20VC Moxxie Ventures' Katie Stanton on What It Takes To Raise A First Time Fund As A Solo GP, The Entrance of MultiStage Funds Into Seed Rounds and The Inverse Relationship of Those That Fund Diverse Managers and Those That Say They Do

Harry Stebbings interviews Katie Stanton, founder and general partner of Moxie Ventures, on "The Twenty Minute VC" podcast. Stanton, with a notable background including roles at Twitter, Google, Yahoo, and in the Obama administration, discusses her transition from angel investing to running Moxie Ventures, which focuses on seed-stage investments in companies that improve life and work. With a portfolio boasting investments in Airtable, Cameo, and Coinbase, Stanton emphasizes the importance of backing strong founders and shares insights on fundraising challenges, particularly for women and people of color. She advocates for more diversity in VC decision-making roles and highlights the disparities in equity distribution. Stanton also touches on the complexities of startup valuations and the difficulty of customer acquisition in a market dominated by tech giants.

• Harry Stebbings hosts the 20 minutes VC podcast and invites listeners to follow him on Instagram.
• The guest is Katie Stanton, founder and general partner of Moxie Ventures.
• Katie Stanton has a notable angel investment portfolio and executive experience at major tech companies and government.
• Harry acknowledges the contributions of several individuals in preparing for the interview.
• The podcast features sponsorships from Pilot, Hymns, and Dashlane.

"You are listening to the 20 minutes VC with me, Harry Stebbings and it'd be awesome to welcome you behind the scenes here."

This quote is Harry introducing the podcast and inviting listeners to engage with him on social media.

• Katie Stanton has a strong background in tech and angel investing.
• She has worked in executive roles at Twitter, Google, Yahoo, and Colour.
• Katie has served in the Obama White House and State Department.
• She is on the board of Vivendi and was on the board of Time Inc.
• Harry expresses excitement about interviewing Katie due to her respected reputation in the industry.

"I'm very excited to welcome Katie Stanton, founder and general partner of Moxie Ventures, investing in founders who make life and work better."

Harry introduces Katie Stanton, highlighting her current role and her impressive career trajectory.

• Katie started in banking in New York but was unhappy with her job.
• She transitioned to tech by leveraging her financial background to join Yahoo.
• Katie worked at Yahoo, Google, and other tech companies, leading to her interest in angel investing.
• Her first investments were in Lowercase Capital and Shape Security, both of which were successful.

"I remember using Yahoo, one of the earliest iterations of Yahoo. And I thought, well, that's interesting. How fun would it be work at a company like Yahoo?"

Katie describes her initial interest in the tech industry, prompted by her use of Yahoo's services, and her decision to pursue a career in tech.

• Katie's experience at Google exposed her to entrepreneurs and led to her first investments.
• She co-founded Hashtag Angels to invest in diverse founders alongside other Twitter executives.
• Katie decided to focus on investing full-time, leading to the creation of Moxie Ventures.

"I was able to invest in a lot of these companies because one of my good friends and mentors and former board member Bijean Sabbath at Spark Capital, approached me with this incredible opportunity to become a scout."

Katie credits her ability to invest in various companies to the support and opportunities provided by her network, particularly Bijean Sabbath.

• Katie acknowledges becoming more conservative as an institutional investor compared to her angel investing days.
• She now has a rigorous due diligence process and a higher standard for investments due to the responsibility to her LPs.
• Katie is more selective and willing to walk away from deals that do not meet her criteria as a fund manager.

"I definitely have become more conservative, transitioning from being an angel and now being a full-time investor."

Katie reflects on her shift in investment approach after transitioning from an individual angel investor to managing a venture fund.

• Harry Stebbings discusses the importance of fund managers placing sizable checks and not just angel checks in competitive deals.
• He emphasizes the need to secure a certain allocation level to ensure time and money are well spent.
• The concept of "coming for the cake and not the crumbs" is highlighted, indicating a focus on significant investment rather than small, less impactful ones.

"I'm looking for valuation caps of less than ten to 15 million. I'm requiring a certain allocation level to make sure that it's time and money well spent."

This quote explains Harry's criteria for investment opportunities, emphasizing a preference for deals with lower valuation caps and a substantial allocation to justify the investment of time and resources.

• Harry describes the challenges of moving from angel investing to institutional investing, where larger check sizes are necessary and competition is fierce.
• He stresses the importance of adding value to founders and differentiating his capital from others.

"It definitely is a different ballgame. I think almost anyone can come in for a friendly $25 to $50,000 check, but in the most competitive deals, you often get squeezed as a fund manager."

Harry explains the competitive nature of institutional investing compared to the more accessible angel investing, where smaller checks are common and less competitive.

• Harry reflects on his experience raising the Moxie Fund, noting the importance of understanding the sources of capital for VCs.
• He shares his proactive approach to fundraising, including contacting a large number of potential LPs (limited partners).
• Harry acknowledges the emotional challenges of fundraising and the importance of resilience in the face of rejection.

"I ended up meeting with or contacting 279 potential lps. So that was good learning experience."

Harry quantifies his extensive outreach during the Moxie Fund's fundraising process, highlighting the scale of his efforts to secure investment.

• Harry identifies organization and hard work as key factors in his successful fundraising.
• He admits that managing emotional attachment during the fundraising process was a challenge.
• The advice from Semil Shah to not become too emotionally attached to potential LPs is acknowledged as valuable.

"What I didn't do well was that it was hard for me to remove the emotion from the process."

Harry reflects on the difficulty of separating emotions from the fundraising process, a challenge that can impact decision-making and relationships with potential investors.

• Harry offers several pieces of advice for first-time fund managers based on his experiences.
• He highlights the importance of building a long pipeline, focusing on allies, and articulating a unique value proposition.
• The significance of starting relationships early with large institutions and being persistent is emphasized.
• He mentions specific funds and individuals who are supportive of emerging managers.
• Harry also touches on the additional challenges faced by older individuals, women, and people of color in fundraising.

"And every time you talk to somebody, ask them for three new names, for example."

Harry provides practical advice on how to expand one's network during fundraising by continuously asking for new introductions.

• Harry agrees with Semil Shah's observation about founders preferring multi-stage money.
• He outlines the four waves of venture capital as described by Jim Marshall, detailing the evolution from the original giants to the current wave of diverse and geographically spread investors.
• The current trend of multi-stage firms growing larger and more global is contrasted with the emergence of diverse seed-stage investors with specific focuses.

"But now there's this really interesting fourth wave, which you and I are part of. So there's differentiation, there's diversity."

Harry summarizes the current state of the venture capital industry, highlighting the diversity and differentiation that characterize the modern landscape of investment.

• The current venture capital landscape has shifted power to founders.
• Founders have numerous options, benefiting from specialized micro funds.
• Early-stage micro funds can provide tailored support and dedication.

"I do think founders are in this driver's seat. Pendulum has swung to them, which is great, and so they have a lot of options."

This quote emphasizes the advantageous position of founders in the current market, where they have the upper hand and multiple avenues for funding and support.

• Micro funds offer specialized expertise and commitment at the earliest stages.
• They can be more beneficial than multi-stage funds due to dedicated attention and resources.

"I do think it's better for a lot of founders at the earliest of stages to have at least one or two of these micro funds who specialize in this stage or in a particular sector and who truly care."

The quote suggests that micro funds are particularly valuable for founders due to their specialized focus and the personalized attention they can provide.

• Founders seek trustworthy capital and specific skill sets from VCs.
• Assistance in market entry, product-market fit, and talent acquisition is highly valued.
• Founders also desire a trusted partner for support throughout their journey.

"Yeah, I think that they're looking for capital they can trust and they're looking for a specific set of skills."

This quote highlights the qualities founders prioritize when choosing venture capital partners, which includes trust and expertise in key business areas.

• Valuations in venture capital are often unjustifiably high, posing investment challenges.
• Founders struggle with the cost of customer acquisition due to distribution consolidation.

"Valuations in venture right now are just unjustifiably high."

The quote reflects the concern over inflated valuations in the venture capital industry and the potential risks they pose for both investors and founders.

• A significant portion of venture capital is spent on customer acquisition through major platforms.
• The reliance on paid channels like Facebook, Google, and the App Store has increased.

"I'd love to know the stat of how much venture money is actually getting reinvested in Facebook, Google and the App Store for customer acquisition."

This quote expresses a desire to understand the extent of venture capital funds being used for customer acquisition on large digital platforms.

• Investors must balance price sensitivity with conviction in a startup's potential.
• High valuations should not deter investment if there is strong belief in the team's success.

"Ultimately the price may not matter in the long run if it plays out."

The quote suggests that while high valuations are a concern, they may be justified if the investment yields significant returns, emphasizing the need for a balanced approach.

• The landscape of free and open distribution for startups has changed, necessitating careful go-to-market strategies.
• Startups must be strategic about distribution channels and customer acquisition costs.

"For the first time ever, free and open distribution is now no longer in existence."

This quote refers to the shift in how startups reach their audiences, highlighting the challenges of the current distribution environment.

• Boutique or specialized micro VC funds play a critical role in early-stage startups.
• These investors can provide focused support and resources that are essential at the beginning.

"You also said about the importance of having the more boutiquey or specialized micro vc funds in at the earliest stages."

The quote acknowledges the value that specialized early-stage investors bring to startups.

• Significant equity value and funding disparities exist between male and female founders.
• The "gap table" study revealed that women receive a disproportionately small share of equity and funding.

"We found that only 9% of equity value goes towards women."

This quote highlights a significant disparity in how equity is distributed, with women receiving a far smaller share compared to their male counterparts.

• Female-led startups often receive lower valuations and face more dilution.
• Biases in the industry affect capital allocation to women.
• Underrepresentation of women and people of color in investment roles perpetuates disparities.

"A lot of female led startups get valued lower and diluted more."

The quote points to the trend of female-led startups facing lower valuations and greater dilution, which is part of the broader issue of gender disparity in venture capital.

• Open and transparent data are crucial for addressing disparities.
• Intentional and fair equity allocation can help reduce the gender gap.
• Reevaluation of valuations and investment practices is necessary for fairness.

"You can't manage what you can't measure."

This quote underscores the importance of data in identifying and managing disparities in venture capital, advocating for transparency and measurement as the first step towards change.

• Harry Stebbings is curious about the strategy of Katie Stanton's new fund and how she approaches diversification.
• Katie Stanton's new fund is a $25 million fund, aiming to invest in 20 to 25 companies over the next two to three years.
• The fund will invest half of its capital in initial investments and reserve the other half for follow-on investments.
• Investments will be focused on pre-seed, seed, and seed plus stages, with an open mind towards sectors.
• Katie has a preference for consumer Internet, future work, fintech, and health tech sectors.
• The fund plans to invest between $250,000 to $500,000 per company with a 5% ownership target.

Yes. So it's a $25 million fund. I'm looking to invest half of the capital and reserve the second half for follow ons. Only investing in seed. So precede seed, seed plus what have you. Basically anything before the a open minded with respect to sectors. But I do tend to gravitate towards the sectors that I love, which are consumer Internet, future work, fintech and health tech. I plan on investing between 250 to 500,000 per company and my ownership target is 5%, which I think allows me to be a great fast follow to some of the larger firms. And so ultimately this allows me to invest in roughly 20 to 25 companies over the next two to three years.

The quote explains the investment strategy of Katie Stanton's new fund, including the amount of capital, stages of investment, sector focus, and target ownership percentage.

• Katie Stanton agrees with Harry Stebbings on the level of diversification for her portfolio.
• A Monte Carlo simulation found that investing in 23 companies yields 83% of the benefits of diversification.

Okay, totally with you there in terms of that level of diversification. We're actually 23 is what we found when we ran the monte Carlo simulation. It gets you 83% of the benefits of diversification.

The quote highlights the result of a Monte Carlo simulation that supports Katie Stanton's diversification strategy for her investment portfolio.

• Katie Stanton discusses the advantages and challenges of being a solo general partner (GP).
• She relies on an extensive network to assist in decision making, including LPs, a technical advisor, and a group called #angels.
• Katie's LPs offer expertise in deal diligence and deal flow.
• Alex Roetter, a former colleague and venture partner, serves as a technical advisor.
• The #angels network provides feedback and supports decision making.

Yeah, it's great to be a solo GP because you can move fast and you can make decisions quickly. But I do rely on a number of people to help me make sure that I'm making the best decisions possible for this portfolio.

The quote outlines the benefits of being a solo GP and how Katie Stanton compensates for the solo decision-making process through her support network.

• Harry Stebbings acknowledges the unique and supportive community around Katie Stanton and Moxie Ventures.
• The support system includes LPs, advisors, and friends who contribute to the decision-making process and provide a sense of community.

Our have to say, when I look at the support system around you, it's not one that I have ever seen before. I don't think. I think the love and outpouring of support for you and Mossy has been incredible and totally deserved.

The quote praises the unique support system Katie Stanton has built around her and her fund, which contributes to her success.

• Katie Stanton recommends three books: "Becoming" by Michelle Obama, "Where the Crawdads Sing," and Jason Calacanis' book on angel investing.
• She suggests the audio version of Jason Calacanis' book for its entertainment value.

Okay, so three books of 2019, at least I love becoming because I love Michelle Obama. Where the Crawdad sang was an excellent book. And then, very begrudgingly, I thought Jason Calicanis'book on angel investing was really good for new investors. And I do recommend the audio version because he's very entertaining.

Katie Stanton shares her favorite books from 2019, highlighting their impact and recommending them for different reasons.

• Katie Stanton identifies John Fahey and Dan Rosensweig as the best board members she has worked with.
• She credits John Fahey for his role in the acquisition of Time from Meredith.
• Dan Rosensweig is praised for being a thoughtful and helpful mentor.

I have two. John Fahey, who was the chairman of the time board because he helped negotiate the acquisition of time from Meredith, and then Dan Rosensweig, who is the menchiest of them all. He brought me onto the time board, and he's the most thoughtful, honest, and helpful mentor, I think, in the business.

The quote details Katie Stanton's experiences with two board members who have been particularly influential and supportive in her career.

• Katie Stanton's first angel check was in a company called Shape Security.
• She emphasizes the importance of betting on the founder, highlighting the founder of Shape Security as tenacious, determined, and ethical.

My first angel check was shape security. And what I learned from that was always bet on the founder.

Katie Stanton shares her first experience with angel investing and the lesson she learned about the importance of the founder's qualities.

• Katie Stanton describes Juul's attempt to recruit her for a CMO position as "ridiculous."
• She contrasts Juul's negative health impact with her work at Color, a health tech company focused on improving health through genetics.
• Stanton rejected the offer from Juul due to the mismatch with her values and career focus.

So, Juul is a ridiculous company. They had approached me while I was working at color. And color, as you know, is a health tech company trying to help people stay healthy by understanding their genetics and predispositions to things like cancer. And a recruiter had approached me about an opportunity to be the CMO at Juul, which was a health tech company. Health tech, in quotes, harnessing disruptive technology to improve and progress this mission globally. And I thought that was kind of a ridiculous thing to try to approach somebody already at a health tech company that was actually making health worse for people. So anyway, I said no.

The quote explains Katie Stanton's decision to decline an offer from Juul, highlighting her commitment to genuinely improving health through technology.

• Katie Stanton has come to realize the significance of ownership in the context of investing.
• She advises that the importance of ownership depends on the investor's goals, whether it's for learning, wealth, or supporting the founder.

Ownership matters. I think early on I didn't realize how important it was, and now it's something that I focus on quite a bit.

The quote reflects Katie Stanton's evolved understanding of the critical role that ownership plays in the success of investments.

• Katie Stanton wishes to see more diversity in decision-making and funding roles within the venture tech industry.
• She advocates for increased representation of women and people of color.

I would love to see more women and people of color in decision-making and funding roles.

The quote expresses Katie Stanton's aspiration for greater inclusivity and diversity in the venture capital and technology sectors.

• Katie Stanton's most recent publicly announced investment is in Ethel's Club.
• She was captivated by the founder, Naj Austin, and believes in the importance of the club as a social and wellness space for people of color.
• Ethel's Club addresses the need for safe and supportive community spaces transitioning from online to offline.

So the most recent publicly announced investment I made was in Ethel's club. And I did that last summer because I became really captivated by the founder, Naj Austin. And I think she's building something important.

The quote shares Katie Stanton's enthusiasm for her latest investment in Ethel's Club, emphasizing the founder's vision and the venture's social significance.