The Sure Shot Entrepreneur

Technology redefining the future of work

Episode Summary

Allison Baum Gates is a General Partner at SemperVirens - a Silicon Valley-based venture capital firm investing in workforce technology, health tech, and fintech. Allison is particularly obsessed with the Future of Work. She shares relatable insights on how companies can evolve with workforce changes post-pandemic. She also debunks one of the myths of raising VC funding: that you can raise funding in the first meeting.

Episode Notes

Allison Baum Gates is a General Partner at SemperVirens - a Silicon Valley-based venture capital firm investing in workforce technology, health tech, and fintech. Allison is particularly obsessed with the Future of Work. She shares relatable insights on how companies can evolve with workforce changes post-pandemic. She also debunks one of the myths of raising VC funding: that you can raise funding in the first meeting.

Highlights

0:54 - 4:11 Can you protect your career from technology disruption?

8:48 - 11:25 Raising VC funding: The number one myth is that you can raise money on a first meeting.

11:26 - 13:45 How to leverage the investor’s network as a founder.

19:05 - 22:33 Remote/hybrid work has given talent significant power to manage the progression of their careers.  How can employers continue investing in their people?

Non-profit: All Raise, Hidden Genius Project

Episode Transcription

Allison Baum Gates: We're at this moment of disruption, labor policy is changing. The labor marketplace overall is changing how companies find, train, and pay employees and how we as individuals think about our work and career, how we prioritize, what we're looking for. It's all changing.

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.

In this episode, my guest is Allison Baum Gates, she's a General Partner at SemperVirens.  Allison welcome to the podcast. 

Allison Baum Gates: Thank you. Great to be here.

Gopi Rangan: Tell me about yourself.

Allison Baum Gates: I would actually define myself by the fact that I am obsessed with the future of work. I've had that in me since the very beginning because I grew up watching both of my parents' jobs, being constantly disrupted by technology. My dad is an architect, and my mom was a graphic designer.

And watching how they adapted to technology, rendering their skills, obsolete, changing the way in which they find work, keep work, deal with their clients, et cetera, had a huge impact on me. And it certainly brought stress into our lives growing up, but it was also a huge learning experience. As a result, I spent my entire life investing into preventing technology from disrupting my work and instead creating an environment for myself and for others where we can actually benefit from technology.

Gopi Rangan: So, you started as a nerd very early in your life. 

Allison Baum Gates: Very early yes. 

Gopi Rangan: How did you get into the venture capital world? What attracted you. 

Allison Baum Gates: It was a long road and frankly, not really a job description that I ever thought was available to me. I did my undergrad at Harvard. I mistakenly believed that having a great degree from a prestigious university would protect me from technology disrupting my job.

Then the financial crisis happened. I started my career on Wall Street and found that even on the trading floor at Goldman Sachs, where people were previously making millions of dollars a year and thought they were immune to a lot of things, technology and algorithms were replacing a lot of those jobs. 

Ended up wanting to get into tech, but found it was very difficult to find a role in technology if you don't have a technical degree. That really motivated me to join a venture back startup as an early employee in New York called General Assembly, where I was helping to build programs, to train professionals in technology skills so that they could pursue work, that they loved. That launched me on this whole path.

We raised quite a bit of venture capital. I ended up learning about venture a little bit that way, but I didn't really dig into it until I moved to Hong Kong to launch our business in Asia. And in Hong Kong, our most popular class by far was Intro to Angel Investing. We had so much demand from people looking to get into angel investing, looking to learn how to engage with startups.

And my idea at the time as a product manager was how can we productize this? How can we build a more comprehensive course to train people in angel investing and the teacher that I had hired to teach that course actually said to me, “I actually don't think that's the most efficient way of leveraging your resources. I'm talking about starting a fund. Would you like to work on it with me?” I looked at him and I said, “I don't know anything about venture capital.” And he told me something that I'll never forget. He said, “Your job now at General Assembly is to find people that are experts at what they do and convince them to come work with you. Venture is no different.” 

And with that, I launched into a long circuitous career in venture, but I still remember that to this day and I think is incredible advice that it's really not about the math or the equations, or even about portfolio construction. Those are all things that you can learn as you go along, but it's much more about finding the right people and convincing them to work with you.

Gopi Rangan: The venture capital world is kind of a closed ecosystem. You got to know people to even get a first meeting. The real work of a VC is largely not known. What can an outsider do to learn about venture capital? If they wanted to get a job in this industry. 

Allison Baum Gates: Venture capital is incredibly cloaked in mystery, and it's a big part of my personal mission to help crack that open and bring transparency and shine a light on how it works.

It's beneficial for entrepreneurs. It's also beneficial for diverse or underrepresented individuals who are looking to get into venture and don't necessarily have the preexisting networks to naturally get a job as an associate at a large firm, which has been the traditional path previously. Venture is much more about understanding these underlying principles related to how you think and how you go about spending your time.

What most people don't realize is that venture is actually not at all about investing money. And this goes for founders too. In today's world money is not a scarce resource. The only scarce resource that exists in the technology driven world is time. How you invest your time is way more important than how you invest your money.

Once you shift your mindset to focus on how am I spending my time and who am I spending my time with that completely shifts the way you approach getting a job in venture fundraising as an entrepreneur, et cetera. 

Gopi Rangan: Yeah, it is a closed industry. I'm glad that you're bringing some awareness on how to think about venture capital, how to prepare for opportunities in this industry.

You started your career as a banker and you are a general assembly, then you moved to Hong Kong to start a new farm. Then you came back to Silicon valley and you were at Trinity ventures and eventually you decided to join SemperVirens. What is SemperVirens and how is SemperVirens different from other venture capital firms?

Allison Baum Gates: SemperVirens is an early stage venture fund focused on investing in companies transforming the future of work through the lens of the employer. We invest in any type of technology, whether it's healthcare, financial technology, infrastructure, workforce technology that is changing this relationship between the employer and the employee.

Looking back and connecting the dots in reverse my mission throughout my career has always been about scaling impact. That's why I got into venture and building a portfolio, as opposed to just working on one company. It felt like an efficient way to change the lives of as many people as possible. What I discovered is that going direct to consumer and changing the way people work one by one can be really powerful, but what's even more powerful is going at it from the lens of the employer where you can actually change entire basis employees at one time. We help build out that distribution channel for our portfolio companies. And we do that through this ecosystem that we've built through all of myself and my partners, our respective networks. It's an ecosystem of hundreds of HR advisors. So CHROs at publicly traded companies, IT people officers at fast growing tech startups, systems players like ADP and Workday that are currently playing a large role in the HR tech stack. We work with large insurance carriers to help them work with employers, transform healthcare for their employees.

We're designed as an ecosystem fund and everything we do is to remove barriers to scale for our portfolio companies. 

Gopi Rangan: So I see that your firm's focus is on workforce, healthcare, and FinTech. What stages do you invest when you look for companies and what do you look for in those companies. 

Allison Baum Gates: We're typically investing at the early stage anywhere from seed to series B.

Because our way of adding value is around connecting companies to potential customers and advisors who sit in HR buyer roles. They typically need to have a product in market that we can evaluate before we are truly able to add value, going back to some of those fundamental principles of venture, we really approach every conversation as like, what do we have to offer?

And when companies are too early or too late, what we have to offer doesn't have as much value at that stage. Typically looking quite early. 

Gopi Rangan: In the first meeting. What kind of questions do you like to ask? So you can get to know the entrepreneur, the idea, and flush out some details. Are there certain types of information that you're particularly looking for?

Allison Baum Gates: We're definitely trying to get to know someone. I wrote an article called the five tempting myths of raising VC fund day. The number one myth is that you can raise money on a first meeting, especially in a zoom environment. It's just so impossible to understand what truly makes someone tick or what they're capable of without knowing them previously.

A lot of the folks, we have a first meeting where we're evaluating an investment opportunity, but we actually have known these people for a years. In many cases, we're looking back at that track record of trust, essentially saying, what has this founder said they were going to do? Have they followed through?

And then all of that is feeding into how we evaluate an investment opportunity in this first pitch meeting today. I will share that context because again, it's something that a lot of founders don't realize, especially first-time founders. You see, in the news, all these folks raising huge rounds at crazy valuations, and you think, well, why can't I do that?

But for the most part, they've been actually working on that for years. We typically look for founder market fit. So does the founder have personal experience with the problem that they're solving and another critical piece of what we're looking for is something called a scout mindset. Are they actually out looking for information about how the world is today or are they simply looking for information to validate what they already believe. And especially when you're selling into HR or just employers in general, you have to be very cognizant of how they're making decisions and what they're prioritizing at that moment in time. I meet so many founders that are so focused on the shoulds. They should want to do this, and they should believe that this is more efficient, but it's just not a priority because HR leaders are so incredibly inundated by different technology, different demands.

That scout mindset is incredibly important and you can figure it out pretty quickly if someone is really open and listening to what the market is telling them, as opposed to just projecting their view of how it should be. 

Gopi Rangan: Yeah, like you said earlier, you are looking for really smart, brilliant people and try to convince them to work with you.

That's kind of what you're looking for, but the way we treat financial institutions in other parts of our lives, it's like you walk into the financial institution, then have a conversation about how much money you want. If you want a loan, or if you want to invest or put your money into savings, it's a normal conversation at the end of the conversation, you make a decision, whether it's a yes or no.

But that's not how venture capital works. Although there is some money exchanged, the conversation is about getting to know the people. I'm really glad that you dispelled that myth in your article. Can you give an example of a conversation you had like the scout mindset and that was evident in the first conversation that when you talk to the founders. 

Allison Baum Gates: Oh, gosh, I like to think that all of our founders bring this type of mindset to the table.

An example of that is a founder we recently invested in, but we've known forever. It feels like the CEO of Bravely, Toby Herbie, is someone I met many years ago when he was first starting out, and Bravely is essentially a platform that provides an HR business partner to every employee. They have a network of coaches and they provide In-moment coaching for any employee.

Think about you have an individual contributor, that's going through their 360 review with their manager. They want to make sure that they're prepared for the conversation. In a typical world, people might have friends that they can do or work through with that. If they make enough money, they might have their own coach.

If they're a manager, they might have access to executive training at their organization. But Bravely's mission is that everybody should be supported in having those conversations. We met Bravely quite a few years ago and he was really trying to figure out where they fit in the market. And I just remember having a conversation with him about why customers were buying Bravely and how they were engaging with Bravely at that time. He approached the conversation with questions for me, which was incredibly valuable. 

Gopi Rangan: Oh, interesting. The tables were turned. He was asking you questions. 

Allison Baum Gates: Exactly, but in a way where he was leveraging our expertise and leveraging our network to understand well, how do you think we fit in from mental health versus executive coaching?

You've seen a lot of companies in this space. How do you think we fit in from both an investment landscape and a customer landscape. Being able to distinguish those two audiences is really critical because whether you like it or not, and regardless of what a VC tells you, they're not an expert in your space.

We all try to be, but if we truly were, we would have been building companies ourselves, walking that line between understanding the difference between an investor audience and the customer audience, and then figuring out how to demonstrate that you have some expertise, but still be open to guidance. And feedback is a really incredible skill and one that Toby certainly embodied.

Gopi Rangan: This is a very good example. Thank you very much for sharing real life stories. How long does it take for you from that first meeting to the point where you say I want to invest? 

Allison Baum Gates: SemperVirens has a unique model and that we don't lead investment rounds. At least not currently, we may eventually, but today we do not.

It is an interesting process of getting to know founders when they're not fundraising. Figuring out how we can add value, whether there's a fit between them and our ecosystem, and then whether or not it's the right timing for them to scale their business. As I mentioned, because we're experts in a certain type of buyer, the biggest factor in success for the companies that we're investing in is timing.

Have they struck on some sort of tailwind that is causing what they're doing to rise to the top of a pile of a very busy customer. So we'll build relationships with founders for literally years when they do decide to fundraise, we can play a role in connecting them to potential lead investors that we work closely with.

We have quite a few amazing folks that we tend to co-invest with quite frequently, and that share our mission and vision for the future of work. Once they're at the point where they're investing, we're able to make a decision very, very quickly, because we've already done all of our work. 

Gopi Rangan: You like to meet founders at any time in the journey of building the company, they don't need to be at a point where they are in the middle of fundraising or just starting fundraising.

They can talk to you between fundraising times as well and build a relationship with you and you prefer that. 

Allison Baum Gates: Absolutely. Timing is everything and what a lot of founders don't realize is that relationship with a VC is not transactional. Our expert VCs in this particular distribution channel, for example, is really understanding the timing of when is the right time to step on the gas pedal.

And if you step on the gas pedal at the wrong time, you can make a lot of really big mistakes that could potentially ruin your opportunity to find success later on. I meet with founders that come to me and pitch me their business, and believe that I should open up our network and start introducing them to customers immediately.

What they might not appreciate is that we're very careful about when we start digging in, when we start making introductions, when we help to scale, because we have a pulse in the market and understand how people are thinking about things today. 

Gopi Rangan: Yeah, that is true. It's a relationship business. The more comfort an investor has, the more eager he, or she will be to move forward with the investment.

It does take some time. 

Allison Baum Gates: Yeah, absolutely. You learn more about a founder from how they react when you tell them no, then you do from them when you tell them yes. There are a lot of companies where we've actually met them at their seed round or met them even at their series a and we've said no, but we've stayed in touch and we're able to invest in it in the subsequent run.

Bravely is an example of that.  I actually met them when I was at my previous firm, Trinity Ventures. We looked at their round at that time, ended up passing, but I still had a great relationship with Toby. He was always keeping me updated, asking me for advice, keeping me engaged. We looked at another round of theirs during the pandemic, ended up passing ultimately.

After they saw some incredible growth over the past year, as a result of market timing, product timing, team timing, everything coming together, we were finally able to create an opportunity for us to invest in the company. And because each of us have such deep networks in this space, my partner Robbie is the co-founder of People Tech Partners, which is an accelerator for seed stage companies selling into HR leaders as well. There are so many companies that we've met and talked to about investing in multiple times and then didn't end up investing for years. But when we did it was the exact right time for us to leverage our network, to help them grow. 

Another great example of that is Matheson, which is a company we invested in recently, offers software for diversity, equity and inclusion. They help employers deal with everything from sourcing diverse candidates, moving them through the pipeline, through their interview process in a way that eliminates bias and then helping the employer themselves also understand how have we potentially introduced bias into how we're dealing with new hires, but also with our existing employees.

So they have an equal hiring index, allowing employers to really dig into the numbers and understand are they providing true equity and inclusion in their hiring process? We spent months and months and months working with Arthur and Dave making introductions to them, understanding how the diversity equity and inclusion market was changing.

We saw a shift at the beginning of this year where new budgets were being opened up for heads of DENI, and it was the number one priority for the majority of our HR leaders. We knew that we had to make an investment in this space and that given what we'd already seen with the Matheson team, even though we hadn't been investing this entire time, it worked out perfectly.

Gopi Rangan: This is very interesting. I want to geek out on this topic of future of work, and I've always had this nagging feeling that large companies have so much leverage in negotiation during job interviews, or even later with employees. How is that going to change? 

Allison Baum Gates: Oh man, I would love to geek out on this, cause this is my number one favorite topic.

We're at an incredible moment of disruption and COVID-19 was terrible. Living through a global pandemic has been awful in so many ways, but it has also accelerated changes that were in the works, but we didn't know when they would reach a tipping point. And we're at this moment of disruption. Labor policy is changing.

The labor marketplace overall is changing. How companies find train and pay employees and how we as individuals think about our work and career, how we prioritize, what we're looking for. It's all changing now at every single level, how things work, it's becoming more digital, distributed, data-driven, dynamic, and diverse.

And that's at every level, that's at the individual level. I have way more options when it comes to jobs, I can work remotely. I can be a consultant. I can start my own business. It's at the employer level. We're seeing employers think a lot more flexibly around how they engage with talent. How they find individuals, whether they're willing to work with them on a remote basis or a flipped basis, which is the concept of spending most of your time outside of the office, but only coming into the office to collaborate with others. And that society at large we're rethinking, what is the role of employer in the life of the employees?

So much of our society and economy was built on this concept that employers were supposed to hand people, benefits and careers and take care of them and provide a pension after they retired. That's just not the case anymore. The average millennial changes jobs every two years and that's completely become the norm.

People are building a portfolio of work as opposed to just one linear path. We're definitely at a moment where that creates an incredible amount of opportunity, but it also completely shifts the responsibility in a lot of ways onto the individual. Now it's up to me to figure out what career am I going to build?

What job do I want? What skills do I need? And that's a real mindset shift for a lot of people that grew up believing that your career was going to be handed to you. And if you did all the right things and you worked hard and you showed up every day, then all of a sudden you are going to be set for life.

That's just not the way it works, especially when we're living in a technology driven world, which is changing faster than ever before. 

Gopi Rangan: That is really true. The previous generation treated work like a ladder climbing process. You spent your entire carrier slowly climbing the ladder one step at a time. You would sacrifice family.

You would sacrifice personal preferences to make work happen, but the future generation were going in a direction where it's a portfolio. It's like an artwork of different types of things that we do. We go from gig to gig, to gig maybe multiple gigs at the same time as well. I'm curious to see how large organizations adapt to this new work force.

Allison Baum Gates: They're trying. One interesting statistic we've been discussing is by some metrics, almost 50% of individuals today are saying that they are interested in changing employers in 2021, this year. I think the statistic is 42% of employees say they plan on changing their employer this year. 

Gopi Rangan: That is huge. 

Allison Baum Gates: And large companies are freaking out.

HR leaders are measured based on employee retention and they're at huge risk, especially at a time when the economy is finally picking up, businesses are gaining steam again and losing talent is always expensive, but it's even more expensive now. Employers are being forced to adapt. They're trying to figure out what can we do to get ahead of this?

How should we be investing in our people? And what does that look like? 

Gopi Rangan: I can see why you are geeking out on this topic. You were born as a nerd, then you have found your spot. You really get into this topic. We've talked about what you look for in entrepreneurs, the scout mindset, and not to expect to close the deal in the first meeting and those kinds of things.

But are there things that entrepreneurs do that you don't find effective or your pet peeves, that things that you don't want? 

Allison Baum Gates: Yeah, definitely. Well, I have micro pet peeves and macro pet peeves. One of my micro pet peeves is when founders ask you after every slide, whether what they just said makes sense.

And for many it's a verbal tick and they don't even realize they're doing that, but you shouldn't have to ask me that. That's one pet peeve I have. Have a conversation, be an expert in your topic, be authentic about what's going on, but don't ask me if it makes sense, because you should know that it does already. This market is completely crazy.

We have conversations every day about whether or not this is a bubble, how long it's going to last. And one pet peeve that I'm sure I share with a lot of other venture investors is when founders try to pressure you into making the decision after the first meeting, because the round is going very quickly.

If you know someone well, and you have an existing relationship, and as I mentioned before, you've been cultivating trust and doing diligence slowly over time, understand how the business has evolved over time. Then that's a fair question to say, yeah, this is moving quickly and I need you to give me an answer, so I know whether or not to reserve room for you, but if we just met and you're closing in three days, I'm not going to invest.

Creating that artificial, whether it's artificial or not, but trying to take advantage of the current environment and place pressure on investors to make decisions when they need to make decisions on their own time is definitely a pet peeve of mine. 

Gopi Rangan: Yeah, I see that often with more of the sale-sy founders, if they come from a world where they have been in sales and they're incentivized by closing deals, try to create that artificial scarcity so that they can get to a finish line soon.

But that style often doesn't work with venture capital investors. 

Allison Baum Gates: No, definitely not. 

Gopi Rangan: You start the conversation with the founder, attempting to build that personal relationship. And sometimes these relationships don't go well. Are there things that you do differently as a venture capital investor compared to when you first started in VC?

Allison Baum Gates: Yeah. Well, as I mentioned, the core of venture investing is understanding and properly allocating and then constantly iterating on how you spend your time. When I first started investing, I was trying to become an expert in future of work and at that time in particular education technology businesses. I was approaching every conversation as a learning opportunity, which was super valuable, but also meant that at times I opened my funnel a little bit too wide and met with every founder that I came across and found myself very quickly getting frustrated or disillusioned or burned out because I wasn't taking the time to really break down where do I believe there's opportunity and why, how do I either test those assumptions or look for opportunities within those spaces. Over time, as I've built and refined and iterated on my investment thesis, around the future of work and where I believe there is opportunity to invest today, I've been much more proactive about going out and actually looking for companies that are solving problems that I care about that I believe are big and are right for disruption. That's definitely been a big shift. I also think I've always taken a relatively entrepreneurial path within venture. So I'm a founder too, in a lot of ways. What a lot of company founders don't realize is that most venture investors, particularly if you're a smaller, more entrepreneurial fund, like SemperVirens, we're constantly fundraising too.

There's a lot happening behind the scenes in terms of how I'm spending my time. What I'm focused on. What might be affecting, how we're investing when we're investing. That really is completely independent of what the company is doing or what round is coming together now. When I first started in venture, we started fresco capital.

I was a hundred percent focused on learning and on raising capital and just meeting as many different types of LPs as I possibly could. On both sides of that funnel, whether it's meeting founders or meeting ambassadors in venture funds, I've gotten better at filtering and qualifying who would be a fit for what I believe to be the opportunity at hand.

Gopi Rangan: There's this sense of curiosity that makes many venture capital investors successful, especially when we are starting a new topic or entering a new area, we are eager beavers, and we meet a lot of different people, but very quickly narrows down to where you want to focus. I see that that journey has happened for you many times. 

Allison Baum Gates: Always learning. 

Gopi Rangan: 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? Which one?

Allison Baum Gates: It's hard to name just one, so I'd like to mention two, if that's okay. I'm very active in the all raise community, all raise is a non-profit committed to supporting founders and funders who are female, and non-binary. Everybody knows the statistics around female founders and female VCs.

And while a lot of traditional investors in venture understand those numbers, they aren't necessarily actively investing in changing them. What all raise does is create really deep networks for women in VC to work together. That's been incredibly transformative for my own experience, building a career in VC.

And I'm so passionate about continuing to invest in that space and create the opportunities for folks that don't come from the traditional technology backgrounds and networks. All raise is a big part of that and something I care a lot about. There's another organization I became involved with, which is Megan Holston-Alexander.

She's an ambassador over at the cultural leadership fund at Andreessen Horowitz. And through her became a volunteer at the hidden genius project, which is a nonprofit that trains and mentors, black male youth in technology creation, entrepreneurship and leadership skill. I've had the pleasure of helping to teach some budding entrepreneurs in the Oakland community about what it takes to engage with venture investors, what it's like to fundraise.

And it was an awesome organization, incredibly well run and really enjoyed being part of that committee. 

Gopi Rangan: Allison. Thank you so much for spending time with me today and sharing very insightful stories from your experiences. I look forward to sharing your nuggets of wisdom with the world.

Thank you for listening to The Sure Shot Entrepreneur. I hope you enjoy 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. .