A $600M VC and ex-Google VP on what gets a startup funded
Brandon (00:31) Okay, okay. Welcome back to the Owner Mode Summit. I'm so excited for this session. This is the final session of the summit. I'm welcoming two folks that I've known for a really long time and really respect to help us judge our $100,000 pitch competition. But before we do that, we have to kind of understand and get under the hood of who they are and how they both have respectively broken, you know, major ground.
in their spaces. So I am very happy to welcome Ms. Bonita Stewart, Mr. Marlon Nichols, to the Owner Mode Summit. Thank you for joining us. both both of these folks have incredibly busy schedules and they've taken the time to really, you know, invest in in sharing their story, but also looking at each one of our our finalists and helping us choose the four. So Bonita Marlon, thank you for joining us. it's a pleasure to be here, man. Thanks for having me. Yeah. Happy to be here. Very exciting times.
Okay, so we'll start with ladies first. We'll start with Bonita first. we'll talk a little bit about your background because this session is really about evaluating early stage investments. And you were coming at it from being a pioneering operator in Silicon Valley. When I was at Google, we intersected and you were the first Black woman vice president at Google, which obviously holds an incredible amount of weight. and
You took that operator lens that you built over many, many, many years and ultimately transitioned into investing, which is what you're doing now. So tell us a little bit about what you're doing today, and then we'll spend a little bit of time going into your operator background in a second. Yeah, sure. today I've actually launched. I'm the co-managing partner at at BAG Ventures and and we
Focus on pre-seed seed enterprise AI companies. We're backing visionary founders who are at the the intersection of enterprises, being able to compete with big tech, but most importantly, you know, thinking about AI native security, thinking about data and infrastructure, autOwner Modeus applications, as well as vertical applications, and even dabbling.
right now looking at physical AI as as well as edge computing. Love it. Love it. but we have brother brother Marlon Nichols who I've had the pleasure of watching him initially, you know, launch his first fund. Now he is raising fund for OE, Marlon. Well we can't talk about what we're raising. but he's up there. He's a rear rear is what is what we'll is what we'll say. Yeah. yeah go ahead. No, I was gonna say, you know
You had when you came into the game, you had a very interesting new thesis that we've now seen kind of proliferate in a lot of ways. I would say you were early in this thesis and you've taken this thesis and expanded it out over time. and you know, you've been in the game as a VC for over a decade at this point, and you've seen the evolution of the space, excuse me, heavily move into, you know, what we're seeing now today, AI. So tell us a little bit around how you approached.
initially your thesis for what you're doing at MaC VC and how maybe that has shifted, if at all, from when you started in today. Sure. Well we we first started and my first firm was called Cross Culture Ventures. And so everything was a play on culture. And what that really meant for us is human behavior. So we were studying the way that humans were, you know, moving moving through the earth and and interacting.
and trying to find emerging trends and traits that could lead to new markets, new industries, just new technology, new things. and we would target those those industries, those things, as the next wave of ideas and and inventions that we would in invest in. And so fast forward,
We we moved away from the the term cultural investing. and what we it's we're still doing the same thing, which is essentially looking at or identifying large swings or shifts in technology, in regulation and behavior. And then looking for the second order effects of those things. So in other words, you know, AI is, you know, everywhere now. That's a
huge technological shift, right? what does that mean for energy? What does that mean for the physical world? What does that mean for whatever? and and try to develop individual thesis on each of those things, study them and then go after, you know, finding the right companies that we think can be category leaders in those spaces. Love it. One of the things I get excited about it with this particular prior side chat that we're having is
the juxtaposition of backgrounds coming into it. And so Bonit, I'm coming back to you. you are an operator, you know, kind of at the highest level. Tell us a little bit about what was your operator experience like and how did that inform what you believe to be is your competitive advantage as an investor. I I think one of the things as an operator, and I do have a deep operator experience having spent time
throughout my tech career, but you know, started at IBM, but also spent time in the auto industry, then coming back to technology with Google. I think the one thing that probably I would say that sets me apart is I've always been one to be able to look around corners. So even when I was at IBM, everyone was focused on the mainframe.
And that was, I'm dating myself, but that is when the personal computer came out. So it was the PC. And I said, I absolutely want to go to the PC division because I think everyone's going to have a computer. And then you fast forward, that's just been part of my career as an operator is helping enterprises and organizations move toward something that
is more innovative and perhaps they cannot see, you know, initially. so whether it was when I was with the auto industry, I you know, I had to really move them through the digital transformation and try to understand, you know, exactly how that would impact the business, but also how an enterprise could create a competitive advantage. And that's when Google came knocking.
And when Google came knocking in 2006 to actually build out the business there around the digital transformation, I started with auto, then looked at finance, you know, media and entertainment and travel. But then I was leading my teams. I said, gosh, we're looking at search, we're looking at display, we're looking at video. What about mobile? So we were one of the first teams to really think about mobile. So I I I would say
a big part of not only understanding operating, but how do you actually take organizations, particularly large organizations, through change? because that's a very difficult and we're seeing that now, unlike the past, not everyone went, you know, moving toward the digital transformation. Many were left on the sidelines or they were their businesses were disrupted.
And even cloud computing, not everybody went to the cloud, but it was the SaaS companies that came in and during that time and said, we can make you know companies more efficient. I think what's interesting about the time today is that big tech, it doesn't matter. All tech companies are looking at AI. Founders, there's just a, you know, just a growing amount of talent.
founders that are looking at opportunities. And then you also have the enterprises that are not sitting on the sidelines and really thinking about how they can pilot and deploy AI. So it kind of goes back to if in fact, you know, at BAG Ventures, we like to say we're operators, we're investors, as I've invest been investing as an LP and angel for over almost a decade, but
Combining those two skills and then having access to the technical talent. Because at the end of the day, you travel with your engineer, you know, to make sure that you can check the tech. because it's very important to have diligence at the the technical level. But an operator mindset, I think, is one to understand how do you how do you you know, catapult yourself forward, but also how do you put in constraints and
And how do you attack something that is quite innovative and look at the advantages and the RLI and the outcome? And so you had a a deep perspective on one leg in the the enterprise, the complex enterprise, and then one leg in innovation and how do you make those things connect? Isn't it's a lot it's a lot easier said than done. Marlon, when we talk about your kind of competitive advantage, the first thing that comes to mind for me is you have already kind of
in many ways surpassed most funds as far as how far you've gotten. What has truly been, in your opinion, what separated you all, not just from a thesis, but from how you've approached investing and and targeting companies and building a relationship with companies, building a reputation, the things that really matter beyond kind of what you have on your website, what separate what separates MaC VC or has separated you from the field over the last, you know, eight to ten years?
Yeah, I I think everything starts with team. And so if you look at you know, our founding team, it's made up of, you know, someone like me who was an operator at a startup and got to an exit. who was a consultant and then a and then a BC. you had a a former mayor, yeah, but a talent ag a former talent agent. and guys have done other things too.
But if you look at consulting, public office and talent management, the the one through line there is storytelling. And when you think about a seed stage company or a pre seat company, you know, they've typically they've built a product, maybe an MVP, and they need to take that product to market. And in order to successfully take anything to market, you have to tell a story that resonates with your target audience.
It's ha it has to be succinct, it has to be precise and it has to move them to the point where they can they'll part ways with their the cash in their in their wallets or they'll become a partner of yours. and so we given our backgrounds, we've just built a fund and a firm that's that that really leans into that, and leans in into it with our founders. so I think that's where we started. And then from there
It's the other thing about all of those those three main professions that I mentioned is they're all service-based professions. Right. And our view is that venture capital is a service-based business, right? we serve our LPs, we serve the founders that we that we back. And so, you know, we have WhatsApp channels open with all our founders. We're talking to them at whatever hour of the night that they need to to work through, whatever their challenge is.
and just showing up for them and and being kind of that that that that counselor, that advisor at at critical times. and you know and and showing up in a respectful way, all the time, no matter what the situation is, goes a long way. And so, you know, our you so you take all that, and then you you think about what's our you know, our greatest source of deal flow.
And it's the founders that we've worked with. and so, you know, over the course of these three funds, we've invested in over 150 companies. So at a minimum, we've invested in with 150 founders. And so if a vast the vast majority of those founders have positive things to say about us in their communities, in their networks, with the founders that are you know, employees that are leaving their company to start another company.
their friends that are that are building companies. we, you know, we get a a nice kind of reputational hit in the market. And we're starting from, you know, a leg up when we when we start to pursue a deal. So we we we call that I guess the right, the right to win. Your your your your right to win is that you have the proof which is in the pudding. The folks that have partnered with you are going around and touting what you bring to the table, how you're accessible.
How you're able to build a culture where you're supporting them and it's real, it's authentic. and that's beyond a website. Bernita, you came up investing heavily yourself, right? Angel investing, building a syndicate, kind of take taking the the grassroots approach to building it up. And so when we talk about access for Marlon, it was my portfolio was speaking, you know, on my behalf. What was your kind of angle and what was your positioning as you started investing?
as an angel and then building out the syndicate. What was your right to win? I think the right to win, first of all, I want to grow up to be like Marlon. You know, so but I, you know, I I think the right to win is around the expertise, you know, that you can bring and the advice that you can bring to founders. Because you've seen a lot of things. You've seen
And I think even ex you know, when you first start investing, you're experimenting, you're making mistakes, you're developing a thesis. But I do think, you know, at this point, it's truly understanding your investment thesis and being able to advise companies. So within BAG Ventures, we have 140 LPs. so we naturally have an ecosystem that we've set up.
you know, to support our founders and we like to say we're one degree of separation from whatever a founder will need. and so it is that understanding of the the enterprise, understanding, you know, how to set up a successful pilot, how to exit a sep successful pilot. And also just being coachable.
You know, being able to share advice and also receive feedback both ways. But I would say the right to win is really building something that attracts customers. And for Marlon, for you, you see thousands of investment opportunities a year, right? At this point, to to you know, to your earlier point, because of your positioning, you're oftentimes gonna be the person that folks are looking at.
when they're looking to seek v venture capital. So your your funnel game has to be extremely strong. tell us a little bit around the filtering. What have you learned over this period of time to really do that first level of of cuts to kind of get to the subset that are even worth spending your precious time. Yeah, I guess, you know, the the table stakes are it's a massive market, right? It it you have to be looking at
the potential of a multi billion dollar outcome for venture math to work. So if it's not if it's not that, then and and to be able to do that in a timely way. And timely, I mean 10 years. I guess nowadays it's more like twelve fifteen, but ideally within the 10 year window, because that's the life cycle of your fund over each fund. then you're you know, you're looking at, well, what's the competitive landscape? Is this
Is this a it's a it's a large market, but is it a crowded market? Right? are are you, you know, sharp elbows with you know, thirty, thirty different you know, competitors? Or you know, is this is is it less of a you know, at this point in time, a competitive market. And then whether it's competitive, like very competitive or not, what's the differentiation here? Sustainable differentiation.
So is there something what is unique about in novel, about this product, about the approach that you're taking, about the the people that are involved, something, whatever is going to give you access to data, whatever is gonna give you that unfair advantage that you can hold on to for long enough to capture, you know, a a significant stake of the of the market. So those that's all table stakes, all right?
So if you're if you're not doing all that, we we can't even really get to a conversation. now once we get to the conversation, the most important thing about investing at the seed stage is the team. And and so in the team, I'm looking for four things. And these four things I've learned over the year are non negotiable at at this point because there've been times where I said, All right, I got three of the four.
let's l let's go and it doesn't work out. two of the four doesn't work out. You gotta have all four just to have a to have a shot. Right. And so one, there has to be someone on the team that understands technology, right? Even if it's not a a heavily technical product and you're outsourcing the building of that product. If if you don't have someone on the team that can speak to whoever's building the product and understand what they're building to make sure that they're building the right
thing, you can end up with a ton of tech debt. And which means that you've wasted your investors' money for a year or two. and now are are are kinda in the hole, right? Because you don't have the product that you that you needed to have. And you now you have less time and less and less capital. So that's one. two, attractors, right? I there was there's one one company recently that's that has one founder employee that's I guess
they're getting valued pretty highly now. But beyond that, I've never seen a company that you know, has been an outstanding company that's built by only by the founding team. so you gotta be able to attract talent. Right. there's gotta be something about you that that makes future employees want to work with you, gravitates you. That could be your you know, your domain expertise is just
the best, right? Or, you know, you're just well respected in that in that space. Or maybe you're you have a an incredible technical mind and engineers just want to work with you. Whatever it is, you gotta be able to attract talent. They gotta come to you and want to work with you. then there's I call it thoughts to things, which is product management, right? Someone on the team needs to understand how to take the idea out of the team's head and turn it into a product that you can then sell.
And then the last thing is gotta be able to sell. Cause no matter how great a product it is, if you can't move units, it doesn't matter. Right. So those four things are non-negotiable with the team, and that's what I look for. Hmm. Bonita, I'm gonna go to you because I wanna add a little bit of a spin to the same question, which is your AI first in terms of where you're focused. And obviously this means a lot of things to a lot of people. So I'm gonna push a little bit on this one, which is nowadays
You have plenty of tools out there, Replit, podcode, where anyone can build a prototype. And so when you focus on pre seed seed, it can be a lot of noise there. Number one. how do you kind of in today's world where anyone can bring you something, really focus on what matters the most? What what are those things for you? Yeah, so similar to what Marlon was saying, there's
Table stakes. I mean, obviously looking at the TAM, the total addressable market, and the go to market, I think are really critical in addition to some of the other areas that he mentioned as well. But I do think one of the things that we look for, particularly right now in AI, there are you have your large language models, your LLMs, and you don't want someone just doing a wrapper, you know, around what
the the LLM. So you we're we're looking for a more of a technology moat. You know, what is something that is defensible? What is something that is unique? and so we actually, you know, we'll have our venture partners go in and take a look at the code. You know, so we do we go under the hood and to to actually have a technical conversation to really vet what I call vet the tech, you know, really check the tech.
to make sure that there's a moat. I I the other area that I will mention, you know, especially working with technical founders is making sure there's one trait that we look for, which we call strategic resilience. Meaning in you when you're in a very competitive, fast moving with a lot of technological change.
You have to have resilience, but it needs to be strategic. Can you make a pivot pivot? Can you assess something and be resilient enough to take a setback and actually go t and take a look at your product, revamp your product, and then pivot. And you you see this and and I saw this, you know, at Gradient is the fact that.
when you're going through cycles, you have to have founders who are very comfortable and resilient enough to be able to pivot. And the power of the pivot is actually could lead to, you know, a six it will lead to success. If in fact you know how to make those you know, at the right, you know, strategic moments during your product life cycle. And it may not necessarily even be related to technology. It might be you have to shift who you're
you know, your your your ICP, you know, your customer profile and that so things, a lot of things could change. And being able to have that agility is most important, particularly as we're looking at highly technical founders. And Marlon, I see you nodding your head on the strategic resilience piece. And I think something that that goes unsaid is I would imagine both you and Bonita have the ability to
look and find opportunities in places where others may not be looking, right? and oftentimes those places are full of strategic resilience, but maybe not necessarily the resources, the connections, the networks to kind of get plugged into the traditional venture structure. This kind of is a maybe a two-sided question, which is can you speak to what your version of strategic resilience is, maybe provide an example that you've seen with one of the founders in your portfolio. And then for the folks who are in this, you know, in our audience, we're gonna have
Founders, we're gonna have the folks that are in the pitch competition watching this. Now with AI, there's a lot of resources available to folks that you needed a CTO. You needed to raise money a lot earlier to build, you know, people trying to go offshore and hire teams in India because that's all they can afford. And now you can do a lot of stuff yourself. what would be your definition of strategic resilience? And what would you say is the opportunity that kind of the drop-in barrier for building these MVPs?
creates for those folks with strategic resilience.
Yeah, I you know, I think it's
Sustained curiosity is is is how I would describe it. Right. these are these are people that are consistently looking at, you know, what's going on in their market. who's you know, who's competing now. real truly assessing, genuinely assessing where they stand up against their their competition, whether it be
workflows or or technology or or what have you. And, you know, actively having conversations with could because they have a level of humility too. So they're actively having conversations with their investors, their advisors, you know, their co founders, their employees, to take that all on board and, you know, make rapid decisions. and many of them.
to make sure that you're keeping the company where it where it needs to be. You're moving in whatever direction you need to you need to move in. I mean it's hard to pick one example. There's so many so many you know portfolio companies that that that we see this with. I mean you can take like a Pipe for instance. Pipe went from you know kind of SaaS or recurring revenue based lending to an AI-native
embedded finance company providing working capital to you know small businesses leveraging while leveraging relationships with you know partners like Uber Eats etc so you know there are you know companies like Mahmee in the maternal health care space that started out you know really focused on delivering services to to be moms and and and recent moms
and and their families to becoming, you know, a a data driven platform and kind of a a a connected software solution that that brings all those service providers together. I can go on. it you know, but again, it's that sustained curiosity, it's a a deep level of of humility, and a need to learn and a need to
have the information to properly compete and the ability and the strength to act quickly. Hmm. So Bonita, Marlon kind of threw out some of the some of the portfolio stars, Pipe, Mahmee. As you started, you know, as an angel investor, you looked at a bunch of opportunities. You you allocated capital to those opportunities. What stands out in your angel portfolio before you, you know, as you syndicated and then ultimately your
You're launching a fund. What's a what's a portfolio story that you're really proud about and show that strategic resilience?
I there's gosh, I have so many, let me
me talk about one because I do think this was probably one that was early on and also made a a number of pivots. but they were in the accounting area. and they even changed their name from you know where where they started. but the fact that they went into an industry and had the industry.
expertise, you look for that, like the depth of expertise within the industry. And then they were able to review the industry, adjust their product, put in the right technical areas to make sure they were competitive, and then they could continue to raise, you know, along the way by hitting certain milestones. And then
As they were moving through, because I was at the seed and they're now at Series B, you know, they made acquisitions along the way. So it's, you know, I'm as I continue to watch, you know, just the the level of the company, they continue to know what they know and what they don't know. And it's not just building, but it's buying. So they're acquiring the skills and
and just becoming more cemented within the industry as a leader. And so I I so I do think you know, having expertise, but being able to pivot and know what you don't know and to adjust the product, they immediately brought in AI, you know, as that became available.
so they were able to add those into, you know, those areas within their their product as well. so that was what I I thought was is important is not spreading yourself too thin, but really going deep in the industry and kind of owning your lane. I love that story because know, everything's kind of coming down to this like flexibility, right? You kind of have a a a belief.
And i earned insight that you really believe is there and you'll do whatever you need to do to kind of fill that gap. and it sounds like just kind of pivoting and changing shape to meet the opportunity is just one of the most important core traits you're looking for. Marlon, if you can reflect back, you gotta go way back before you had the six hundred AUM. a lot of the folks in the audience here, they, you know, are high earners, they're at a, you know, a big company, they're now looking to enter into the private markets, right? They might have
low six figures to deploy it to the private markets. If you were wearing that hat, how would you approach you know, entering into the private markets? You know, what what lessons would you share for folks that are like kind of looking to get into it from an angel perspective? what's to stay away from how you would think about deploying? Hmm. I'd say probably the number one rule is to invest in things that you understand.
because, you know, and try to stay away from the the the hype cycles. you you have to be able to do your own work and gain a level of conviction, you know, that is your own before you you write that check. 'cause if you're you know, if if you're just following what someone else is doing, you're not really investing, right? or you're not you're not doing the the the job of being a venture.
a venture professional, right? for that you might as well just, you know, contribute to an existing fund if you can get in or or join an an angel network that, you know, that is just doing group investing. But if if you're serious about becoming a venture capitalist, it's important to but again, that that curiosity thing has to come on this side of the table as well.
Right. You gotta you gotta want to learn. and you should only invest in things that you truly understand. Renita, same question. You earn a lot of stripes. What what would you yes, I earn and I actually I this is an area I I'm I think is is so important, particularly as you're, you know, moving through as an angel investor, then even becoming an LP. I mean, we're very focused on, you know, really creating that next generation of of LPs.
I would say that
Even if you are just an angel investor, you need to have an investment thesis. So I just want to double-click on what Marlon has said. What do you know? Do you have a thesis? You you could pick a new thesis, but then have a thesis and understand the thesis. I think many times angels do just come in and they don't necessarily spend the time to actually develop an investment thesis that they can diversify.
and they end up coloring outside of the lines and then it, you know, becomes like a Frankenstein, you know, type of angel portfolio. and so I I would say, you know, make sure you have an investment thesis that you understand and even refresh over time. The other is
you must educate yourself. So go to school. Like it's it's it's pretty simple math in venture, you know, in terms of pre-post, you know, the math is is elementary, but it's important. And so it's, I would say myself, even as part of that class rebel, great angel investing. That's what we recommend. Actually, it's available for anyone who joins the bad collective to take
class rebel to educate yourself. I've been through the Black Venture Institute. I've been to BC University. I'm, you know, I'm constantly educating myself similar to as you're a corporate board member. You're you're you take board education. And so I I think it's you just don't go into an alternative asset class that is a risky asset class that you, you know, every dollar that you invest is a dollar that you would lose.
it you could potentially lose. And so I think you have to invest in yourself by A, having an investment thesis that you refresh constantly. And then you also you learn you you you learn venture and you learn angel investing and spend the time to educate yourself constantly. Got it. So we're we're not even if you're a professional who doesn't do this full time.
You're not spraying and praying. This is not what we're what we're recommending as a strategy, it sounds like. from I I I would recommend diversification, right? but it it comes with an investment thesis, it comes with education, I love the word, you know, curiosity, but you you still need all of those elements as well. and so I think if you're gonna spray and pray, you need to
do educated spraying and and praying. Just to have a level of a base level of knowledge. Got it. Marlon, anything else you want to add before we introduce these nine AI first finalists who are building access infrastructure for part of this competition. and maybe you can speak on what you would ask the audience to really watch for when we reveal the joke results because the whole idea here is that
You all have kind of broken down how you evaluate investments, how you've kind of earned the right to win. And then now we're gonna get into the process of really looking at a field of of of companies that, you know, we believe are high potential and how we thought about these companies potential to really make the hard decision of the top four. Anything you wanna add as we kind of transition into the into the judging phase? Yeah, I'd say look for you know,
the distinction between companies that are trying to build something better versus the companies that are trying to create new entirely new markets.
Hmm. Very interesting. Love it.