Finding the Perfect Match with Floodgate’s Ann Miura-Ko & Lux Capital’s Adam Goulburn

With thousands of investors looking for the perfect company and countless startups waiting in anticipation to find the right investor, there is immense stress and pressure to find the perfect match. Building a diverse team, made up of voices of various ages, paths, and preferences is a work of art that helps to create conviction for both investors and the startups they’re pursuing.

Surrounding yourself with voices that both confirm and bring up new perspectives allows for well-informed decisions. This week on the Kauffman Fellows Podcast, we have two guests who intimately understand the value of a team: Ann Miura-Ko of Floodgate and Adam Goulburn of Lux Capital.

Guest host Renana Ashkenazi (Kauffman Fellow Class 25) leads discussions on the importance of the people surrounding you and how their influence can lead to a stronger conviction. Tune in on Spotify, iTunes, and Anchor.fm.

This season of the Kauffman Fellows Podcast is produced in partnership with Mighty Capital. Together, we unravel what truly makes a great VC investor.

EPISODE 5: Kauffman Fellow Renana Ashkenazi (Class 25) speaks with Floodgate Partner Ann Miura-Ko, Co-Founding Partner at Floodgate. She has been on the Forbes Midas List of top venture investors multiple times as well as the New York Times Global Top 20 Venture Capitalists list. With early investments in Lyft and Refinery29 as well as newer companies like Popshop Live, Poparazzi, Monthly, Emotive, Roo, and Polygence, Ann has proved herself to be a valuable asset to many different institutions and companies over the years.

Tune in now and catch some of our favorite soundbites below!

https://open.spotify.com/episode/765qLupFzYT8earoNQ3KZ2

Relying on gut feeling for early-stage investing

Though data is taking over the world, and it’s crucial for smart and informed decision-makers, it’s still just one piece of the puzzle. Human beings have a superpower in addition to data.

“For the most part, that early-stage investing is so much gut and so much intuition. Because there’s really nothing to analyze. That’s a tough piece of coming in so early, but it’s also what I really love about it because you can make very unconventional investments and justify it with your gut.”

How disagreement and debate inform conviction

Working in partnership with other investors can be handled in any way from complete chaos to calm discussion. Ann embraces disagreement.

“I explore ideas through debate, so I don’t mind when people disagree with me. I love having someone try to talk me out of something. Now what I’ve come to realize is, that isn’t the way everyone explores ideas. And so when we hire someone new, one of the things that they have to get used to is the vociferous nature of our disagreements.

What I love about our organization is we really are truth seekers. We believe that truth can come from anywhere. It could be literally anyone on our team. It’s not based on status, or title, or age. I get closer to the truth by having people disagree with me.”

Seizing inflection points in VC

Venture capital is not an “anytime, anywhere” tool. It’s best at the brink of an inflection point.

“There are components to an inflection point. The first part is that there is a real cause to an inflection point, that cause is tied to something technical — so new technology emerges, that is going through an inflection point. Natural language processing is a good example of that today, that enables you to do something new that you never could do before.

Second, regulatory changes can be an inflection point. During COVID in the United States, telemedicine became possible across state lines. That was a big point in time that enabled new companies to be created.

Then the third is really society — societal beliefs or societal adoption of things can actually create new possibilities. And so if you have a density of adoption of smartphones, as an example, you now have the possibility of something new. If people believe that nuclear power is safe, that suddenly creates new possibilities.

The ways in which society operates and what they believe, and what they will adopt actually create huge changes in what is possible. That’s the cause of an inflection point. That cause then impacts an entire startup ecosystem. It could change what is possible with building a product. So it might become better, cheaper, faster, things that weren’t possible before suddenly become possible. A new business model might become a possibility because the margin structure is suddenly different, you can recreate it more cheaply.

The most important thing is that that change suddenly creates a new adoption path and your linear growth curve suddenly becomes an exponential curve.

The last ingredient is that you as a startup have to have a secret about it. Because if everyone knows that this inflection is coming, and how it’s going to happen, then there’s no path for a startup. The single advantage that you have usually, is that you know something that a lot of people don’t know.”

On diverse teams and points of view

Humans are pattern-recognition machines, but it can be much too easy to rely on that trait rather than to continue to look at what’s in front of you with a fresh viewpoint. Ann has two approaches.

“Some of it you just have to structure it into your organization and return to optimism. For me, I sometimes just need to study something. And then I can see what’s changed.

Other times you just need people to say, you should look at this again. The people who are most likely to say that are young people. We’re very passionate about always having young people around, whether they’re interns or whether they’re associates.

We also have a loose network of former students who help me look at deals. And part of the reason is, I don’t know if something’s changed. If someone is looking at an idea for the first time, they’re much more likely to fall in love with it, than for me to look at something where I’ve seen that same business or the same type of business fail over and over again for a decade. And I’m blind to the fact that things are different now.”

Listen to the full episode above on Spotify or over on iTunes.

EPISODE 6: Renana Ashkenazi (Kauffman Fellows Class 25) speaks with Lux Capital Partner Adam Goulburn. With his extensive background in biomedical research, Adam invests with the idea of “no idea too early and no idea too crazy.” He always considers the question, “Is this a science project? Or is this science and technology ready for primetime?”

Tune in now and catch some of our favorite soundbites below!

https://open.spotify.com/episode/3VHM6iUJ92jPOqNZ3VV8C8

Conviction in choosing companies and ideas to invest in

Adam and Lux invest in both early-stage startups and companies they start from scratch, depending in part on what they learn at the thesis stage. Whatever the opportunity appears to be, Adam said the people involved are a key element in his choice to engage or move on.

“The one commonality across early-stage and late-stage company formation is conviction around the founding team, which is less quantitative driven and more qualitative. Do I want to be working with this person? And do they want to be working with me for the next 10 years? It’s very hard to do that in an Excel spreadsheet, or under some framework.

You can have your data points, whether it’s a first-time or second-time entrepreneur, where they’ve been prior, and so on. Those things do help. But ultimately, it’s seeing that person and interacting with that person or team to know if you want to be backing those people.

With later stage companies, we have invested with our later-stage fund in larger-scale businesses, and we absolutely are diving into all the data rooms and the financials. And that gives us a lot of conviction in those types of businesses.”

The most important factor driving deals

“I fundamentally believe that venture is a people business. It is a relationship business. I often joke with people when they come to me because of my technical background, whether it’s a Ph.D. or an MD, or science background. They say, ‘Do I need a technical background to get into venture?’ And in my experience, it’s no. If anything, you need a degree in human psychology. And so I think, if we’re interested in certain areas, it’s our job to get to all the right people and build those relationships.

If you’re not building those relationships, you won’t have the ability to move quickly. We’ve lost deals because we haven’t had those relationships prior — and that’s on us. And so we then write those names down, and we write those firms down and those entrepreneurs down, and we make sure we build those relationships for the next time. I think that helps with the speed of conviction because it’s always hard to bet on someone that you’ve only just met for 24 hours.”

On sector and vertical knowledge as a VC

With abundant capital available, VC firms operate in a competitive marketplace and need to stand out, as the competition must as well. Knowing a lot about a business may seem like the best way, but it’s not the only way.

“Capital has become a commodity and you have to differentiate yourselves. One of the ways of doing it is presenting your knowledge. Embedded in your question is Tiger Global. How are they doing so many deals in such a quick amount of time and putting money to work? I’ve seen some of the 70-page deal memos that they put together to send to the entrepreneurs prior to say, ‘Here’s the work I’ve done on your business.’”

Deep topical and technical knowledge is not required, though, Adam said, and there’s value in being “a mile wide and an inch deep.”

“You can get pigeonholed and limited into certain sectors because you’re focused on one thing. I think venture is much more about multiple, concurrent theses in areas that you’re investing in.”

On value add investing

When talking about value add, we need to understand what it is exactly each entrepreneur needs from us, and it’s not one size fits all.

“Founders and entrepreneurs are unique human beings and part of our job as investors is to figure out what makes them tick. Now, it might be a 70-page deck of here is customer diligence that we’ve done, and here are 15 bullet points on where I think you need to go or helping them recruit some of their executive team or just generally being a helpful person and making connections. There are all those different things and it’s our job to understand what makes them tick.”

On what makes a great investor

After a decade at Lux, Adam has honed his viewpoint on successful people in VC: “Don’t overcomplicate things. This is a people business, and you have to be okay with unknowns and things not working. The most important thing you have is a 1:1 relationship with your founder and how you can help your founder. That is all people. Whether it’s recruiting or other investors or potential partners, it’s all people.”

Listen to the full episode above on Spotify or over on iTunes.