Positive Trends in the Startup Ecosystem

Intro 00:01
Welcome to Startup Success the podcast for startup founders and investors. Here you’ll find stories of success from others in the trenches as they work to scale some of the fastest growing startups in the world stories that will help you in your own journey. Startup Success starts now.

Kate 00:18
Welcome to Startup Success today, we have Jennifer Richard, Principal of Bonfire Ventures in studio. Welcome.

Jennifer 00:27
Hi, thanks so much for having me.

Kate 00:29
Thanks for being here today. Before we get into Bonfire Ventures, I wanted to learn a little bit about your background and what led you there.

Jennifer 00:39
Sure. So I have a little bit of a nonlinear path that became linear a little bit more recently, but I am an LA native, so grew up outside of the, you know, kind of Silicon Valley tech hub. I went to undergrad at Emory in Atlanta. So again, outside of the tech hub. And I actually studied English and I thought I was going to maybe be a teacher or a lawyer. I actually did teach for a year and France after I graduated college. And so I taught English for a year. It was very difficult, I realized maybe teaching wasn’t the right path. But I still wasn’t sure exactly what I wanted to do. So I came back home, worked in media and entertainment for about four years at Creative Artists Agency, so a big global talent agency. And there is where I started learning about, you know, people who are very prolific in tech. So Biz Stone, co founder of Twitter was one of our clients, Gary Vaynerchuk, Eric Ries, who wrote The Lean Startup. And that’s where I really started getting exposure. And so from CAA, I decided to take a dive into the startup world that was blossoming in LA at the time. And I ended up spending six years under a group of serial founders of early stage venture-backed startups, mainly in e-commerce functions, and then went to business school at UC Berkeley finally made my way up to the Bay Area, and then decided to transition into VC at that point. And I have now been in VC for almost six years.

Kate 02:27
Oh, fun, what a great background, I could see how that lends itself really well into investing. Tell us about Bonfire Ventures.

Jennifer 02:37
We are a Southern California firm. Our headquarters is in Santa Monica here in LA. And we are one of the long LA firms. So one of the OG firms investing out of LA, but we lead Seed rounds into B2B software companies. We’re pretty focused in that we, for the most part, only lead. I would say, nine investments out of 10, we are the lead investor. We only do Seed, and so our entry point is around 500k In ARR. And we’re typically writing a $2-3 million check. And we only do B2B software. So kind of generalists within B2B But nothing outside of it.

Kate 03:20
And you must see a lot of interesting things at the Seed stage then with the B2B market.

Jennifer 03:25
Yeah, yeah. I mean, that’s the nice part of being generalists is that you see it all. And so I’m constantly learning about some new industry or vertical or customer type. It’s actually really fascinating how much exposure you have on the B2B side.

Kate 03:44
I bet. What are some areas that you all are excited about for 2024? For right now?

Jennifer 03:51
Yeah, that’s a good question. So there’s a lot of areas we spend time in, I would say that me personally, I come from an e-commerce background. And so I will always have a natural affinity to e-commerce enablement. So platforms that help brands and merchants be more efficient and more profitable in the way that they sell. I also spend a lot of time in retail tech. And so again, like how do retailers run their businesses more efficiently. I and we as a firm spend a lot of time in vertical SaaS, especially in legacy industries. So you know, how do we find ways to bring these industries that are still in the 60s here into the 2000s? And then, you know, more generally, there’s a lot of just unique applications for some of the newer technologies that are coming out like generative AI everyone is talking about. And so how do you apply that to again, all of these legacy industries like healthcare, legal transportation and logistics, in ways that are able to just really bring those industries forward. And we’re seeing a lot there.

Kate 05:05
I think that’s super exciting. We just had some people on talking about, you know, healthcare. And there’s so many industries that could stand some innovation, right. Like you said, they’re stuck in the 60s. Yeah. What is the LA? I mean, you know, San Francisco took a hit with COVID. How is the LA like tech market doing?

Jennifer 05:27
Yeah, so actually, a lot of people who went through COVID, in San Francisco moved down to LA. Which is actually a really good thing. And so I would say that, you know, I entered the LA tech scene in around 2014. So I’ve been in it for about 10 years now. And it has actually just been fascinating and really inspiring to see how much it’s grown over those 10 years. I mean, we have actual tech hubs on the west side in Santa Monica and Venice, and now blossoming in Brentwood. And so we’re seeing a lot of growth across the board, I would say, you know, 10 years ago, there were just a couple of are very early stage sub $20 million Seed firms. And now we have a ton of capital, we have multistage firms, we have several Seed firms that are over $100 million, over $200 million, we are seeing a lot of diversity of industry. And so whereas there was a focus around, you know, like media and sports and things that you just see a lot of in LA. We actually have a lot of companies just kind of across the board outside of consumer and media. But across the board, in B2B, we have a lot in space and defense, healthcare because of San Diego. And so we are just seeing a lot of growth and kind of every area of the tech ecosystem. And that’s been really exciting. And then also, we have a lot of talent here. Because, you know, we have UCLA, we have USC, we have CalTech. And so I think that all of those things together, and of course, the great lifestyle that you have in LA with the weather and cost of living, all of those things come together to just really bolster our ecosystem. And I only see it growing from here.

Kate 07:27
That kind of optimism is and what’s transpired down there is really great to hear. Just because you know, the market has been a little unusual over the past few years. Are you all Yeah. Are you all feeling pretty optimistic, then about 2024? And in the startup ecosystem?

Jennifer 07:48
Yeah, we are. And I think some of it is anecdotal data. But some of it, you know, we’ve seen some reports like SVB put out a report, I think it was either at the beginning of this year, the end of last year, but just showing that the ecosystem is beginning to rebound. And we’re seeing that with our own founders who are, you know, going to market after maybe taking a year or sitting at a year or two out. And what we’re seeing is that more rounds are getting done. Our founders are getting multiple term sheets, rounds are becoming more competitive. And so I think that the most tangible differences we’re seeing are at the later stages. Although I will say at Seed, you know, the earliest stages, even throughout the downturn have been pretty resilient. Deal flow for us has stayed pretty consistent. We’re investing a little bit later, so in companies that have more traction. And therefore, we are paying around the same price for more revenue, and so that’s a change. I guess rounds have gotten cheaper when you think about it that way. But actually, the prices we’ve been paying are consistent. And so we’re seeing stability across Seed and then the later stages are just, people are allocating more dollars. if that answers your question.

Kate 09:19
Yeah, no, that actually makes a lot of sense. And I think for people listening, you know, that’s good to hear. That shows things trending in the right direction. And you mentioned a lot of the areas that you are excited about, you know, you and Bonfire Ventures What do you look at like when making an investment? You know, besides just like the space like what’s important to you?

Jennifer 09:45
Yeah, well, I mean, there’s a few things of course, because we’re investing at the seed stage. We are looking to get into a very long term relationship with the founders we invest in. And so when we write a check at Seed, we’re expecting this to be a seven to 10 year relationship until the company exits. And so I would say, number one, are these people that we want to work with very closely for the next seven to 10 years? And so at the heart of it, it’s a founder bet. Is this someone who can execute? Is this someone we can trust? Is this someone who has good business sense and good resilience? So I would say that’s number one, I would say another piece is just, what is this technology? Is there a real technical moat? At the end of the day, we’re investing in software companies, and at the heart of them must be just defensible tech. And so that’s what we’re looking for. And we’re looking at it within the scope of a general market map. And so where does this company fit within the greater landscape? Is this going to be a category winner? And then how big is the opportunity? You know, at the end of the day, we’re venture capitalists, when we are in this business to make money, we have investors that we have to answer to as well. And so how big of a market opportunity is this? And do we just see this being a billion dollar plus outcome? And I would say those are, those are some of the things that, you know, we must check the box for every investment we do.

Kate 11:27
That’s really helpful, and especially how you framed it, that it’s true, you’re building a relationship with these founders, that’s gonna last seven to 10 years, that’s a really long time. Do you all become pretty close with founders? I mean, is it that kind of dynamic?

Jennifer 11:46
Yeah, absolutely. I think our model is a little different. And that, you know, we’re low volume, high conviction investors. And so we write about eight to 10 checks a year, and that’s across an investment team of six. So it’s like one and a half checks per person. And so we are really investing in founders and in companies that we feel we can be helpful with and actually be partners to. And so we talk to each of our founders, I would say, on a weekly basis, and we really get to know all of them, like we know their families. we know when their kids are born, we know their dogs, and we spend time in person with our founders. We do a founder summit where everyone can get together and collaborate. And so we strive to be our founders first call for both good news and bad news. And that’s something that we can’t mandate in docs, that we have to earn. And I think we do a really good job of earning that kind of respect and trust throughout our portfolio.

Kate 13:01
That’s impressive to hear. I had someone on talking about founder mental health, and they were saying, you know, when they get checks from VC firms that care that call, there’s relationships, they’re not afraid to call their VC firm with good or bad news, that it’s an open dialogue. It really helps with success rates, and then just the whole founder experience and well-being and mental health. That’s pretty awesome. That that’s the approach you take. I want to switch gears because you are a Kauffman Fellow, which is an organization that I think is, for lack of better words, super cool. If you could just tell our listeners about it and your experience, I think it would be really funny here.

Jennifer 13:48
Yeah, of course. So I actually just graduated from the official curriculum part of the program, now almost a year ago, which is crazy. The way I describe it is that it’s almost like a VC-specific business school experience. And for someone who went to business school, I feel like it’s pretty applicable. But it’s a two year program, that is for VCs who are more senior in their careers. So you have to be committed to being an investor long-term, most people in the program or at the partner level. And essentially, it’s two years of meeting on a quarterly basis to just discuss and learn about different aspects of the job. And so, you know, like one module will be on personal brand, one module be on firm brand, and one will be on portfolio construction. I mean, it’s pretty much everything that we have to do on a day-to-day And I would say what makes it so special is that most people working in VC firms are working with just a few people, you know, VC firms tend to be pretty small. There are often things that you, you want to ask someone, but you don’t want to ask someone within your firm. And also, a lot of times you’re so in the bubble of your own firm, that you really only learn how to do things one way and so to hear how other people approach the same role, and the same responsibilities is super interesting. And so that part of it is very valuable. Another piece is that there’s just these really cool travel experiences. So every quarter, you meet in a different place, I went to Mexico City, I went to London, Nairobi, Miami, New York. And so they really do a good job of getting everyone together in places where you can have these unique and memorable experiences. And that just facilitates bonding and more genuine forms of networking. So it was a really, really awesome experience. And I can’t say enough good things about the program.

Kate 16:12
That is so great to hear. I mean, I encourage those listening to check it out. It’s, it’s pretty impressive. Thank you for sharing that. And congratulations.

Jennifer 16:22
Thank you so much.

Kate 16:23
We always wrap up the show with just based on your investing experience and your own personal experiences, and being a Kauffman fellow, with just some general advice for startup founders listening that are in the grind that are trying to get through the day to day if you could share anything.

Jennifer 16:42
Yeah, so part of the conversation we had brought up one piece of advice I have, and then I was just answering some emails earlier that brought up another piece. Okay, can I give to very different pieces? (Yes, please do.) So I would say the first piece is to just not rush and cut corners when it comes to fundraising preparation. You know, investors, we come across hundreds of decks, 1000s of models, and it’s so easy to spot a good one from a bad one. And you really only get one first impression. So if you have the resources, pay a professional deck designer, find somebody to help you with your model, get a second pair of eyes, because you really want to put your best foot forward. And usually when an investor is deciding whether or not to take a call, they’re doing this based off of an email with materials that they’re reading on their own. And you’re not there to insert your personality, and say all the things you want about the business. So make sure your kind of static materials look good and are professional. So that’s one piece. (That’s good advice.) And then the other piece, I would say that’s more for post-investment is we talked a little earlier in the conversation about how we tend to be our founders first call. And I mentioned you know, we know when someone’s getting married, or when they’re having kids, but we also are there with our founders when they’re going through a divorce or a really tough breakup or having a mental health crisis. And I think that from that I’ve really learned how important transparency is. And, you know, we’re all in this business to grind and make money. But at the end of the day, we’re all humans, and I can speak for Bonfire for sure in that our founders well-being is number one, and we can’t help them if we don’t know what’s going on. And so, even though some people can be afraid to show weakness or are afraid to look distracted, I think it’s so important to be transparent with your investors. If there’s something that’s going on that’s really distracting you from the business, we can’t help you if we don’t know. And so remembering at the end of the day, everyone is human first I think helps us go much further in this industry.

Kate 19:14
I love that because it normalizes that we’re all humans and that we’re gonna go through tough times and struggles and (especially every seven to 10 years). Yeah, that’s a long time something’s gonna happen to you. And the fact that it’s okay to showcase that and not try to just bottle it up and keep it just grind it out like everything’s fine. This has been really a great conversation. I really enjoyed talking with you. You shared a lot of really helpful information for everyone listening for those that want to learn more about Bonfire Ventures. Where did they go?

Jennifer 19:49
Sure, I mean, so I am available on all of the platforms. I’m on LinkedIn, I’m on Twitter, you can reach out to us via our website as well, there’s a contact area, so feel free to reach out on any of those avenues.

Kate 20:05
Okay, great. Thank you for that. That’s that’s a nice offer. Thank you so much for being here. It was, it was a really great conversation.

Jennifer 20:12
Thank you so much for having me really enjoyed the conversation.

Intro 20:16
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