20VC Alexa Von Tobel on Raising NYC's Largest Ever Female Led Fund , Portfolio Construction, Compression of Fundraising Timelines, Reserves Management & Personal Branding in Venture

In this episode of "20 Minutes VC," host Harry Stebbings interviews Alexa von Tobel, founder and managing partner at Inspired Capital, the largest female-led VC fund based in New York. Alexa discusses her entrepreneurial journey, from founding LearnVest and its $250 million exit to authoring a New York Times bestseller and serving as a presidential ambassador for Global Entrepreneurship. She shares insights into the challenges of saying "no" as a VC, the importance of mentorship, and her approach to building founder relationships and portfolio construction. Alexa emphasizes the potential of New York as an underdog in the innovation ecosystem and her commitment to supporting entrepreneurs with empathy and rigorous decision-making.

• Harry Stebbings introduces the 20 Minute VC show, invites feedback, and announces the guest Alexa von Tobel.
• Alexa von Tobel is the founder and managing partner at Inspired Capital, the largest ever female-led VC fund.
• Alexa's background includes founding LearnVest and authoring "Financially Fearless."
• Harry thanks various individuals for their question suggestions for the show.
• Silicon Valley Bank is highlighted as a supporter of startups and visionaries.
• Descript is promoted as a tool for podcast creation, allowing audio editing through text.
• Spectre (formerly CrunchDecks) is mentioned as a data source for tracking company growth.

This is the 20 minutes VC with me, Harry Stebbings and I'd love to hear your thoughts and feedback on the show. Do ping me on Instagram at H stepbings 90 96 with two b's. It'll be awesome to see you there. And I respond to all messages personally there, but to the show's day and switching coasts to the east coast. And when I saw this fund announcement back in 2019, I knew this was a show that I would love to do. And so I'm super excited to welcome Alexa von Tobel, founder and managing partner at Inspired Capital, announced in 2019 as the largest ever female led VC fund based in New York.

Harry Stebbings introduces the podcast episode and his excitement to feature Alexa von Tobel, due to her significant achievement in launching a major female-led VC fund.

• Alexa began showing entrepreneurial tendencies at a young age by selling art instead of running lemonade stands.
• She worked at Insight Venture Partners and realized her passion for entrepreneurship early on.
• Alexa co-founded LearnVest during the recession and later sold it for a significant sum.
• Her experience with entrepreneurs and angel investing led her to want to focus on venture capital.

So I'll just say it started probably when I was ten ish years old. I was the weird kid that rather than having lemonade stands, I would take art off the wall, by the way, not fancy art, like, just some art off the wall of my parents'house. And I would sell it on the street and definitely did not make for being a great child. But I think it really early showed me I was an entrepreneur, went to Harvard undergrad, started my career, actually at Insight Venture Partners, where I gravitated right there early. And I quickly realized that I was obsessed with entrepreneurship.

Alexa recounts her early entrepreneurial activities and her path through Harvard and Insight Venture Partners, where her passion for entrepreneurship became clear.

• Alexa discusses the difference in mindset between angel and institutional investing, emphasizing the fiduciary responsibility when managing others' capital.
• She highlights the importance of having clear goals for capital and the change in investment strategies when transitioning from angel to institutional investing.

Yeah, I mean, to think about it, when you're angel investing, you're a steward of your own capital, and that may mean you really like somebody. You give them some money. The return profile may be two x five x, it may be lower. When you're running your own fund, you are stewards of someone's capital. I take my fiduciary responsibility extremely seriously.

Alexa explains the distinction between using personal capital for angel investing and the greater responsibility of managing a fund with investors' capital.

• Alexa attributes the success of their LP pitch to the strong team chemistry and their collective experience in building and scaling companies.
• The team's unique background of starting as investors, becoming entrepreneurs, and then returning to investing resonated with LPs.
• Inspired Capital's deep roots in New York City and commitment to the entrepreneurial ecosystem were key selling points.

Well, first I'll just say we've got a lot of work to do. I really do think that we have 20 years ahead of us of exceptionally hard focused work. And so it worked well in that we got into business very quickly, which is wonderful. But I really do feel like we're just getting started. And I think what resonated was one our team.

Alexa emphasizes the work ahead for Inspired Capital and how their cohesive team, with a strong track record and passion for entrepreneurship, made a compelling pitch to LPs.

• Alexa reflects on the fundraising process, noting that it happened quickly but was limited due to her pregnancy.
• She suggests that under different circumstances, she might have conducted a more extensive fundraising process.

Well, I think just, and I don't know that I've changed this. So my last day, as I transitioned off the management team at Northwestern Mutual, literally the last day that I left Northwest Mutual and launched inspired. It was the same day, and on that day, we closed about 125,000,000. So it happened instantly.

Alexa shares that the fundraising for Inspired Capital was rapid and coincided with significant personal milestones, hinting at potential improvements for future fundraising efforts.

• Fundraising is typically advised to be done early in the year or in the fall when people are focused.
• Fundraising during the summer can introduce additional logistical challenges.
• Despite the challenges, the fundraising process was successful, completing a final $75 million over 90 days in the summer.

"And so we fundraised in the middle of the summer, which I think probably any smart human would tell you, don't do it."

The quote emphasizes the unconventional timing of their fundraising, suggesting it is not typically advised but was necessitated by their circumstances.

• Prior experience in investing and managing Northwestern Mutual's venture fund provided a strong foundation for current fund management.
• Portfolio construction is a critical focus, with regular reviews to ensure alignment with the fund's pacing and investment strategy.
• The importance of balancing ideas and thesis building with the practical aspects of market conditions, founder dynamics, and deal structuring.

"I think the one thing that we just think so much about, really, is that portfolio construction, and being incredibly thoughtful about how we think about the math around the portfolio."

This quote highlights the importance placed on portfolio construction and the strategic approach to managing investments within the fund.

• The fund is structured with a $200 million capital, with a 50/50 split between reserves and initial deployment.
• The fund is further segmented into three sub-funds: early-stage seed fund, Series A fund, and a follow-on fund.
• Each sub-fund has its own rules and investment criteria, with emphasis on diversification and rigorous decision-making.

"We almost then break that up into three smaller funds inside our own fund."

The quote describes the internal segmentation of the fund into three distinct investment areas, each with its own focus and strategy.

• The reinvestment process is tailored to each company's performance and needs, with a supportive approach towards portfolio companies.
• Portfolio construction principles prevent spreading capital too thinly and encourage doubling down on successful investments.
• The team's founder experience provides empathy and understanding in supporting entrepreneurs through fundraising and growth phases.

"Portfolio construction is you can't spread your capital like peanut butter."

The quote metaphorically explains that investment capital must be allocated strategically rather than uniformly across all opportunities.

• The venture fund's returns are not solely dependent on valuation but on identifying and investing in companies with the potential to be category leaders.
• Long-term success is prioritized over short-term valuation gains, with a focus on fair valuations that benefit both the founder and the investor.
• The approach is to work collaboratively with founders to achieve the best possible outcome for the company in the long term.

"I actually feel deeply aligned to the entrepreneur."

This quote expresses a strong sense of alignment and partnership with entrepreneurs, reflecting a shared goal of long-term success.

• Fair valuation is crucial for sustainable company growth and future acquisition potential.
• Excessive valuations can limit the number of potential acquirers and negatively impact the founder's ability to steer the company.
• A balanced approach to valuation considers the founder's well-being and the investor's interests, aiming for a reasonable middle ground.

"You're actually doing yourself the best interest to go out and get a fair valuation, not the maximum and not the minimum, a fair one, whatever that may be, in the middle."

The quote advises founders to seek fair valuations that allow for growth and sustainability rather than pushing for the highest possible valuation.

• The abundance of capital in the market can lead to faster funding rounds and inflated valuations.
• The speaker expresses concern over the pace of funding rounds and the implications for thoughtful investment decision-making.

"Do you find it tough today? Because I find this tough with such excess capital, funding rounds are so much faster moving than in my eyes, they ever have been."

The quote reflects on the challenges posed by the current investment climate, where excess capital and rapid funding rounds can complicate the investment process.

• Alexa von Tobel views building relationships with entrepreneurs as everyday community building.
• She plans to be part of the New York ecosystem for a long time and engages in activities like monthly dinners with no agenda to talk about interesting categories.
• Alexa believes in getting to know people truly, even if it seems inefficient because it may lead to discovering a great entrepreneur in the long term.
• The ability of a founder to be superhuman, super resilient, and overcome obstacles is critical, and getting to know founders early is important.

"I really approach building relationships with entrepreneurs as just like, everyday community building."

This quote emphasizes Alexa's belief in the importance of organic relationship building as a fundamental part of her work and life, rather than a separate activity.

"The things that you think will be easy will be hard, and the things that you think will be hard will be exceptionally hard."

This quote, attributed to Alexa's partner Lucy, encapsulates the belief that building a company is inherently difficult, reinforcing the need to understand the founder's capabilities deeply.

• Alexa von Tobel believes that personal brand is essentially one's reputation.
• She emphasizes the importance of reputation being built one day and one decision at a time.
• Alexa considers investors' judgment and entrepreneurs' track record of trustworthiness and reputation as critical factors.
• She values being a good human who makes great decisions and takes the high road, especially in the face of adversity.

"None of us are perfect. In my own career, I think I've learned lots and lots of lessons, but I really do believe reputation is everything."

This quote reflects Alexa's perspective that reputation, built through consistent actions and decisions, is the most significant asset for both individuals and professionals.

"Are you an incredibly good human who's going to make the best decision? Who in the face of major adversity?"

Alexa highlights the importance of character and ethical decision-making in both personal and professional contexts, suggesting that these qualities are fundamental to a strong reputation.

• Alexa von Tobel acknowledges the difficulty of saying no, especially when empathizing with the recipient.
• She advises that saying no early, honestly, and with care is the kindest approach.
• Alexa believes in helping in other ways when saying no and emphasizes the need to develop a personal and authentic way of doing it.
• She mentions that being good at saying no is a necessary skill in her job, which involves frequent rejection.

"The nicest thing you can do to somebody is say no early, say no honestly and with real care."

Alexa conveys her approach to declining opportunities or proposals in a way that is considerate and constructive, suggesting that this is the most respectful way to handle such situations.

"You got to get good at it because it is the part of the job."

The quote underlines the inevitability of having to say no in a professional context and the importance of mastering this skill as part of one's role.

• Alexa von Tobel values mentorship and learning from people with diverse perspectives and experiences.
• She considers mentorship to be akin to genuine friendships and has learned key life lessons from mentors of all ages.
• Alexa actively seeks advice and insights from others, including those who might be considered competitors, to avoid potential pitfalls and improve her judgment.
• She believes in the value of understanding different generational perspectives, including the openness and future-oriented views of younger individuals.

"I don't need to know everything, I shouldn't expect to know everything, and that I should constantly surround myself with people that will broaden my perspective, add to the contours of my own thinking."

Alexa acknowledges her limitations and the benefits of seeking diverse viewpoints to enhance her understanding and decision-making abilities.

"I want the long list of every mistake I'm going to make."

This quote illustrates Alexa's proactive approach to learning and her desire to be aware of potential challenges ahead of time, with the aim of minimizing errors in her work.

• Alexa von Tobel believes that a partner can also be a mentor and shares her experience with Penny Pritzker, her business partner and mentor.
• She describes how her relationship with Penny developed through shared experiences and common values.
• Alexa appreciates Penny's judgment, integrity, and decision-making, which have influenced her own approach to business and life.

"Penny and I became friends, and we actually ended up as part of the ambassadorship. It was a totally made up thing. It was pretty cool that they did. It was totally made up."

Alexa recounts how her friendship and mentorship with Penny Pritzker began through a shared role as ambassadors for entrepreneurship, highlighting the serendipitous nature of their partnership.

"She is somebody I looked up to. I admired deeply her judgment, her integrity, how she makes decisions."

The quote expresses Alexa's respect and admiration for her business partner Penny Pritzker, emphasizing the qualities that make Penny a valuable mentor to her.

• Alexa von Tobel and Mark Batsion considered the need for a top-tier fund on the East Coast.
• Alexa reached out to Penny Pritzker with the idea of creating a fund focused on innovation.
• Penny Pritzker responded enthusiastically and wanted to become Alexa's business partner.
• Alexa also involved her best friend, Lucy, due to their shared passion for innovation and problem-solving.
• Inspired Capital was born from a natural and effortless partnership among friends and mentors.

"I really made and mark bastion and I had been sitting there and I made two phone calls. One was to Penny Pritzker. And I said, hey, penny, I think the east coast could use an a plus fund that really thinks differently and is passionate about innovation and fueling the next 30 years. And she said, you have to do that, alexa. Absolutely. It's the right idea."

This quote explains the initial conversation and the motivation behind the founding of Inspired Capital, highlighting the perceived gap in the East Coast funding ecosystem and Penny's immediate support for the idea.

"And then right after we got off the phone, she shot me an email and said, you got to call me back. And literally, she was like, wild idea. And I called her back and she was like, I want to be your business partner."

Penny Pritzker's prompt follow-up and enthusiasm to be Alexa's business partner underscores her commitment and the quick development of the partnership.

"And my second phone call wasn't even a phone call. It was to Lucy, who's one of my absolute best friends."

Alexa's decision to involve Lucy, a close friend and trusted collaborator, in the founding of Inspired Capital reflects the importance of personal connections and shared values in their business venture.

• Alexa von Tobel is passionate about New York and believes it is an underdog in innovation.
• New York could support more innovation, with a growing ecosystem each year.
• There is a disparity in funding between New York and Silicon Valley, with a $1 to $12 ratio per capita.
• Alexa sees New York as a collaborative and vibrant place, and Inspired Capital aims to contribute significantly to its ecosystem.
• The infrastructure in New York, including banks and tech headquarters, supports a thriving intellectual and academic environment.

"First of all, New York could support so much more innovation. And as I said, every year this ecosystem is growing."

Alexa von Tobel emphasizes the potential for growth in New York's innovation ecosystem and the positive trend of its development.

"Really there's $1 here to twelve in the valley. That's the math per capita."

This quote highlights the funding disparity between New York and Silicon Valley, suggesting an opportunity for growth and investment in New York.

"And for me, I wouldn't want to do anything else with my time."

Alexa expresses her commitment to fostering the venture ecosystem in New York, indicating a personal and professional investment in the region's success.

• Alexa von Tobel values tough and empathetic advice from board members.
• Lee Barba, an experienced CEO and board member, exemplifies the qualities Alexa respects: preparation, insight, and honesty delivered with empathy.
• Inspired Capital aims to emulate these qualities in their relationships with the companies they support.

"He always gave me the toughest advice and it really was like he cared so much."

This quote describes the meaningful impact that board member Lee Barba had on Alexa, emphasizing the importance of challenging yet caring guidance.

"He understood how vital it was for him to push me harder and faster because we were never going to win if that didn't happen."

Alexa acknowledges the necessity of being pushed by board members to achieve success, highlighting the balance between high expectations and supportive mentorship.

"And part of one of the reasons why I love inspired so much is we want to do just that for every one of the companies that we get the privilege of being behind."

Inspired Capital's philosophy is influenced by Alexa's positive experiences with board members like Lee Barba, aiming to provide similar support to their portfolio companies.

• Alexa finds saying no to entrepreneurs to be the most challenging aspect of her role.
• She strives to decline opportunities in a quick, sincere manner while still offering helpful advice.
• Alexa empathizes with entrepreneurs as she has experienced rejection in the past.

"I think we already covered it. Say no, right? When you've had people say no to you."

The difficulty in rejecting pitches is a personal and professional challenge for Alexa, as it resonates with her past experiences of receiving no's.

"I try to say no in a way where it's quick, it's sincere, and then I actually do something to help the entrepreneur get ahead."

Alexa's approach to declining opportunities is to be efficient, honest, and supportive, reflecting her commitment to the entrepreneurial community.

• Alexa wishes to see innovation spread beyond coastal cities.
• She supports the development of emerging tech ecosystems across various locations.
• Inspired Capital aims to contribute to the growth of innovation in diverse regions.

"But I really do want innovation to spread."

This quote encapsulates Alexa's desire for a more geographically diverse innovation landscape, indicating a vision for a more inclusive tech industry.

"And you're seeing pockets of innovation happening everywhere from Atlanta to Austin to Boulder."

Alexa acknowledges the emergence of new tech hubs, signifying opportunities for growth and investment beyond traditional centers like Silicon Valley and New York.

• Alexa and Inspired Capital focus on special entrepreneurs and contrarian views.
• The recent investment in Snackpass was driven by the founders' unique perspective on food and their product's rapid growth.
• Inspired Capital seeks to identify and support innovative products and passionate founders.

"So we just announced this. We were part of the snack pass round, and two reasons. The two entrepreneurs there, Kevin and Jamie, were incredibly special."

This quote reveals the importance of the entrepreneurial team in Inspired Capital's investment decisions, highlighting the founders' special qualities as a key factor.

"They have a bit of a contrarian view around food and they're just really special entrepreneurs and we loved the product."

The attraction to Snackpass was due to the founders' unique approach and the product's success, showcasing Inspired Capital's strategy to back distinctive and compelling ventures.