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On the Grit and Grace podcast. We shine the spotlight on the stories behind the leader.

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What a great pitch is is really telling somebody a story?

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Is the story about their passion, is the story about the problem at solving the park is in all of it Like.

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Everyone now wants to go. What's the recipe for the story?

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Joining us today is Melissa Belbeck, principal at White Cap Venture Partners.

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Each year, she and her team meet with over 500 entrepreneurs, selecting only a few for investment A journey worth millions.

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We're diving deep into the minds of the venture capitalists, unraveling how they assess and bet on startup ventures.

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Stay tuned as we explore the essence of winning companies and what sets these founders and leaders apart from others.

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Let's dive in. Welcome everyone to the podcast.

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Truthfully, I need to let everyone know that, Mel, you and I know each other.

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We have had a history of working together at Ritual, but it's been a lot of years, so thank you for coming.

0:59

Yeah, thanks for having me, Jen. Knowing that you're in venture capital now you kind of crossed over.

1:04

Can you give us all a little peek behind the curtain?

1:08

What is life like for you now working in venture capital?

1:13

Honestly, it feels like it's come full circle. It's an incredible job.

1:16

I spend, honestly, most of my days just talking to the most inspiring entrepreneurs.

1:21

Yeah, which is a dream come true.

1:23

Honestly, this sounds totally nerdy, but when I was younger, I remembered talking to my friends and we'd always have ideas of this business or this idea.

1:32

Now it's truly come to life in a job, which is really incredible.

1:35

I would say. I probably spend about half my time meeting new entrepreneurs to make decisions around whether we'll invest in them, and we, across our team, meet with about five or 600 entrepreneurs a year and we only invest in a handful of companies, and so it's really kind of a high volume of meeting these entrepreneurs, but it's always a lot of fun hearing about new ideas.

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Has the journey of deciding whether it's a worthwhile investment been easy or hard for you, and like what have you had to learn about really making strong decisions?

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It's incredibly hard and it really is more of an art than a science.

2:12

Okay, Just to give you a sense. So we invest at the series A stage and we're typically writing checks that are in the five to $10 million range.

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And so we're meeting with companies that maybe have 10 employees, maybe 20, maybe 30, but kind of somewhere in that range.

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Maybe they're doing three to five million in revenue and in order for an investment to be successful, they need to reach 100 million in revenue in the next five to seven years.

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So what's the market like?

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What's the team like? Do they have these tailwinds that will take them from this tiny company today into something that can meaningfully impact the world?

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When I first started it almost felt overwhelming, but over time you really get to see kind of trends and get a sense for what's good and what's not, and you meet some really inspiring people working on some cool things.

3:03

And the ones that do get the investment are there like patterns and qualities, like what are the character traits that you notice, that jump out In the founders themselves.

3:11

Yes, I would say. Above all, it's passion for what they're working on.

3:16

Yeah.

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It is a really grueling job.

3:19

Yes. You are working 24, seven, and so somebody just has to be really, truly invested in what they're working on.

3:29

They have to be very tenacious.

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Somebody who's smart will only get you so far, but you just have to have like that, like true grittiness, in order to succeed.

3:39

How many companies do you say you hear from a year 500 and you get down to like ten potentials that you invest in Exactly.

3:46

I personally probably meet with about 200 entrepreneurs here.

3:51

Let's talk about the pitch itself, because I'm doing some consulting and coaching for founders who are getting ready to go into fundraising.

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What is the process like?

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To pitch like their company Meaning?

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Should they be having conversations with you before building relationships and then, by the time they do get to the pitch, what's a strong pitch?

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I find one of the biggest mistakes founders make is say just say, oh, I'm fundraising, and they just kick off the process, yes, kind of going in with no relationships.

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A lot of the series of investments we make, we have known the founders for at least a year or two.

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It's not the role. Definitely.

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There's people that we meet just running a process Candidates pretty small.

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Typically you will kind of be like a known entity before you start to fundraise.

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When you enter a relationship with a VC, you're signing up for five to ten years working with this person.

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There are a lot of characters in this industry and it's really important that you are also choosing the right VC to go on that journey with, and so I absolutely recommend getting to know them on a personal level before you start to fundraise and then in terms of that process.

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So it's really kind of getting your materials together, getting your story really tight, kind of coming up with your initial hit list of VCs that you're going to approach.

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And again, this is also really important because one of the biggest mistakes I see founders make is they kind of do a spray and pray and just reach out to anybody that has capital and asks for money, and that's not a good approach, because you're going to spin your wheels talking to a bunch of people that just aren't a fit for you.

5:30

So the hit list is more curated around, like the founders going.

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These people are right for me, exactly, but how do they know?

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that Like how do they discover that? I would say do two things.

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One, talk to somebody within the industry.

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If you have a friendly, they can usually be very helpful for you to navigate who is appropriate for your stage, even like talking to accelerators etc.

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They usually have a pretty good idea of who's who and where they stand.

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And if you can have a friendly in the industry, kind of tell you what people are like, character wise, that's also great.

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Different personalities work for different people. What's right for me might not be right for Jen, might not be right for the next person, and so I think it's really trying to find that match, and so absolutely recommend getting something to guide you.

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That being said, it is typically a situation where you're going to have to make dozens and dozens of pitches before you get to a yes, and so don't be like too laser focused.

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It's kind of about finding that right balance in between.

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A good pitch is going through kind of that checklist of is the market size big enough?

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Is the team the right team, whatever you can find online where it says these are the things that VCs care about.

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I think what a great pitch is is really telling somebody a story and walking through something that tells the VC like why this is such an exciting opportunity and why you're the person to do it, and I think the biggest mistake I see people make is they go through that checklist without really telling me the story of like why should you be super excited and why should you be really excited right now?

7:03

What's in the story, though, is the story about their passion, is the story about the problem at solving the park?

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Is it all of it?

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Like everyone now wants to go. What's the recipe for the story?

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It's so funny because it really is so dependent on the company and like that's why this is so hard.

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That is why it's an art and not a science. But you really need to think like a VC and the way that I kind of evaluate companies is what is the path towards this company becoming 100 million in revenue?

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And this is kind of just like an arbitrary benchmark that that VCs use, because typically when you get to 100 million in revenue, you have tons of different opportunities to exit the company.

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So that's kind of the benchmark and there's just so many different things that go into it.

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Like is the market big enough? What needs to go right in order for us to get there?

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What do we need to execute on? It's really hard.

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I sit down with tons of entrepreneurs and try and make the story and it's just so individual.

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And I think the big question is where am I falling short in my story?

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And I see sometimes people just want to go to the level of granular detail on the today.

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But you're really talking about like painting the picture for the future as well, and can you plan ahead?

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What are the foreseen risks? How will you solve those problems?

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And then you're really giving the VC community a picture of where it's going, but also insight into how the founder is going to solve the problems.

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The biggest flaws that I see is so the company maybe has three million in revenue and you're going into great detail on your financials and this and that, but it's like, okay, you're three million in revenue, like that doesn't matter.

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The question is, how do you get from three million revenue to 10 million next year, to 20, 30, 40, all the way up to 100?

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And so, yeah, there's so many different things that go into it.

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Founders need to give themselves time to think strategically and to pan back and to look out.

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A lot of founders I'm seeing today are just they're in the weeds right now.

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You have to be, but you also have to come out and you have to build enough space, enough of trust within the team to be ready to kind of have that foresight, have that line of thinking.

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But you don't get there if your entire week is firefighting on the current business.

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100%.

9:13

Right, but you don't get there. Yeah, and I always say, like, work with somebody who knows you well enough but is far enough removed from the business.

9:22

There's tons of people out there that you can bring them in enough so that they are giving you advice that's really relevant to you and they really understand what's going on.

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And I want to kind of jump to the next move. So it's you've raised the funds.

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Now what? So let's talk about this.

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Like you've made a big bet on a company.

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They are one of the 10 in the year that you invest in.

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Teams that I'm going to call this, you know, have high expectations and can stay the steady course.

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What do you see in those companies who are doing it well?

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Yeah, I would say probably the most important thing would be to have a culture of experimentation and look at the series A stage.

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Maybe you raise eight to 10 million.

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That will really only get you so far. The thing that you're always battling as an early stage startup is how can we achieve super high growth and do it with 40, 50, 60 employees whatever that may be and kind of a limited budget?

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And so I think the best founders and the best companies that really see success are the ones that experiment really quickly, they measure it, they find out what works and knowing how to take a team through that process 100% and people get really invested in what they're working on.

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It's hard to say like, okay, no, actually let's cut that out and move on to the next thing.

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It's hard to design teams around that when people are running in so many different directions, and so it's not an easy thing to manage, but I do think that the best founders are ones that know how to measure those things quickly.

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Teams need to feel like failure is okay and welcome and that there is success in the iteration.

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So we're constantly focusing on what next experiment?

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What next experiment? We're weaving that through meetings and we're weaving that through celebration and conversation notes.

11:13

Finding product market fit is not a one-time thing.

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It's an evolving thing and something might work for the first couple years within your business.

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Maybe it gets you to five million in revenue, but that isn't necessarily the thing that's going to get you to 10 to 20 and so on.

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So it's definitely really important to keep doing that?

11:30

And how are the founders themselves pacing Like?

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How do they set themselves up to be able to hold this level of stamina over five, 10 years?

11:41

Like this is not an easy thing.

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The one thing I highly highly recommend, though, is for founders to find that outside person that they can lean on for advice when things do get crazy.

11:53

And I think it can be so lonely, as you're growing that quickly and you're reporting to the board, which can be difficult.

12:01

You have employees that report to you, which obviously, that relationship will always kind of be like hierarchical in some senses, and so I think finding whether it's another founder or somebody you trust, somebody like you, jen, like a coach that can help you through those moments, is really incredibly important.

12:20

I just want to kind of flip to the VC world just a little bit.

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Has it changed much since the pandemic?

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Have the VC community gone deeper and working directly with companies post pandemic than pre pandemic?

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I guess I should caveat this that I started in VC in June 2020.

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And so we were kind of like deep in the middle of COVID.

12:38

But I'm sure a lot of the listeners on this podcast would know 2020 and 2021 were bananas years.

12:45

Kind of all hands on deck trying to solve the problems.

12:47

Yeah, but also it's. It was kind of detached from reality a bit in that it was the biggest year for venture, biggest period, I guess I should say for venture funding, kind of the end of 2020 and throughout 2021.

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That was the period in time where you saw tons of unicorn valuations for earlier companies and you would expect Capital was pretty easy to get and it was just an entirely different world.

13:14

The board meeting conversations were all about growth.

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It was all about hiring raise as much money as you can to hire more.

13:21

For people who are not that close to us. Just watch the WeWork story.

13:24

I mean, that's a little bit.

13:26

I don't know if it's exaggerated, but that hyper growth mode at all costs grow is what you're talking about, right.

13:34

And the market's rewarded that and so it made sense.

13:37

You could go and raise that next round pretty easily and you didn't have to worry about cash.

13:43

Contrast that, with 2022 and beyond, the markets crashed, interest rates rose, pessimism is probably at its all-time high, and so VC funding is down substantially.

13:57

It's a lot harder for companies to raise money and they've had to really change how they think about growth and hiring, and I think a lot of the conversations around the boardroom now is about runway and what we can do to preserve cash, to make sure companies can wait it out until 2024, 2025, when the markets will be better.

14:19

And it's honestly been really difficult for the companies that raise money in that 2020, 2021 time period because the conversations have just entirely changed.

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The measure of success has changed.

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Everything has changed. A lot of them have really really difficult decisions where they needed to reduce staff by like 25, 30, 40% plus, and it's just so hard to kind of shift a company towards growth and whatnot to something where we're really thinking about costs and your economics and efficiencies and stuff like that.

14:56

And it's also really hard to let go of 30% of your staff and wake up the next day and you need to motivate the remaining employees.

15:05

You have to motivate people, but you also have to try to put trust back in the system, because I just think that there's a psychological safety that goes away the minute that pendulum switched and great leaders have to think about this like a lot without the communications and motivation and the cultural notes.

15:23

But is this a little bit more right sized and probably better in the long run that we're measuring this way?

15:30

I think it is better in the long run. Yes, Absolutely.

15:32

I think it's really hard for the companies that had to transition between those two periods because they really had to change their mindset and it's really hard to steer an organization.

15:43

I think for companies raising fresh capital now they're probably going into it with a much different mindset and much different expectations that it's probably going to be easier and better in the longer term.

15:53

We have a lot of women who listen to this podcast and I love strong women leaders, but there's a lot of lessons along the way.

16:00

Is there anything that you can speak to?

16:02

Yeah, look, the number one thing in this industry is having confidence.

16:08

You need to find a company, like a little early stage company, and go and present to your team and explain to them why this is the best idea ever, why it's going to be that $100 million company, why it's going to be a 10x return, et cetera, et cetera, and that's a really hard thing to do, and so I think it's really all about just finding your voice and finding the confidence to do that, and it's not an easy thing.

16:31

How do you?

16:32

trust to make financial decisions and bet on people.

16:37

Is it that you just see enough character?

16:39

You have to trust your gut with it and the art of the science.

16:43

There's a lot of diligence. At the end of the day, you have to make a move and take a risk on a company and a person.

16:51

Is there any secret sauce in that mix?

16:54

Honestly, I don't know. It's so different for every VC.

16:57

There's some that air more towards the side of diligence and some that air more towards the side of feel and gut feeling.

17:05

But I would say you have to do the work, you have to understand the financials, the market size, competition.

17:14

I'm not saying that you don't need to do that stuff, but at the end of the day, you have to just believe that these are the 10 things that are going to happen in the world.

17:23

That will make this a really good opportunity and nobody can forecast that I know.

17:29

It's like you're making a decision with limited information.

17:32

I think that's the theme we can all relate to. Some of us just jump.

17:35

Some of us need a lot of information.

17:37

We have the paralysis over the analysis, but at a certain point you have limited information and you have to make a leap.

17:45

Exactly the people that won't do well in this industry are the ones that will never get comfortable with that.

17:50

They'll keep doing the diligence and they'll keep coming up with reasons why they say no, and they'll never come up with a reason why they say yes.

17:56

I think that is probably the biggest downfall for people in BC.

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I feel like I could sit here and talk about startup companies.

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I know You're an amazing leader.

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You've inspired me so much. You're coming out of the startup world getting inside a venture.

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I think there's a lot of women who are going to be inspired by your story.

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So thank you so much for sharing.

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Thanks for having me, Jen. It's always great chatting with you.

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Thank you so much, mel. Thank you for joining us.

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