CIBC Innovation Banking Podcast

Angela Tran [00:00:06] The era of, cheap money is over, but I think there's still access to, just money in general. I think the difference being, as founders are now going out to fundraise, there, there's just a higher bar that needs to be cleared. So we have to again, focus more on the narrative of why you, why now. Great founders and great companies will always raise money. 

Michael Hainsworth [00:00:29] Hello, I'm Michael Hainsworth for the CIBC Innovation Banking Podcast explores the world of startups, growth stage companies and late stage companies that have made a big splash in their industries around the world. In the early stages of a startup, it's important to be willing to pivot, understand where your strengths lie and find your tribe. Angela Tran knows this as general partner at Version One Ventures, it's her job to help entrepreneurs get their idea off the ground by playing to their strengths and providing guidance on areas of weakness. She introduces them to like-minded members of the community, and she understands the importance of the pivot, because she's done it herself. She joined founder Boris Wertz a year after the now 100 million dollar fund got off the ground despite her original plan, become an engineer. 

Angela Tran [00:01:29] I did all my degrees at the University of Toronto and I started out in engineering science. I majored at the time in biomedical engineering, but it was the early 2000s, so I wasn't really sure what the job market was for this. So I decided to pivot to financial engineering, which wasn't too far from kind of the principles that I had learned in my undergrad. So I did this for my master's and my Ph.D. and then at some point moved to Silicon Valley in 2010 and tried to build my career as an engineer in Silicon Valley, which meant very different things and engineering in Toronto. It was very much software developer based, and while I could code, I certainly couldn't do it at the production level. So I struggled. And it wasn't until I met a fellow Canadian who had just graduated from, you know, the premier accelerator called Y Combinator that I decided to pursue entrepreneurship instead. He had this amazing idea to take the top Ph.Ds, train them to be data scientists, and then place them at companies like Facebook, Google, LinkedIn, Twitter. Because at the time in 2012, big data was all the rage. He asked me actually to be his guinea pig at first, and I thought, "No, no, no. I think I would be much better off being an entrepreneur with you". And so we did this together for one and a half years, although the company went on for another eight, and I was able to advise over the time. But it was an amazing experience finding people like myself and giving them a chance to, to be contributors to industry outside of academia. It was amazing. 

Michael Hainsworth [00:03:20] So you moved from Insight Data Science into the venture capital world. And what I love about your story and it underpins everybody I've spoken to on this series so far that it's about the people you meet and the connections you make along the way that help get you from where you were to where you are. 

Angela Tran [00:03:41] Right. Exactly that. I mean, when I moved out to to Silicon Valley in 2010, I didn't know anybody. So the first thing I did was went to my alma mater at the University of Toronto, and I said, "Hey, what are there grads from engineering or arts and science or any, any department are here?" And I met another Canadian who was a VC at Greylock at the time, and he was very good friends with my partner Boris at Version One now. And that's how, that's how we were connected. 

Michael Hainsworth [00:04:14] And the other sort of consistent thread in the conversations I've had is that success comes from not being afraid to fail, and that when you got into venture capital funding, you didn't even really know what venture capital funding was. 

Angela Tran [00:04:28] Nope, no idea. I mean, after I left Insight, I, I just I didn't know what I wanted to do, but I knew the things that I valued, which was continuous learning, compassion as it pertains to working with people and helping people realize their dreams. Growing up, I never really knew what I wanted to do, right? Hence the, "Oh, I'll do biomedical engineering or maybe financial engineering." But there was always a theme I think, of around continuous learning. But on the compassion side, I think I just really wanted to help people. And then the last pieces are just around freedom, the freedom to kind of pursue your, you know, whatever it is that you want to do. We're so lucky to live in the ecosystem that we live in because we are we have so many opportunities around us. The question is, which opportunity do you take? This is kind of the ,the long winded way of saying is saying I didn't know what I wanted to do, but I spoke to as many people as possible to really understand what were the opportunities in the Bay Area at the time. And, you know, I didn't say no to any meetings, hence I didn't say no to, I was just really fortunate and thought like, oh, of course I want to speak to this person named Boris Wertz. Why not? And so, Boris, we we had our first call over Skype. This was in, I think, July of 2013. And and I think we jived, you know, personality wise. And then he told me that he was going to be visiting the Bay Area a few weeks later, he's based in Vancouver and that we should meet. And as part of my kind of homework take, take home assignment, I was supposed to to identify three companies that would be a good fit for Version One, usually at the seed stage. And of course, not knowing anything about venture capital, I asked myself, well, "why does he only want to see three companies?" And that's when I put on my engineering mindset or put on my engineering hat again and thought, well, there must be a better way to do this. Why is it you only want three? There's probably infinite number. And so I spent the better we better most of my time over two weeks, just trying to gather as much information as possible on every startup on this planet. I went on to Twitter, I went on to Crunchbase, I went to Angel lists, which are kind of like, you know, repositories for information, called their APIs and tried to build predictive models of what successful companies were in this batch of, you know, 50,000, 100,000 startups. And I quickly learned that this is an impossible task, at least trying to do this at an early stage. 

Michael Hainsworth [00:07:10] So did you give you three companies, though? 

Angela Tran [00:07:12] I didn't. I couldn't. I when I met him three weeks later or two weeks later, I said he said, "So what do you have for me?" I'm like, "Nothing." And he and he was probably very perplexed. And he's like, "Well, what were you doing these, during this entire time?" And I said, "Well, I was building models." And, and he he's like, "Well, what did you learn from these models?" And I think that was the kind of premise of our relation, like, you know, the start of our relationship of, wow, she's thinking outside of the box. It's completely wrong. But it was just very different. 

Michael Hainsworth [00:07:43] I've been told that you and your co-founder Boris are completely different people, and now I'm really starting to get a sense as to what that means. 

Angela Tran [00:07:51] We love backing mission driven founders, so people who won't stop at anything to solve that solve the problem that they've experienced firsthand. So I don't I don't actually think we're all that different. I think personality, yes. But the way we think our working styles and I think they're actually quite complementary and allow us to trust each other and have a super effective and and dare I say, like efficient partnership. 

Michael Hainsworth [00:08:21] Some people would have just done the homework as assigned. Provide this prospective partner with three leads for funding. But Angela was thinking bigger and looking to apply her expertise to an industry that was foreign to her. It's a consistent theme with the people I speak to on this series passion for exploration, solving a friction point or going a new way. That's what drives their success. She cites her willingness to try new things and apply her passion for learning for her success at Version One. Version One Ventures provides seed level funding to founders of companies that are barely more than an idea. And the last decade has been very good to the VC firm. But Angela is experiencing her first major bear market as interest rate spike, valuations fall and investors stepped back to see what she can do with the capital they've already given her. Entrepreneurs are feeling the same pressure. I wanted to know how a founder with little more than an idea can still attract capital during these uncertain times. 

Michael Hainsworth [00:09:29] Why call the company Version one Ventures? 

Angela Tran [00:09:33] Version One Ventures is really about us as a fund trying to work with entrepreneurs to help them build the first iteration of their product. So the first version, the first iteration. And so, you know, sometimes when companies come to us, they haven't even started putting code onto the screen. So for us, you know, there's never any time in a company's life cycle that is too early. In fact, we enjoy being part of that process to get that first product to fruition. 

Michael Hainsworth [00:10:12] And I guess being part of that whole process involves not only, you know, providing capital but also advice, guidance, feedback, that wisdom necessary to take it to the next level. 

Angela Tran [00:10:24] Yeah. I mean, capital, capital is quite a commodity, or at least it was before, before, you know, 2022. So I think, you know, one of the things that Boris and I have a lot of pride in is, you know, just being there for our founders during the good, the bad, the ugly. And this can this comes in different flavors, whether it is extending our network to founders when it comes time to fundraising or customer development. It also extends to our thoughts on product building or our thoughts on business models. And I think the last piece that I that is probably underrated, but what most people come to me for is that kind of like the mental and emotional support that is required when building a company. I think a lot of us forget that building a company is not just building a product, right? It's about managing and leading folks to build that product. And everything at the core of an organization is people. And so most of the support we provide is around people. 

Michael Hainsworth [00:11:35] Well, tell me about those people. For whom do you typically open your wallet? 

Angela Tran [00:11:52] So typically we like to invest in founders or entrepreneurs, people who have just identified a problem in their own industry or, you know, just something that they they experience day to day that is just urging them to put all their time into solving this particular issue. For us, we are pretty agnostic to industry. It doesn't really matter what the application is as long as the person at the helm really understands the problem and won't stop at anything but to solve this problem. 

Michael Hainsworth [00:12:20] So you joined Version One in 2013, a year after Boris started the company. So this is your first winter for an industry because I know crypto is a big thing for Boris and among other things, of course. How has that financing environment evolved over the last 10 years of the fund? 

Angela Tran [00:12:43] So like you said, you know, since joining in 2013, I've been very fortunate or most of us who've who've been in venture during this time, we've been really fortunate to to see this amazing bull market. Right. It's it's there's been a lot of capital that's been put into startup ecosystem innovation. So what's been amazing about this incredible bull market is all the innovation that has come out of it. And and it has been sunshine and rainbows for a really long time. And, you know, for both both founders who have seen their companies be valued at over billion dollars or what we call unicorns, or for venture capitalists who now think that they are the best investors in the whole world because their their investments look so great and everything that goes up has to at least come down a little. And after an incredibly bullish 2020, 2021, we're starting to see, you know, muted activity relative to to those two major years. But this is kind of still in line and on par for the growth that we've seen since 2013. It just means that, you know, we I think we went too fast too furious and and now things are just taking their time to slowly adjust. But like I said, everything is relative. And we're I think we're still on this incredible trajectory. It's a it's micro winter versus a huge winter. 

Michael Hainsworth [00:14:19] So if we went too fast and too furious, what do you say to the start up, today, in trying to raise money for the first time in this environment? 

Angela Tran [00:14:28] I don't think it's any different from before, except we really place a greater emphasis on, well, what is unique about you as a founder that puts you in the best position to build this company right now? This is not like I said, this is not a new phenomenon or a new way of thinking. But I believe the bar is just a lot higher for investors to deploy capital. So we really need to to come up with, you know, great answers to these questions for people to be, you know, happy to give away money. 

Michael Hainsworth [00:15:09] So then what's a great answer to the question of of why now, the why you that that's unique for every individual right. What about the why now? 

Angela Tran [00:15:18] So why now? Traditionally or generally speaking, when we when we're pitched the why now, I think founders tend to focus on macro trends. For example, I'll use climate and energy sector. You know, we are all stakeholders on this earth. We have all experienced now by now the effects of wildfires. And, you know, everyone knows that we have to do something to solve this crisis. But as a founder pitching to a VC, that macro story is just not strong enough. We have to figure out how to tie this to a buyer who needs to buy your product today or was is so desperate that they needed to buy it yesterday. 

Michael Hainsworth [00:16:07] So if the companies you invest in are at their earliest of early stages, I guess the why you and the why now are the critical questions to answer, because they're not going to have metrics that you can turn to to help you decide who to invest in. 

Angela Tran [00:16:23] That's right. And so when there are no metrics to invest in, we really are focused on thinking about what the future looks like with this company. How much of an impact can this company make on particular industry on the world? I think that's that's probably the most important aspect, or one of the key parts of trying to figure out the kind of why you and why now. The other thing that we, we often think about is what is the non-obvious thing that this company becomes? Sometimes we're pitched ideas where we can see kind of the writing on the wall. And while a lot of those can become really, really good businesses, it's hard to imagine how you go from good to great to incredible when it's a very obvious past path that most people can copy. And so part of the why you piece that's special is trying to understand the founders thinking behind what this can really become. 

Michael Hainsworth [00:17:39] It's fascinating to me to learn that voices like Boris and Angela will make investing decisions based less on the idea, and more on the individual. Being able to tell a good story about the idea is important. But giving a voice and understanding of who they're investing in is what can make or break landing funding. In a world where money is becoming scarcer and less of a commodity than the past decade. So I wanted to understand where Angela sees VC funding in the software space going from here. 

Michael Hainsworth [00:18:12] Crypto was a theme that you really care about. What do you say to companies in this space shivering through the investment winter, I suppose, crypto or otherwise? 

Angela Tran [00:18:21] Our our message hasn't really changed for those companies either, just like kind of mainstream companies. But I think specific to crypto, we continue to just encourage folks to find and build something that is, you know, a native use case to crypto. And by this I mean, you know, how can we really take advantage of the trustlessness feature of where and the decentralized nature of crypto. So today we've seen, you know, a couple of use cases from, you know, store of value like Bitcoin to NFT. He's using smart contracts to, you know, kind of decentralized finance. And so we just keep encouraging folks to think about how can we really take advantage of crypto technology versus applying crypto to a particular sector. What is actually native, new, that couldn't have been done before but is possible now because this idea of decentralization and trustlessness. 

Michael Hainsworth [00:19:24] I suppose that applies to the other big thing right now, artificial intelligence and pretty much anything as well. So what signs are you looking for as evidence that we're getting a spring or or any kind of thawing when there is a winter scenario? 

Angela Tran [00:19:42] You know, in every time we think about the I guess, thawing as things start to warm up, it's just about people. It's about heat. People bring heat. And as soon as an area becomes interesting, we see a lot more founders, which attract more investors, which attract more founders and which attracts more investors. It's quite cyclical. And so that's what we kind of look for early signs of spring. And then as it goes into summer, super hot, it becomes you start to see how this cycle becomes unsustainable. Lots of capital into the system, lots of start ups being built. But then it's a lot of noise, lots of what we call tourists, both founders and investors alike, who are there to try to maybe just monetize quick value that they can capture. And so then that leads to winters again when we realize that things are not sustainable. 

Michael Hainsworth [00:20:45] With the doubling of interest rates in two years, is the era of cheap money over? 

Angela Tran [00:20:50] The era of cheap money is over, but I think there's still access to, just money in general. I think the difference being as founders are now going out to fundraise, there, there's just a higher bar that needs to be cleared. So we have to again, focus more on the narrative of why you, why now. Great founders and great companies will always raise money. 

Michael Hainsworth [00:21:17] And I can imagine there is a survival of the fittest component to this as well. 

Angela Tran [00:21:21] Absolutely. Absolutely. And this applies to, to investors as well. I mean, we've had, we as investors have our own investors who have been backing managers like us during this bull market and now are pulling back and waiting to see how we do in terms of our track record. Right? And so they're evaluating our performance in the same way as we are evaluating our companies' performances with a little bit more scrutiny and and with a little bit more of a critical eye. But, Michael, I really think that great companies, great founders, great investors, we will always have money available to us. It's just that the bar is a little bit higher now. 

Michael Hainsworth [00:22:13] Angela, thank you so much for your time and insight today. 

Angela Tran [00:22:16] Thank you for having me. I really enjoyed thinking about, you know, my path to venture capital as well as what the future might hold. 

Michael Hainsworth [00:22:27] So what did we learn from Angela's experience as an engineer turned venture capitalist? Her willingness to pivot is admirable and gives us an understanding of just how far passion can drive us in the direction we wish to go and to learn that in the earliest stages of a startup, it's less about the problem your product or service solves and more about you, who you are as a thinker and leader. And then it becomes about why the product or service is essential today or even yesterday. 

Michael Hainsworth [00:23:05] This has been the CIBC Innovation Banking Podcast, where we learn the secrets to innovation, economy success from the entrepreneurs who are paving the way for the future. I'm Michael Hainsworth. Thanks for listening.