Sydney Thomas at Precursor Ventures talks about founders who truly care. She describes how she wants to work with inspiring entrepreneurs. She invests in startups to build the middle class.
Sydney Thomas at Precursor Ventures talks about founders who truly care. She describes how she wants to work with inspiring entrepreneurs. She invests in startups to build the middle class.
That's really important to me where I'm working with people whose values I align with, because those don't change really. People's values don't really change that often. If they do, I think it's really impressive, but I think a lot of folks, their values are pretty hardwired and it's really important for me to kind of assess those out with these people at the beginning.
And I hope also that I can be very transparent about mine as well so that founders also know who they're working with. And so those are some of the first questions we start discussing and first conversations we start having.
[00:00:35] 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. We are here with Sydney Thomas. She's a venture capital investor at Precursor Ventures.
Precursor invests in the earliest stages of an entrepreneur's journey. Typically the first institutional round of funding, which is often called the pre seed round of funding. My firm, Sure Ventures, is a co investor with Sydney's firm in many startups. I've really enjoyed working with Sydney and the founder of Precursor, Charles, over the years.
In this episode, Sydney and I talk about her investment philosophy, her journey through multiple different cities from San Diego to West Virginia, New York, and eventually to Berkeley and Oakland, where she lives now. And her unusual career in public sector and how that translates to venture capital today.
She gives examples of startups that helped her form the conviction on how entrepreneurs care, the ones that really care, not just talk about it. And her investment focus that is driven by the motivation to create opportunities to build middle class. Sydney, welcome to The Sure Shot Entrepreneur.
[00:02:12] Sydney Thomas: Thank you for having me.
I'm really excited to be here.
[00:02:15] Gopi Rangan: Tell us about yourself, Sydney, starting with your background, where you grew up, where you went to college, and your career so far.
[00:02:23] Sydney Thomas: I am from San Diego. My mom is from West Virginia, and my dad is from Denver, Colorado. And so I spent summers in the farm town, literally a farm town in West Virginia with maybe a thousand people total.
And I went to Duke undergrad, studied public policy because I was just so fascinated by what my lifestyle and childhood was in San Diego compared to what my mom's lifestyle was brothers and sisters and my cousins and aunties and uncles lives were in West Virginia and seeing so much of the discrepancy came from governmental policy that I wanted to dig in more there.
So I spent the summer after my junior year interning for Congresswoman Barbara Lee, who is now my congresswoman in Oakland. And after I graduated, went to New York to work at the Bloomberg administration for about four years. It was a really interesting experience and I learned through it that the public sector and the private sector have worked together to create some really great things in this country, and also some really bad things in this country.
And in order for me to really be as impactful as I wanted to be, I needed to have some information and access to both sides of the aisle. And so spent the couple of years after my stint in the administration at Berkeley for business school and spent those two years interning everywhere because I had no clue what the heck I wanted to do and somehow landed at Precursor where we do investing into startups where I'm able to really, I think, have a awesome front side seat into creating, I think, a much more interesting future.
[00:04:16] Gopi Rangan: You've been all over the country and you've had a very unusual experience in public sector before you moved into the private sector, especially venture capital. I'm curious, what makes your investment philosophy different from other firms? How is Precursor different?
[00:04:32] Sydney Thomas: Yeah, I think that's such a good question.
And I think so much of my really wacky background plays a huge role into this because when I got into venture, I didn't realize how little people in the private sector knew of the public sector. And so I spent the first couple of, you know, years just trying to translate my background into words and phrases and just stories that my private sector colleagues would understand.
One of the things that I saw that I was able to do in the public sector that I think a lot of folks I work with now. haven't yet had an opportunity to do is really serve literally the most vulnerable communities. I think when I was working for, you know, Michael Bloomberg and I worked at the Fund for Public Schools, my main job was to help fundraise and implement programs for public schools that were in, I think, all intensive purposes failing.
That means that I was in communities working with people, working alongside people who I think a lot of folks who I now work with might not even know exist, frankly. I think that access to that community gave me such an interesting perspective of what my investment thesis is, which is around focusing on building companies and investing in companies that make those folks lives better, really build out the middle class that invest in a brighter future for I think a lot of folks who have not been included in the investment theses of other venture capital firms.
[00:06:11] Gopi Rangan: This is very interesting. I see that you came in close contact with communities that could benefit from the power of entrepreneurship. When I switched from being an engineer, building things to the venture side, what really drew me to venture was that I could see the power of entrepreneurship. It truly transforms and improves a community.
True sustainable economic development happens because of entrepreneurship. And it looks like you had a very similar experience, but maybe even more impactful because of the direct involvement in these communities.
[00:06:43] Sydney Thomas: I think that is so true, and it is really powerful. I was just reading actually a Wall Street Journal article a few weeks ago that was saying how a lot of the folks who have been fired during this time of COVID have reinvented their lives by being entrepreneurs.
It gives me so much hope that people continue to find careers, joy, livelihoods, even when they're dealt not great cards. Teaching folks and making accessible to folks the opportunity of entrepreneurship can create, I think, a much more interesting country.
[00:07:21] Gopi Rangan: So how does your experience in so many different places in the past, how does that help you engage with entrepreneurs today?
Do you ask different kinds of questions or are you looking for certain types of entrepreneurs?
[00:07:34] Sydney Thomas: Honestly, the thing that it helps me with the most is I still see myself very much as an outsider, as somebody who doesn't really know a lot of the right things to say or the right, you know, Customer Lifetime Value (LTV) to Customer Acquisition Cost (CAC) ratio. All of these things that I think some of the more entrenched folks who have been around for 10-50 years have built up this really impressive and also well very intimidating, just kind of, they've lived such a venture capital life they can't even imagine any other life. And I think having had so many different lives, the barrier between my life and the entrepreneur's lives who I talk to it's much more thin. And so I think that I'm able to understand what they're talking about more.
I'm able to be less on a high horse myself. And it creates a different type of relationship that I think is a lot more mutually supportive and mutually admirable than putting one of us on a pedestal and the other one of us kind of in this servant type of position.
[00:08:39] Gopi Rangan: Yeah, that's heartwarming to hear it.
Ultimately, it's a partnership. We just happen to provide capital and that's just the contribution to the equation. But it's a true equal partnership. And if anything, entrepreneurs are more important than investors. What kind of entrepreneurs do you invest in?
[00:08:57] Sydney Thomas: So the types of companies that I'm looking for are building out essentially opportunities to build the middle class.
They're investing in building out maybe it's a FinTech company that is helping small businesses better understand how their finances work. Maybe it's a healthcare company that is helping older people access healthcare remotely that they wouldn't have had access to before because they couldn't go back and forth and back and forth to the hospital.
I think that those are the types of companies that I'm excited about. And usually the entrepreneurs who are building these companies are just people who care. I don't know. It seems such a low bar, but it's actually a really high bar. That's what I've seen caring is not something that I think should be taken for granted.
And I did take it for granted. I want to just be honest for a little bit, because I thought that everyone just kind of had that muscle, but I'm realizing more and more that it's not everybody has it. And that's something that I really value when I'm working with founders, because one of the things that I actually mark on my investment criteria is your commitment to the customer is just overwhelming.
If anything, I don't have to worry that your commitment to making your end customers life better is your main goal with this company. That's a really core part of it when I'm looking for entrepreneurs. How committed are you to the customer compared to reinforcing your own business goals or your own investors goals, or because as an entrepreneur, you're going to be pulled in so many different directions that I think this is a direction that you should really never compromise.
[00:10:36] Gopi Rangan: Yeah, the phrase ' we are building this solution for a better future' or to 'save the world', those kind of things are thrown around all the time, but the kind of entrepreneurs that really care about it they are very few. How does it come through in the discussions? Can you give an example of a startup where it really came through that the entrepreneur cares?
[00:10:56] Sydney Thomas: I invested in this health care company a few months back. I was seeing all of the potential with what they're building with regards to not just building, they're building a way for the elderly to access better health care remotely. Hence that example I used earlier. And
[00:11:12] Gopi Rangan: What's the name of the company?
[00:11:14] Sydney Thomas: So they're still pretty quiet. It's very recent. That's the general ballpark of where they are. This is
[00:11:20] Gopi Rangan: fun. I want to hear the story.
[00:11:23] Sydney Thomas: So when I was talking to the founder, I was asking him a whole bunch of questions about all the different ways that his company could go. And if you wanted to grow more quickly, obviously you could start selling directly to consumer.
And he was like, "yes, I could, but that's not the consumer that I want to focus on. The consumer that I want to focus on are the folks who are actually on Medicare and are getting these insurance products. So I need to sell directly through the insurance company and I know that's going to take me longer.
I know that it might be more expensive, but in the long run, that moat is really powerful. And also those are the consumers that I actually care most about." And that kind of resiliency in the face of an investor telling you, "Oh, well, you could do this and it'd be so easy, and then it'd be over" was just really inspirational. Those are the types of founders I want to work with. I want to work with somebody who's actually really inspiring because that helps me continue to do my work and continue to also take the risk of finding more of these inspiring founders is when I get to work with the folks who are already doing amazing, amazing things.
[00:12:31] Gopi Rangan: This is very interesting. The inspiration that you get from the entrepreneurs from these conversations, that anchors your interest and forms conviction for you. What stages do you meet these entrepreneurs?
[00:12:42] Sydney Thomas: Yeah, so we are pre-seed. And so what we say internally is that we're pre everything. And so there's no traction requirements, literally no requirements.
And so we are investing sometimes off of a pitch deck, sometimes off of a pre launch MVP, sometimes off of post launch, but I'd say the vast majority of our investments are the former two examples that I shared.
[00:13:08] Gopi Rangan: Oh, that's quite early. Could you pick an example and kind of talk about what did you see in the company and what stage it was?
And that would be very interesting to hear.
[00:13:16] Sydney Thomas: Okay, so one company that we just invest in called Mira, they're building out a way for people who can't afford health insurance to still access health care. I started talking with the founder at the end of last year. He hadn't really launched anything yet. He still had this awesome idea, but just hadn't quite launched.
I would have invested then, but I was so worried that it was actually conflicting with another one of our companies, Decent, which is also a healthcare company based in Texas, that I was afraid to invest. And then six months later, after he had launched in New York and had a little bit of traction, but still very much honestly, it was still just him full time, I realized that this is actually very different than Decent. Decent had raised another round and kind of solidified the path that they were going down. And so we were able to reconnect and invested in his company before any other large investor did. I'd say on the heels of that investment, then he closed a seed round that was larger with more folks who were excited about what he was building.
But at the time of our initial investment, he was using our capital to bring on his first real full time second hire and continue to build out his company and continue to grow in New York and also in other cities, too.
[00:14:42] Gopi Rangan: I'm an investor and Decent and I admire the way Nick Soman is building the business. But healthcare overall is so broken that I think we need many solutions to fix the problem.
So Decent is one way of solving the problem, and the market is so huge that I'm sure there's room for Decent and many others to thrive and succeed. What do you usually ask these entrepreneurs and what can they do to make it easy for you to understand their business and form that conviction?
[00:15:13] Sydney Thomas: Yeah. One of the things that I usually say is I open up every pitch now by saying the reason why I'm excited about you is because you fit this specific thesis on investing in the middle class.
[00:15:24] Gopi Rangan: Oh, interesting.
[00:15:26] Sydney Thomas: And then it gives them a jumping off point to then say, "You're right, or actually, like, really cool that you thought that it's not quite true".
And I think that from there, we talk about sometimes really random things. This is something that was exciting. They'll tell me about their backgrounds, where they grew up, or where they first saw this issue, or why they think it's such an important problem right now. Or we start talking about macro trends, we start talking about anything.
But it allows us to kind of have this mutual kind of respect, I think, from the viewpoint of what we're trying to do here in the world. That is, I think, a really powerful place to start a relationship. That's really important to me where I'm working with people whose values I align with, because those don't change really.
People's values don't really change that often. If they do, I think it's really impressive, but I think a lot of folks, their values are pretty hardwired and it's really important for me to kind of assess those out with these people at the beginning, and I hope also that I can be very transparent about mine as well, so that founders also know who they're working with.
And so those are some of the first questions we start discussing and first conversations we start having.
[00:16:44] Gopi Rangan: Yeah, I agree with you that these values, they make who we are. It's possible to change some of those things and be involved, but for the most part, they're pretty well ingrained, and you can see those values come through in some of these personal stories.
And I remember when I spoke to Nick the first time, he talked about how he experienced healthcare in his own personal journey. He talks about it on a blog as well. It shows his journey of the struggles that he went through the healthcare system and how he came out of it. And now he's much better and everything, but that inspired him to really think about, "okay, I'm going to do something about it.
I'm going to build a business to transform." This cannot be faked. You cannot slap marketing on it to make it look nice. It's either there or not there. And that comes through in those early conversations, the passion and the values are very clear.
[00:17:35] Sydney Thomas: 100%. I think also I did actually in business school, a little project on health care in India.
And it was so fascinating to see. I think actually there's a lot of similarities in this over privatization of health care that has then created just a complicated mess. And I think that that is very similar here, too. And I'd love to hear also your story, how you started getting excited about healthcare, especially here.
[00:18:04] Gopi Rangan: Healthcare is still complicated for me. So many regulations, and there are so many different types of parties involved. And the incentives are completely wacky. That's why I see that there's a huge opportunity. The reason I got excited was that any industry that has such complicated systems stuck in stone age hasn't evolved in decades.
And especially if it touches people's lives at highs and lows and has a horrible NPS score, they're dissatisfied. It's just screaming for innovation. And that to me is the crux of why I do what I do. I wouldn't say I found it. It's there and it kind of fell on my lap and I do invest in healthcare and I invest broadly in other areas also.
But with the same theme of can we build a better safety net for people? Can we enable peace of mind for people? And that's what drives all my investment decisions. Usually this comes through in a conversation with an entrepreneur in the first few minutes.
[00:19:02] Sydney Thomas: That's awesome. I love that. I think it's so true.
The NPS is so low. So, so, so low.
[00:19:08] Gopi Rangan: Are there things that tick you off? Some things that you're not happy with or some pet peeves that come up in conversations?
[00:19:16] Sydney Thomas: Oh man, one of the things I'm trying to do is with this pandemic, I think what it has told all of us is to slow your behinds down.
That's what my, this is a phrase my mother would have used, slow your behind down. Because last year in particular, I got so frustrated by so many things. I realized at the basis of it all, I was just tired. I was just tired. When you're slower, I think you can pick up on, "Oh, okay. I'm upset about this?
Is this actually real? Am I making up some story in my head? This entrepreneur is also probably picking up on things and maybe upset about random things about me." I'm trying to practice the four agreements more effectively the first one being take nothing personally, or maybe it's the second one or third or fourth, I don't know, but it's one of the four.
And that is giving me a lot more space to these conversations for them to go up, down any which way. And just to be a little more forward about asking, "okay, why did you say that? Or could you give me a little more insight behind what you meant when you did this, or when I say this, I meant this." And just kind of giving people more grace, because I think that that then allows for the human part of it all to fall in because we're all humans at the end of the day.
I'm not trying to completely evade the question, but I do think that there are a lot of things I would have said yes last year that ticked me off and having had the wisdom of one more year have realized that I was just tired. Yeah,
[00:20:56] Gopi Rangan: sometimes it's just us. I had a business school professor, Neil Bearden, and he calls it the attribution error.
So we attribute something to be positive or negative or the weight that we give is too much because of our emotional situation. And if it's an error on our part, then we make something to be much bigger than it is actually. So if we accept that there might be an attribution error. So for example, if someone does something and it really hurts us and we take it personal, the attribution is that, "well, you didn't have good intentions." That may not be true at all. That might be just an accidental mistake and just happened to hurt us. If we change that attribute, then we see that person in a different way. That's what he taught me. And I try to follow that as much as possible.
I want to understand how do you engage in conversations with these entrepreneurs? How long does it take from the first meeting to "yes, okay, we're ready to make an investment, we're going to sign"?
[00:21:55] Sydney Thomas: So I would say the thing about the pandemic and kind of jumping off from the last point around slowing things down is that because we're not meeting in person with these folks we actually take a few additional steps around references now that we had honestly never done before because when we were meeting folks in person, it was just less important because the reference was that they found us and we hung out in the same room.
Nobody died.
Now we're "okay. Wait, we've never actually met you. Are you real? Is this real?" We respond to cold emails. Sometimes these folks who we're talking to, we have no actual mutual connections to. I'd say that has slowed us down a little bit in that previously we'd probably do first meeting to check in the door around a month.
We've tried to keep it to around a month. And now I'd say it's anywhere between a month and a half, sometimes two months before from first meeting to checking the door, just because I think we're trying to dot our I's and cross our T's a little bit more now that we're investing still all across the world, but not able to meet anyone in person.
[00:23:10] Gopi Rangan: Do you feel this is a permanent change for you in the way you evaluate opportunities or do you feel you're itching to get back to the way it was?
[00:23:18] Sydney Thomas: I love it. I think this is great. I think this new kind of slow kind of relationship building, trust building is better, honestly, because I'm able to get more proof points with this other person before we start actually entering into this more transactional relationship of me actually owning part of your company, because I'm able to just have a better sense of who you are, have a more, I think, open dialogue about what our values are, have a more complex, and I think, complete view of who you are before we enter into this really kind of permanent relationship.
I actually felt really flustered trying to go so fast last year and quite overwhelmed by it because you don't really even get time to catch your breath. People, especially entrepreneurs who are for fair reasons trying to close their round to just get back to work are telling you, "okay, well, I'm closing next week.
So. Are you in?" I'm like, "Oh man, I don't know. I need to breathe on this. I need to sleep on this." And so I think that I'm really loving having a little more space to make these decisions because I think I'm making better decisions this way.
[00:24:41] Gopi Rangan: So what's one tip that you would give to entrepreneurs before they come to meet you?
[00:24:46] Sydney Thomas: I think that the main thing that I get concerned about when I meet with founders is when I start asking them questions about the customer and they, they don't know the answers or don't have a hypothesis. And I'm not saying that you need to be a know it all and lie when you don't know the answers to something.
But I do start to get worried if I start to press you about questions around the customer, whether it's around willingness to pay or it's about where are these people more generally either the country or specifically, what is the time in their life that they're looking for your product? When I start asking you questions that are a little more about the customer journey, and you don't really know, that worries me. I want to be the least informed person in the room.
I want you to be able to tell me anything and everything that might be going on with this customer's life that makes your product so perfect for them. Because if you don't know, then I don't know if you're going to build what you need to build that's actually of use to this customer.
And then who are you building for? And that worries me a lot. So I'd say the main thing that I would try to counsel entrepreneurs on before they get on a meeting, I think with me or with any VCs, I'd love to hear your feedback on it too, is to be the most comprehensive in your study of who you're serving, because that is at least in these really early days, what you're selling me on is that this person and their pain points and their problems so significantly that you're going to be able to build something that makes their lives that much better.
[00:26:23] Gopi Rangan: Yeah, the focus on customers and the depth of insight that they can share about the customer base they target is, incredibly valuable. I treat it as a teaching moment where I'm waiting to learn and I'm open to their ideas on how the world would be if their product worked. Depth on that topic is very exciting for me to hear.
So that's what I live for. It's great to have that conversation. When that depth is not present, it comes through in the conversation. Maybe the entrepreneur is not fully ready or maybe they haven't thought through as much. Maybe they themselves don't have conviction in the business, which is okay as well.
It's in the early stages of the business. I want to have those conversations and we build conviction together. Okay. This is fascinating. We've touched so many different topics all the way from San Diego to pet peeves to many other things. I want to switch to a different topic. And I ask you about your community involvement.
Is there an organization that you volunteer at and you play a role to serve the community?
[00:27:26] Sydney Thomas: Yeah, it's such a great question. I'm in Oakland, I'm an Oakland resident and recently joined the commission on public safety in Oakland.
And so essentially Oakland has a host hundreds of community boards and associations that you can join that essentially are basically public accountability tools to oversee different measures that the city has passed, the local residents have passed, or policies that the city council has passed, and it's such a cool opportunity.
I'm on this board with nine people who I think I would have never met otherwise, so different. And it's just a really cool way to get an insight into how the city works, how my tax dollars are getting put to work and also provide feedback and advice and counsel to the city on these issues too. They actually listen.
And it's really cool. I would just encourage anyone and everyone to explore how they can get more involved in their local government because that's how democracy works.
[00:28:32] Gopi Rangan: That's true. We all play a role.
It's great to hear your role in public sector. How do you find opportunities like this?
[00:28:40] Sydney Thomas: Yeah. Oh my goodness. Well, one of the cool things about the pandemic, there's many, many, many terrible things. One of the cool things is that I've been forced to get to know my neighbors. Luckily, I really like my neighbors. And one of my neighbors actually works for my city councilman. It was just so cool to talk to her about her experience and what she's learning and how she's supporting the community more generally. And she told me about the portal that exists there. It's for all of the different, you know, public services and commissions and opportunities.
And so I would say, get to know people in your neighborhood who don't just work for tech companies because they might know something and be able to put you on to something that you didn't know before.
[00:29:32] Gopi Rangan: Well, this is great. Thank you so much for sharing your stories and your insights and especially the last part about community service.
It's great to hear your version of how venture capital works and your engagement with entrepreneurs. I'm looking forward to sharing all this wisdom to the world. I want to thank you for coming on to the show and sharing your, comments and insights.
[00:29:54] Sydney Thomas: Thank you for having me. This was a lot of fun.
[00:29:58] 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.