July 14, 2020

What is a Venture University and how it sources its deals, by Jasmine Yu Zhang.

What is a Venture University and how it sources its deals, by Jasmine Yu Zhang.

In this episode of Fundraising Radio, Jasmine Yu Zhang explained how Venture University works, how do they source deals and how their deal sourcing is different from other firms and individual angels. We also discussed the current situation and talked about fundraising during pandemic.

Venture University: https://www.venture.university/

SoGal Ventures: http://www.sogalventures.com/


Transcript

Alright, this is fundraiser a guest speaker who have just been using investor and venture partner as venture University and Lisa will talk about the vein truth University. 

What it is, what it does, how is it different from other investment firms, and how it works in general and old school we're gonna talk about angel investing in general and about jasmine's, personal investment preferences. 

So, just a, let's kick it off by giving us some background on herself and on venture University. 

Sounds good. 

I'm very glad to be here so my background, 

so I'm economics by training so I had a master economics on my professional life in the corporate finance, 

financial planning, 

business strategy, 

and also managing wealth management side. 

Belk venture University what is that? Yeah, solvent University. It's really special from compare with the traditional found. 

So Vinci, university itself, it's all investor, accelerated program. So you guys probably heard of startup XR program, but this is for investors and also they have an investment arm as well. 

So for you to solve it, it's a motor stage investment from. We invest from Pre seed through the recipe office in San Francisco, New York, Chicago, and still gonna open one in Hong Kong. 

So we'll have a roughly each quarter. We'll have like, thirty five investment team. So compare with traditional investment firm. That's like a large team. 

We sell five pool verticals, customer enterprise, fantag, frontier and healthcare. 

We roughly invest two to five companies, each quarter investing, initial, initial check size around a hundred K to two hundred K up to one million and lean the full opp around where we invest up to ten million. 

Nice. So, let's go step by step to make sure that we're all on the same page that everyone understands how venturing University works. So, first you have a. 

Like, he team of investors right? Working on finding new investments right? And then you send it over to the management who make the final decision to invest or not to invest, right? Yeah. 

So so they're two general partners,
Andrew,
and the sky,
and they are they Rondell from and around the team as well so each quarter they will recruit, you know, 
twenty, 
thirty plus,
investors work with them from deal sourcing to investment the entire investment lifecycle. 

So that's why it's a little bit different. Each quarter the investor on the team is a little different. They bring their diversify around. And also the deal flow would be able to sourcing is a much larger is compare is traditional investment for. 

Yeah, right it's different. You're right here. So let's talk about your personal role. So what do you personally do at venture university? Most of the time. 

Yeah, sure. So it's academic part and also practical part. 

So, academic part, we, you know, the general partner will give us lecture about a surgeon academic part of the investment and about how to do financial modeling how to do due diligence, et cetera. 

But most of time, we are focused on the critical part. I was saying that it's maybe twenty, eighty, eighty percent of time. 

We are acting as a real it is really investor like, any other VC firms fully sourcing the deals. Each person depends on your network. Depends on how you sourcing deal. 

We sourcing roughly from five hundred to one thousand each quarter. The after sourcing deal. You found the deal, you willing to present a partner meeting if we get approval from partner meeting, then you move to the next step, which is the due diligence. 

Then you prepare for the. 

Investment committee meeting, if that get approved, then you will do a reverse demo to all the investors. So you, it is a syndicated model. So we will bring the deal to the investors. 

Then we will, you know, since the deal is approved on the IC level. So, we will make the investment decision there. 

Got it and let's talk about how you source deals specifically. So where do you find those views that you wanna bring, except for your network? Of course? Yeah. Network always very important. 

So that's where the most a called use another way is, you know, be part of the ecosystem. So we get a lot deals from those incubators and accelerators. Each week. 

I probably will attend at least the two of those to listen to the deals. Sometimes we found a vehicle to do over there as well. 

So you saw famous one tech start up by Combinator and et cetera there's a whole bunch and they probably each region, each city, even each country have a lot. So we are global phone. 

So, you know, I'm not connecting China and the sun connection, a Singapore, Australia and Israel so those two accelerate in those regions. 

We're also right now everything's virtual, so it's super easy to put his face. Peach competition will peachy meetings got it. 

So, let's talk about your other role as a limited partner at so soak out Ventures. What does it do with so gal Ventures? Yeah, so gal is a micro VC firm. 
They specialize investor. 
Woman founders, or at least the Wilma is a CO founder, the investor diversity founders, and also primary folks on customer customer segment. 

So a limited partner really just means that investors so I don't participate. They do daily operation. 

So, they just prevent updates about you, would they invest what the performers etc solely acting as a investor also go. 

Got it got it and you're also doing some I mean, you're doing some investing besides venture University, right? 

How do you think he's your sourcing deal source and process for intriguing versus different from your personal angel? Investing deal sourcing process is different in any way or is it visually same thing? 

I think that's a little bit different. So, why was the doing Andrew, you know, start to three plus years ago? 

Most, like, mostly is the I get deal from my network or either from friends or some professional connections. I occasionally will go to those to the pitch competition. 

I'm in Chicago, so there's a technology they have, we'll have a weekly, so I will go there not every week but once a while I will go there to see is any good deals, but the EU is a much bigger platform and also much deeper connections. 

They pretty much have a relationship with a majority of the incubator and the accelerator. So you'd be able to access to a lot more deals. That's one thing. 

And another thing is, you know, you can do a traditional salespeople, too, just to go to crunch space. See, you know those startup who raise the money in the past twelve to eighteen months. So they probably going to raise the money again. 

So just do a CO call reach out to those funders. 

That's another way to do deals wait a second. Can you actually elaborate on that I just heard, you know, doing a cold calls to reach out to founders how can you, can you explain in details how, how you do this? 

So elaborate on that a little bit. Sure, so, you know, we all heard bottles founders reach out to investors they called called the investors will find out their address and ready to step over. 

So it's exactly same for the investors because some deals they always over subscribed. 

So, if you can find the good deals at early stage, it's you take a more active role, which is engage the team, engage with the founders, Ernie, and reach out to founders and help them along the way. 

And then you pretty much grow with the founders, though. So this is the same as those the founders reached out to the investor. You must also reach out to founders as well. That's really cool. How many of those deals? 

I mean, that's basically a dream of a nice term founder probably to be oversubscribed and to having, you know, investors, actual reaching out to you. So, how many of those have you seen and what are the major and what defines that start that might be oversubscribed. 

So, how do you answer this question? I'll make it simpler. I asked really broad questions, so I'll make it more specific. 
Would major traits, like, does the startup have to have, like, a hundred percent month over month user growth or does it have to have, like, fifty plus percent retention rates or super high click through rates? 

Or are there any metrics that basically define a startup? That's gonna be oversubscribed. I don't think there's a magic per se, because each industry, each startup is different. 

Depends on the, you know, their business and their industry. It's a little bit different. Pretty much. 

A good deal is means they have a very good commercial traction and also really solid technology solution or, you know, unique value proposition for NASA. Nasa, NASA retag could be other things as well. 

And also a large amount of investor willing to invest that company. So the actually, a really good position to choose the investors. So, at that point, not all money equal. 

So it depends on what value the investor can add to the, to the company. So that's the one deal I forget the name. I was not part of it. 

I heard that deal was oversubscribed and even some really big VC firms, they only get a really small portion say ten K. 

and we're also getting I know they, because they want to utilize those relationships the want to take advantage of all. The investor will be C can add value. Right? 

That doesn't make sense. So, let's talk more about your personal investing experience as an angel. So, let's begin with basics. What do you like to invest in? And which stage. 

Yeah, I personally I invest in the seed stage. The company I folks selling is mostly enterprise. Well, that's really big, broad and also sound customer pretty much the business model. 

I understand. I don't invest things. I do not understand or do not have someone to help me validate the market validate the technology right now? Actually look at the deals on the deep tech side. So I understand what they're doing. 

But how they do it? I have no idea since I have a technical background. 

So in that case, I actually leverage a lot people who have, or like a technical background to help me to help me a validate the deal and all of them, they can get excited. 

Then I can get excited then I can validate, you know, that you've found the business perspective. 

Right so, and let's discuss the major red flags that you see on the beach deck. What are the major three red flags that you see on the pitch deck frequently? 

Yeah, also, one thing unknown is the traction. So some is soft traction. Some hard traction. Sometimes they have big name on there, you know, say traction. It do not really means they have already hard traction. 

Cool means no sound corporations that they could try every single new things on the market. The pay a little bit Plc money, but that not really means that you have all commercial traction. 

So I think that needs to be a little bit careful and also say being accepted by those accelerator incubator that's called a soft traction. 

Whether we really look at his heart traction, it's a really commercial traction. That's more exciting. Other attractions. Yeah. Important, you know, nice to have, but not as important as the real customer hard commercial traction. Absolutely. 
And how should founders basically define hard versus soft traction? So, if they have been accepted to some cool accelerator or something like that, or, let's say, a letter of intent from a B Corp, how should they put on the pitch deck? 

So, that they make clear those soft traction, not hard traction, but still, you know, show that, they are doing something valuable. 

Yeah, I mean, for founders, I think the soft traction, silver, valuable, still put on a page tag but be prepared. The VC will ask harder questions. 

Because being accepted by those prestigious, that means, you will be able to get access to more quality investors. 

Those according ambassador definitely will ask a much harder questions. Like, why what's your value proposition? Why you're different and why your team can succeed compared with your competitors. 

I think it's up to the VC to decide that soft traction or hard traction for founders, you know, all the tracking and some good traction. But to make sure the tracking is a sustainable. If with the subtraction become very sustainable. Say, you have all collaboration with B. 

Corp start on small deal, small PLCs that you'd be able to approve it and then become a really big, large commercial chunk contract then the soft contracting convert to the harsher contraction. 

So, 

there's no clear line, 

but the app to VC, 

I think, 

at this point, 

it's up to VC to really decided by the four founders that you have, 

you know, 

real traction that not like oh, 

you know, 

I asked my, 

my mom's friend, 

whoever just I half my product that's that's structure. 

Attraction. Yeah, absolutely. And he mentioned just one red flag. So far we have two left to cover what our other two red flags that you see frequently on the. 

Another thing is the founder is over estimate over project on the revenue side. Sometimes, you know, I understand all the funders are very optimistic. 

I think that they need to be,
and also all very confident about their tech market, 
their selling capabilities, 
but equally you over projects the VC, 

when they value the deal, 

they will do a haircut that will evaluate a more conservative way to compare was the South thunder's evaluation what other evaluation direction 

got it and the third red flag is the third one is sometimes I so founders put a really big name on their advisor, 

which is great. 

Do you have a connection with selling an all? Well, qualified advisor? The other thing is how much they value that advisor. Well, how much time I should say the adviser really spend down helps the company. 

That's a it's a hard to quantify it. We just see the name on the deck. That's so true. Actually that's very common. And very, very true so good point here. 

Let's move onto your personal fundraising experience, basically. So you mentioned our Pre interview call that you were raising some money for a company you've Co, founded, which is synergy not sure if I said right? 

How, how, how did that go? How did that go? 

So that was a company I founded into southern sixteen so so to give a little background, so, synergy is a in the king tack, whatever, an injury, or whatever you call it. 

So, we all know the electronic vehicle is super popular and the key about electric vehicle is about the battery. 

So, the key of the battery is about material ISA battery, which is a one thing. Very important is called. So that companies to manufacturing, the really high end. 

So, you'll hear all the news, though, the cars on fire or the battery. It just I'll fire because the quality of that actually is a quote to the operator for that business is a very capital intensive. 

So we try to raise a lot of money in that time. I don't really have too much experience to raise money. Well, how to talk to investors. So I pretty much you talk to every single. 

Well, I know Twitter is without understanding what their check size, what industry they're investing just like a really. 

Blindly just to reach out to every single one. I know. Obviously I'm in that process and also allow founders probably also acting that way at any stage. 

Actually, there's much better strategy. How do you reach out to investors, for example really understand the investor industry. I reverse research about them. 

What their typical check size I think that's important as well and also build a relationship with they might introduce you to some other investors, but also depends on the vc's personality. Not. 

Everyone will will refer deals because of one question to keep asking. Each other is oh, do you invest it if you are not invested why give me this? Right? 
So, be careful about asking that you can, you know, some, some people is more open than other. So I think that's good advice to remember. 

That's true, you know yeah. Making research is always important and if you were coming, just to random investor who just has investor in their LinkedIn tile, that might lead to a waste of time for both of you. So be careful with that. 

So, great experience, by the way, how did that fundraising process and updated end up? Well, we're not as well as you wish. So. So we were close. 

So that process a lot and also, so, you know, we, at the end, who really worked with us is not a traditional VC. 

It because that's not a BC play under that. And so remember VC play. You need to have a return five to ten times, two to three times two to four times as P play. 

So that play kind of like either P play or industry phone play. So, the way actually reach out to the top industry leaders in the industry. 

So, we actually have much more in depth conversation with them and helped upgrade their technology by leverage us to help them. How to, how do you say expand? And they're. 

The verticals or the entire supply chain, something like that. So we were, we're really, really, really close, but unfortunately the result is workout due to some political work. 

They always stay own companies. 

That happens that happens all the time in the third world. So, it's a good point actually that you mentioned that, you know, for you have to have at least ten X return or something like that. Something at least close to that. 

And if you have lower than that, or if you expect to have lower than that, just reach out straight to private equity firms that's exactly what exactly. Investors are looking for the incubators five to ten difficult. 

Yeah, right. Right, right. So let's move on to the couple last questions, and we'll wrap it up. First question is gonna be without depend dynamic. 

That's the central question that I'm asking now, because it's depends now and that's the question that get left from Elise and the question is, what's your advice to founders who just have to race right now? 

During this dynamic they just cannot bootstrap for like, half a year. More to wait till the dummy begun what's your advice to those people? Yeah, so prepared earnings. 

So, if you expected, you know, cash around and next six months that you have to start a race right now, because it is along alone. 

Long life cycle or long term to raise money and also be conservative. Always spend money, be frugal and also be a good salesman. Sell your company. So your product general revenue and reserve cash. 

You know, once they cautious, I think is pretty much true at this point. 

And also, because of to all your financial understanding, your projection B, how do you say, prepare prefer the worst to expect the best that we expect the best for the horse? I think. Yeah, exactly. Exactly. 
Because I think the second option was right? So, let's move on to the last question of today's episode. It's a call to action. What's the one thing that you would like the list here to do as soon as the episode is over? Yeah. 

So I think challenge Ariel and the something thing. 

That's right, because that's how you grab what's the what do you see action may not be that true because we are, we are the product of our environment, so the environment and kind of define our thinking process. Well, I think defined our thinking boundaries. 

So, my advice is to challenge the status quo challenge your thinking, a lot of the comfort zones talk, who's people different from your background? 

So you may get a totally a different answer or, you know, you'll, you'll, you'll be totally different. 

Absolutely, that's correct. And I guess my personal recommendation for this one is gonna be watch Silicon Valley. The show is just super fun. You know, if you haven't seen it yet, you should definitely watch. 

It's just it's so good, but please do not take the stuff that you see there. Seriously. Okay. Just just watch it for fun. Okay. And have a great day. We'll wrap it up here. Thanks a lot just for coming up. 

And for sharing your knowledge on these fields, I think you're the first speaker from venture University. So congratulations. And thanks a lot for taking your time. Appreciate it. Thank you. Really gotta have a chance speak with you.