Transcription
We're entering into a relationship that's going to last longer than the average American marriage, so know who you're jumping in with.
I didn't come here to make things 10% better, 10% faster. That's not my mission in this life. And I don't think it's a bad thing for people to make money that way or to build companies that way. But I'm here to be the board member for the founder for whom I am the perfect board member. I am the perfect investor for someone who has a complex business model, innovation, often technology-driven company, and is looking for someone who is willing to look at the puzzle from a different direction and is willing to say, "Huh, that's a little riskier, but if we win, we win really big."
Yeah, welcome climbers to another episode of Climb by VC. I'm your host, Jake Kapor, General Partner of VC Ventures and co-host of Climb. Every week on this show, I speak to investors, founders, and industry experts who are building the future and helping scale companies that are changing the tide on climate change. Today, I'm thrilled to be joined by Kate McAndrew, who is a founding partner of Balun. Uh, I'm going to talk about the name, you got to know that. Uh, I'm thrilled to have you in our San Francisco studio. Uh, you've been an investor for over a decade. You were most recently at Bolt before, uh, raising a $100 million Fund One for Balun. Uh, you're backing ambitious companies at the frontiers of technology and design. We'll dive into all of that, but first, thank you for joining me.
I am so delighted to be here. Thank you for having me. This is going to be a great time.
So let's, let's start with the memorable name. What is Balun? Is it contagious?
I haven't heard that one yet. So Balun is one of those fun German compound words, um, that means the art of building. So, Bau means building, and Kun means art of. And what I love about that term is I really believe in the art of building companies, the art of building teams, the art of building venture firms, honestly. And I think it's very, um, popular or fashionable to dig into the science and the technology and forget that so much of what happens at the early stage is about art. It's about the magic of that. And, um, the name really encapsulates that for me. I also love that it hearkens back to kind of Bauhaus. And, you know, we're a collective of creative technologists, and we really see ourselves as being, in some ways, like a decentralized studio. And, um, we wanted to exist within that lineage of, you know, communities past, present, and future that are about bringing together eclectic people at the frontiers of technology and design to build fundamentally new things. So Balun just really spoke to our team. We also have German partners, so we felt like we could use a German word on, um.
So that kind of gave us permission to meable because I'm like, when I'm when I'm looking at my email, I'm like, yeah, there's only one Balun. There's three different, uh, New Frontier Ventures. Although that might actually be a real fund. So I probably shouldn't use. Probably is at least three new funds. There's like three funds named X Frontier Y. There's only one Balun. Thank you.
Um, well, tell, tell me about you. You just used the word collective to describe your team, uh, and this idea of a collective that backs creative technologists. So let's break down both sides of that. How is a collective different from a venture fund? And what's an example of a creative technologist?
Yeah, so, you know, I think that we really have a belief that the ecosystem is more powerful than the ego system. And so much of how we have architected the discourse around startups and investing is all about kind of Nostradamus on a hill pontificating about the future that will be. And they have all the money. And, you know, they're like these, these truth tellers. And I think that that's really a, a myth, right? That genius, usually male figure, is really a myth. And the truth is, if anyone who's ever built anything knows that great things are built by teams, right? They're built by teams. And it's not necessarily even just the employees that come to work at there every day. It's also the consultants, and the manufacturing partner, and your branding agency, and your mom, and your yoga teacher, and your dog. It's the collective of people who come together to put energy behind a mission. And we felt like we really wanted to honor who we really believe does the work, right? And really sit against this myth of like, kind of the genius founder. Not to say that founders are incredibly special, unique kind of entities within that ecosystem, but the best founders also know that it's not all about them. Yeah.
And so, you know, we have four general partners who make all the investment decisions in our fund. We have a $100 million fund, so we're investing out of the fund. But we have about a 100-person collective that are all subject matter experts, like truly, you know, experts in their craft, really pushing the bounds of their disciplines across a variety of everything from, um, you know, experts in material science and, um, IP law, and community building, and, you know, all kinds of different storytelling, all kinds of different people.
These are your LPs, or they're just kind of friends of the firm?
So interestingly, we, we waved the check size for anyone that we wanted to bring into the collective. So, you know, most of our, if we have a $100 million fund, most of that money is, you know, large institutional investors. But because we wanted people to have shared upside in the fund, anyone that we invited into the collective, we allowed to invest at any level. Um, so the, the collective includes every founder in our portfolio. So that's the majority of how it's growing right now, kind of this group of subject matter experts and LPs. Many of them, we've worked with before for for many years. And if you're in the collective, we also have, um, a couple features that I think are really special. So anyone who's in the collective gets deal bay, deal carry on any company that they source. The collective is our number one form of deal flow. And that's really honoring that ecosystem that is the fund. That also, if you think about that, that means any founder that we back actually gets carry, right, if they bring something in, right? So we also run these studios, which are kind of, um, collaborative sprints around new topics that we're curious about. We're running one right now on mushrooms. So, so mushrooms as material, as medicine, as metaphor. So they're just, we love working together, we love building things. This is a group of, of doers, not not talkers. So the collective is an amazing way to engage with, um, the people who we think are really building at the frontiers of technology and design.
Side tangent on mushrooms. One of the, uh, best answers I got on on the show was we had, uh, Shaya Harris from Supply Chain Capital. They back food tech. And, and, and I asked Shaya, I said, what are we going to be eating more of in 2030 and beyond? She goes, mushrooms. She goes, just start eating them now. They're going to be in everything. You're totally growing. I mean, the uses of mushrooms are blowing my mind. I, yeah, we could go on all day about mushrooms. Well, we'll save it for for another time.
Um, let's talk about this idea of, uh, backing founders early. And, you know, one of the things that, um, really caught on me as you said, is it's not just about, uh, the founder and the myth of the founder. It's those first 10 employees. It's the people that really kind of come swallow the ship when you're not totally sure where the captain's going, but you're, but you're on for the ride. How do you know that these founders are going to be able to build these teams and attract this really great talent when you back them as early as, as Balun does?
Yeah, so we exclusively lead pre-seed rounds. To us, what that means, it's typically pre-product, pre-revenue. So it's a person or two and a pitch deck and a strategy, right? So we really invest as early as it gets. And we invest big. We invest, you know, $500,000 to $2 million at that stage. So we have a very, very high conviction approach to backing founders at that stage. And I would say what you just named, yeah, is one of the number, like it's in the list of the top three things that we look for, really. Because the number one job of the founders at that time, and really enduring into the future, is about convincing, you know, convincing people to do the irrational thing, right? To leave Google or OpenAI and leave a million-dollar salary, you know, to come take a moonshot with them, to get better payment terms from the factory, to, you know, it's little things, it's big things. But the number one thing that great founders do is inspire people to follow them. Yeah. Right? And so I think that, um, what that archetype looks like can be very different depending on the kind of company that you're building, right? Who, who you need to inspire to build a highly technical, you know, EV charging company or geothermal company is different than who you need to be able to inspire if you're building an infinite formula company, a consumer business. So the, that founder of the inspirational, the inspirational, galvanizing leader doesn't always have to look like a fast-talking, you know, super chatty, big personality. It can be a neurodivergent, you know, PhD, right? But in either case, and in both cases, you have to be able to bring people to your mission. You have to be able, um, to show others that where you're going is worthy of pursuit. Yeah. And so that's something that we really, um, that we really try to understand about the founders.
And questions you can ask to, to understand that, or is this something that you, I guess, like discern over time, just spending time with them?
Um, I mean, both. And so I think one way that this comes out is how old do people pitch, right? Because if I don't leave that room inspired, you've failed the test. Even if I think the market's big, even if I think you're really smart, there's a lot of smart people doing things in big markets. So I think one of the things that I look for for it's like, did I leave that room feeling a little more alive than when I entered it? Um, so that's one thing. I also think in diligence, you know, the jump through the phone reference that we're looking for. We do a lot of personal reference checks. And, you know, off-book, on-book, we do a lot of reference checking. And one of the things that we're looking for is that jump through the phone, wait, they're doing something I want to invest in, or man, if I had money, I would invest. Or like, and, you know, there's a big difference. And the more I've, probably thousands of thousands of reference calls at this point, most of them live in the middle band. They're good, right? But we only invest in the ones that are great. And that's often about there's something about this person where whoever is on the phone, it's just like, they're doing something I don't even know what it is, and I've got to get in, right? And I think there's an energy to that that that we try to suss out in our own meetings, but we also try and pull out of the people that we're that we're talking to and doing reference checks, um, in the diligence process. Those are just two ways that I would say we try to get to the heart of that.
The, the reference check thing is so important. And it's something that, you know, we tried to do from day one at our fund. I am still amazed how few founders turn around and reference check their VCs. Totally. Cuz I'm like, listen, if, if I'm asking you for four or five references, that's a hint for you to turn around and say, who have you worked with? And what would they say about you? And so I, I look, I think my advice to founders is always like, it goes both ways, right? Be, be ready for an investor to ask to speak with your references, but also turn around and be ready to do the other way.
Well, and I think in hearing that from you, what that tells me is that you're looking for a fit, obviously, right? And so you like, you want to find a fit, and the founder, you want the founder to make an, an informed decision about a fit with you. Yeah. And so I think that even putting that invitation out, I think is really beautiful, right? Um, it's an expectation setting. It's like, look, we're, we're entering into a relationship that's going to last longer than the average American marriage. Like, we should keep our eyes open about we're going to be together for 10 years, you know, we, we may be a smaller part of your cap table as you get deeper into your process, but those early days, we're side by side. So know, know who you're jumping in with into whatever you're doing. And so, um, yeah, I think ultimately, it's about clarity and focus, right?
And, and on that note, what I really loved about, uh, learning about you and, uh, the focus with which you operate. There was a great quote, I'm going to make sure I, I quote it correctly, uh, on your, on your LinkedIn profile. You said, "If you're building something 10% faster, I'm not the investor for you. If you're running an existing playbook, I'm not the investor for you." Let's unpack that a little bit more because VCs love playbooks. They love, you know, oh, this founder, he did that at that company, and now he's doing it in this company. And by the way, we see a ton of software that's just 10% faster, but it resonates in a new era with a new audience and a new buyer, and boom, there's your next unicorn. So why, Kate, are you pushing back against those trends?
You know, I'm not pushing back against them. I'm just saying that's not what I'm here in this world to do. I didn't come here to make things 10% better, 10% faster. That's not my mission in this life. Yeah. And I don't think it's a bad thing for people to make money that way or to build companies that way. But I'm here to be the board member for the founder for whom I am the perfect board member. Yeah. Right? I'm looking for that 10x partnership for the people who need me. They need my brain, they need my heart, and I want to offer all of that to them. And the truth is, I think life's short. You know, I'm, um, I'm in my late 30s. I'd like to think I have a couple decades of great work ahead of me. I only have so much energy. I'm a mom. I have a three-year-old, like, and every hour that I put out there, I really feel like I need to be offering a true expression of of who I am. Um, otherwise, I feel like, what the [ __ ] am I doing, right? Right? Like, so why do something that other people can do? Why not do something that only I can do? And it turns out I've been doing this since 2012, and I've learned a thing or two about what I can uniquely do. And I have a capacity to understand complex problems, and to understand business model innovation, and to take risk. And so for me, I am the perfect investor for someone who has a complex business model, innovation, often technology-driven company, and is looking for someone who is willing to look at the puzzle from a different direction, and and is willing to say, "That's a little riskier, but if we win, we win really big." Yeah. And it's going to feel good, right? And so that's just about.
And, and I love that because those founders are undertended to, and that gives me an advantage, right? It's an undervalued asset. Um, and so there's just all kinds of reasons why that then creates a competitive advantage for me. And I now have a track record of investing in those businesses and helping them do the hard thing well. And so that helps you get more referrals there. So I just try to focus on the thing that I'm uniquely good at. Yeah. Um, and it's not yucking anybody else's yum and what they're good at, but, you know, I'm just trying to live.
No, I hear, I, what what resonated to me most about that was the willingness to take big risk. And I think, um, this is what I, you know, whenever young investors reach out to me and they're like, hey, you've been doing this for a while, and, you know, I listen to your podcast or whatever, I'm trying to become an investor. I want to do seed stage, pre-seed. I'm like, okay, what should I, what do I need to know? And, um, the best piece of advice I got when I was starting out was from Hunter Walk at Homebrew. He said, Jay, it takes at least five years to know whether you go to this job, are you totally put in the work for five years without the feedback? And I think by nature, especially in today's sort of social media era, we are all about feedback loops. We, we want to know if something is working. Our moods are affected by the the feedback that we get. And when you're in this job as an investor, and you are writing checks every month, but the returns aren't coming back just yet, and you're not totally sure, am I good at this? You got to wake up the next day and keep going. And the fact that I think you just highlighted that you have an appetite for that risk, it's, that's that's rarer than I think we believe, especially, you know, we're here in the valley. There's a lot of monkey see, monkey do. To find somebody who says, hey, I'm actually willing to take that pre-seed risk is is rare.
Well, and I think I was never particularly drawn to these monkeys, you know, like I never envisioned being in Silicon Valley. That was not an aspiration of mine. I had aspirations about how I might shape the world, how I might help that happen. And it turned out venture capital was like an incredible tool set to to do that with. But I'm not particularly, um, swayed by what a partner in Jason Calacanis thinks about me. Why don't I care? I don't care, right? That's that has nothing to do with my intrinsic value as a person or as an investor. That's just not how I am. Yeah. And I think that that is beautiful. Then that allows me to look at first principles. That allows me to have my practice. And I do think about it as a practice, right? And, um, I think one of the pieces of advice that I got was not to be confused about what your job is, right? Like, I have a mission, I have a goal of impacting who gets to run companies in this world, elevating the art of building those companies. And for me, it's really about shifting what capitalism looks like from an extractive kind of scarcity model to a more abundant model. So that's a mission that I have in this life. But my job is to return capital to my LPs. And if I don't return capital to my LPs, I don't get to keep doing my mission. Yeah. Right? And so then it starts to be like, okay, well, what's the practice? What are the data? What's the practice of this work? And thank God, I'm a Capricorn. I only think minimum and 10-year time scales. I'm like a long-term planner. I want to work. Oh my God. And I got some Virgo in there, so like, and Aries, we're doing stuff. Like I love to work. I love it, right? It's a pleasure. And so if you actually just love the work, the actual work, and if you live in the pleasure of that work, and in the practice of that work, the outcomes happen. Yeah. Right? And I was very lucky that when I got my first real venture job, I ran an accelerator for two years and did kind of 20 deals out of that. But then my my first venture job, I got a junior associate role at a brand new fund. And I was so lucky that one of the GPs there, who is not on Twitter, no one knows his name, you know, he's made more money than he ever needs to make, sold his first company out of MIT in the '80s. He has managed multi-billion dollar funds through the '90s, keeps a very low profile. And I got to learn under him. He's now my partner, my equal partner at Balun, right? And we worked together for eight years side by side at Bolt. And I really think that he taught me to do the practice. That this was a get-rich-slow game. That it was not about, how are your deals doing? It's about the practice of, are you delivering for the founder? Is this the right investment to make, whether it fails or succeeds, right? And he really taught me the practice of longevity. And the number one thing that he taught me is you got to stay curious. Curiosity is what makes you not worry about whether or not the founder thinks you're smart, but instead let you focus on, what do they have to say? I gave up founder very early on. It's so stupid because I think they're so, and this gets to the ego thing. People are, I think so many junior people who get into VC are so afraid that they're not going to look smart enough. Totally. And that keeps you, that holds you back from doing the job. Yeah. Right? So anyway, I'm kind of going on and on, but great.
Yeah, look, I, I, I was going to actually ask you, I mean, are there lessons from building houses at Habitat for Humanity, well before you got into your venture career, that still stick with you as you're now building a venture fund?
Oh my God, you know, so many, actually. It's interesting, but the one that comes to mind, just because I think it drives home what I was just saying, I had this construction crew manager, Harvey Harmon. Harvey, I still think about Harvey. He brought his guitar to the job site every day, and he would like sing songs with all the volunteers every day. He, he was an extraordinary person. Um, he lived in South Africa during apartheid, and his wife was a midwife. He, his three, raised his three kids there until they were teenagers. And he went back to the US. Just an amazing person. But he told us this story from when he lived in Africa. When he first moved there, there was, um, a man who lived in, um, a barren, essentially a barren landscape that had been stripped of all of its nutrients. And Harvey met him, he became friends, and he left. And I think he went back six years later, okay? And the landscape had been completely transformed. Um, and he had built this, you know, incredible farming infrastructure and fruiting plants, all that stuff. And the abundance of that place, he transformed the village, right? Because he'd be able to do this. And Harvey asked, you know, how did you accomplish this? And he said, "I moved 10 bags a day." So he had dug this huge hole that that had layered agriculture in it. Yeah. And he moved 10 bags a day. And that really, to me, got into my psyche that if you have audacious goals, don't necessarily focus on the goal. Don't focus on, I have to feed my village. Focus on, what are the 10 bags that I have to move today? Yeah. And to me, that, and if you do that, if you move 10 bags every day, if you plant that one tree, if you do each of those things every day, ultimately the outcome comes. Yeah. Right? So I think that that was just a lesson that he shared with me, taking forward.
I love that story, and it, it resonates with me. And I'll tell you, uh, maybe I'll share a similar story. I love that that sticks with me. So, um, during the pandemic, uh, I had a lot of time on my hands. I started a podcast where I was interviewing professional athletes about what they were doing post post-career. One of the people I was lucky enough to speak with, I have a deal for you then, actually, about that. I don't do a lot of sports tech, but know quite a few. Something interesting in my inbox. But, um, but, uh, uh, I got a chance to chat with eight-time Olympic medalist Apolo Ohno. And Apolo is actually now a venture capitalist in his own right. So he's pretty active as an investor. So Apolo and I are chatting, and, you know, I kind of asked him about that experience of winning that first medal and what it taught him. And he was like, honestly, man, it felt really hollow. I was like, wait a minute, you brought home gold for your country in front of billions of people watching you in the Winter Olympics. And he goes, it was 30 seconds. I got up on that podium, they put the medal on me, people clapped, and then I walked out. And I was like, I woke up at 3 AM for an entire year for four straight years for that 30 seconds. And that was kind of his story to me to say, so you find the joy in the journey because you're going to realize when you get to the outcome, one, there are always more outcomes, more goals, more peaks you want to reach. But two, the amount of time you spend up there isn't always going to feel worth the grind. Yeah. So if you, if you focus on the joy in the journey, you focus on the steps. His his feedback was, you know, you have a goal four years from now. How do you break it down? You say, what do I have to do three years from now, two years, one year, six months, six weeks, one week, today?
Well, and I think too, to kind of bring it back to technology, you know, I love investing in first-generation technology products. And I think one of the things that, um, my business partner, Tyler Mincey, co-founder and GP at Balun, he was on the original iPhone team and ran the whole iPod roadmap there with, he was in his 20s, $7 billion dollar, you know, business line in his 20s. And I think, you know, he's so accomplished, he rarely talks about it. He really talks about it. He's so accomplished. But together, we've sort of talked about Balun as a place where we want to pride ourselves on doing new things well. And it's not like, oh, we want to run the iPhone playbook. That's not what it is. It's not, oh, let's go build the, we built the iPhone, now let's go build the iPhone 2.0. It's like, we built the iPhone, now what's the next new thing that we want to make? And there is an art and a practice to building fundamentally new things. And I think that is the art of building, that is the craft of that. And I think that skill, that zero to one in fundamentally new areas, is something that venture capital is really designed for too. And this gets to our earlier point around, you know, why not make things that are 10% more efficient or what have you? Was like, I also believe that our asset class was designed to take big swings. Yeah. Right? And, and so I just find it a little, um, weird to just do the like incremental thing. It's like, no, no, we're here to do the big things. So how do we do new things well? And how do we have that as a practice in the collective? And I think that is all about advancing the art of building. And then looking for people who have that ambition so that we can help bring that practice around them and support them in that as board members.
And how does your perspective change on the archetype of this founder? Like, I, I think about this quite often, given that a lot of founders that we're backing, they're building in legacy industries. You're building in, you know, the, the hard to decarbonize, the hard to digitize, construction, logistics, manufacturing, shipping. The profile of the founders we see that are building in those spaces doesn't look like the typical coder in a hoodie with a laptop. It looks like an experienced executive who spent 10 years and now she's like, hey, I was running this inside, I'm now going to build a startup and sell to my, my, my former employer and other people like me. How does the way you diligence those individuals change? And, um, how do you help them avoid some of those first-time founder pitfalls?
So I think what I'm hearing from you is that you feel like in maybe especially climate tech, um, that the archetype of the founder that is going to be successful might have more operating experience and not be that kind of swashbuckling college student. Well, just less, less startup experience. Yeah. It's not even just they're coming, they're coming from big companies. That's right. Yeah. Yeah. How does that change how you evaluate them for for investment?
Number one, I would say, I don't know if I agree.
Okay. Well, that, yeah, I don't, I don't know if I agree. Um, I don't think that people who come out of big companies are fundamentally bad founders or something like, I don't think that's true. Um, but I do think that there's a mode of operating that they have to have. And so, um, and, and just to give, say, and not that I totally disagree, because if I think about some founders in our, um, in our portfolio, like the founders of Software Defined Automation, they're, you know, this is technical, but kind of making cloud-based PLCs. They're basically trying to wrap software around the factory floor in a very, and you can't really build that company unless you've been inside, you know, so they came from Siemens, they came, they came from those kind of legacy industry. Um, and so I think you're right, there are certain industries where you got to come from the inside. You have to be deep in the technical disciplines. You have to be deep in how those organizations work. So when we're diligencing folks like that, a lot of what we're doing is trying to understand how are they as operators? How are they as builders? How are they as leaders? And, and you can see it a little bit in their career trajectories. Um, and then it's, you know, in the diligence framework around how are they as managers, and how do they move quickly, and are they hard driving, and da da da. So it's, it's about kind of figuring out the psychograph. Um, and oftentimes they have, they typically grow very quickly within an enterprise organization, right? There are folks that are, they're not in any given role for more than two years, right? Because they, they, that they're not stagnant, they want to keep growing, keep growing, keep growing. So I, I, I don't want to say totally, um, totally disagree, because I think my examples in the portfolio were 100% true. Um, but I also think that, um, we've seen, you know, folks who don't come out of the legacy industries or the legacy enterprises, bringing a fresh perspective in, and it really working. And bringing like a, a new kind of creative insight or a technology insight. So I, I can, it can be both.
Is there something, I guess, that those founders, like, I'm not even totally sure who had to ask this question, but it's like, I almost find sometimes there's founders who like don't know what they don't know, and that's almost healthier because they are willing to question old beliefs about how an industry operates, which is powerful. Sometimes the flip side of that is you back somebody and they go, yeah, we didn't realize a sales cycle was going to be 9 to 12 months, and we only raised 16 months of funding, and it's like, okay, well, what do we do?
Totally. And so for me, that's a big part of what we have to test in diligence, right? Like, if, like, I need to know the sales cycle, right? Like, I'm not going to trust what the founder thinks about the sales cycle. I have to go pressure test. What do I think the sales cycle is? Call some customers, figure that out on my own, and then assess, are they raising enough money? Now, I can tell them, um, I think you have the sales cycle wrong. Like, you're raising a million dollars, and I think you really need two, and here's why. Let's talk about that. And by the way, we probably need to think about recruiting a VP of Sales than we thought, because like, you have good instincts, but this is a founder-led sales organization, you don't got it. So let's think about how we resource that early on. Let's bring in support around that. So I think part of it too, and in that conversation, you find out, is this person listening, or is this person not listening? And like, you need a listening team, right? You need a collaborative, you need a collaborative team, especially if they're first-time founders, because they don't know what they don't know. And so the question is, how quickly will they learn? And I think that has been one of the top predictors of success that I've seen for, for not, you know, not just early stage founders, but for greener people, whether they're coming out of school, they only have a few years of experience, whatever. I think about, you know, slope versus Y intercept, right? You have some people that are high on the Y intercept, they've learned a lot, they've got strong networks, they're very seasoned, but their slope is shallower. I love a low Y intercept, steep slope founder. Right? And the number one thing you there is just like, are you listening? Are you taking the feedback? Are you integrating it? And by the way, that doesn't mean you have to listen to me, but you need to listen to 10 people and then make a choice. Yeah. And by by integrating all of that input, right? So it doesn't mean that you have like a puppet, and you just the VC says, and then you go. They say that's not healthy either. By the way. Don't. No, they're not as close to your customers as you are. Totally. But I think it, it's my job to see the pit, to get the operating plan, to look at the funding plan, and say, does this make sense? Do I think we can hit these milestones on this money? If not, why not? And to talk about that, and to rightsize the plan, right? And that's a lot of what we need to do to set people up, um, for success. And by the way, it might be like, they think they need to get 10 customers, and we say, actually, you just need the two right ones. So let's find the two right ones. And, and it's about helping people understand what are the right milestones and what not to do, because you can't do everything at the early stage. So if you're a pre-seed company, so one of the most powerful things that you can do is to say no. That, it, believe it or not, that comes up so often, uh, as we talk about kind of what founders get wrong, it's just focus. It just comes back to the idea of knowing what you need to do, knowing the path you have to go get there, and then as you find success, the distractions only only get bigger.
One quote that I've heard you say that I, I really love and would love to unpack is, uh, "Most VCs back people on quality of resume, not quality of experience." What's an example of somebody where you backed them on quality of experience or quality of work, uh, and maybe not quality resume?
Interesting question. Um, so I think when I think about a resume, I think about, you know, names on the page, right? Have you been at some some big names? And I, I think that, did you go to the right schools? You know, what have you not what did you achieve there? What did you make while you were there? And I, I think that, um, one of the issues that I understand with that is if you're, you know, a rising principal at a big fund, like no one ever got fired for backing someone who's been at Dropbox for five years, who's going to go build something adjacent to what they saw at Dropbox. Like no one ever got fired for that. There's that 10% faster for you, right? Yeah. Totally. Or, and it's also just like, oh, that's a plausible founder, right? That, you know, that makes sense. And so I understand why we do this, why we back the people that we think look good. And there are a lot of programs out there, I won't name names, that are just all about taking talent that has done a couple of years at a brand name place and, you know, um, just putting money to whatever they want to do next. All mafias, right? It's X C Mafia or the ABC Mafia. My discomfort with that is brand names do not make you exceptional. Doing exceptional things at brand names makes you exceptional. But like, I want to know what you've accomplished. Yeah. I want to know what you shipped. I want to know like how you grew. Like, so I'm looking at trajectory. Um, and so I want to know, were you at this place for long enough to have an impact? Were you, were you, did you really build something? Did you really ship something? So you have to really dig in, um, to to that work history. Yeah. Um, and I think the other piece of it is people, or investors often undervalue experience that happens outside of work. Right? A lot of times, people's passions in life, um, give them insights that lead them to companies that are surprising. Right? Like, I think about, I led the pre-seed round in Bobby, which is an infant formula company, back in 2018. Now, Laura was an early executive at Airbnb. No one's going to argue with that resume. But she was building an infant formula company. That's an FDA-approved CPG product. She had no background in food. She had no background, um, in in medical devices or FDA clearances. And she was direct to consumer, totally. So was the resume good? Sure. Airbnb's good. But it wasn't obviously a rock-solid resume for the business based on work experience. But what she was was a brilliant, passionate mom on a mission who knew how this industry needed to change and was going to run through walls to make it happen. And so it was actually her personal experience with feeding her babies, coming from Europe where the food regulations are very different than they are in the US, being here, trying to go back to work at Airbnb, being stuck in this bind of wanting to breastfeed but feeling like that takes 32 hours a week, and she was an executive, and how is she's going to make it work? And so her personal life experience, her personal passion, which is not on the [ __ ] resume, was the thing that made her the best founder in the world to go found this company. And so many people discount that personal experience as being relevant. I'll give you another example. This is a a company that recently invested in, um, that is not announced. I won't say too much about it. But, um, the founder ran the entertainment vertical for Instagram early on, and then for Clubhouse, and really on the forefront of integrating what does it look like for, you know, influencer-led kind of scarcity-driven, um, product e-commerce experiences to get integrated into, uh, platforms and products. Like, kind of best in the world at that thing. Super passionate about vintage home furnishings, and now she's doing something in between. But like, she doesn't, and I backed her as a solo founder. Right now, she doesn't know anything about furniture logistics, or she didn't when she started. Now she's like a master at it, right? Because she's personally passionate about it. And you can bring in operators and other people who have experience, you know, around that thing. So I think often times, like when I think about the creative technologists, they're bringing a key insight into a market that may have come from their work, but it just comes from their life. Yeah. Um, and then they have some sort of skill, often on the technology side, that allows them to build the thing better than anyone else, right? So, and often times that's actually, that's that's the technology piece that's sourcing from their resume, whereas the insight might actually come from their personal life. So, yeah.
I, I got to tell you, I've done 65 episodes of the show. That is the first time I've heard founder-market fit be talked about in that way. Because I think when people talk about founder-market fit, it's very classically, has depth in this field, or has expertise in this way of building a team or operating or this industry. But the talk about passion as being a part of founder-market fit is so unique to me. And maybe dovetails into what what I'd love to ask you about. B Energy, which is one of the companies you invested in. You know, from the outside, I, I, I didn't get it because the founders who I typically see working in the energy industry come from the energy industry. They come from utilities. They, uh, have at least somebody on the team that has built and sold into this customer. And when I looked at the founders' backgrounds, I was like, huh, they're building geothermal energy, and, you know, neither of them looks like they spent that much time in the geothermal energy world. So maybe unpack that for me. What am I missing here? And, and what convinced you that these were the right folks to go build this business?
H, I love this company so much. I am, I am like, so honored to be on their board. So first of all, I met the co-founders, D'lsey and Thomas, almost 10 years ago. Wow. When they were starting their previous company, and we passed. And it was the right thing to pass, that that wasn't the business. But I like, I was like, you two, I'm watching you two, you're going to do something interesting. Yeah. And, um, I just kind of kept tabs on him. Um, and D'lsey and I became friends. We became moms at the same time. And I really got to know her as a person, as an operator. And like, D'lsey is one of the most tenacious people I have ever met. And I live in San Francisco, okay? So this is like, serious, big, carry, audacious goals. Like she's just in. She's so tenacious. I can't, I can't, um, overex, I can't overexpress how true that is for her. Yeah. Now, what I think is really interesting about what they're doing is Thomas is in, you know, MIT mechanical engineer. Um, I'm the only non-mechanical engineer on the GP team, so like, we've got some deep technical chops in what we're doing. And if you look at geothermal, I really believe that we will only get mass geothermal adoption in the US if it is as cheap as putting in an HVAC. Like, I think we have to make it that cheap for the consumer. And if you don't change dramatically change the cost of drilling in some way, that's not going to happen, right? And so I got wind that Thomas had been tinkering in his garage, you know, and sent my partner Matt, who's an MIT mechanical engineer, who happens to live, you know, not that far from Thomas, to kind of go check out what Thomas was up to. And so we actually were talking with Thomas kind of just about the tech and sharing notes and like, and this is one of the beautiful things about working on a team that's non-competitive. Like, I think all four of us worked on diligence on this thing in different, different ways. And Matt was just like, there is something fundamentally new here. Um, and he was like, we should, this is serious, like, we should look into this. And what I loved was they're not, what what they started with was how do we build a drilling system that has these cogs? Like they started with cost. Yeah. And they said, if you start with cost, get our unit economics right from day one. If, if, like, if drilling system can't be more like, if an install can't cost more than $15,000, or can't cost more than $10,000, how would we do it? Wow. And they started with that principle because their goal is to get people out of fossil fuels. And so it was all about how do we bring cost down. So it wasn't saying, I've been working in geothermal forever and this is how I know how it works. They came from the outside in and said, if we're going to change adoption, it
has to be as cheap as HVAC. If it has to be as cheap as HVAC, how much does can it cost per drill? If you have to build a drill for that cost, how would you build a drill? Right? Yeah. And so they started there. And I think that's sometimes what you get when you have people from the outside looking in. And it turns out Thomas is an absolutely brilliant technical mind. Yeah. And Dulcey is an absolutely tenacious, knock-down-walls operator. And the two of them, they're husband and wife, by the way. They have four kids. Wow. And the two of them are here to make a dent in climate change for their children. They are on that mission. They're on it together. And they are putting everything that they have into it. So when we open the board meetings, it's about, it's all about impact. It's like, how many kilowatts? Like, this is what we're working on. But they understood that the key place to get there, the key lever, was economics. Right? And so that drove engineering. And so I, and by the way, the first thing they did was go get the best geothermal, you know, minds who've been working in the space, Sanding Lives, etc., to come on advisors to come out. So they brought that industry experience around them. They brought that policy experience around them. So part of what I think makes founders like that special is knowing what they're not. Know who you are. Know who you are not. Right? Be the best that you are. Bring the best around you. That's about being humble, self-aware. That's about that, that ability to get people to follow you. Right? And so I see that in them. And so to your earlier point about different kinds of founders starting technical companies or in legacy industries or whatever, I honestly think depending on the industry, depending on the approach, both can be totally appropriate. It both can work. Um, it's, it's just about figuring out how do you do it right? And do these particular people have it? It's the, it's the strength of the why you, why this, why now? Right? Not he's so reductive, but like ultimately when you're sitting in a pitch, you know, you want to hear those three things. Uh, the why you can be your background. The why this is probably your passion. And then the why now, you're, you're going to have the diligence to say, is there a reason that this company needs to exist today? And and and can actually solve a massive problem?
One thing I picked up on there, um, which I think is rare, more as I look at how other funds are constructed. Again, we're new in our journey. And, you know, we're, we're trying to think about the right way to make decisions. Do you guys make all your decisions together? Where all four partners are on board? Or is it somebody PWS the table and says, that's, that's my gal. That's my girl. I'm going to go invest in this deal. Like, how do you typically manage that?
So we, first of all, we've worked together for a long time. So it's a new fund, it's our fund one, but we've all worked together in some capacity for many years. We really know each other and trust each other. Um, and we have unanimous decision-making. Wow. So, and that really works for us. Okay. Um, and I think that the best thing about the way that we work as a team is we are a team. And we want to, we, we don't compete against each other. We only compete against other funds. Right? So we want to collectively do the absolute best deal. And I think it takes a real practice of equalness, um, and collaboration and and and trusting each other. And also, you know, calling, being able to say, like, I'm going to hear you on that one. Or saying, like, I hear what you're saying, but I still think I'm right. You know? And, and I think what's interesting, and like, we have to have unanimous, unanimous decision-making, but there are often times where people say something like, you know, I have this concern. I don't want to block this, but I just like, this concern is big for me. So if you feel really strongly, go for it. But I just want to, I don't really think that we, yeah, like this is something that that I that I really feel like is it right about this or something like that. And so there's, there's just a lot of sensitivity into how that gets done. We don't do like technical voting. It's not, it's not like that. It's really a conversation. And what I love about it that is I think it really raises the bar, especially at pre-seed. Because at pre-seed, it's very easy to be like, I just like them. Yeah. You know, you get tired. You and then gut. I love. Oh, yeah. Like I feel like there's like my partner Matt, he's so good. Like, I'm, I'm the worst. Filling out the deal sheet. And like, and that's like, yeah, but you know, he did, you know, he's always digging in. And this is that. And at first, sometimes I'm kind of like, oh, Matt, like, just trust me. And then I'm like, no, like, he does trust me. And at the same time, he is forcing me to do my best work. Right? We force each other to do our best work. And I think that, like, I'm smiling because I know that at the end of the day, we will do better investments. We will have a better fund because we have intellectual honesty with each other. Yeah. And because we're really support other in that process. And we all are very different. Like we have different strengths. We come from different backgrounds. And so what I love about that is we really listen to each other on different aspects of businesses. And like, I think that, yeah, just brings us to a better place. So ultimately, like, there is a deal lead. Some, someone takes the board seat. But we'll often actually do boards with two of us with someone, you know, with a number one and a number two because then we keep learning from each other. And then we can fold those learnings into the next excited person, the least excited person in the room, together. Totally. And, and but one of the rules is, once we're in, we are all in. And so like, if you had a reservation before we got to yes and put the term sheet out, like what I see people do again and again, I love this. I'll just use the Matt example. Like, I remember I did this deal that Matt wasn't super hot on. And he had this one concern. And as soon as we closed the deal, the first thing he did was say, how can I help address this concern? Right? It's like, how do I show up to this concern? Because I, I, I feel like I want to help set them up for success. Right? So once we are in, we are all in. Like, we know. And everyone is putting the full force of their network, their work, behind the investments. And that's really powerful too. So if you get an investment from Bons, it's not just Kate. Right? You're getting the whole team. Um, I think that's really special.
Yeah. So as you're advising these founders, you're on their board, what's a piece of advice that you give that you feel like doesn't get taken often enough?
Be a little easier on yourself. Yeah. I just was in a board meeting before this, actually. Okay. And, um, the, it's a great company. We did the pre-seed last spring. And they just started raising. They're like, a couple weeks into their seed raise. And the founder, like, I could just tell that he's so, he was, he was already doing the post-mortem on what he did wrong. No. You know, he was like, well, I should have done this, this, or that. I mean, we still have like, a bunch of lead can in the pipelines. Like, I would not be surprised if we get term sheets the next couple of days. But he was just like, we should have done this differently. And that differently. And like, I see other people do it this way. And I just said, Matt, like, I totally disagree. Like, if you had run the fundraise this other way, there's all these other problems that could have happened. This is just the process. And I told him, take that rock out of your backpack. Like the rock, the weight of that feeling that you made some strategic error. And if only you had done it this way, it would be going better or something like that. Is not helpful. Right? So be a little easier on yourself. It doesn't mean don't do retrospectives. Don't think about how you can improve. But the emotional weight of, if only I had, is not helpful. And my father has this phrase, which I love, and I've really taken it on in my life. And it's the strong move on. Right? And, and I really believe that. And so, yeah, trying to just telling people to relax a little bit. You know, not to, not to retro everything. And, and just take the rock out of the backpack. I think I say it a lot. Um, but I think it's hard to do. We know that, right? I'm, you know, I, I look back, you fundraised. You know, what those conversations are like. I remember what it's like to totally, totally. Well, and especially when you're in the middle of it. Yeah. Right? And they're a couple weeks in. They're deep with leads. But they haven't, they haven't gotten the term sheet yet. So they're in the [ __ ] right now. And, you know, we raised a $100 million fund. What I'm really proud of that. But there was plenty of times where I was like, I'm in the [ __ ] right now. You know, like, I am in the [ __ ] and I don't know if this is going to happen or not. And like, I have a baby. I'm like, you know, I was like, how am I going to do this? And if only I'd done this, this, or that. And it's like, it makes sense when you're in the middle of it to kind of look back and and try and stress yourself out what you could do differently. But really, what you have to do is just keep going. Yeah. I, I, I joke that, uh, we were fundraising for our fund one while my wife and I were planning our wedding. Which meant that I was fundraising and she was planning our wedding. Totally. Like this is, you know. And because then I, you know, as you were talking, it's like bringing me back. It's like, then there's the pressure of the money. You know, you're talking to LPs, you're trying to close. And, you know, by the way, you can't fully be present in other aspects of your life or your business or whatever you're doing. And it just adds that pressure. And so, um, beautiful advice to, uh, to take. I'll close with you where I left to close with of our guests. You know, we talked about a lot of the climate investments that you've done. I know you're not a climate fund per se. Um, one of the things that we, we see, I think so much in the media today is it's the doom and gloom about how fast we need to be moving, the things that are happening to our planet, and the anxiety around the fact that we're not doing all of those things. What gives you hope and optimism about technology and its role in pushing back against climate change?
I actually don't think that technology is the answer. Okay. I think that the intersection of design and technology is the answer.
Say more.
I think often times in technology circles, we forget what really motivates people to make choices. And, um, people do things because they're motivated by beauty, by love, by greed. Right? Like these are the things that motivate people to change behavior. People don't change their behavior out of righteousness. Right? And so if we're really trying to, the classic example being Tesla, electric car is like, you got to make it sexy. Right? Make it sexy. You want it. Right? Make a sports car. So that's a classic example. But I actually started this, um, art show called Beacon, uh, which we hosted last year with a, um, a design studio called Prow, designing the regenerative future. We're doing another one, um, later this year. I'll let you know when that's happening. But what that's really doing is shining a light on the companies that are putting design first in the climate conversation. And I think it's those companies that are going to be successful in making climate sexy. Right? And so I really, I mean, I do a lot of consumer investing, enterprise too, but I think that the technologists need to remember that they exist within the container of human desire. Um, and technology is a component of what will help us move the needle, certainly. But if we're talking about adoption and behavior change, I think we really need to start with what motivates people. So that's why I think design and technology together are the path.
I love that. That is a wonderful place to leave it. This was a far-reaching conversation in ways that I don't even think I I expected. But, um, so much about, I think founder psychology, investor psychology, and really valuable lessons, I think for our listeners as they're building their companies or or backing the next great ones. Kate, thank you so much for joining me on the show today. I'm so grateful to have spent some time with you. And, um, it was just a lot of fun.
Well, that's it for this week's episode of Climb by VSC. I want to thank my guest, Kate McAndrew from Bons, for joining us on the show today. Hey, did you know that you can watch as well as listen to every episode of Climb? Head on over to YouTube. We release new episodes every Wednesday and clips every single day. There's a lot of clips. You can keep scrolling forever. If you enjoyed this episode, I'd love for you to leave us a five-star review. Five stars only. And if you love this episode, please recommend a guest to us to have on the show. We'd love to have them on. Well, that's it for now. Thank you so much for joining us on Climb by VSC. We'll see you next week.