YouSaid · the spoken record

Chad Byers

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24
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2016-08-24
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2016-08-24
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1
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  1. “Yeah, so we invested in a company called Modzy, which was formerly called Pencil and Pixel. Shannon Tellerman is the founder. She's absolutely incredible. Spent some time at Google and was in the early days of VR. And what she's building is the ability for”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “I think it's no question getting to work with awesome founders and getting to be involved in some of the milestone that these businesses are taking in terms of closing a big round or closing a big customer or hiring that really great executive, just seeing kind of the growth trajectory and stories of these companies through the eyes of the founders is what makes this job exciting to me.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “My biggest challenge in each of my partners would answer this question differently, but is probably building the machine that is the firm, right? So building the startup from hiring to branding to our internal processes, I kind of focus a ton of my time on building the operating business that is the fund. And that is tremendously rewarding as well as challenging.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “So I think it's Facebook. My second answer, although this is kind of cheating, would probably be Amazon. So Facebook or Amazon, I don't think it's Apple. I don't think it's Google. I think it's going to be one of those two.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Let's see. I think recently it's when breath becomes air point of view they have on what's really important in life is essentially health and family. And I think that is pretty central to the way I operate and what I strongly believe in.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Yeah, I think we're going to have to get creative on that front. I don't exactly know how that looks, but we have some thoughts and some frameworks on how to do that. But yeah, I think it's a good point. Anytime you scale people, you scale complexity. And so the trade-off is how do you scale people to be more helpful without increasing complexity to a point where it kind of stymies everyone from decision making?”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “Deals were percentage of the deals that were leading. So going from 20% in fund one, we're hoping to lead 40% of our companies in fund two. And obviously we still play nicely with a lot of other VCs as syndicate partners. And then lastly, we want to scale our ownership percentage. And that's obviously what the LPs like to see. But essentially becoming moving from a follow-on fund and hopefully 10 years from now being the investor of record in every deal, right? Being responsible for getting that company from a successful seed to a series A. The path we're taking is slightly different than folks. I think a lot of funds are scaling really quickly. They're going from a 25-ish million dollar fund to 100 plus million dollar fund and one or two funds. And I think the difficulty there is do you have the brand to compete with the top brands at early stage because you're going to have to be leading deals if you have a fund of over 100 million. So our end goal is to be a top early stage fund. We just have kind of a 15 or 20 year roadmap to get there taking a pretty kind of slow methodical approach to building the brand in the fund.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “I appreciate the trust. It's a great question. So where we're headed, we have a very clear kind of understanding of what we want to become. So for us, the end state, and then I'll kind of work backwards, the end state for us is 125 to $150 million fund capped at that size, never getting bigger, focused exclusively at early stage, heavy investment into platform and services to help the companies, help the companies directly, but also help the companies connect together and help each other. six to seven GPs or I should say five to seven GPs so super heavy on the GP side probably more so than anyone at that size again to be able to offer far more bandwidth per company than any other fund you know how we get there is we're taking a very methodical approach we're in phase two of this again we think of this as a startup so we've done the seed around we just closed our series a as we scale the fund we want to scale three aspects so our check size and fund one was 250k and this fund is 500k we want to scale the number of”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Yeah, so there's no question folks are doing opportunity funds. They're kind of, if you think about it, it's a more structured way of doing what a lot of folks were doing, which is called SPV Special Purpose Vehicles, as a quick explanation. A lot of people were using SPVs to capture their pro rata at later stage rounds. Maybe they capture it for their existing LPs or for other investors as well. And then people started rating opportunity funds, which were a much more structured way. They had a pre-set up terms ahead of time for all their future investments to capture essentially growth investments from their own portfolio. We've seen a lot of it. We haven't done it. The feeling in the LP community is pretty mixed on them. And so we haven't gone there yet, but it's something we've thought about and we've seen quite a bit of.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Yeah, that's a good question. So in fund one, just to give you a benchmark, we were about a one-to-one in terms of upfront to follow on capital in terms of the ratio. So for every dollar we invested upfront, we had a dollar for follow on. What we learned in fund one, which is really important to inform what we did in Fund two, was that these companies that grow really quickly for us, it was companies like Robin Hood where we invested at seed. And a year and a half later, they had raised a $50 million Series B was our pro rata in these companies was getting pretty large pretty quickly and that our reserve strategy just really wasn't the right one for the firm we were trying to build and the ownership we were trying to maintain. And so in Fun two, we've shifted to a dollar upfront to $2 follow on. And who knows in the future that might change again, but that's the model in which we're going to operate this time. And I think having more reserves is going to be definitely the way to go for us.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Yeah, I mean, I think it's probably less so that we're competitive because that's our thesis. It's probably more so that we actually believe for businesses that are building defensibility through data and data network effects, we can be the most helpful. You know, the reality here is a company that's building a data type company will probably go talk to other founders in this space, right? And ideally, those founders are going to speak really highly of us. The reason to talk to Susan is not because, hey, they have that thesis. It's because, hey, if you're building a company like that, they're going to be one of the most helpful investors in the valley to help do that.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Yeah, so there's no question they can be. I think, in our opinion, we'd rather see one of those other three than just a strong brand. So I think a good example of this is in the commerce space, there's some companies, I think, where they're most defensible aspect is brand. There's examples of massive companies whose brands are extremely powerful if you think of Coca-Cola or you think of Nike, right? Or you think of even like an Apple, although they probably have other aspects as well. There's no question it can be. We just probably aren't the best investors for that type of defensibility, but there's no question I agree.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “If you're actually helpful to your founders, that is the best way to build a brand and mindshare to Michael's question. The proof for us in that was our Anchor LP in Fund 2 called probably 30 of our 40 portfolio company founders and just said, is SUSASA helpful? Like, what do they help with? Are these guys going to be here to stay with the type of stuff and support they can do? And I think fortunately for us, that was a yes.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “And so we'll always maintain in a really low partner to company ratio. Ideally long-term kind of 68 companies per partner, which is very unique at seed because we want to be so operationally involved. Our long-term vision for this fund is to have 6 GPs on a seed fund, which would be pretty unique. The third one is where we play in the seed market. So we are product market fit investors, so sometimes that leads us to be in the later part of seed. But what that really means is we like to see product when we invest. We like to invest in something that's already in customers' hands. We can play with the product ourselves. We can talk to customers. We can say, is this solving the pain point that you guys had? And I think lastly, and this is the most important one, is like, you have to be helpful, right? The best way to build a brand, in our opinion, is not to do tons of fancy events or, you know, do PR, all these other things. It's to build word of mouth marketing, right? The strongest form of marketing is word of mouth.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Yeah, totally. So I think we do that's a great question by Michael. I think we do four things well, and the last one's probably the most important. The first thing is we're thesis driven. I think individually each of these things are interesting and unique, but together they kind of make us, right? They make us a single individual in this community. So the first one is thesis driven. So we strongly believe that for businesses to create long-term value today, you have to have some form of strong defensibility or moat. And we think the best moats today are built with data, network effects or economies of scale. So we literally kind of want to be, you know, the moat guys and very focused on how does data network effects and economies of scale really, really build that. The second thing is bandwidth. So we strongly believe that you have to have a lot of free time to get extremely involved in these businesses. We wanted to bring the same operating model you see in late stage venture with the amount of involvement.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “So, people that have started companies in sectors who are experts in those sectors and connect again as kind of mentors to the founders. And we leverage our LPs in a massive way. They are extremely involved in our business. Obviously, we wouldn't be here without them, but they are much more than just capital to us. And I think that's a strong competitive advantage of how we operate the fund.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “Yeah, so I'm really excited you asked that question. So we actually think about LPs in a totally different way for us, our LP base is 100% strategic to us, and we built it very intentionally, although we got a lot of no's. We never felt desperate for capital. We never brought in people we didn't think could add value. So our fund one and fund two makeup is not too dissimilar. We added only some big folks for Fund two. But our makeup is about a third late stage VCs. So these are individual VC partners investing in the fund. And obviously the benefit there is they can give us tremendous insights into the benchmarks our companies need to raise A's and B's. They can be mentors for our existing founders. They can write follow-on checks for our existing founders. So there's a tremendous amount of value there. About a third of our LPs are private equity managers. These folks hold large portfolios of companies that our software companies can sell into. These companies can buy our businesses. A tremendous amount of value there. And then we have a good number of kind of famous well-known operators.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “Throw a bunch of reasons on a wall, and we got every single one, but probably the most common ones were new fund, new team. At the time we were in LA, SF, and New York, literally the team was distributed. Most big institutions, that was an immediate no. Felt the team had to be in the same place. Probably those three were the most common, but honestly we got every single one.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “Yeah, it's a great question. So, now many people have written about the fund fundraising side. And so it's a pretty interesting space to talk about. So fund one was really, really hard. We were four people who technically had never really worked together in a material way. I mean, we had done some of this founder dating and investing together as a while, you know, for a while, but we had really just come together. The way I describe it, again, we've always thought of this fund as a startup. So the way I describe it to entrepreneurs, so they know we can empathize with them is we were trying to raise a $25 million speed round with no product. The product we were promising was the fund we were trying to build, right? The fund we were trying to build. And exactly that, the product ends up being the team, right? The team is kind of the most important thing that these LPs are going on. So fund one, you know, we targeted high net worths and family offices. That's how”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Yeah, I mean, no question, that's the way to go. And I think the simplest reason for why that's the case is as an angel, you can build an actual portfolio and track record, right? So when you want to go institutionalize that and finally go raise money from LPs, there's a portfolio of companies that those LPs can look at. One of the things we did when we raised the first fund, I think, that helped in a tremendous way is we pulled some of our angel investments into fund one at cost. So we took some investments we had made the year before, put them in the fund at cost even though some of them had some markups. And it was super helpful, one, for LPs to say, okay, you say you're going to do all these things and here's a basket of companies that live up to what you say you're going to do in terms of the type of companies you want to invest in, the stage you want to invest in, the type of founders you want to invest in. So there is actually something to go on. And I think that's the reason why you've seen people start as angels and move to institutional funds in that kind of order.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “Yeah, no, it's a great question. I mean, I think the first thing I would say is they're just completely different animals, right? When you're angel investing, a lot of things are different. Your tolerance is probably a little bit different. You don't really need to have as much of a cohesive story and thesis around how you're investing and how much capital you want to deploy. The consistency between checks doesn't need to be quite as clean. So I think just in general, angel investing is a lot more flexible, right? It's obviously your capital. You're not reporting to anybody else. No one else is kind of watching over what you guys are doing with the capital. And so, you know, a lot of people want to stay at the angel stage because of that flexibility. But for us, you know, all of us having run companies wanted to build a startup fund, right? We've always thought about the fund as a startup. And for us, like institutionalizing it was really the only way to go for us. And all the challenges that came with that were exciting to us. And we can talk about those.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “Starting companies now, founders in my network during that process really met the team that became SUSE. We were all operating different companies, we were all doing some small angel investing, and as a group really thought about, hey, this is something we're all really passionate about. I can't believe this investing thing can be a full-time job. We've all been on the operating side. Wouldn't it be awesome to try to start a fund? So we all did a little bit of founder dating for a while, invested as a syndicate of angels, and then really decided to take the plunge and try to raise the first fund.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “It wasn't quite as powerful as it is today, but it was a pretty mind blowing experience. And that really continued. So after college, I knew I wanted to get some operating experience. I knew I wanted to work in tech. I'd been obsessed with it my whole life. And so I spent six years at two different companies in various product roles. And the first company was pretty special. It was called Silver Spring Networks. And they built all the infrastructure, software, and services that power what's called the smart grid. So allowing electric utility companies to get electric data every 15 minutes out of the grid. It was a pretty transformative experience for me. I got to be there doing a tremendous amount of growth from about 150 people to 600 people and eventually see the IPO, which was kind of just a fantastic first company experience dream come true. Got to write part of the S1, which for a 23-year-old was pretty awesome. And so from there, I moved to New York City, was working at an ad tech company running their platform team and had just started to do some small angel investing into really friends that I grew up with in the valley that were.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “Yeah, I mean, I guess the starting point for me was really growing up in the Bay Area and being fortunate to be raised in SF and then move down to the bay near Stanford University. And as an early kid, I was exposed to tech and entrepreneurship and VC, which was pretty special. And I guess a couple of funny caveats or stories. I remember being one of the first sellers on eBay during the Beanie Baby craze in the late 90s. So I was 11 years old. I'd set up this like little business flipping beanie babies on eBay. I would go to the summer camp where I had a friend from China and he'd bring me beanie babies from China and I'd sell them on eBay and turn a pretty good profit for an 11-year-old. And it was kind of a great example of being in the right place at the right time and trying these new products. And that kind of love affair for tech continued for my whole childhood being exposed to some of these biggest companies at their earliest stages. I remember trying early Google.”

    2016-08-24 · The Twenty Minute VC · 20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures · IDENTIFIED FROM THE TRANSCRIPT · source