At DNX Ventures we value partnerships with academia, and especially some of the entrepreneurial programs and professors at the HAAS School of Business at Berkeley. This summer we welcomed four interns in various stages of their education and various locations in the world, as we love the global as well as new perspectives these young minds bring in.
The young lady I got the privilege to mentor this summer was Connie Chen. Below follows her takeaways in a blog post form, which was one of her deliveries of the internship. Enjoy the read! :)
Entering University of California, Berkeley as part of the Haas Global Management Program, I knew I was intrigued and excited by the business world, specifically in the global sector.
This summer, I joined the Global Entrepreneurship and Innovation Program led by three Berkeley professors. The program fueled my international business interest as I, with four other teammates from Portugal, Brazil, Austria, and the U.S. formed a startup idea, obtaining first hand experience for what it takes to be an entrepreneur. Leaving a strong footprint, I realized to be passionate and resilient, yet open-minded and strategic became extremely crucial. I learned disparate countries have different cultures, different regulations and laws, and different end goals. That’s why when the program introduced me to DNX Ventures, this specific Venture Firm became such an appeal to me -- they welcome and foster a cross-cultural environment, provoking an authentic, open environment between their team and startup investments. To maintain a genuine and transparent leadership can be so imperative in scaling startups to the next level, and I strongly admire how DNX Ventures does just that. I was more than eager to join DNX Ventures as an intern, delving deeper into the VC realm and determined to find out what investors seek and want to commit to a startup.
During this internship, the big question I set out to answer was “How do you evaluate a company?” From the very start of the internship, I was invited to join in on numerous pitches and meetings with portfolio companies. Observing countless pitches, it’s interesting to note how important those face-to-face interactions can be. An idea can look incredible on paper, but just a thirty minute call can showcase the outlook of potential of a company's prospect and success. Here are a few mistakes from pitches I’ve picked up on that many lacked or didn’t include:
Well-spoken: Being well-spoken and the ability to communicate thoughts effectively and smoothly. When presenting, it’s relatively easy to spot clear discrepancies where one can structure their ideas well and have a clear thought process while another takes much longer to understand what exactly they’re trying to say. One hands you the puzzle as a whole and the other hands you pieces the listener has to put together. If the CEO is more focused on the tech, a great sales/marketing right hand is extremely beneficial to convey the company’s business goals and mission accurately.
Team dynamic: Talking with one of the DNX General Partners, we discussed what he looked for when investing, stating he needed to be able to trust the startup in showing the right judgement. He asks himself, “Will I be okay to lose money to this startup if it goes sideways?” Will the team have the awareness and judgement to continue to push through in pivoting to overcome any hurdles? The team matters. In some pitches, there are two leaders from the startup that present. Investors will watch how they interact and evaluate the dynamics. Is one more dominant? Are they overstepping each other? Is there tension between the two and accountability in place for each role? Without the right team, there will be a lack of initial trust in the startup’s ability to execute well - especially when things go sideways.
Value proposition: Some startup pitches spend more time discussing product details than why and how this product can help their end consumers. It’s important to not lose sight of the company’s vision and value for product technicalities, as it shows you care more for your “baby” than focusing on building a company. Building a company means thinking and being ecstatic over everything -- customers, market, employees, future growth, etc., and not solely the product. The successful entrepreneur will always have an open mind and think ten steps ahead into the future, giddy to implement and adapt.
Sales cycle: Having a number of current customers is great, but the details matter. The length from the initial customer interaction to a signed deal can be three months or one year, which is why the sales cycle and onboarding process is also relevant to an investor. Shorter sales cycles and onboarding process point to quicker established customers and room for increased customer traction. When entrepreneurs can reiterate around how long it took to obtain each paying customer, if asked, it exemplifies their own due diligence.
Diversity: Having diversity within a startup is becoming a necessity relating to age, race, gender, occupation, etc. A lack of diversity might become a flag to investors, as a diverse team offers more perspective and higher chance to better outcomes. It also signifies the team’s ability to hire and work with different people with different backgrounds and perspectives - which is as important when you start working with many companies and their different needs in different parts of the world.
These are just a few takeaways that I observed during the internship, but it opened my eyes that there is so much more to evaluate than just numbers.
I realized that finances of startups are less important than I initially thought when evaluating an early stage company. When helping to decide deal evaluation metrics, the numbers (ARR, gross margin, etc.) are still evaluative aspects, but many times, early stage startups have very little revenue, track record and history. And so we evaluate the entrepreneur in their previous experience, ability to hire, ability to communicate, or having a clear GTM and vision, or through product market fit in their customer and market urgency, proof of concept, or returning usage. And how these customers have been acquired - is it repeatable? Scalable? Cost efficient? And so much more..
In the end, working with DNX Ventures has been an incredible learning experience through the pitch evaluations, competitive research, lead vetting, and developing a deal evaluation tool. The people and the environment have been more than welcoming and their supportive culture doesn’t just end inside the company. It also transfers to any current, potential, or even unfit investments. They offer detailed suggestions on improvement and optional paths forward, and utilize their related networks to help promising startups that come their way. Their customer-centric approach is something I will always strongly admire and utilize in my future endeavors.
The fact is: starting a company is difficult, and DNX Ventures funneled my understanding that it’s true the entrepreneurship environment is hectic, but their journey is what makes their company so valuable. DNX supports each of their journey’s in every way possible. It has been truly inspiring to experience.