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“Venture Capital” is a small subset of private equity surrounded in mystique and fable. In reality, the world of start-ups is filled with the highs and lows of hard work, loneliness, crushing disappointment and, sometimes, unbelievable success. The bold founders usually have a vision to disrupt the status quo and build a new world around that idea. The VC community is a unique culture that understands the founders’ motivations. It provides the resources, support and discipline to help them prove their idea, grow, survive, adapt and thrive in the face of the longest odds. They say “it takes a village.” In “Venture Capital”, the hope is that these mavericks are surrounded by an ecosystem of investors that understand the disruption they feed and have the patience to let them manifest their vision.
JULIE FREDRICKSON is the Managing Partner of CHAOTIC CAPITAL. She will help us understand what it takes to survive and thrive in this space and skewer some sacred cows along the way.
Julie’s Background
“I’m a founder with experience in retail and e-com businesses across all stages. I’ve raised from venture, PE, and crazy people. for everything from cosmetics to online advertising. A couple of my companies even exited and are still around.
My first company was Coutorture Media, a luxury affiliate publishing and e-commerce network acquired by Sugar Inc. I then founded playAPI, a developer tool kit and SaaS platform for digital brand marketers. Most recently I went physical with Stowaway Cosmetics a direct to consumer cosmetics brand, which is now part of WIN Brands Group.”
Venture Capital Generally-
What does success of individual investment look like?
What does success of portfolio look like?
Differentiation
1. Underwriting Businesses: Asset-Light & Equity-Efficient:
“We focus on ventures fitting the VC mold, prioritizing scalable, asset-light companies that require minimal equity financing. Two of our most successful seed investments raised <$50 million to achieve unicorn status while earning hundreds of millions of dollars in revenue and tens of millions of dollars in profits per year.”
2. Founder’s Unique Point Of Leverage:
“Every successful startup has a unique point of leverage that allows them to gain escape velocity going from 0 to 1. We seek startups that possess a proprietary advantage such as
- Pre-existing customer relationships,
- Proprietary community driven distribution channels, or
- Innovative technology, to propel their initial growth and achieve escape velocity.”
3. Resilient to Competition: “We invest in companies whose products and solutions would be painful for incumbents to replicate. We look for those that:
- Cannibalize existing profit centers,
- Disintermediate legacy distribution models, or
- Require replatforming to create an insurmountable competitive edge.”
4. “Avoiding Over-Complexity: Great startups must maintain maniacal focus while they scale.
Acknowledging the high failure rate of startups, we steer clear of those with multiple dependencies, instead concentrating on businesses with a single, transformative opportunity for success”
CURRENT CONDITIONS
- Raising Capital
- Deploying Capital
- Macro Environment and its effect on allocators – how much do you stay focused on your mission vs pay attention to what’s happening in the world- how does that work
LIGHTNING ROUND QUESTIONS
- First over the wall vs let others make rookie mistakes
- Do you diversify investments around and idea?
- How real is the East Coast / West Coast Capital Culture schism? International?
- How do you avoid “Jangly key syndrome?”
- Without giving away the secret sauce, how do you evaluate founders / leadership?
- Any post-COVID lessons or trends to focus on? Location, WFH, trends in Gen-Z etc?)
DISCLAIMER: THIS PODCAST IS FOR EDUCATIONAL PURPOSES AND DOES NOT REPRESENT AN ENDORSEMENT OF CHAOTIC CAPITAL AS AN INVESTMENT.