In this week's episode, Nick Moran, the Founder and General Partner at New Stack Ventures, shares his insights into his firm’s focus: investing in outsiders. Nick gives authentic examples, explains what he looks for in founders and why it’s different from other Silicon Valley venture capital firms.
In this week's episode, Nick Moran, the Founder and General Partner at New Stack Ventures, shares his insights into his firm’s focus: investing in outsiders. Nick gives authentic examples, explains what he looks for in founders and why it’s different from other Silicon Valley venture capital firms.
In this episode, you will learn:
[2:23] Getting into venture capital as an outsider
[6:05] Why having creative insights is more important than building the standard Silicon Valley profile to attract investors
[10:07] Is commitment to the problem combined with flexibility to customers’ needs the sure-shot to startup success?
[23:21] How can founders prepare for the first meeting with New Stack Ventures?
Non-profit that Nick is passionate about: Wounded Warriors Project
Nick Moran is the Founder and General Partner at New Stack Ventures. Nick is a proud supporter and evangelist for early-stage startups that don’t fit the traditional Silicon Valley profile. He has held positions in mergers and acquisitions, strategy, and product management. He also hosts The Full Ratchet, a podcast where he interviews fellow investors and venture capital experts. Nick’s passionate about non-profit organizations affiliated with veteran affairs and helping PTSD veterans.
New Stack Ventures is a Chicago-based early-stage venture capital firm that invests in 'outsiders' - mission-driven founders with an irrational commitment to their cause regardless of location or circumstance. Its portfolio includes Cybrary, Scope AR, Tovala, Tripscout, Pliant.io, Hologram, Regroup, XILO, Urban Sky, phood, Shotcall, and Fairmarkit.
Coming up next week Tuesday in Episode 66, we invite a special guest, David Forsberg, Managing Partner at Ascent Energy Ventures, to chat about investing in innovations and imagining a more automated and digital energy industry.
Subscribe to our podcast and stay tuned for our next episode that will drop next Tuesday.
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Nick Moran: This will take over your life. It's all-consuming. And there are sacrifices, my wife, my son, my broader family - They have all made sacrifices.
Gopi Rangan: You are listening to The Sure Shot Entrepreneur. A podcast for founders with ambitious ideas, venture capital investors, and other early believers tell you relatable, insightful, and authentic stories to help you realize your vision.
Welcome to The Sure Shot Entrepreneur. I'm here with Nick Moran. He's a General Partner at New Stack Ventures. New Stack Ventures is a Chicago-based venture capital firm investing in very early-stage startups. Let's find out from him how he invests in startups, what he looks for and what does a Silicon Valley-based venture firm looks for that's different from what he looks for.
Looking forward to an exciting conversation. Nick, welcome to the Sure Shot Entrepreneur.
Nick Moran: It's a pleasure to be here. Thank you for having me.
Gopi Rangan: You're welcome. Tell us about yourself, starting with your career as an investor. How did you get started? What attracted you to venture capital?
Nick Moran: I’ve always been a builder and a creator and a serial starter of things. I've always been drawn to folks that were starting businesses. It's my passion, it's my hobby, it's my obsession to study other folks that have built businesses. And what's more meta than starting a business to help other people start businesses and achieve their dreams.
I really think that venture it's one of the best jobs one could possibly imagine. We get to empower and support and amplify the success of remarkable human beings and help them achieve their dreams. I've always been drawn to new businesses and new technology. And when I first discovered that there was a profession around it, that you could be a supporter and evangelist for early-stage startups in the form of venture capital financing, it became a natural path for me to be a full-time VC.
Now it was a much longer story together. You don't roll out of bed and become a VC overnight. It was quite a hard path for me as an outsider to become a VC. But happy to talk about that.
Gopi Rangan: Yeah. Let's jump in. How did an outsider to get into the venture capital world?
Nick Moran: Yeah, so I was very fortunate early in my career in corporate America. I was able to exit corporate America when I was 32. I had had a series of successes. I worked in M&A for a while, so I was scouting out early-stage tech companies to purchase for a large conglomerate. I ended up becoming an entrepreneur within a large organization and developed and created a chip-based way of testing compounds in drinking water.
That product had extraordinary success to allowed me to exit the corporate world as a young man. At that time, I moved back to Chicago with my wife and began angel investing.
At the time I had made a decision or really known that I wanted to become a VC, but I was so drawn to technology, I was so drawn to startups and entrepreneurship, that I figured if I became immersed in the existing Chicago ecosystem and help build the ecosystem in some way in the Midwest, that I would find my next calling and my next career.
That's really where things began. I started as this independent angel cutting checks to early-stage startups. I found out very quickly that I was an outsider in every regard. So even though I thought I had a good professional track record, I had never worked in tech, and I had never worked for a big venture capital firm. When you haven't done either of those things, there are a lot of doors that slam shut in your face. I'm sure there's a lot of entrepreneurs in the audience that has experienced that as well.
I had to find a way in through the side door. As an outsider, you have to be creative. You got to bring some ingenuity to the table, and I had to figure out what's a way that I can provide some interesting value, add to the venture ecosystem and get doors to start opening. That's when I launched the first venture capital podcast. At that time, podcasting was nascent, there was a show emerging called Serial that was drawing a lot of people to the medium, but it was very early in audio. I happen to catch that trend early.
By showing up as an angel investor to the Brad Felds of the world, they weren't super keen on speaking with me. But showing up with a microphone and offering them a platform to reach a large listener base, a lot of VCs in San Francisco and New York City and beyond, were really interested in chatting with me. And after you spent an hour on the phone with somebody, that's an opportunity to further build a relationship. That was my beginning. I built a network of Series A and Series B VCs by hosting them on the show. By building a large listener base, I was able to reach a lot of angels, a lot of family offices, and most importantly, a lot of founders.
Fast forward, it's been seven, eight years since I started the show. Our three top-performing companies in the portfolio were all listeners to the show that reached out to me cold. Ultimately, we ended up investing at New Stack Ventures and those companies have gone on to great success. So hopefully we'll continue, and we'll find more great founders-to-be.
Gopi Rangan: What a great journey coming out of areas and sectors where it's not typical to use that pedigree to start a venture capital firm. On one side, I'm always fascinated that very interesting people come to the venture capital industry without a background. But on the other side, I see that it's a lot, a lot easier, if you worked at one of the large tech companies, or if you got educated at one of the top universities, then it becomes a lot easier to start a venture capital firm. And here you are, you paved your own way. The podcast, you're a pioneer there. You are one of the first venture capital-focused hosts on this podcast.
Your podcast is the Full Ratchet. Now you have established a venture capital firm in the Midwest. How is New Stack Ventures different compared to typical venture capital you would see?
Nick Moran: Well, the firm is built very much in the mold of myself. So, I was an outsider entering venture capital and the tagline for the firm is “We invest in outsiders.”
We put a lot of effort and focus on identifying profiles of startups that don't look like the standard profile in Silicon Valley. What often gets funded on the West Coast are folks that went to Stanford, and they worked at Google or Facebook or Airbnb or Uber, and they're located in the Bay Area. That's a standard profile and those startups get funded all day long.
But what's harder to attract funding to are startups that are located in Phoenix or Salt Lake City or Atlanta or Chicago. Profiles of founders that may not fit the common mold. So maybe they didn't grow up in tech, maybe they grew up in banking or private equity or real estate, or maybe like myself, they grew up in the industry. And they are the A-plus superstar, extraordinary professionals in their domain, but they didn't commit their early career to build technology companies. We will find these folks that don't have the standard Valley profile because of location or because of the founders themselves.
And that creates a great opportunity for New Stack because we know how to find those startups. We're not afraid of the fact that they don't have deep experience in the startup world. But they're bringing creative insights and what Peter Thiel calls “the Secret.” They're bringing these insights and these secrets and these discoveries about their industry and their networks within their industries, and now they're building transformational, scalable technology.
That's not a hundred percent of what we do. In some cases, we'll invest in folks that have worked in tech, but in every case, they're an outsider by some definition. So, either the location they're building in or the schools they went to, or the background and the experience that they have is not a typical Silicon Valley startup. And we find them early. We can invest at the pre-seed or seed-stage in many cases, it's pre traction, but we'll do a substantive investment for that first round. So typically. Half a million bucks up to 2 million and we lead rounds or co-lead rounds and help bridge that gap. Take these remarkable opportunities, these multi-billion dollar potential outcomes, and help them round out the profile and get Series A ready. So that when they've developed some traction and when they have some momentum, we can connect them with the right coastal investors at the right time and attract interest from tier-one quality VCs.
Gopi Rangan: So, you are an outsider, and you invest in outsiders. You don't look for the traditional background in a startup founder, a non-traditional background, even having no technology background is okay for you. I'm curious. What do you like about startups? What's most exciting for you?
Nick Moran: The upside is tremendous. Marc Andreessen has said the downside with any startup is zero and those folks get to start working on something new. And the upside is limitless. Startups are just transformational for the economy. The pace of innovation is expanding by the day. It's a dynamic environment. It's different every day. We face new challenges every day, every week, every month. There is no day that looks the same.
It's very different than other financial services industries and many other corporate jobs, where you can develop a playbook and you can rerun that playbook for years or decades. The startup playbook has to change by the day. If not by the hour, if you're really good at writing new playbooks, creating new processes, studying the market, and working with customers to see what the emerging trends are going to be before they hit. This is a great place to spend time and build a career.
Gopi Rangan: What do you look for in entrepreneurs in the first couple of meetings? What questions do you ask? What information are you seeking? What kind of characteristics appeal to you?
Nick Moran: The most important thing for any firm or any investor is to find a startup, that's the right fit.
We all have our own lenses. We all have a certain type of person that we like to work with. And there are many different profiles that can be successful. As a venture capitalist, I may say no, or I may pass so to speak on. That could go onto great success, but it wouldn't be the best fit culturally and it wouldn't be the best partnership from a value-add standpoint.
When I'm meeting an early-stage founder, I'm looking for somebody that has a shared philosophy building about motivation, about their first principles, and what makes them tick. When it comes to teams, we have six factors that we prize over all others and tenacity is one of them. But even more important than tenacity for us, is our preference and prioritize authenticity.
There's gotta be a deep connection between the founder and the startup that they're working on. That connection can come in many different forms. Everyone has a different connection to what they're working on, but if you can unpack the layers and figure out why a founder is working on the problem that they're working on, you can determine the true motivation. And if there's an authentic connection to the problem that's being solved, in cases where there is a really strong, authentic connection, then one doesn't really have to worry as much about tenacity. And one doesn't have to worry as much about obsession, not just passion, but an obsession.
Because those that are truly working on something that is fundamental to their core beliefs or the reason they were put on this earth, this is the Magnum Opus of their professional career in life, is this startup. Not the next one, not the previous one, it's this startup that they want to commit the next 10 plus years of their life, their best working years.
When that becomes clear to us, many other things fall into place. Now, of course, they need to be aimed in the right direction and they need to be working on something that's venture scale. It has to have the ability to go out and raise a big Series A. If somebody who's just really, really passionate about running a franchise business, that's wonderful, but that wouldn't be investible. So, there are other factors of course, but the thing that we look for above all else is authenticity.
Gopi Rangan: So, you look for two qualities, tenacity and authenticity. Tenacity without authenticity is just stubbornness and they just won't give up. It's a great quality to have, but having that authenticity, the purpose of why you're doing what you're doing, when that is clear, tenacity automatically comes through with it. And that's what you're looking for.
Nick Moran: Yes, those are two of the major factors.
Gopi Rangan: Let's double-click on this. Can you give an example of a startup that you invested in and how you saw tenacity and how you saw authenticity in the founders?
Nick Moran: Yeah, there is a startup that is building a travel company. Basically, they're going to challenge TripAdvisor. They want to be the modern-day TripAdvisor, but for the new young consumer, the Gen Z folks and younger. This is run by two founders, Konrad Waliszewski and Andy Acs. And these guys are just travel obsessives. Konrad spent after a career in banking, private equity, and then startups. He spent over a year just traveling the world and building a travel blog.
He built this enormous following in this enormous community of folks that followed him and wanted to learn about his travels and wanted to see pictures. He'd done all this building on the front-end before he actually had a business around it. And then when he decided to build a startup in the travel segment, he found a new and creative way to fill the top-of-funnel and to draw consumers in.
Konrad focused on building real social media accounts on Instagram and Snapchat and Twitter. He published a lot of content to those accounts, which drew in many fans, those fans ultimately clicked through and downloaded the app and the start-up is called Trip Scout. They are now number one in SEO on the apps for travel. This is a startup that faced really hard times. Recently, the pandemic hit, and travel stopped. Many startups folded, but not this startup.
This startup only got stronger and more powerful and created new and unique forms of sourcing users and engaging users and creating a wonderful product experience for them as they explore the globe and search for new destinations and go through virtual travel every day, instead of just when they're on an actual trip.
So that's one where the founders are off the charts on their level of authentic commitment to the problem, on their tenacity, on their obsession, their ability to story-tell, their ability to focus on what's important. Many of the factors that we prioritize highly here at New Stack.
Gopi Rangan: This is a fascinating story of a founder, who's passionate about the topic that they're working on. Committing to building a business focused on travel, in the middle of a pandemic, is just hugely risky. It shows the authentic commitment that the founders have with the problem statement.
If I were to take the other side of the argument, if there was a founder that says, well, the problem statement is important and I really care about it, but customers want something else and I want to be flexible and I want to go where the market goes, serve customers with the solutions that they care about. It's less about what I want to do. It's more about what they want.
Is that something that you would count as a positive? Or would you say that this is not an authentic commitment to the problem statement?
Nick Moran: It's a hundred percent positive. So, it may seem like a cop-out answer, but at New Stack, we want to see both.
We say that we want to find founders that are stubborn about their vision, but very open-minded about the path to get there. Konrad and Andy are very stubborn and very driven about the mission to reinvent the travel experience for the better. They want to deliver something with technology, that delights the future generations of travelers and improves every day they're on this earth, not just the day that they're actually traveling.
But the pathway to deliver that the actual product, how it evolves, the needs of consumers and how you meet them at the time that they're engaging, whether they're planning a trip, whether they're not planning a trip at all, or whether they're actually on a travel experience and a trip. The path with which they get there and deliver on those needs, they're incredibly flexible, very open-minded very versatile and they want to deliver the best experience for our customers at any time.
Gopi Rangan: Can an example of where focused on customers let the growth of the story, not just the original idea of what they wanted to solve and they pivoted, they may have changed the business, and that has also worked well.
Nick Moran: Yeah. So, another consumer startup I could cite is a company we invested in, in Chicago called Tovala. Many years ago, they've gone on to great success there with an ARR like no number I've ever seen. It's so high it's astounding. Tovala basically built a meal kit business when there were many established meal kit companies that existed, but Tovala had this vision of delivering really healthy, high-quality meals to consumers with no effort required.
What they noticed is that they went into the market with this concept for building a meal kit company and they started talking to customers that use Blue Apron and use HelloFresh. And what they found is that these customers kept complaining about the amount of work it took. So, they were buying into this concept of easy dinner, they would get these meal kits in the mail, but then they still spent 45 minutes cooking and they'd still spend 10 to 15 minutes cleaning their pots and pans. They bought into this promise of easy dinner, but the solution didn't solve the problem.
Tovala set out on this mission to figure out how do we deliver on the actual problem? How do we deliver delicious meals with no effort required? Effectively, what this company ended up doing was building a very smart oven system. It combines a few different technologies, it can use convection, heat, baking, heat, broiling, and most interestingly, they added steam. So, they can do a lot with steam. And now actually for the past few years, they send you meals in these little silver, aluminum trays. You've got your protein, let's say it's a salmon, a delicious salmon with a miso glaze. You've got a side which is a vegetable. You put these into this oven, you scan a barcode, and it knows exactly how long it should steam the food, exactly how long it should broil the food, and within 15 minutes you get a restaurant-quality meal that comes out.
So, they're not compromising food quality. Like you would, you know, with a standard meal kit that you just shove in the oven. And they're eliminating all the cooking and all the cleaning. But it took them a lot of time to really understand customers’ needs and how different models would work or not work. And then to develop the technology that serves the needs.
And the market has spoken. It's clearly accelerating. The growth has been astounding. Customer stickiness is off the charts, very different than the existing meal kit companies. So, there's one where the vision had to be reconciled with a lot of customer discovery and a lot of customer work in order to figure out what is the right technology that solves this problem instead of just building technology and then figuring out how to pigeonhole that into a set of problems and finding the market.
Gopi Rangan: We talked about tenacity, we talked about authentic commitment, and we talked about the focus on the customer. You've given some really interesting real-life examples of founders who have exhibited these characteristics.
But when you're talking to entrepreneurs in Phoenix, Arizona, or St. Louis or Tampa, Florida, and you don't know that. What questions do you ask them in the first one or two meetings? How do you assess these qualities in them?
Nick Moran: So the first time we interact with a startup, we call that an intro meeting. We try and keep the stakes pretty low. It's just an opportunity to introduce ourselves. We don't jump right into the business, in the business model and all the specifics, in the very first 20-to-30-minute meeting. It's much more important that we understand the foundation, the mindset, the background of the entrepreneur.
One of the things we try and accomplish with that conversation is bringing down the walls. A lot of founders and even venture capitalists, like we have to pitch LPs, we have to go out and raise money ourselves. Part of that is you have this veneer up, you have this wall up, this standard pitch that you use in a standard story that you want to tell, and you get asked hard questions and you gotta be able to tap dance pretty quick and figure out creative answers.
But what's more important is really the truth and really the way that people think. The only way you can get to the authentic truth with people is if you build some trust, if you build some rapport with them. If you come at them in a non-threatening manner and you're not judging them, you're just seeking to get to know them as best as you can.
We're trying to break down the barriers early and just create an authentic connection with human beings because that's when the truth comes out. Another guest I've had on the show years ago talked about how anytime he meets with a YC founder or a TechStars founder or Strata-X or Alchemist or Angel Pad, it takes a few meetings to strip off all the layers of the onion because they've been so packaged and coached and trained by all these accelerators to actually get through to the truth beyond just the commercial pitch. With those founders, it takes longer and it's a little harder. And the same is the case with anyone until you've built some modicum of trust, and until you have some credibility with that founder and just treat them like a human, you're going to be getting the canned-pitch, answers that feel a little more transactional. But the more you can strip away those layers and get to people's true, authentic self, you will get the truth and that's what you need, you need the true answers.
And sometimes people reveal things that they shouldn't be revealing, but hey, at least you got the truth and you can quickly assess that there's not a fit. And I love it when that happens. They feel safe to tell you what the true reason was that they started something and why they're really motivated and how they made certain decisions, why did you make that decision?
If you can get past the layers and get somebody who's going to open up to you, they'll start telling you. How they really feel about things, and you can really see the person behind something, instead of just the structured investor-ready pitch. If they are really working on the right thing and know enough about it and are deeply connected to it, that's what creates a second meeting.
We don't do many second meetings. It's probably one in eight, maybe one in 10. That's how it goes in the early meetings.
Gopi Rangan: Authentic discussions are far more valuable when you're meeting a new person and trying to establish trust. These polished pitch presentations make it difficult for me as well.
What tips would you give to entrepreneurs before they come to meet you? How can they prepare for that meeting?
Nick Moran: Well, it's more about finding the right thing to work on. If they're working on the right things and they're aimed in the right direction and they've decided on the right north star, then they can come to have a chat with me anytime.
And even if they're not ready for funding, I am 100% gonna keep in touch and stay close to them as they continue their journey. We have a couple of stages in our funnel. We call active watch and passive watch, and we pay very close attention to those because, in both of those cases, we consider those people to be uniquely special and working on the right things. They just might not be ready for venture capital yet.
So, when I'm coaching founders, it's much more about that discovery process of working on the right thing and finding a startup that they can commit their lives to because this will take over your life. It's all-consuming. And there are sacrifices. My wife, my son, my broader family, they have all made sacrifices of my time and my energy and everything else, even financial sacrifices to support me in starting my own business. The same is the case for the startups that we invest in. So, you don't want to be committing so much of yourself to something that doesn't drive you every day and get you excited every day.
Sometimes I'll meet a founder and it's not that they're not fundable and they're not capable of building a venture backable startup, but we've met them at the wrong time in their life journey or career and maybe they're not working on the right thing for them in our opinion, or maybe they don't have the right set of experiences yet in their life to find their true calling.
It's okay for many young folks to go through experience working for other startups or working in industry or spending time in other areas if they haven't found that true calling yet. It's a big mistake to start a startup just to throw your hat in the ring. A lot of people advise that, like go out there and start something. I couldn't disagree more.
One should be deliberate and careful with what they commit to and what they're going to go out and fundraise for and spend their best years on. Otherwise, it's going to be a long soul-sucking, painful experience. If you're trying to build something that you're not enthusiastic and excited about every day because there are so many hard days.
Gopi Rangan: So you have, de-cluttered the chaos of all these different types of advice that entrepreneurs get from various different types of people, including investors and other advisors.
You're telling them, tell your story and describe why you were put on our team to work on this problem and why you're going to spend the most important years of your professional life on this. And that is the conversation you would like to have in the first meeting. That's very interesting. Thank you for making it simple for entrepreneurs to understand.
I want to switch to the next part of our conversation and ask you about your community involvement. Is there a nonprofit organization you are passionate about? And which one?
Nick Moran: I've been spending more time and money with organizations affiliated with the VA and with PTSD and veterans that have sacrificed a lot to provide security and this amazing lifestyle and opportunity that we get to enjoy here in the United States. It's something that doesn't get enough attention and often not always, but often afflicts folks that are socioeconomically disadvantaged.
So, they have less of a voice. And it's a cruel irony that these people go and protect our freedoms and allow us to live these amazing fulfilling lives, where we get to pursue our passions and our dreams and many of them come back with injuries that you can't see and it prevents them from doing so.
I would encourage everyone here too, well, there are local organizations that you can get involved with the Wounded Warriors Project. Of course, that's an area that I would encourage folks to put some time and energy into, because in this specific field, in venture capital, we deal in the realm of, in some cases, the impossible and the infinite and incredible, incredible successes that require people, a lot of freedom, financial freedom, freedom of thought, freedom of opportunity. It's easy to neglect what creates those freedoms, in the people that have sacrificed for them.
Gopi Rangan: Nick, thank you so much for spending your time sharing very real stories of startups and your personal takes on what it takes to build a successful business. I really appreciate your examples. I look forward to sharing your wisdom with the world.
Nick Moran: Gopi, this was such a pleasure. Thanks so much for having me.
Gopi Rangan: Thank you for listening to The Sure Shot Entrepreneur. I hope you enjoyed listening to real-life stories about early believers, supporting ambitious entrepreneurs.
Please subscribe to the podcast and post a review. Your comments will help other entrepreneurs find this podcast. I look forward to catching you at the next episode.