(upbeat music) - Welcome to Funding the Future, a special edition of Category Visionaries where instead of interviewing founders, we interview the VCs and angel investors that back them with capital, resources, and advice. Now, let's jump straight into today's episode. (upbeat music) - Hey everyone, today we're speaking with Clancy Star, managing partner of Go Head Ventures. Clancy, how are you? - I'm doing great, how are you, Rhett? - I'm doing awesome. Let's go ahead and talk about the founding of the firm. So you founded it in 2015, take us back to 2015. - Yeah, actually some of the legwork started in 2013, actually my sophomore year at Stanford. So I have two other co-founders, partners at the firm, one of whom was older, TK Mori, and we met in 2013. At the time he was running a small consulting firm connecting Japanese large corporations to small US startups. He was actually kind of thinking about showing it down at the time. And then when I joined, I said, well, it seems like some of your clients might be interested in doing investments, so maybe we should try. So he got one of his clients, I got a few alumni from Stanford and we glued it together. That's right around when I met my third partner, Phil Brady, who at the time was working at Andreessen Horowitz on their deal team. And yeah, he kind of hopped on board and that's how we got started. - And was that a master plan? When you started going to Stanford, did you have this idea that you were gonna launch an adventure fund? Or where did that come from? - No, no, no. I didn't know what venture capital was until six months into being at Stanford. And then actually I was working at a small artificial intelligence startup my freshman year, just part-time. And we went around and pitched a bunch of VCs. It didn't go that well, but I actually really enjoyed my interactions with those VCs. And that's how I kind of got the bug or at least the interest in it. - And then what happened next? Do you have this idea? When do you guys start raising money? - We started raising money in 2014. So I guess kind of like junior year for me. And that was really early stages. And yeah, we had one partner in Japan who gave us three million dollars. We had three US angels who gave us a million dollars each. So we glued it together and that first six million dollar, the tiny little entity was the start of go-ahead ventures one. - And what were they betting on then? Were they betting on your, you being able to figure this out? Were they betting on your partners? What were they betting on when they gave you that money? - That's a good question. I'd actually love to ask them now with 10 years of hindsight. - I think they were just betting on us. I think one of the challenges with pitching a venture capital fund is you're not pitching one specific idea, right? You're pitching the idea of letting me choose the ideas, which is a bit of a harder sell, actually. I think especially stateside where people like to choose ideas. So I think they were just betting on us, maybe a little bit on the Stanford network as well. But yeah, I think it was mainly a bet on us. - And if we zoom out now, how many funds are you at? How much has been raised in total? Can you give us any detail there? - Yeah, sure. We have three sort of core funds and a couple of SVs. I think the total committed capital base is maybe $180 million US dollars right now. So that's kind of where we are. - And what about companies that listeners may have heard of? Anyone that you can share or talk about? - Yeah, I mean, we have a few. I actually think our highest profile one, just in terms of press coverage is colossal biosciences. So they're resurrecting the woolly mammoth. That's actually a company we just funded three years ago. Companies that we funded a longer time ago that are now unicorns include video amp. We have another company based here, NLA, which is working on its unicorn status called Collectley as well. But yeah, those are probably the three that people are most likely to have heard of so far. Oh, maybe hacker rank. - And then what's the general thesis behind the fund? And maybe it's changed or maybe we can just talk about fund three. I think that's the one that's raised the most. What is the thesis for that fund? - Yeah, I mean, the thesis, let me go back to the beginning just briefly. Back in 2015, 16, 17, I think we were really just doing our best to emulate what we thought the best in class Silicon Valley VCs were doing. So, you know, we leaned a lot on Phil's learning certain juice and Horowitz and just kind of what we heard on campus, et cetera. But I think in 2020, the venture capital business model kind of imploded on itself and then re exploded. And there was this long period of time where no one could do in person meetings. And so in 2020, we rolled out our system of prerecorded video submissions from founders to go ahead. And, you know, our thesis has always been to choose the best people. But I think seeing so many videos of people in the same three, four minute format made it so much easier for us to do apples to apples comparisons. I know why Combinator has been doing a version of this for a while. But yeah, that's really our thesis is just like see as many of these people as possible have, you know, honestly a kind of low acceptance rate and just go from there. So. - Talk to us about the video submissions there. What questions are you asking? What are those guardrails that you have? - Yeah, it's really open ended and anyone can go to our website and see it. We basically just, you know, for the initial intake forms, like name, email, LinkedIn, uploading a pitch deck is optional. The video submission itself, we just asked them to briefly introduce themselves for 20 or 30 seconds and then just go straight into give us for three minute elevator pitch, tell us about the problem and the solution. That's it. - And for numbers sake, let's talk about numbers. How many video submissions do you typically get in a year would you say it? - Yeah, so when we started this, we started in 2020, we were getting about three per week. Now we get around 60 to 80 per week. So you can kind of do the math from there. So we're seeing a little north of 3000 a year at this time. We estimate why Combinator, which we still have to do a lot of work to catch up to, probably sees 30 to 40,000 unique videos a year. - What percentage of those lead to an actual first meeting with you? - Yeah, it's around one in 10, get a first meeting and then from there. Yeah, I mean, our current acceptance rate is I think 0.45% for deals. - What are the ones that get through, have in common? - I think, you know, I don't want to give people too much of the cheat sheet, but I think in general, people who spend more time talking about the problem they're solving rather than the solution tend to do a little better. I think we get really drawn in. I know a lot of other VCs do too, when someone seems to have a really deep understanding of what is wrong with the current status quo. And I think a lot of people want to explain every single feature that their product has, et cetera. But most products in the beginning, if they can just solve one kind of big issue, it doesn't have to be a huge problem very well. Even if the solution is not very well put together or kind of rough, they can often find product market fit. - What about red flags? Is there a specific red flag as you're watching those videos where you just instantly close out? They're done, no chance of going forward? - You know, I think some people, especially like, I don't know, maybe old, I don't want to say it too clearly. But maybe like some older founders who've worked in other industries for a really long time will spend a lot of time talking about exit modeling and scenarios and stuff like that. And usually in our experience, people who are very focused on the exit are often looking for a quicker exit, even if they say timelines like five years or six years, they're often actually really one year to three years. - This show is brought to you by Frontlines Media, a podcast production studio that helps B2B founders launch, manage, and grow their own podcast. Now, if you're a founder, you may be thinking, I don't have time to host a podcast. I've got a company to build. Well, that's exactly what we built our service to do. You show up in host and we handle literally everything else. To set up a call to discuss launching your own podcast, visit frontlines.io/podcast. Now back to today's episode. Makes sense. What advice would you have for founders that are pitching investors and trying to raise funds? What's like, I don't want to say the number one piece of advice, but what would be some of the top advice that you'd want to give them? - You know, there's a really, I don't know why they haven't published this and maybe they have their reasons. There's a great podcast episode with Paul Graham, where he's talking about how they were deciding how long the Y Combinator interview should be. And they basically had, my understanding is they had all the partners at YC who were currently there at the time attend every single interview with the founders. And there was a stopwatch in front of everybody. And every minute on the minute, the YC partners would rate the founder on a one to 10 scale. And they would do that for 30 minutes. So they started with the basis that 30 minutes is the longest potential interview time we'd be willing to give people. So every founder would effectively get 30 ratings from every YC partner. And what YC was trying to figure out is at what point do the ratings stop moving? At what point have we kind of made up our minds? Not like how accurate we are or whatever. It's just like whenever we decided, you know, we're right, we're right, we're wrong, we're wrong. But they found was that of all the YC partners participating, 45% actually crystallized the rating after the first minute. So that first 60 seconds, basically half of the partners had already decided, you know, comes up, thumbs down. And after the seven minute mark, 95% did not change their rating for the following 23 minutes. So what I tell our founders, the ones we've already invested in, we're trying to help them raise additional capital. And I would tell any founders like really work on your first minute. Think about how to make yourself as unique and impressive sounding in the first 20 seconds in your personal introduction. And that next 40 seconds, you should say something really interesting and special about the problem. So I try to spend an hour working on our founders on just their first 20 second intro. And I spent an hour on that next 40 seconds, because I think half of firms are deciding whether they're going to allocate in that first minute. Even though they don't want to admit that, I think many people are deciding in 60 seconds. What's the best way for founders to summarize a problem? And do you want them to go big with a problem? You want them to go small and be very, very specific? How do you think about that? Yeah, that is difficult. Like, I think there are some problems that inherently sound bigger. And it's sometimes like there's some problems. Like, I think cloning willy mammoths is a good example. It's not entirely clear what problem you're solving. Like, okay, perhaps these mammoths are going to step on the snow in the Arctic tundra and make it easier for trees to grow or something like that. At least that was the argument. But like, I think oftentimes more details are helpful. Like, understanding like, oh, well, we tried this and this is what happens. So obviously that's not the solution people want. Like, little things like that, I think, are helpful. It's cool to have a big vision and we do fund some companies like that for sure. But I'm very interested in the real details of why customers want specific things or unhappy about certain things. And are there like industries that you're focused on right now? I know you mentioned biotech there. Is biotech the focus or is it industry agnostic? No, we're very aggressively agnostic, I would say. So we always preface our life partner pitches telling founders, you know, like, we are going to ask you questions about your business and your idea. But it's not because we as a firm specifically have an internal set of VCs on different sectors that we're trying to mix and match on a five-year, 10-year horizons. I think it's very difficult to do. And I really can say, honestly, our worst passes have been situations where we really liked the founders, but we didn't love the idea. So, yeah. And what do you think you get wrong when you do pass? Is that always the problem? That it was the right founder's wrong problem? Yeah, I think that, I mean, just financially speaking, yeah, our worst passes have been that situation where we're just like, we really didn't like the idea, we liked the team and they either changed the idea a lot or they iterated on the idea so quickly that it didn't really matter that the initial product wasn't quite yet fitting in the market. Being industry agnostic, is that ever hard to be there to add value to the investors or is that a value add that you are industry agnostic and you don't have tunnel vision because you're coming from the space? So, you mean value add to the portfolio companies or to the limited partners? So, the portfolio companies, the founders themselves? The most welcome. Yeah. So, we really just try to help people raise money. That's it. And we tell people that really upfront, like, I think a lot of people promise a lot of support. And I think some of the funds do deliver on it, but at least within our portfolio and some of our friends portfolios, we did a survey. We basically asked the founders, how many of your existing customers are people who came from an investor introduction? And I think out of like a hundred our portfolio companies, only to the portfolio founders said this came from the investor and I wouldn't have this customer if it weren't for this investor. So, you know, I think fundraising is something that we know pretty well for age. You also have to keep in mind, Phil and I are pretty young. We're just 30 and we've been fundraising the whole last decade. And I think it's the only thing we effectively have operational experience doing is raising money. So, that's what we focus on supporting people with. Got it. Makes a lot of sense. Yeah. It's telling you in the intro there, you know, as we were chatting, the pre-intro or pre-conversation that I have a PR firm and we're very used to VCs coming in with the startups that we work with. They kind of play this value add pitch and then they have a PR firm that comes in and the PR firm is working with like 15 or 20 of the portfolio companies. They have no context, no idea what they're doing and very, very little value add overall. Was that a strategic decision on your end to not try to expand and have more services that you're focusing on delivering to founders or giving to founders? Because I feel like a lot of the other VC firms out there, it seems like they're trying to go very broad. They're trying to say we can help you with recruiting, we can help you with PR, we can help you with marketing and hiring and fundraising, all of that. You've just spoken. Yeah, well, I think part of the issue is that when we first started writing checks back end very end of 2014, early 2015, we would take board seats and we would give a lot of advice and there's a very good argument that at ages 21, we shouldn't have been giving any advice and when I look back on that advice at age 24, I was like, oh, man, that was really bad advice in some cases and then when I look back at the advice I was giving when I was 24 at age 27, I was like, oh, man, that advice wasn't actually much better and I think to our credit, part of it is that these industries move and they change and it's like, with hindsight, it's very hard to feel great about advice that you gave three years ago in almost any aspect of your life, but I did see some patterns, you know, I think actually the Silicon Valley Bank collapse was a really funny example of this where every VC I knew and their mother was telling their founders like, oh, yeah, like once you take our money, you should set up the Silicon Valley bank account and we're going to introduce you to our banker and she's going to set up this line of credit for you and everything's going to be great and it created basically a systematic collapse because everyone had given their portfolio founders the same advice with regards to banking and I kind of think that's a nice analogy for a lot of other aspects. It's like, what if you're a VC firm and you give all your founders the same advice on how to find product market fit and it turns out five years later objectively you gave them pretty bad advice. It probably would have been better to say nothing and then have some of them figure it out and have some of them not figure it out, let it be a portfolio rather than kind of just like march everyone off a cliff. If you're wrong, you know, I'm sure some VCs are right, at least within something things that they help out with, but we thought really hard and I think fundraising is something we feel like everyone for sure needs money, like it's almost never a bad thing to have money and we can actually help with. What's the most common piece of advice that you're giving to founders then when it comes to fundraising advice? Yeah, it's a bit of what I touched on earlier is that the pitch is over so much faster than you think it is. It's like that first minute, if I don't know, if I'm not impressed by who you are and I don't know what you do, then you've probably lost like half the time you've already lost. So I really just focus on those first seven minutes with people. I can't really say it's like general advice and maybe one thing I often say is you have to be concise, you have to shorten this. One other thing I would say is a lot of founders treat investor pitches a little bit like customer sales calls where they're just like explaining everything that the product can do, explaining everyone that's in the market and it's too comprehensive and with investors, it's more like we're looking to be educated by the founder on a few things we didn't know about. We want to walk away impressed and brevity is better. This show is brought to you by the Global Talent Co. A marketing leader's best friend in these times of budget cuts and efficient growth. We help marketing leaders find, hire, vet and manage amazing marketing talent for 50 to 70 percent less than their US and European counterparts. To book a free consultation, visit global talent.co. What about the first check that you ever did? Talk to us about that first check. What was that experience like? Well, I think my first check I got really, really lucky because we invested my first real check was into a company called Videoam, which is advertising software company here based in Los Angeles. I just did it the way other VCs do it. It was referred by another VC firm. I flew down to LA to meet the founder, took a few hours at the whiteboard with them figuring out if I thought it was a good idea or not. I was still diligent seeing ideas a lot back then. I thought it was a good idea and flew back in and said we should write this check. It was a much more traditional process, I think. Any examples of ones that weren't so traditional? Well, now the way our flow works is everyone does the same thing, right? Even people we've met in person, we send them through our website, they submit a video application. We always get back to people within three days. Within three days, we always say, yes, you can come to a live partner pitch over Zoom or no, but please consider reapplying in the future. After you're invited to that partner page, we collect a little more information like burn rate, projections, that kind of stuff. Partner pitches are always Monday here, which I guess is kind of traditional for a lot of VC funds. We always give people a yes or no on Tuesday at 5 p.m. People are usually pitching us between noon and 5 p.m. on Monday. We always give them a safe, an actual signable agreement, not a term sheet on Tuesday at 5 p.m. If we're going to move forward. Wow. How do you make decisions that fast? Talk to us about that decision-making process. Well, we started with a longer decision-making process and we also started by gathering more information from founders and kind of like what we asked our founders to do when we're helping them with their pitches. We just kept editing it because I think we kept finding, I was the person banging the drum on this the hardest. I was like, are you really using this information? Like, I was tracking people's usage on the Google Docs that we had founders filling out. I was like, you're not looking at this. Like, you made this decision and you never looked at this piece of information and people were like, yeah, you're right. I didn't look at it. So I was like, let's not ask them. You know, let's just leave them alone, save them the 20 seconds and save us the 20 seconds. And we just kept shortening it. One thing that's kind of a secret is that like we do like to talk with our advisors and stuff about some of the videos that we're most interested in and in some cases, we'll show them and get their feedback even before we go into the live meetings. So we were prepared with some questions that we might want to ask, etc. But yeah, I think we just edited over the last four years or so and it just got shorter and shorter. What about on the topic of category creation? So this is category visionary's podcast. A lot of the founders that come on, they have aspirations to create new market categories. Obviously, there's a lot of risk when it comes to creating new category. So what's your general view there on category creation? If a founder in one of those videos says, this is a category creation play, are you instantly swiping right or are you swiping left or just really depends on the market? Yeah, I mean, definitely category creation is a bit of a buzzword. And I think everyone likes to say they're creating a category because it instantly kind of implies that you have a blue ocean that you're going after and the market must be bigger. But ultimately, you're selling to people and if you're going to sell to people, you have to add some value to the customer. So I wouldn't say I'm more likely to swipe right or left. You know, I still just listen for the same thing. I'm just trying to see, are you really helping one person do something, whether it's an existing category or new category? Maybe one thing I'll add is that I think a lot of founders start out solving a problem that later becomes a category and they don't really realize that they're in it until later. I think we've had that happen with a lot of our companies or they're like, oh, we're kind of customer success. But like, oh, no, now we're actually like this other thing, which is like kind of upstream attrition or something like that. You know, it's just, yeah, it's difficult to create categories, I guess. And if we just zoom out in general, how would you summarize the state of venture today? Hmm. Well, that's a big question. I mean, I think if I guess I had to split it into two, I think really early stage is one whole category and everything else is another category. And I'm sure everyone in the other category would disagree and split it into five more categories. But I make this distinction because I think that in later stages, there's a lot of need for firms to differentiate with regards to the value that they add, meaning that I think a lot of firms at series CD, maybe even starting from B feel like, okay, we're kind of a check and the good companies here all have offers. And we have to add a marketing department, we have to add a recruiting arm and stuff like that in order to differentiate their capital because probably the good founders have options for capital. You know, I think at the early stage, some really like celebrity kind of founders have many options for capital, at least for smaller checks. But I do think at the early stages, and this is a lot of our firms thesis is what really sucks for founders at the early stages is the process of raising money. It's not actually so much like the process of interacting with your investor after they raise money. And so that's why we focus so much on creating a short timeline, but actually more importantly than how quick it is, is how transparent it is like, we always get back to people after 72 hours like for us, that's like a red alert crisis at the firm if somehow some founder hasn't heard back from the GPs in three days. And I think that it's really important. Like, I think other early stage firms should think about what founders are saying about them, even when they don't invest. So yeah, I think for us, I kind of split into two, I think early stage firms should really focus on the process. I think late stage firms probably do need to find a way to differentiate like what's special about taking money from them and that kind of thing. Is there anything that you commonly see on Twitter, I guess X now or LinkedIn from other VCs that you disagree with? Well, yeah, there's a lot of that stuff I disagree with. I mean, I think one general pattern, I think a lot of VCs write posts about industry trends and sectors. And I think that, I don't know, that way of thinking I think is difficult because it really puts them in a position where they kind of have to be right on certain things and they may like have their blinders on and miss people who are doing things that don't quite line up with the thesis. That said, like, we generally don't engage in discourse on Twitter and LinkedIn, like we generally just repost our own portfolios, accomplishments. We don't try to like do thought leadership and stuff like that. It's just not really our style. And we found that the best way to consistently increase deal flow is to give the founders that you don't invest in the best process and the best kind of just experience possible. Talk to us about making that decision because I feel like a lot of other venture capital firms, they're doubling down, I would say, are like betting big right now on building their own brand. There's a lot of podcasts where every VC now has a podcast. Talk to us about that decision to not go down that same path. Well, I guess with regards to how we kind of came about this process and why we doubled down on it, a lot of it actually was just based on our own frustrations with fundraising. You know, I think fundraising for a VC fund is an easy. What we started, what we found was that what was frustrating was not like how quickly people got back to us. It's just that we didn't even know if they would get back to us. And I think a lot of founders can relate to this. Like, oh, I had this great meeting with the VC. I didn't even hear back from them. I heard back from them like five weeks later that they decided to invest in something else or whatever. And so we just thought like, wow, like, I mean, if it's bad for us, imagine how much worse it is for founders that have like a burn rate and kind of a drop dead date and everything like that. So that's why we built this. We kind of built it for ourselves as pseudo founders, founders of the VC fund. We doubled down on it instead of focusing on building out PR and stuff like that for ourselves because we just started to get so many referrals from people that we didn't invest in. And I kind of thought that referrals from founders that we didn't invest in might not be as high quality. And that wasn't the case at all. Like tons of people were like, oh, well, I'm just going to send the smartest person I know to do this, even though I didn't get a check because it was so easy and quick, like, what's the harm? So I think 70, 75% of our deals just come from referrals from founders we don't invest in. So yeah, I think the difference is that we really treat and think about, and I'm not saying other firms don't do this at all. But we really treat and think about founders that we don't invest in as customers as well. I think many firms basically say, if you're in the portfolio, you're a customer and we'll move mountains for you, we'll do everything. That's great. But I think that a lot of firms could think a little harder like, oh, should we really, maybe we could have done something a little nicer for that founder or like, maybe we should have gotten back to him or something, you know? So yeah, we've just focused on this because it's what's yielded deal flow and high quality deal flow. Now, final question for you, since we're almost up on time, let's zoom out three to five years into the future. What's the big picture of vision here for go-ahead ventures? Yeah, I mean, this isn't like some secret I've told Michael at Y Combinator directly, like, we want to do Y Combinator at scale. And frankly, with like a little less support than Y Combinator, but with even faster deal making and decision making than Y Combinator. So I kind of want to be value add in the process of raising money from us and raising money in the next round. And that's kind of what we do. But I want to do it at the scale of Y Combinator. Like, you know, we see 3,500 a year. I want to see 30,000 a year. We're going to keep working on it. What do you have to do to make that happen? Do you think or maybe a better way to ask that as you think about making that happen, what's going to be like the biggest challenge that you're going to have to overcome and solve? I think probably the thing that we have to think about is basically melding the cyber and real world. You know, I think we need to think about like, are there some things that we need to do in person, like events we need to go to? We don't do any of this stuff right now and bodies that we need to just get in front of people and then kind of funnel people through this. Or is there more that we can just do with computers and automation? Like we don't do any outbound outreach right now, either from computers or anything like that. So I think we have to consider doing both. If we want to achieve that scale and try to make a flywheel effect like Y Combinator has. Amazing. All right. Well, if founders are listening in and want to follow along with your journey, where should they go? Yeah, please just go to our website. Go ahead, vc.com. So that'd be awesome. We'd love to see your applications. Even if you think you're a little early, just apply. And worst case scenario, we'll just tell you to reapply in six months. We have many people who've applied three or four times and we eventually fund them. So it would be great to hear from anybody. Amazing. Love it. Thanks so much for taking the time. All right. Thank you, Brett. This episode of Category Visionaries is brought to you by Frontlines Media, Silicon Valley's leading podcast production studio. If you're a B2B founder looking for help launching and growing your own podcast, visit frontlines.io/podcast. And for the latest episode, search for category visionaries on your podcast platform of choice. Thanks for listening and we'll catch you on the next episode. [MUSIC]
