1Mby1M Virtual Accelerator Investor Forum: With Cindy Padnos of Illuminate Ventures (Part 4)

Cindy Padnos: We structure our seed investment with, at most, three other co-investors, but typically have one co-investor. We think it’s really important to be investing with like-minded investors.

It’s also a bit dangerous to have a very large fund writing a small check into your seed round. It’s a significant signaling risk if that fund doesn’t come back to lead the Series A. The question is why not. It might not have anything to do with the company. It might be as simple as the fact that that partner had another company that they financed three months ago and they just can’t take on another new investment right now.

Sramana Mitra: What you’re talking about is this trend that has come together in the last decade – spray and pray. There are lots of funds that are putting a little bit of money in a lot of deals and just not taking any Board seats or any real skin in the game. That has become very popular right now.

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1Mby1M Virtual Accelerator Investor Forum: With Cindy Padnos of Illuminate Ventures (Part 3)

Sramana Mitra: I have a specific question that relates to our community. We have a global base of entrepreneurs. Very often, entrepreneurs have their development teams elsewhere, whether it’s India, Eastern Europe, or other parts of Europe, but they’re aware of the fact that if they’re going for enterprise customers, North American customers are the primary customer base they want to go to.

How do you look at those companies? How do you define North American companies? Do these kinds of companies fall within your scope or are they outside?

Cindy Padnos: They’re well within our scope. Most of our companies have a portion of their development resources offshore.

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1Mby1M Virtual Accelerator Investor Forum: With Cindy Padnos of Illuminate Ventures (Part 2)

Sramana Mitra: Let’s flip that question around. Now that you have been in this business for a while and you have an investment thesis, what are you looking for? Can you pinpoint where do you want to invest in? What kind of industry trends and segments of the B2B space are of particular interest to you?

Cindy Padnos: We tend to invest in companies that are leveraging all of the data that is being collected today. They take these vast amounts of data but the vast amount of data are collected in our SaaS business applications. They mind that data. They do incredible things with it.

Those are companies we’re typically looking for. They are leveraging machine learning and other AI-related techniques to build >>>

1Mby1M Virtual Accelerator Investor Forum: With Cindy Padnos of Illuminate Ventures (Part 1)

Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Cindy Padnos, Illuminate Ventures was recorded in September 2017. 

Cindy Padnos, Founder and Managing Partner at Illuminate Ventures, discusses a topic that we’ve been highlighting recently: the need for multiple seed rounds as a way to bridge the Series A gap.

Sramana Mitra: Tell us about Illuminate Ventures. What is the focus of the firm? How big is the fund? What sized investments do you make? >>>

1Mby1M Virtual Accelerator Investor Forum: With Charlie O’Donnell of Brooklyn Bridge Ventures (Part 5)

Sramana Mitra: Entrepreneurs start up somewhere and they get intoxicated with this funding thing. If they are hitting their stride and everybody is chasing them and offering them money, it goes to their head. They want to keep raising money. If you get to a situation like that, it’s perfectly okay to sell out for a small fund.

Charlie O’Donnell: I also think there’s a little bit of a difference in terms of what goes on in geographies. One of the things I noticed is that in the Valley, the goal is to be at the top of the heap of the startup world. It’s focused on a single industry – tech.

If you sell your company for $500 million, you’re clearly not at the top. It seems like everybody is focused on that climb. New York >>>

1Mby1M Virtual Accelerator Investor Forum: With Charlie O’Donnell of Brooklyn Bridge Ventures (Part 4)

Sramana Mitra: Your strategy is to not worry about the ones that are not really making it and will have to raise money with liquidation preference where you don’t have the negotiating leverage. Focus on the ones that will get to decent exit and you need three of those to make your fund economics work.

Charlie O’Donnell: Yes. I do 80% to 90% of my total investment upfront, which is a deviation from the way that most fund managers work on it. The way to think about my fund is, if you had a $100 million seed fund, what percentage of that fund goes into the seed round? If you’re following on three to one or four to one, you’re really talking about, at most, 20% of the fund and the rest of it was dollars when you double down on your winners. >>>

1Mby1M Virtual Accelerator Investor Forum: With Charlie O’Donnell of Brooklyn Bridge Ventures (Part 3)

Sramana Mitra: How do you process the current investment climate where capital is moving further and further upstream? Some of the funds that I’m sure you were involved in your previous life are becoming gigantic funds. As a result, they have to move upstream and deploy larger chunks of capital right away. How does a seed investor mitigate the Series A gap?

Charlie O’Donnell: For every fund that you’ve seen move up, you have some set of funds that fills in that space. The capital environment is pretty efficient. We certainly have Series A funds that insist on deploying $8 million to $20 million. It’s very hard to get a seed-funded company from their initial check to a position where they can take on a $10 million investment. >>>

1Mby1M Virtual Accelerator Investor Forum: With Charlie O’Donnell of Brooklyn Bridge Ventures (Part 2)

Sramana Mitra: I was talking to John Staenberg up in Seattle. He’s one of the most prolific investors in the North West. He’s invested in 300 companies. One of the drivers of how he chooses which entrepreneurs he wants to engage with is what he wants to learn about.

For example, he’s not very knowledgeable about Bitcoin and he is interested in learning about Bitcoin. He’s interested in entrepreneurs who are working on new opportunities in Bitcoin as a mechanism of understanding that trend.

Yes, investors do look to entrepreneurs to educate them and train them, which is what was driving my question

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