Pod Insights How I Built This with Guy Raz How I Built Resilience: Jennifer Neundorfer of January Ventures About this episode January Ventures is an investment firm that is trying to address the unique challenges and biases faced by entrepreneurs often under-represented in business, including women and people of color. The firm's co-founder and managing partner Jennifer Neundorfer says that despite more attention in the recent months, great ideas from these diverse groups have always been there. These conversations are excerpts from our How I Built Resilience series, where Guy talks online with founders and entrepreneurs about how they're navigating turbulent times.
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0:00 Guy Raz? We get support from US Bank. A question I love asking founders. What's the one decision you almost didn't make? The one that changed everything? Because it's never the obvious stuff. It's never, I decided to start a company. It's the small, boring, Tuesday afternoon decision you barely remember making until you realize it's the reason everything after it either worked or didn't. Say you're 18 months in. Business is growing. You've got expenses coming from six directions. Gas for the van, office supplies, your phone bill, team lunches that are actually client meetings, and you're putting it all on whatever card you grabbed in year one. You're not thinking about it. Why would you? You've got bigger problems.
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1:30 Guy Raz? based on one small decision. Visit usbank.com/business to learn more. The creditor and issuer of this card is US Bank National Association, pursuant to a license from Visa USA, Inc. Some restrictions apply. Our presenting sponsor today is Anthropic, the team behind Claude. Every founder on this show started with a hard question. Not the marketing plan, the 2:00 AM kind. Is this idea any good? Am I the one to build it? Should I quit my job? Anthropic got built the same way. A public benefit corporation founded on one Hard question. How do we make sure AI goes well for people?
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5:06 Guy Raz? If your revenues are at least in the seven figures, get NetSuite's free business guide, Aligning for the Agentic Era: How AI is Changing Everyday Work, at netsuite.com/built. The guide is free to you at netsuite.com/built. netsuite.com/built. Hey, everyone. So I have a request. If you value this show, if you value the stories, the lessons, the wisdom and inspiration we bring to you, if you think of me as your friend, which I am, because even though millions of you are listening, I'm actually talking just to you right now. I need you to be there for me as well. And you can do that by supporting what I do and buying my book, How I Built This.
5:51 Guy Raz? It is just out now and available everywhere. And it doesn't cost more than a few cups of coffee. And it's filled with wisdom and stories and ideas that will have you feeling inspired and fired up to take on the world. So please, if you love this show and what we do for you, do us one back and pick up How I Built This wherever books are sold.
6:18 Guy Raz? Hey, everyone, and welcome to How I Built This: Resilience Edition. On these episodes, we're talking with entrepreneurs and other business leaders about how they're meeting this very challenging moment in new and creative ways. And today, we're going to hear from Jennifer Neundorfer. She's the co-founder and managing partner of January Ventures. It's an investment firm focused on tech startups founded by women and people of color. Jennifer joined me to talk about how her company is approaching investment strategies during this unprecedented moment and how they differ from other firms overall.
6:52 Speaker 01 What we're doing differently is really building a venture firm that is designed around access and transparency. That's not what venture has traditionally been known for, and it's what has really underserved women and underrepresented founders. And so, we make it very easy for founders to pitch us and find us, and everything that we do is focused on removing friction for those founders at the earliest stage.
7:18 Guy Raz? And what type of startups do you look for?
7:21 Speaker 01 We invest primarily in tech-enabled software businesses. So, we are investing in companies that we believe can be high-growth, scalable companies that are going to be capital-efficient. We are investing the capital early and then are looking for outsized returns. So, we're looking for companies that can go on to be $100 million, billion-dollar companies and really be those outliers that generate returns for our fund.
7:46 Guy Raz? And you invest in the seed stage, in the early stages of a business?
7:52 Speaker 01 Yeah. We invest at the pre-seed and seed stage. And one of the reasons that we do that, Guy, is when we started January, we did some early research, and there had been a lot of data talking about how little venture dollars women receive. In 2019, female-only teams received just 3% of venture dollars, and if a woman happened to have a male co-founder, she received 11% of venture dollars. But what we found in our data, as we looked just at the earliest stage, is that there's not only a gender gap, but it really starts early. So, for every dollar that a male founder... raises at the pre-seed or seed stage. A woman raises thirty eight cents and a black woman raises just two cents. And so that is really where we are focused in January because as you can imagine,
8:38 Speaker 01 a dollar versus thirty eight cents on the dollar versus two cents on the dollar. Many of those founders are handicapped from the start. And so our focus is on getting them the capital and resources that they need to really generate momentum for their business and get to that scalable growth curve.
8:55 Guy Raz? How large is your fund right now?
8:57 Speaker 01 Yeah, we're deploying out of a twenty million dollar fund. You know, we're typically writing checks that range up to, you know, half a million plus because we're investing at a stage when founders are raising, you know, two hundred fifty, three hundred, up to a million dollars. And really at those those earliest stages and often the first capital in.
9:18 Guy Raz? And who are your investors?
9:20 Speaker 01 Our investors range, so many of them are the typical investors that you would expect to see. Family offices, high net worth individuals and some institutions and foundations. But from the beginning, my partner, Maran, and I wanted to be very deliberate about who our investors, who our limited partners were. Because so much of the traditional venture model has relied on a very small set of investors or limited partners and has reinforced this flywheel around making that small group very wealthy. And so what we have done in both of our funds is proactively reduce the barriers for non-traditional investors to invest in our fund.
10:02 Speaker 01 Whether that is, you know, a founder who is just beginning to accumulate capital and wealth and may not have a lot of liquidity and finding ways for them to participate. Or, you know, pitching LPs who fall outside of the of the traditional circuit that most funds pitch. You know, whether it's by geography, race, ethnicity, we've really tried to work hard to diversify our LPs.
10:26 Guy Raz? How do you find startups to invest in?
10:30 Speaker 01 I mentioned that venture has been so long really inaccessible to most founders. And a lot of that is because many venture capitalists rely on their network to source deals. And that's fine, but most of the people that are in someone's network look or are similar to, you know, have similar characteristics to that person. We hear a lot of VCs talk about the test. Can a founder get a warm intro to them? And if so, then they're willing to consider taking a meeting. We turned that on our head at January. And so from the day that we launched, we had been open to cold pitches. And when we went out with that, many of our peers told us that we were crazy. There was, we weren't going to see great pitches. There was no way that we could handle that sort of volume.
11:16 Speaker 01 And we were pretty overwhelmed when we launched in October of 2018. We saw 400 pitches within the first week. And so very quickly, we leveraged technology to develop a scalable way to review those deals. We're very generous with the first 30 minute meeting. We want, Martin and I want to be the first people that are meeting these founders, right? We want to be the ones who are judging whether they are a fit for our thesis. And then we have a higher bar for who we spend time with, who we do diligence on, and ultimately invest in. Because the nature of our business is there's a very wide top of funnel. And in any given fund, we're making 25 to 30 investments. So there is, it's a pretty Darwinian process.
11:59 Speaker 01 But we're deliberate in the organizations that we work with to make sure that we are reaching founders that really fit that underrepresented mold and telling them that our light is on and we want to be the fund of choice for them.
12:10 Guy Raz? So tell me, tell me about some of the startups in your portfolio.
12:14 Speaker 01 Yeah. This is the part that I love talking about. It's sort of like talking about your kids. And it's hard to pick just one, but I'll give you a sense for some of them. We are investing in problems that we believe are big and we really care about solving. We're really focused on investing in companies that are addressing big, broad problems that are going to shape the future. And so one of those founders that is Really doing this is a founder, Julia Collins, who is the CEO of a company called Planet Forward. Julia is a founder who has deep roots in both food and sustainability and, you know, great founder market fit. That's something that we look for a lot.
12:55 Speaker 01 And Julia is building a regenerative supply chain for sustainable foods.
13:01 Guy Raz? Can I just, can I just quickly ask you, sorry?
13:03 Speaker 01 Yeah.
13:03 Guy Raz? Can you just, can you kind of explain just in plain, plain language? What does a regenerative supply chain mean? I mean, I, I know what a supply chain means. I know what regenerative means.
13:11 Speaker 01 Yeah, that's a great question, Guy. It's really about the ingredients and where brands and, you know, and CPG companies are sourcing the ingredients for their foods. And they would basically evaluate the sustainability and, you know, on a number of different metrics, including the carbon footprint, including how those ingredients were, were actually farmed. And then be able to suggest alternative sources and alternate, whether it's, you know, a different farmer, a different type of ingredient that will have the same impact. So that I, as a brand, could make those adjustments and make a more sustainable and regenerative food product.
13:52 Guy Raz? Right. So if you were looking for palm oil, for example, this platform could say, hey, you know, this is a better place to source your palm oil from.
13:59 Speaker 01 That's exactly right.
14:00 Guy Raz? Right.
14:00 Speaker 01 And they are really the first ones to do that. And, and what we've seen in the past six months is that consumers, you know, between being at home and suddenly really caring about what food they eat. And then all of the very visible events in the last, you know, couple of months around climate change, consumers are really starting to, uh, there's a, there's an acceleration in consumers' awareness of climate friendly foods. And, you know, being conscious of their, the choices that they make and wanting those to be sustainable.
14:30 Guy Raz? Got it.
14:31 Speaker 01 One other company that I'll highlight is a company called Kinside, a founder, Shadia Segala, who is a, as a repeat founder. And with Kinside, the problem that she's solving is how employers and employees find childcare. And I mentioned Shadia because she's an amazingly charismatic entrepreneur. She's a great leader. She had built a great company. But we got to March and the world shut down and suddenly no one was sending their kids anywhere. Everyone was locked at home. And so for this moment, you know, it's suddenly a lot of her business was in question.
15:11 Speaker 01 And like many of our founders, Shadia saw the long-term opportunity. And this looming childcare crisis that is on the horizon of parents not being able to get back to work because either they can't send their children in person or all of these childcare providers, many of them have gone out of business. She's really become a thought leader and started during COVID while people were locked at home, laid the foundation for now, what the business is doing is getting employees back to work and making sure that parents can find childcare, even if it's not where they were sending their child prior to the pandemic.
15:50 Guy Raz? Are you seeing, I mean, there are a lot of, has been a lot of momentum. I don't know if it's real or not, but there certainly have been some VC firms that have announced more support for Black and Latinx startup founders. And Andreessen Horowitz announced a fund and it's unclear what that will mean. But is it, I mean, are you finding lots and lots of Black and Latinx and other founders of color coming to you with, with ideas? Is there a real kind of surge in new ideas coming from founders of color?
16:23 Speaker 01 I would say that that supply of Black, Latinx, LGBTQ, that supply has always been there. And so for us, it's not that we're suddenly seeing a new surge now. I think that we are seeing at, you know, at sort of the industry level, that it is a conversation that more people are having. So there's more visibility around the conversation. But, you know, this taps into our whole belief for starting January, those founders have always been there. You know, so much of what we are doing is trying to make venture accessible to those founders
17:04 Speaker 01 because for so long it hasn't been. And if their names become synonymous with the Bill Gates and the Mark Zuckerbergs of the world, you know, that's when we will know that we have been successful.
17:16 Guy Raz? When we come back in just a moment, more of my conversation with Jennifer Neundorfer and why many entrepreneurs don't want to take venture capital. Stay with us. I'm Guy Raz and you're listening to How I Built This, Resilience Edition from NPR.
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20:06 Guy Raz? Hey, welcome back to How I Built This, Resilience Edition. So venture capital can be a lifeline for some companies. But if you listen to a lot of our How I Built This episodes, you'll hear many founders tell me they regret taking venture capital money at all, and others saying that they're glad they avoided it. So when I spoke to Jennifer Nundorfer of January Ventures, I asked her about the criticisms VCs often get. And the knock that I hear on the show from so many founders who didn't take VC money is that VCs expect a 10x return within 10 years. And it forces entrepreneurs to focus on scale and only scale. Do you think that's a fair criticism?
20:47 Speaker 01 In some cases, yes. And one of the things that I talk about a lot is venture capital is not right for every business and not every founder should feel like they have to go out and raise outside capital. And I think my main piece of advice to founders and a conversation that I always have with founders as part of meeting them is aligning the incentives of the capital with the vision and motivation of the founder. There is nothing worse, and many of your guests have talked about it, than having friction and having those incentives be at odds. Because the reality is, you're right. Then the venture model requires a really high return threshold.
21:29 Speaker 01 This is a risky asset class and so investors are going to... Investors and our LPs expect a huge return. So I do think that is the right question for founders to ask themselves out of the gate. But I think the second question, if founders are interested in venture capital, is to really do the diligence on the fund and the partner who is leading that deal. Because there's just a wide variety of outcomes that funds are shooting towards and stylistic differences between partners. And so that, you know, we always encourage our founders to do diligence on us because that really will make or break the, the quality of that experience.
22:09 Speaker 01 And I think will shape how the founder feels on the flip side of having taken venture money.
22:16 Guy Raz? Jennifer, do you, do you think, I mean, I get this, ask this question a lot, and I have my answer to this question. We're in the middle of a global pandemic and an economic crisis. And, um, and I think something like 50% of the Fortune 500 companies started during economic downturns. Do you think now is a good time to start a business?
22:34 Speaker 01 I think that there will be great companies that are born out of the constraints of this moment. And we've seen that historically. I think that will happen again. But that said, it doesn't make it any easier for prospective founders to make the leap. Because the reality is, it's actually quite hard to raise money right now. Um, so right after COVID hit in April, we did a survey of our early-stage founders. We talked to 250 early-stage founders in our community. And it was interesting, 50% felt that COVID would negatively impact their business, but 50% had already pivoted, which just speaks to the nimbleness of early-stage founders
23:18 Speaker 01 and the fact that in a certain sense, COVID has put everyone back at the starting line and sort of reset the opportunities for early-stage startups. But the more interesting point, Guy, was that 70% of the founders said they, their experience was that funding opportunities were drying up. And so with that context, it's very easy for, you know, venture capitalists like me to sit here and say, now's the time to build, go out, great companies are going to be born. But as a founder, considering making that leap, that's a scary environment to just leap right into. And so, you know, our response to that was to launch,
23:59 Speaker 01 to launch new initiatives to really make it easy for founders to fundraise at scale. One of the things we did and continue to do is an event called Pitch Collective. We have all these inbound cold pitches, right? Where we're meeting founders who aren't in our network. But we realized that, you know, they're just pitching us. And at the end of the day, that's not that scalable because they're going to have 20 to 50 meetings with venture capitalists. And so what we've done is gather 10 to 15 other GPs, other venture funds to join us for those pitches. And it's a small thing, but it's one of the examples that we are doing to just try to take that friction out and really try to support founders
24:40 Speaker 01 because there's a lot of opportunity, but it's also a really challenging time to build a business.
24:45 Guy Raz? I'm going to take a question from Facebook. This is from Deborah Gladney. She writes, she's in Wichita, Kansas. She writes, as a black female founder, it's great to see capital being deployed to help minority founders, but bias still exists. So what are VCs? In your case, you, what are you doing to combat the bias that we all know exists? The systemic bias?
25:05 Speaker 01 Yeah, Deborah, that's such a great question. And one of the things that we're doing, Deborah, is taking a hard look and being intentional at the questions that we ask founders. So one of the ways that bias can show up is in the things that venture capitalists ask founders when they're in a diligence meeting. And so we've taken a really hard look at that and have actually begun to script out our, you know, the key questions that we want to cover so that they are the same, whether it is, you know, a white woman, a black man, a black woman, whoever it is. And also regardless of the geography, because I have invested now both on the coast and in the middle of the country. And there's a lot of bias that we see in terms of the questions
25:48 Speaker 01 that founders from the middle of the country get asked versus founders on the coast.
25:53 Guy Raz? Yeah, I remember we interviewed Toby Levki of Shopify and when he initially looked for funding, everybody told him to leave Ottawa and to move his operations to Silicon Valley and he didn't want to.
26:04 Speaker 01 Yeah.
26:05 Guy Raz? It's a multi-billion dollar business today. So what advice do you have for up and coming entrepreneurs who are looking to pitch? What stands out to you in a pitch?
26:15 Speaker 01 We see so many pitches and it is hard to make a pitch stand out in this new world. And it's even harder to make a pitch stand out when you're doing it via Zoom. You don't know what the person who's watching the pitch is doing on the other end.
26:30 Guy Raz? Yeah.
26:31 Speaker 01 And so we encourage our founders to really invest in nailing that virtual pitch. And one thing that we really love is when founders do, you know, whether it's using Loom or some other screen recording, send us a pitch that is not just a slide deck. It's them delivering the pitch and there's nothing better than that. You have to be charismatic, you need to get the points across, but then we, we hear how the founder would tell their story rather than flipping through on a static PowerPoint. So that's one way that we really encourage founders to stand out. And then it's all about running a tight fundraising process. And so being clear about who it is that you think you may be a good fit for, going after
27:15 Speaker 01 them hard and creating some urgency and momentum around the raise because frankly, the scariest resource in all of this is a founder's time. Every single fundraising pitch eats up their time. It's something that we are really conscious of in our process, not to have 10 meetings with a founder because they don't have that type of time.
27:34 Guy Raz? Yeah.
27:34 Speaker 01 So, you know, I think being protective of your time as a founder and running a tight process, getting to a quick no, if, you know, if that's what, where it's going, don't be afraid of that, but really leaning in hard to the ones where there does seem to be a fit. And then, you know, Guy, I mentioned this before, but really doing diligence on your investors. So, so much of the fundraising dynamic is set up for funds and GPs to diligence founders, but it really should be a two-way street because you're giving these people ownership in your company and. Make sure that they are willing, you know, that we, right, that we as venture capitalists are willing to work for that ownership and that we're really going to provide value.
28:14 Guy Raz? How much of the decisions to back a company are based on your intuition? And how much of it is based on like just doing the math and plugging in the numbers into a spreadsheet and looking at the result?
28:28 Speaker 01 We look for three things when we're looking at founders. The first is a big market. We need to believe that the company is going after a big market or that they're going to create a big market. The second that we look for are evangelist customers. So we invest really early. We don't expect there to be a lot of customers, but it's easy to stand up some sort of MVP of a product, right? The first version is probably going to be ugly. It may be held together on the backend manually with a little bit of duct tape, but we'd like to see someone who has used the product and is wild about it. But then the third place guy that we spend most of our time is on the founder and the
29:12 Speaker 01 team and getting to a place where we believe that that team is differentially suited to build this company and to be successful. So sometimes it's a unique insight that they have. Sometimes it's really differentiated experience. Sometimes it's just, you know, the sort of a magnetic leader that can make things happen. And that, to a certain extent, that is a gut feel, but we try to put data into it. We spend a lot of time doing reference calls so that it isn't, you know, Maran and I sitting here and we have a call with someone and we have a good gut feel and we say yes. We really try to check our own gut feel and our instincts with data from people who know them well.
29:53 Guy Raz? Great. Jennifer Nudor of January Ventures, thank you so much for joining us.
29:58 Speaker 01 Thank you. It was great to be here, Guy.
30:00 Guy Raz? That's an excerpt from my conversation with Jennifer Nundorfer, co-founder of January Ventures. To see our full interview, you can go to facebook.com/HowIBuiltThis. And if you want to check out other past live interviews, you can find them there or at youtube.com/NPR. This episode was produced by J.C. Howard, with help from Will Mitchell, Bruce Grant, Matt Adams, El Manion, Gianna Capadona, John Isabella, Julia Carney, Neva Grant, and Jeff Rogers. Our intern is Farah Safari. Thanks for listening. Stay safe, and I'll see you in a few days. I'm Guy Raz, and you've been listening to How I Built This, Resilience Edition.
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