was that a lot of folks might go to grad school, you know. We thought that a lot of the best cs talent might go to grad school and they might work on a project for a semester and then just kind of call it quits.

Nick: Sure

Peter: I think we’ve seen that invalidated a little bit, at least in what we’ve done so far. We’ve seen teams, you know, take leave of absences from school, we’ve seen folks, you know, finish out their PhDs and graduate, you know, work on their ideas full time. That was one thing that we were really cautious about. And then we ultimately, you know, have, have seen a lot of great teams get started on. I think the second piece also is I think we, we, you know, we didn’t anticipate how quickly some companies could really accelerate to the next level. I think we’re, I think that part of it, a function of the, the ecosystem that we talked about earlier which is there are more, you know, sources of funding and there is more support for, for these entrepreneurs now. But you know, three and a half years ago, you know, when we were kind of really getting started, you know, we didn’t know that, you know, one month after we gave a, a team $25,000, you know, they would be closing a, a million dollar or two million dollar round.

Nick: Wow

Peter: And so, you know, we’re going to now, you know, these are all the learnings and things that we observed that, you know, when we, when we take time over the summer when, when folks are, folks are out of school, this is the kind of stuff where we figure out how we adapt and more to, to accommodate the, the dynamics that are, that are unfolding.

Nick: You know, for those investors that want to focus on deal flow in the university environment, what advice would you have for them?

Peter: Yeah. I think they are definitely a growing number of forums in which they can accomplish that, which is nice. You know, i think, you know, some of these universities are creating demo day programs. So for example Northeastern has an amazing demo day called Idea. And, you know, I think that’s a great way to, for, you know, an investor in Boston to spend two hours and see the best ideas that are coming out of Northeastern. You know, the work that Stanford does at Star Labs, they have a demo day. So I think just taking two hours and seeing what the best young people are building, I think is a great, great, great use of time. I think the second piece is, you know, a lot more of these companies are starting to kind of leverage things like #AngelList early on. And so you can, you know, you can learn more about these companies, you know, as they’re getting off the ground. So I think #AngelList is increasingly an interesting place for them. And then I think the third is funds like, you know, dorm room fund, our work, you know, we’re always excited to, to share what we’re seeing and share opportunities, you know. We’re, we’re so often the very first money that these entrepreneurs ever receive. And so, you know, we’re always excited to, to get more folks, more folks into the fold helping these companies grow and scale.

Nick: Yeah. And then on the entrepreneurs side, any advice for them? Students out of university interested in building a venture funded startup, you know, what would you suggest or what words would you leave with them?

Peter: Yeah, absolutely. So I think the, the first piece is to recognize that the university is one of the most rich and interesting places to find co-founders. Like I can’t emphasize that enough. Like there are some of the smartest people, the most talented people. You can get to know them, you can work with them. And so I think folks should definitely, you know, look at their interactions at the dining hall and their classes, their roommates, as really really really fertile ground for finding co-founders. I think the second piece is to take advantage of all the, the amazing content that is available, right. So you know, making things like a Twitter account, starting to share thoughts and ideas on Medium. Reading amazing content that’s shared on things like Hacker News, listening to podcasts like yours. I mean, there’s never been so much transparency and distilled learnings available online that’s just so accessible. And so, spend a lot of time trying to like aggregate those best pieces of advice online. And we’ve got some of it on the #Rough Draft website where we feature a bunch of blogs and podcasts that we think are really great sources of information. But I encourage students to, to seek that out. Because you can, you can basically do, you know, like almost like a little bit of like a startup 101, you know, night school while you’re still in school. And definitely take advantage of that. And I think the third is to, to leverage the, the, the student email address to it’s fullest.

Nick: Yeah

Peter: Reach out to all the VCs you want to, all the startup CEOs, be humble, be mindful of people’s time. But I mean, the ability to get advice and to navigate pitfalls and to, to find mentors early on is, you know, it’s a really amazing opportunity to do that while you have that student email address.

Nick: Yeah that .edu can take you a long way

Peter: oh it could take you everywhere

Nick: #Peter, if we could address any topic related to startups or venture, what topic do you think should be addressed and who would you like to hear speak about it?

Peter: Yeah. So, you know, this is a, this is a really good question. You know, I, I’m always fascinated by the conversation around the , you know, and then we talked it a little bit earlier, which is this, the new models and modes of, of venture capital. You know, I’m always fascinated by whether it’s the work that #Andreessen does with their, their team and talent and kind of approach to venture, the work that #Notation Capital is doing around kind of pre-seed investing and working, you know, with very early stage entrepreneurs and providing first capital. So I’ve always fascinated with these, these kind of new models, how they crop up, why they crop up. And I think there is, it’s also an interesting moment to see like almost like the intersection of, you know, there are a few really good kind of sociology papers around the venture capital ecosystem. And it would be fun to think about the professors that think about the evolution of the venture ecosystem. And then the, you know, the, the fund managers that are actively redefining that. And I think to think about venture as something that can move as quickly and become as flexible and dynamic as entrepreneurs and entrepreneur ecosystems. You know, I’d love to have that conversation and to think through, you know, what’s, what models of venture haven’t we seen? That might be coming down the the, you know, coming down in the next kind of few years that we might expect. So I think that’s a, that’s a fun conversation that I don’t know, you know. I’ve had enough forums to learn from and to listen to. So I’d love that.

Nick: So glad that you said that. I, I feel like I have this conversation pretty frequently because there’s, there’s just so many venture forums that look exactly like the next one. And I think that’s probably the problem for a lot of LPs now, is, you know, there’s not a lot of things that are unique and innovative on the financial services side like there is on the, the entrepreneurship side.

Peter: Yeah, I think that, I think finding kind of the, the opportunities for differentiation and, and invention and innovation within venture is a topic I love. And I think a lot of amazing people have perspectives on this. And so, to get some of those insights together and also just to try to think through, you know, 5 years from now what entrepreneurs that aren’t being supported today could be supported with a new model. So I’d be, I’d be really fascinated by that.

Nick: Alright, here’s a tough one for you.What startup investor has inspired and influenced you most and why?

Peter: This is an easy one for me. I love

Nick: Oh good

Peter: that you asked this. Yeah, so I would have to say #Chris Sacca without a doubt. So I was very, very lucky to be inspired by a lot of his work early on. He was one of the first VCs I ever got to, to spend time with and to, to learn from. I was, I was very lucky to be connected by a mentor in my sophomore year, as I was learning a lot more about the venture ecosystem and startups, I was still so early on and I, today I still have so much to learn. But back then I had even more to learn as you can imagine that. And I think hearing the way he forges relationships with entrepreneurs and, and also just the, the way he gets involved with amazing companies early on is something I am really excited about. Because I think that the kind of relationship and story that unfold when you have put faith in the best and the smartest people early, I think is one of like life’s little like greatest joys. I think that’s when founders become your friends and your family. And that’s the kind of venture capital, that’s the kind of investing that, that I want to do with #Rough Draft and with #GC. And I think getting exposed and inspired by that very early on in my career is something that I’m, you know, insanely grateful for and it’s something I hope I, I really have the opportunity to be more of.

Nick: And finally, #Peter, what’s the best way for listeners to connect with you?

Peter: Yeah, absolutely. You know, I try to, part of my joke is I’m, I’m going to try to be one of the most accessible VCs. I, you can grab me at Twitter. My handle is badboyboyce , badboyboyce. And so just tweet at me or dm. I try to be super responsive there. And then, you know, I’m always available at the email too. I’m peter@roughdraft.vc

Nick: Well, I’m really happy that my colleague #Mike Dross introduced the two of us. This has been a lot of fun today. And I look forward to the next time

Peter: I totally appreciate it. These questions are fantastic. Like I mean, I love talking about these, these topics, and I’m super grateful for the way you framed it. So yeah, I had a blast. And I think the more, the more of this narrative we get to share and the more of feedback I get on the model and, and opportunity to share the story is, is hugely, hugely valuable to me. So I’m, I’m very grateful for that.

Nick: Awesome. Well I’m serious about us wanting to do it in Chicago. So if you are ever out here, I would love

Peter: oh yeah

Nick: the opportunity to buy you a beer or if not beer, something

Peter: ten thousand percent, my next trip there #Nick, you will be the first person I meet up

Nick: Alright, #Peter, appreciate it

Peter: Thanks so much, #Nick, you too