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Elizabeth Yin

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22
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2017-11-15
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2017-11-15
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  1. “Yeah, unfortunately, I can't talk about hustle fund investments yet, but one of my Angel portfolio companies, who also went through the 500 Startups Accelerator, they're called the Pill Club. It's essentially free birth control and that gets sent to your door. And, you know, when I first saw them and they first joined the 500 Startups Accelerator, they were really early. And that was actually an unusual bet for 500 startups because 500 startups has been investing in companies with more and more traction. Anyway, this team was really, really early, but what I liked and kind of going to our thesis with Hustle Fund was they just moved really, really fast. And they also had regulatory concerns that you had alluded to earlier that we discussed. You know, they have to jump through hoops around licensing and whatnot. Like if you're going to send prescriptions around, it's hustle.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Just everything. If you seem untrustworthy, it doesn't matter if you are or you're not. Investors just don't want to have anything to do with you because they don't want to take the risk.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “You know, I think the world is evolving, actually. Don't actually think that that would be the strategy for us. I think if you ask me 10 years ago, that would make a lot of sense. You know, with some of the rise in new funding mechanisms, including ICOs, which are very controversial, I actually think in 10 years some of the craziness will level out. And maybe it's not on Bitcoin, but maybe it's on another token or so that you will see fundraises done differently in 10 years.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “You need to raise a lot more money, and I think this is our first fund, you know, frankly speaking, we are just getting our foot in the door, and this is going to be a small fund. And so this is a strategy that makes sense for our fund size.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Are not even near product mark of it by any means, you really do need diverse portfolio access. And so this is why we are writing a lot of checks, essentially to hedge bets, essentially to gather information across lots of different companies. But I do believe in ownership to a good extent. I mean, I know that a lot of sort of traditional VC strategy is to go in at get 10%, 20% of a company if possible. I think frankly speaking, that is great. If you can identify winners and you can do that, then of course that's a great strategy. I think that, you know, sometimes at the precede level, you cannot always do that. You don't have the same level of metrics. Therefore, you may want to err a little bit on the side of, okay, let's spend more money on a diverse portfolio theory and let's reserve some capital for follow-on, but you're not going to get the same level of conviction or same ownership levels as some of the later stage funds. Now to be a later stage,”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Yeah, so I don't think they're in conflict with each other entirely. So that's my first thing. I think a lot of VCs think that they are. But let me point to one example that everybody knows YC. YC has large portfolio theory if you look at their bachelizes these days, over a hundred companies per batch. And then ownership, you know, who knows what they're doing with their continuity fund. But I think the direction that you see them going is, first off, they write a really small check. Like their overall deal is 120K, but I believe that YC itself is only putting in a fraction of that and they're buying a lot of ownership with that fraction of it. And the valuation is sub two million on that. So they have a lot of ownership right out the gates. And then with their continuity fund, they are pouring into their winner. So they will have high ownership. So I think that is an example of a model where you capture the best of all worlds, at least for early stage, especially for what we're talking about preseed. So not even talking about postseed, because there's a world of difference between the two, but precede when you don't have product market fit.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “We would want to participate. So I don't have a great answer for you. Of course, there are the absolute flukes where the team is slow, product sucks, everything gone wrong, but just out of fluke, dumb luck, they get acquired anyway. You know, I don't have a great answer for that. But the vast majority of companies that are doing really well that I've observed just from all these companies I've seen go through 500 and our own Angel portfolios, they do tend to exhibit speed, but there's always dumb luck that can't be accounted for.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Yeah, that's a good question. I think first off to be clear, there are certain areas that we are not investing in. So we don't invest in pure consumer apps. So we would have missed out on a Twitter and Instagram, Snapchat, et cetera anyway. That being said, if you want to dive into one of those for a moment, so take Instagram, you know, their history is they had this other app and it was fully featured with all this stuff and they didn't quite get the adoption that, you know, would have been breakout success until they pivoted later. And this is kind of what I was alluding to a little bit. We understand that there are so many reasons why you may not be able to move quickly. It may be that the team is moving quickly and doing everything they can, but that metric just isn't moving the needle. And that's fine. We just wouldn't follow on at that point. But the hope is that we are operational VCs. So hopefully we'll be able to continue to help the founding team. And if they end up pivoting into something else and you do start to see that breakout, then of course.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “I mean, certainly there are other things that we are cognizant of as we're coaching the teams. Like, for example, one of the top reasons why founding teams fall apart actually has nothing to do with speed, although speed is a byproduct. It's just, you know, co-founder, Drama, and co-founder breakups and co-founder issues. Like that, you know, morale around team, all of those things are probably the number one reason why things fall apart for the company, which of course will translate into speed. You'll see that they're not moving. But, you know, we are looking at other typical startup things as well, and that's a very common issue. We'll try to help teams with as well beyond the growth project if there are problems. And then, of course, if it's not meant to be, then founders part ways.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “And that could be as short as weeks. It could be longer, but it could be as short as weeks. And really what we're looking for if we decide to write a follow-on check, that criteria in part is based on the speed at which that priority metric is moving. It's not so much about where that number stands today. So in other words, like if a team is starting from zero, let's say that revenue is the most important thing, and then all of a sudden they got to $1,000 in revenue by the end of the week. Obviously, depending on the circumstances of how they got to that $1,000.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Well, so there's essentially two assessments here that you're breaking into this question. One is around how long do you need to know whether a team is moving fast? And the other question is, how long do you need to know if you have gotten to at least the first wrong of product market fit? Answering the latter, like to get to product market fit, there is no way that we'll be able to spend enough time with the team to get to that point. Getting to product market fit could take years. Unfortunately, that's just a really, really long project. That being said, however, setting up that initial infrastructure with the dashboard will help the founders be a guide in that direction, but that would take years to assess. And I think, frankly, like it's post seed or series A investors who are most concerned with that. We are not looking for product market fit. And then answering the former question of, well, how long do you need to decide whether or not to write a follow-on check because you believe the team is really moving very fast?”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “A lot of KPIs that are important to founders very often, you can find in platforms such as MailChimp or CRMs. It could be like a lead generation type of KPI, or it could be a sales KPI that you can find in your Stripe account or even code commits, GitHub. And all these platforms have common APIs. So we are essentially automatically pulling those numbers or that data using these APIs and helping founders set up a dashboard such that they can see, aha, am I moving the needle on this?”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Yeah, so we want to be helpful to our startup founders, especially since Eric and I have operational backgrounds having been in their shoes before. So first and foremost, we essentially propose a growth project, you know, based on the company's needs. It could be they need help with customer development, or it could be even later in the funnel, they need help with sales like cold calling or cold emailing. These are things that we can help with. And so we structure a multi-week project where we provide about an hour a week of coaching and work with the founders on whatever their top priority item is, whatever that KPI is. And then we help them in order to understand whether that KPI is being affected, we help them put into place some structure around tracking that KPI. This is something that we did manually while at 500 startups when we worked with companies. But the general concept works really well from past experience. And so what we're trying to do is bring some automation to this.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “You're not biased at all. And certainly there are a couple of emerging managers that are now up and coming around. I don't think there's one that hasn't quite announced yet, but I met a young emerging manager who is actually funding college teams. He just graduated from college himself, so he has a strong network amongst different entrepreneurship clubs at different colleges. So that's another model which traditionally hasn't gone after. Arlen Hamilton is going after underrepresented minorities and doing a lot of outreach around communities there. I think that's really innovative. No one has really tapped those communities. So I would say that there's a handful kind of in these different categories, but in large part, the vast majority of both emerging and non-emerging managers I see going after the same folks.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “I think to be honest, there hasn't been a lot of innovation on scouting amongst VCs. I think you see actually at the early stages a lot of VCs going after the same founders. At Hustle, our model is to go after teams that are moving really quickly. This may or may not include teams that have strong pedigree, certainly it encompasses some of those teams, but it also encompasses a lot of teams that don't. I think a lot of emerging managers and also existing managers go after the highly pedigree group of people who maybe they went to Stanford and studied CS or whatnot. So I actually CS as going after a different pool of folks. Some of the more innovative ways that I do see a couple of emerging managers moving forward include folks like, well, Jason Lumpkin obviously has SASTR as a platform, so pretty much any SaaS founder would want to go to him for their postseed round or whatever you want to call it.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “Yeah, that's a great question. So to be clear, we're a precede fund. We don't mind being first check in. We don't mind being super early. And very often than not, actually, we are talking with teams even before they have a round together and investing independently. And we're investing in a pretty templated way. We're investing essentially on, it's a standard YC safe. And, you know, we have a side letter with a couple of terms that we want around prorata and information rights.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “So I think just at a high level, the funnel today of how a lot of VCs work is they'll do a lot of talking and then they'll decide to invest and then maybe they'll do some coaching. So that's basically the funnel. But we want to flip it around because I've seen over 20,000 deals and I've observed hundreds of companies.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “For sure on certain metrics that's not possible, so let's say you're a fintech company and you need to jump through a lot of regulatory hoops, you can't just start selling your product tomorrow, and I understand that. That being said, there are certainly activities that you can do very fast. For example, a portfolio company of mine actually is in health, and for them they needed a lot of licenses actually to be able to set up shop in a number of different states within the US. So how quickly are you moving against that if that's your top priority? Like, how quickly are you jumping through these regulatory hoops? Like, what are your actual actions doing to move that needle? And those are the kinds of questions that I would get at for those kinds of companies, even if it's not sales related.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “Yeah, so my initial assessment, which is based on talking to be fair, is based on a set of questions that most VCs don't ask. So a lot of VCs will ask you high-level questions about the market and in your personal background and all that. And, of course, that is important too. But what the questions that I'm most curious about are more in the weeds of your business. Like, for example, if you tell me, Harry, that you're doing customer development on some problem, I'll ask you a lot of detailed questions about how you went about it. How quickly did you do these customer development interviews, for example? Was it in one day, one week, one month? It gives me a sense of speed in terms of how much a particular item is a priority to a founder and how quickly he or she is moving against it.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Yeah, so at Hustle Fund, what we are looking for, well, first off, our thesis is around speed. So we're looking for startups that move very quickly. And by that I mean if you have your one priority, it could be sales, it could be product development, whatever your top priority is at the moment, how fast are you moving? This is something that we noticed, Eric, my business partner, and I noticed in many of the portfolio companies, we worked with a 500 startups and in our own Angel portfolios, the best ones are the ones that execute on that one metric that matters very fast. And so what we're doing at Hustle Fund is we're basically trying to assess how faster teams moving. So of course, before we invest, our assessment is based on talking, which is what most VCs do today. But then even after that, if we're going to decide to follow on in a company, we will do that assessment based on how fast teams are executing.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “Yah for sure, well, so for personal experience having fundraised myself for a startup as well as having interactions with so many portfolio companies at 500 startups, just the interactions that you have with many VCs is just crazy. For example, I think maybe some of your listeners can relate. You'll go into a meeting with a VC and you'll have your meeting and then at the end the VC will say, okay, well, you know, let me think about it. I'll get back to you. Let's try to set up another meeting. And if you can chase that person down and assuming that you can, which in itself is a challenge, like you just have meeting after meeting after meeting, and very often VCs assess people based on those meetings, just basically by how well you talk, and also based on your resume, especially at the early stage when you don't have a whole lot to show, do you have pedigree or do you not have pedigree? VCs don't actually assess you based on execution, which I always thought was kind of mind-boggling to me because, you know, at least I've 500 startups I've seen so many.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “Well, pretty accidentally, actually, more recently in another life, I started a company called LaunchBit, and it was an ad tech company. We sold it to a larger ad tech company on the east coast of the US in twenty fourteen, and then after that I started mentoring companies at 500 startups. 500 startups was actually our first investor, and we went through their accelerator program. So I went back to the mothership, and one thing led to the next, got more and more sucked in and started investing out of the 500 fund, became a partner there, and also ran their accelerator for two years. So that's how I got into it.”

    2017-11-15 · The Twenty Minute VC · 20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund · IDENTIFIED FROM THE TRANSCRIPT · source