Eric Ver Ploeg, founding partner of Tunitas Ventures, talks about how his seed-stage venture firm is helping entrepreneurs raise the best possible Series A. He shares his inspiring career journey into venture capital and expounds on the three key things he looks for in a potential investment. Additionally, he offers insights into the transformative shifts within the venture capital landscape, shedding light on the evolution of his personal viewpoints.
Eric Ver Ploeg, founding partner of Tunitas Ventures, talks about how his seed-stage venture firm is helping entrepreneurs raise the best possible Series A. He shares his inspiring career journey into venture capital and expounds on the three key things he looks for in a potential investment. Additionally, he offers insights into the transformative shifts within the venture capital landscape, shedding light on the evolution of his personal viewpoints.
In this episode, you’ll learn:
[3:24] One of the hardest and most aspirationally awesome things that a human can do is start a company.
[7:16] Even an experienced entrepreneur needs help raising series A.
[10:54] What does it mean to create a category-defining company today?
[16:00] Back to the basics: defensibility and unit economics
[23:30] How has the venture capital industry evolved and how have your perspectives changed?
The non-profit organization that Eric is passionate about: StartX
About Eric Ver Ploeg
Eric Ver Ploeg is a founding partner at Tunitas Ventures, building on a successful angel investment track record. Eric is a 2x venture-backed startup founder, where he raised rounds from Kleiner Perkins, Mayfield, JMI Equity, VantagePoint, and others. He spent 11 years as Partner at large multi-stage venture firms, where he was a board member of 25+ startups, and had a vote in ~500 Series A to Pre-IPO investment decisions leading to ~130 investments.
About Tunitas Ventures
Tunitas Ventures is a Silicon Valley-based seed- stage venture firm that focuses on helping companies raise future Series A from the best possible investor. The firm invests across all technology sectors (except Healthcare/Life Sciences). Portfolio companies include InspectHOA, blotout, GO2, Via.Delivery, among others.
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I just think the people who end up being entrepreneurs are some of the greatest humans on earth, and they're doing the greatest things for society and and for the whole planet. So that's a place where it overlaps with my professional undertakings. It's just the kind of thing that I feel like — helping these entrepreneurs just even a little bit in their hero's journey.
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. My guest today is Eric Ver Ploeg. He's the founding partner of Tunitas Ventures. We're gonna talk to him about his investments. What does he look for? Tunitas Ventures especially focuses on late seed stage startups - investing in companies to help them raise Series A round the funding. What does that mean? He's also extremely knowledgeable. He's experienced in venture capital. He has like 20 plus years of experience in this industry.
We're gonna learn about how the industry has evolved and how his perspectives have changed, and what can we learn from his lessons. Eric, welcome to The Sure Shot Entrepreneur.
Eric Ver Ploeg: Thanks for having me.
Gopi Rangan: Let's start with you. Tell us a little bit about yourself, where you grew up. You grew up in Columbus, Ohio, in the Midwest, and then you made your way to Silicon Valley. Tell us a little more about that story.
Eric Ver Ploeg: Yeah, it's a great place to be from. I think that Midwestern values are a good thing to bring with you and being sort of a down to earth and direct is a good thing in venture. To answer your question, I went to engineering school, got an engineering degree at Case Western Reserve University. That's the first place I heard about this thing called Boar's Law. And I looked at that and I said, Hey, that seems like a pretty good idea to hook your career up to. This thing where you're gonna be in an industry where everything gets cheaper and better by a factor of two every year and a half or two years.
Like how could that be not a good place to be? I probably took it a little bit too literally and said, oh, I'm gonna be a semiconductor guy. So I, I applied and got into Stanford into the PhD program and got a PhD in semiconductor device physics there which was a like, just a fantastic. Place to be a student.
Really loved doing that. And then went to work briefly for Hitachi at their central research labs in Japan, because at that time the Japanese were crushing the Americans semiconductor companies. And I thought, well, I should go learn. You know, I. How they're doing it. And what I realized was that a lot of stuff was not transferrable and that the semiconductor industry as we knew it in, in Silicon Valley, was probably coming to, you know, the end of its glory days.
And so literally my last day at Hitachi was my last day in the semiconductor industry. I came back to Stanford and got an M B A. Then started two venture-backed companies. Co-founded the first online ad serving company, and then with a friend who was finishing up his PhD in computer science a few years later.
Founded a main memory database company. So you know, two venture-backed companies that I co-founded and then spent eight years as an MD and a very large venture firm. VantagePoint Venture Partners left, did a few other things. Ran a quant hedge fund. Decided to get back into venture after a while.
Started doing my own seed investing and then spent three years as an MD at D T C P here in In Men Park, and then decided I should launch tens, which is probably the interesting whole part of that background.
Gopi Rangan: You come from the silicon part of Silicon Valley, started your career in the semiconductor industry, and you've played so many different roles, which you've already highlighted deep into institutional venture capital firms like Vantage Point.
You were a founder a couple of times and you even started a SPAC recently. Now you were on the corporate venture side of things at Deutsche Telecom, D T C P, and then eventually you decided to start your own firm. Why do you like venture capital?
Eric Ver Ploeg: It's the part of the ecosystem and, and the part of business that I think is the most interesting thing in the world.
That most of the new job creation and GDP expansion and the things that create newness and wealth and prosperity for nations and, and people all over the globe are from new companies. And I think that. One of the hardest and most aspirationally awesome things that a human can do is start a company because it is the thing that creates goodness in the world.
You know, from an economic perspective, you know, disproportionately you know, going and getting a comfortable, safe job at some big company is good and, and, and it adds value to society. But it doesn't have the role of changing the world the way a startup can do.
Gopi Rangan: The beautifully said. And it also encourages outsiders to come in.
New ideas, new people, strangers, working with strangers. It's not you work with your own friends and cousins and neighbors and you have to actively seek out to work with brilliant people wherever they come from and give chances those, to those people to build amazing businesses. Fascinating industry indeed.
Eric Ver Ploeg: It's egalitarian in a way that no one other industry really can be. Because the best and brightest are the people who are most able to go do it, will do it. And the role of the venture investor is to try to identify and, you know, help those folks, you know, be successful in that journey.
Gopi Rangan: Why did you start Tunitas? How is Tunitas different from other VC firms?
Eric Ver Ploeg: Maybe taking a step back, right? I, I think in the venture industry, it's gotten order of magnitude larger, maybe two in the last two decades and two things have happened. I'm first, the bar has raised so high on being a public company that whole lot of finance that used to be public company finance has shifted to sort of late stage private company finance.
And so it is sort of created the private equity world and turned venture into a small little cottage industry into. Two pieces, one, you know, so the early stage venture piece is bigger, but you know, still sort of the same as it was two decades ago. And then we've created a brand new, completely different piece, which is late stage venture growth or whatever you wanna call it that is really there because for reasons that are debatable, we, we have, and our regulators have chosen to make the cost and difficulty of being a public company so much
Gopi Rangan: higher.
That's been, that's been the evolution in the venture industry in the recent past. So that has created some challenges. And how does that inspire you to start Tunitas?
Eric Ver Ploeg: In that context, as the industry gets larger, you would expect more specialization of labor.
And so as I look at the early stage venture ecosystem, One of the things that occurs to me in this need for increasing specialization of labor is not just by sector, but by functional expertise, the value that the venture firm brings. And one of the things that came out loud and clear from the seven seed stage private angel investments that I've led was that even an experienced entrepreneur needs help raising series A. You know, even an experienced entrepreneur has done it twice. One lifetime and it does not prepare them particularly well for doing the job in an excellent way. And so that was the initial sort of observation. And then I looked at my background and network and said, you know, I am wildly above average.
I. For delivering on helping in that way for companies. So that was the, the genesis is, is the belief that there's a general need for specialization and then where would be the best specialization for me to deliver in terms of meeting need with my unique set of skills and helping them raise the next round.
Gopi Rangan: Raising series A is, I would argue it's the hardest.
Funding round for a startup. It's one of the most competitive rounds of funding as well for a vc. So it's really hard to find good companies to invest in, and it's really hard for a company to get to that stage where they can raise Series A. So there's a big gap from pre-seed, seed round, multiple rounds of that Seed Plus, and then few of them get to Series A.
The graduation rates for companies that get to Series A is very low. You chose to specialize exactly in that spot.
Eric Ver Ploeg: So, yes. And I consciously did not choose to try to be a series A firm, right? Because that would be trying to compete with the top 10 or 20 series A firms that are already established and they're really good at that. To me that feels a little bit like a suicide mission as a new emerging manager. Whereas trying to be the person who talks their way into writing a check three to nine months ahead of the series A round with the value proposition that I'm gonna help you raise Series A and, and back it up, right? You can't just say it, you gotta do it. Really back it up and have a process and have track record that shows that you are way above average in getting that done is really helpful. And so, yes, the graduation rate isn't super great, but at the seven seed stage investments I've made, one hasn't gotten to that point.
One has failed outright and the other five did successfully raise Series A. And three of them from top 10 series A firms. So, I have a demonstrated ability to get this done, and part of the reason is my background and experience.
Gopi Rangan: Let's talk about some of the specifics here. You've already had successes with companies that have raised Series A. What is the best stage for a founder to meet you? When should a founder start talking to you?
Eric Ver Ploeg: Nine months ahead of series A is sort of nirvana, but I'm always happy to talk earlier when somebody introduces me to say a pre-revenue company and it's something that I'm excited about. I always say happy to meet with a caveat that I would only invest if we're sort of three to nine months away from Series A. Seems like maybe you're not quite there at that stage, but happy to meet or let's schedule a time when that's closer.
Gopi Rangan: What do you ask them to check if this is the company that you want to spend time and consider investing, what happens in that first meeting?
Eric Ver Ploeg: So the way I look at it is the kinds of companies that the top tier series A firms are interested in. Generally, there are three things. This is super simplistic but I'm looking for companies where they're creating a new category. The AI boom is a real and genuine thing, but once you've seen the leading company who's gonna do X with AI for industry category y, And then you see the fourth or fifth or seventh one that's gonna basically do the same thing for the same set of customers, but there is a twist on it, those are rarely the outsized home runs. Occasionally, but usually not. And because of that, the top tier series A firms don't have a lot of appetite for the seventh player doing essentially the same thing. Frankly, not much interest in number 3, 4, 5, or six, either maybe two, probably not number one.
That's best. So what those companies have in common is usually they're creating a brand new category, right? You know, like the best exit of venture last year was Figma. And when people say, well, what's your sector focus thing? And I said, well, in 2014, whose sector focus was to say? I am really interested in companies who are ha helping graphic artists collaborate online with their clients.
And so, to me, I'm not so arrogant to say that I know what the future holds. I think the best entrepreneurs find the themes and the great ideas and they pursue them. And often they create brand new categories in the process.
Gopi Rangan: Can you walk through one example from your portfolio?
Eric Ver Ploeg: Okay, so my most recent investment is a company called InspectHOA. They're about to rename themselves. And there's a perennial first slide that you see in decks over the years that says, look how broken it is to buy a house in this country. You know, it's a mess. It's a total mess. And I've seen that first slide and how big the industry is.
Like it's many, many tens, hundreds of billions of dollars of available market for somebody who can kind of address that fundamental problem. And every time you look at it, people try to boil the ocean. They're trying to do everything all at once because, well, here, let's just streamline the whole damn mess right at the beginning.
But there are so many entrenched interests and so many entrenched players, and it's so different from geography to geography that the approach of coming in and saying, we're gonna boil the ocean and make it all better on day one, is just too much. Whereas with InspectHOA, they've said: no, no, no; we're gonna take a totally different approach.
We are looking at each of these crazy steps in this process as a discreet workflow, and so we are just going to serve the existing players and take their workflows and run them as a tech enabled service one at a time.
And so you start with like the biggest pain for the title companies is dealing with the local HOAs. There are so many of them. There are so many different rules. There are so many things that are written into their rules that aren't enforceable, but the things that are enforceable vary by geography. And the title company is the one who's on the hook if things go wrong, like the seller hasn't paid their dues recently.
And so getting all that information from an H OA that may or may not pick up the phone today is just a nightmare for the title companies. And so InspectHOA started with that, kind of like Uber started with black cars, and then they pick up the next workflow, and then the next workflow, and then the next workflow.
And then they're serving a broader and broader swath in that really complicated, messy chain of events that is required for a human to end up buying a house in this country.
Gopi Rangan: How did you meet the founder?
Eric Ver Ploeg: A pre-seed investor that I know introduced me, and this is part of where my differentiation, I think helps is because I try very hard to have everyone know that I am, helpful at raising series A, that this pre seed investor, it's like this company is doing great, but nobody can understand what the heck they do.
I can help. I can help explain in words that the venture ecosystem can understand, and I can also help them see and talk to the people who will grok their, their pitch.
Gopi Rangan: I play sort of a similar role in the pre-seed stage when founders are attempting to raise the first institutional round of funding.
I help the founders tell the story the way it works for the industry, and then they can find a lead either through my network or when they go out into the market to discuss the fundraising plans. It becomes a lot easier for them. I see that you target a stage that's a little later when pre-seed investors bring their companies to you to prepare for Series A.
What got you excited about the founders, Anton, Vishrut and Atin? I see that the complexity of the problem is not easy. Yeah. To get behind, but something must have really got your attention, say, yes, I want to invest.
Eric Ver Ploeg: that,
The sequence for me in the moving towards a Yes. The first thing I look for is, are they really creating a brand new category?
And usually, not always, but usually I can sort that out before I even take a meeting. And I won't take a meeting with like the seventh player in a complicated, messy, overcrowded space. Sometimes you can't figure that out. And so you figure that out in the first 15 minutes of the conversation.
The second thing that I look for is a defensible business model. That's born out from my own analysis of where the greatest exits occur in venture and my own personal painful experience of having a company not wildly differentiatable but you know, was doing great. Got to 30 million of revenue, nice growth, things were looking good.
And then they do a venture round. Word gets out how well they're doing. All of the adjacent players end up basically copying and pasting the bullet points from, from my company over onto their website. And we all knew it was BS, but the customers didn't know it was BS. And so our sales cycles stretch out.
The customers are smart. They say, "Hey, you know, we tested yours against theirs and I mean, we prefer yours, but theirs is one half the price. What are you gonna do for me on price?" And so it just ends up being a miserable place to be with company that isn't meaningfully able to sustain a barrier for new entrants to come in. So that's the next thing I look for. And there are classic ways that, that establishes itself and books written on that one topic. And I usually can figure that out before the end of the first meeting. And then the last thing I look for, and the reason I make it last is 'cause I can't figure out how to do this less than 10 hours.
Is it working? You know, is the unit economic model of the business starting to work? And it's shocking how often a company will have revenue, will have some impressive metric numbers, have some something or rather, and you look at it and you say, if this was a lemonade stand on the corner, it would be losing money hand over fist.
And the bigger it gets, the more money it loses. And so, you know, like no thank you. And at the stage that I look, it's rare that they have well polished gap financials, right? Usually I'm waiting in their internal tools to understand exactly how the levers of the model work to ascertain whether or not the unit economic model a good one.
Gopi Rangan: You have a process. Usually you come into the meeting only when you know that this company is going to create a new category. Then you look for a sustainable business model, and you try to figure that out in the first meeting so you don't take too much of their time, and then you spend many hours researching to see: is it really working? And if it's working, then can you help them get to Series A? What kind of plans can you put together to help them? Can I challenge you on the first one, please? Facebook was the seventh social networking company. Zoom was the seventh online video company in a conference platform. There are so many examples of that.
If you don't want to meet the seventh company in a crowded market where there's a clear demonstration that there's a demand for that, which is why there are already six companies there, but there can be a solution that really breaks through. And creates a huge solution. We can talk about similar kind of examples in the browser market and so many other things like that.
Wouldn't you miss out on some of the big winners if you only focus on the first and the second?
Eric Ver Ploeg: For sure. There are corner cases that I will miss out on. I'll push back on the pushback when you come to Zoom. 'cause I was the point person in an inherited investment in a player in that category. And the differentiation there was less around the product and more around the go to market.
And so like you would know before taking the first meeting with Zoom, that it, they weren't trying to make a better product. I mean, the app, the product was good, but the core source of differentiation was a completely different go-to-market motion. And so for me, that is a new category, right? That is a brand new category.
And I'll push back on Facebook as well, because I was a partner at VantagePoint Venture Partners, where we were the main investors in MySpace. And when Facebook came along, it was not a social network the same way that Friendster and MySpace were a social network as we had conceived it at the time. Sure.
With the backward definition, we cast them all into one big category, but the approach that Facebook took was fundamentally different. It was not about let me broadcast to the world, everything, and it was much more about how do I interact with my friends that I know in the real world, in this new medium online?
And so, okay, yes, they were both social networks, but one of them was fundamentally a different category of social network. But there are cases like I, you know, I, I probably wouldn't have taken that first meeting with Google, right? Like there were, you know, that did not feel that different to me. When I first heard about it.
I was like, there's already Alta Vista, there's already, oh, these are the search. This search is better. So yeah, I, I might miss some, but I will also not waste an inordinate amount of my time or entrepreneur's time on companies where I think the odds are low.
Gopi Rangan: I like these intellectual debates with you. We go back to first principles and we begin to think about what really made a difference in that investment in that company. I like investing in category defining companies as well. I have quite a few in my portfolio, but I always wonder, will I miss the next Google because it's the seventh search engine?
And will I miss the next WhatsApp because it's the 14th text messaging company, but they will actually make it big. Maybe there are some corner cases we will miss, but We focus on category defining companies. We get to meet some amazing entrepreneurs. How many companies do you typically invest in average year?
And what's your typical check size? And how many companies do you plan to invest from the fund?
Eric Ver Ploeg: I just launched the fund and did a first close last fall. And so some of these numbers are TBD in the fullness of time and will change when I go to fund two. But for fund one, I'm writing $400,000 checks. There's a blessing and curse there. I might miss out on some of really great opportunities where they say, "eh, your check is too small to really move the needle for us where we are so that's the curse. And I definitely missed out when I was writing a hundred thousand dollars checks on my own.
I missed out on a fantastic opportunity that I loved. And the CEO seemed like me, but he'd already said, "I've been telling people the minimum check is a half million. I can't let you in for 100 K." And so, and that would've been a 51 Xer unrealized for me at this point. So that's a painful lesson on being too small.
But I'm hopeful that it also allows me to get into companies where what they really want is me and say like, yeah, 400 K on this, reasonable valuation. It's not a gigantic amount of dilution. And sure, we'll squeeze you in. I haven't had a trouble yet of getting in. So that's the first part of your question.
Then the question about portfolio construction. That will depend on the total amount raised by the fund, but the the minimum would be 10 companies and Okay. Certainly be higher than that.
Gopi Rangan: When my companies get to the point where they are getting ready for series A, I'll be sure to call you, and I've been already reaching out to you.
Eric Ver Ploeg: I'm honored that you have reached out to me.
Gopi Rangan: You've been in the venture world for many, many years and in various different roles. How has venture capital industry evolved and what do you like to see change to make this industry better?
Eric Ver Ploeg: We talked at the outset about it getting so much larger and the bifurcation of early and and late, where early is what we used to talk about as being venture full stop two decades ago and late has been created by the ever lifting bar of being a public company.
I don't see those trends going away. I don't see the specialization of labor and more and more narrow focused, especially at the earliest stages companies. I see entrepreneurs pulling together seed groups that meet various needs, right? Rather than, oh, "I'm picking one lead who's gonna be, I hope my go-to for every single thing, my first phone call for all, every conceivable problem forever and ever" to "Hey, I really want somebody who can help me with this next gigantic hurdle I'm facing." Whether it's a hiring hurdle or a industry knowledge hurdle, or a fundraising for the next round hurdle or whatever it is, you can get that specialization from multiple players.
If you asked what I think would be most helpful for the ecosystem, I think it's about lowering the friction associated with starting a company. And here I think our regulators and long creation folks have good intentions, but every time they try to do something, they end up making things just more friction filled. So if you make it easier for people to start companies, you'll have more companies start it.
I don't know if you dramatically increase the, the fraction that become successes, but you definitely will have more starts.
Gopi Rangan: Yeah. Anything
that encourages entrepreneurship as a career choice and getting more people to pursue this as a choice so that they can start new companies and solve new problems, that is always a positive for the the net ecosystem.
We're coming towards the end of our conversation and I want to ask you about your community involvement. Is that a nonprofit organization you are passionate about? Which one? So I
Eric Ver Ploeg: love entrepreneurship. I'm a mentor at a bunch of different accelerators, but the one that I'm most active with is the Stanford StartX Accelerator.
And I guess it helps me a little bit in my professional duties, but it, but it, I do it because I. I just think the people who end up being entrepreneurs are some of the greatest humans on earth, and they're doing the greatest things for society and and for the whole planet. So that's a place where it overlaps with my, my professional undertakings.
But it also, it's just the kind of thing that I feel like if I can help these entrepreneurs just even a little bit in their hero's journey of moving from absolutely like creating nothing. Sparking it and helping them, you know, make a, a bonfire out of it in a good way, not in a, in a bad way. That's one of the greatest undertakings that a human can can do.
Gopi Rangan: That's fascinating. Indeed. As venture capital investors, we get front row seats to watch that show. It is truly an honor.
Indeed. Eric, thank you very much for sharing candid stories, specific examples from your career and so many lessons that we can all learn from your. Two decades of experience in the Silicon Valley.
I look forward to sharing your nuggets of wisdom with the world.
Eric Ver Ploeg: That's very kind. Thank you for having me, Gopi.
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.