Budding venture capitalists and entrepreneurs alike found lots to chew on at the latest CornellTech@Bloomberg discussion, held at Bloomberg’s Global Headquarters in New York City on Wednesday, February 28, 2018. The event featured an introduction by Bloomberg Beta’s Karin Klein, after which Bloomberg TV anchor Scarlet Fu spoke with Ellie Wheeler, partner at Greycroft, Rebecca Kaden, partner with Union Square Ventures, and Beth Ferreira, managing director at FirstMark Capital. The panelists discussed their own career paths, the areas they see as most promising for investment, and, of course, those that appear overhyped.
All three emphasized that their career journey to venture capital had been circuitous, and that there is no single best way to become a VC. Kaden started out as a journalist, and soon became fascinated by the intersection of technology and online content, and how digital publishers could ever make money. That propelled her to business school, where her mentor, Silicon Valley’s legendary ‘coach,’ Bill Campbell, suggested she might like venture capital. Campbell was also a close advisor to VC firm Maveron, where Kaden spent six years before joining Union Square Ventures last October.
Ferreira started off as an investment banker, and caught the startup bug when she was helping a smaller company raise money. “They were thinking about the big things and working all the time. It was a big wakeup call,” she says. She joined Flatiron Partners in 1998, and saw the rise of the dotcom boom followed by a contraction that halved the size of the venture industry. Eventually, she too lost her job, and went to business school. Then she took senior operating roles at fast-growing startups – notably Etsy and Fab.com – before returning to venture capital.
Wheeler had a brief stint in medical school before deciding, just before the first-semester finals, that a career in medicine wasn’t right for her. She then joined a private equity firm in Boston, worked in corporate development at Cisco, went to business school, and eventually, became a venture capitalist. “There isn’t one path,” said Wheeler. “It’s not, first you do this for two years, then you get into a private equity fund or a hedge fund. It’s not something formulaic like that.”
Dotcom crash aside, the panelists all agreed that a career in venture capital isn’t something you can time. Fu pointed out that the job market and the economy seem to be doing well, but the three panelists said that doesn’t necessarily mean that VC is doing well, too. Wheeler noted that as more money flows into venture, deal sizes go up, investors are coming in at earlier stages, and companies are able to delay going public.
Meanwhile, her industry, is, as she put it, on a ten-year feedback cycle. “What we had is probably a few vintages that might be really awful over time,” she said. “The venture ecosystem is such an oddity and kind of a lagging indicator. The stock market doesn’t affect us today. It hasn’t affected us for quite some time.”
Kaden noted that, despite the increases in the amount of investment money available, institutional early-stage venture capitalists such as those on the panel were actually asking to see proof of business fundamentals, and workable unit economics, earlier than they once did. This trend can be hard to see, she says, “because there are so many people who will write a check for other things,” such as strategic investors and those that are more targeted toward eventual mergers or acquisitions.
The panel also had plenty of advice for struggling entrepreneurs who may think Amazon has monopolized all the opportunities in e-commerce. Ferreira pointed out that there are at least four things Amazon doesn’t do well: They don’t do brand well, and quality can be suspect – either when Amazon is creating products or when they’re selling those of other people. It’s also really hard to discover new things on Amazon. “If you’re saying, ‘I need a dress for Saturday night,’ that’s not a search you can do on Amazon,” says Ferreira. “But there may be branded places online you can do that.” Last, Ferreira said, Amazon doesn’t curate, and there are plenty of e-commerce possibilities in making shoppers’ lives easier by limiting their choices.
Kaden says she tries to figure out “where people are putting their money today that they weren’t 24 months ago.” One big opportunity, she says, is in health and wellness. The patient is actually becoming the consumer, as opposed to the health system or the doctor. “Companies are still selling B2B today,” she says, “but, ultimately, it’s B2C because they need that pickup from employees.”
When asked to name a field that was relatively played out, all three agreed on a somewhat counter-intuitive answer: Virtual reality and augmented reality. “You’re seeing very high valuations and not as much traction as you thought you would have,” says Ferreira. Facebook has already invested heavily in this field, so startups need to show why their special sauce is going to be better than Facebook’s. Wheeler could be counted as the optimist among the three: “It’s less about, this is not going to work,” she clarified. “It’s more about, is this going to be a venture outcome? Is this going to be as good a return as everyone says?” The answer, all three agreed: Not likely.
You can watch the entire panel discussion below: