20VC How To Assess Founder Psychology, Why Talking About Financial Returns In The First Meeting Is Always Wrong & How To Allocate Time Amongst A VC Portfolio with Kara Nortman, Partner @ Upfront Ventures

Abstract

Abstract

In a detailed episode of "20 minutes VC," host Harry Stebbings interviews Cara Nortman, a partner at UP Ventures and a key figure in the LA venture community. Cara shares her journey from a varied academic background to a distinguished career in venture capital and operations. She reflects on her early work experience at Morgan Stanley and Battery Ventures, her influential role in corporate M&A at IAC, and her operational insights from managing companies like Urban Spoon and CitySearch. Cara also discusses the importance of board chemistry, the value of resilience and a growth mindset in founders, and the significance of diversity in venture capital. Additionally, she touches upon her latest investment in STEM, a company simplifying content revenue distribution, and offers perspectives on the evolving landscape for female VCs and entrepreneurs.

Summary Notes

Introduction to the Podcast

  • Harry Stebings introduces himself as the host of the 20 minutes VC podcast.
  • Harry invites listeners to connect with him on Snapchat and read about his decision to join Atomico on Mojitovc.com.
  • Harry introduces Cara Nortman as a guest, highlighting her roles and achievements.

"Welcome back to the 20 minutes VC with your host Harry Stebings, and you can add me on Snapchat at htebbings, or you can hear more from me in long form on the fantastically named Mojitovc.com, where you can read all about my decision to join Atomico and the thought process and reasoning behind that move."

This quote is Harry Stebings' introduction, promoting his social media and website while setting the stage for the episode.

Cara Nortman's Background

  • Cara Nortman is a partner at UP Ventures and a co-founder of Seedling.
  • She has a significant background in the venture community, with experience at IAC, Microsoft, Battery Ventures, and Morgan Stanley.
  • Cara has been involved in notable acquisitions and advised for Tinder.

"Now Cara is a partner at UP Ventures, one of LA's leading venture funds, and Kara is also a co-founder of Seedling, where she currently serves as chairman."

The quote introduces Cara Nortman's current roles, establishing her as a prominent figure in the venture capital industry.

Introduction to Xero Accounting Software

  • Xero is presented as an easy-to-use online accounting software for small businesses.
  • It offers features such as invoice management, cash flow tracking, payroll, inventory, and real-time collaboration with accountants.
  • Xero integrates with over 500 business apps and is used by a large customer base worldwide.

"Xero is beautiful, easy to use online accounting software for small businesses. With Xero, you can easily manage your accounting anytime, anywhere from your computer or mobile device."

This quote explains the benefits of Xero, emphasizing its convenience and user-friendly nature for small business accounting.

Introduction to Pearl Rear Vision

  • Pearl Rear Vision is a wireless backup camera and alert system that installs in minutes.
  • It is solar-powered and software-based, allowing for updates and new features via an app.
  • Pearl Rear Vision is available for purchase online and is aimed at those looking to upgrade their car technology.

"Pearl Rear Vision is the only wireless backup camera and alert system that installs in minutes and updates throughout its lifetime."

This quote highlights the unique selling points of Pearl Rear Vision, focusing on its ease of installation and ongoing updates.

Cara Nortman's Venture into Venture Capital

  • Cara discusses her non-linear path into venture capital, which appeared linear in retrospect.
  • She reflects on her diverse academic interests in college and her initial search for a two-year professional experience.
  • Cara's family background did not align with her venture into private equity, which was unexpected for her and her family.

"Yeah, you know, I think when you look at my path, it seems a bit linear, but a lot of it was accidental while I was going through it."

Cara's quote captures the serendipitous nature of her career path, which only seemed planned when looking back.

Early Career and Interests

  • Cara started as an analyst in private equity, gaining a strong foundation in business.
  • She was drawn to emerging industries such as telecom services and operating software.
  • Cara was proactive in her career, volunteering to work with partners in these new industries.

"It gave me a really strong kind of sense of the underpinnings of business."

The quote reflects on Cara's early career experiences and how they provided her with a solid understanding of business fundamentals.

Experience at Battery Ventures

  • Cara joined Battery Ventures during the dot-com bubble, engaging in sourcing and investments.
  • She was responsible for cold calling CEOs and securing meetings with potential investment opportunities.
  • Cara experienced the burst of the bubble, which led to increased responsibilities and board seats at a young age.

"I was just given the opportunity to do a lot of things that I probably had no business doing."

Cara's quote reveals how the challenging times post-bubble burst led to accelerated learning and responsibilities in her career.

Transition to IAC and Operating Roles

  • Cara moved to IAC, working under Barry Diller in various capacities.
  • She spent time in mergers and acquisitions as well as operating roles, managing business units like CitySearch and Urban Spoon.
  • Cara was involved with early-stage companies, including Tinder and Vimeo.

"So I worked at IAC for seven years in corporate and then went into an operating role there."

This quote summarizes Cara's tenure at IAC and her transition from corporate roles to more hands-on operating positions.

Early Career and Venture Experience

  • Cara Nortman shares her early career experience, including her involvement with Sean Radd and IAC.
  • She mentions her role in providing Sean Radd with his first business plan, which later evolved into something different from the original concept.
  • Cara moved from day-to-day involvement to starting her own company, Seedling, which was funded by Upfront.
  • She later transitioned to a chairman role at Seedling and joined Upfront as one of the General Partners (GPs).

"I went in and recruited Sean Radd into IAC and gave him his first business plan, which turned into something completely different. It wasn't Tinder. He took it and very much made it his own, but was something I got involved with the day to day of in the first year and then left to start my own company, which is called Seedling, makes experiential kids products upfront, funded that company, and eventually I moved into the chairman role and joined upfront as one of the gps here."

Cara's quote explains her initial involvement in Sean Radd's business venture and her progression from an active role in the company to founding her own business and eventually becoming a chairman and GP at Upfront.

Qualities of a Great Board Member

  • Cara Nortman believes that the effectiveness of a board member largely depends on the chemistry with the founder.
  • She warns against the common mistake founders make of choosing board members based on reputation rather than compatibility.
  • Great board members should balance pushing founders out of their comfort zone and being supportive, helping to build the founder's brand.
  • Building a cohesive board is about adding value thoughtfully rather than showing off.

"I think there are a lot of different profiles of great board members, and a whole lot of it depends on the chemistry that you have as a board member with the founder."

Cara emphasizes the importance of chemistry between board members and founders for a successful partnership.

Building Board Chemistry

  • Cara advises getting to know potential board members well before appointing them.
  • She shares her personal experience with Mark Suster and Dana Settle, emphasizing the importance of rapport.
  • Cara recommends having meals with potential board members and their significant others to build personal connections.
  • She believes in engaging board members outside of meetings by sharing documents and feedback in advance for more productive discussions.

"The first thing is really getting to know someone before you put them on your board. And sometimes you do have to do that in an uncomfortably quick time frame."

Cara's quote highlights the necessity of building personal relationships with potential board members to ensure a good fit.

Professional Boundaries with Board Members

  • Cara acknowledges there is a line between being too close to a board member and maintaining a professional relationship.
  • The primary responsibility of a board member is to put the business first, even if it means being direct and potentially offending someone.
  • She believes in the importance of founders conducting due diligence on investors, just as investors do on founders.
  • Cara shares her experience with Mark Suster, who supported her during challenging times in operations.

"I think you have to make sure if you are taking on the responsibility of becoming a board member to a company, that you're always putting the business first."

Cara stresses the importance of prioritizing the company's interests over personal relationships when serving as a board member.

Time Allocation Among Portfolio Companies

  • Cara spends the most time with companies where she feels she can make the most impact.
  • She feels a psychological connection to all her companies and tends to support those in need.
  • Cara believes the status of startups can change dramatically over time, and companies struggling now could become successful later.
  • She discusses the debate between the value of 'picking' versus 'doing' in venture capital, emphasizing the importance of both.
  • Cara supports her companies through psychological support, market knowledge, fundraising, hiring, and other areas without overstepping and impeding the founder's growth.

"I spend the most time with the companies where I feel like I can make the most impact, and then I certainly have a psychological connection to all of my companies."

Cara's quote conveys her approach to time management with her portfolio companies, focusing on impact and supporting companies through their challenges.

VC Engagement with Portfolio Companies

  • Venture capitalists (VCs) invest in only a few companies yearly, leading to careful consideration of ownership stakes.
  • VCs aim to be helpful to their portfolio companies without overstepping into operational roles.
  • The role of a VC is likened to that of a coach or mentor, providing guidance from a higher level.

"ow just because we'd only invest in about two companies a year, so we don't have that many. And a lot of thought goes into kind of how many we take on in ownership because of that. But I definitely spend a lot of time with the ones that are in a state that may work out and it may not, because I do think there are little things vcs can do to be helpful, though, just not to the point at which you're getting in the weeds and actually operating. It's still very much a sort of like coach and mentor level."

The quote emphasizes the selective investment approach of VCs and their intention to provide support without becoming too involved in the day-to-day operations of their portfolio companies.

Assessing Founder Psychology

  • Understanding a founder's personal story, motivations, and the reasons behind their venture is crucial.
  • VCs look for founders with a clear connection to their business and a coherent journey leading up to it.
  • Assessing a founder's past experiences, including their actions during high school and college, can be insightful.
  • Resilience and the ability to navigate tough times are key traits VCs look for in founders.
  • The company's hiring decisions and the founder's choice of associates reveal much about their worldview.

"I really like to understand that person's story. What's led them to this point? Why are they doing this? What drives them, what motivates them?"

This quote highlights the importance of a founder's background and intrinsic motivations as factors in VC investment decisions.

Female VC Perspectives and Diversity

  • Female VCs may build rapport differently compared to male VCs due to various factors, including fewer women in the field and differing social activities.
  • Diversity on a board, including female representation, is seen as beneficial for better decision-making.
  • Data suggests diverse perspectives lead to improved business outcomes, but concrete data on women as better investors is anecdotal.
  • Women may have different communication styles and team-building strategies, potentially influencing their approach to VC.

"I think it's a wonderful opportunity to become a female vc as a founder, to take a female vc on your board, to take any type of diversity on your board and in your company."

The quote discusses the advantages of having diversity, including female VCs, on a company's board, and the positive impact this can have on business decisions.

Improving Gender Equality in VC

  • Encouraging a supportive environment for those advocating for gender equality is crucial.
  • Initiatives like the board list help increase female representation at the board level.
  • More women need to be in decision-making roles within VC firms.
  • Efforts should extend beyond tokenism to ensure that minorities and women have a substantial and enjoyable role in organizations.

"Well, look, I think there's a bunch of things that are being done, and there's more that can be done. I think one thing that can be done is for all of us just to continue to allow more people to try to do good and make changes and allow them to fail and make mistakes."

The quote suggests that to further gender equality in VC, there should be an environment that allows for trial, error, and learning, particularly when it comes to increasing diversity in leadership roles.

Broad Based Diversity in Venture Capital

  • Cara Nortman emphasizes the importance of building diversity in venture capital firms and on company boards.
  • Encourages the inclusion of women on private boards, advocating early diversity consideration at Series A and Series B funding levels.
  • Highlights the need for female General Partners (GPs) to have the authority to make investment decisions and learn from mistakes with mentorship support.
  • Mentors played a crucial role in Cara's career, offering guidance and support in the venture capital industry.
  • Recognizes the value in funding diverse teams and the importance of continuous efforts to build a diverse portfolio.

"build kind of broad based diversity and help the people who are sitting around the table feel like they have other people they can connect with." "we should try to get more and more women on private boards." "taking a risk, bringing in female gps, giving them real authority to write checks, to make mistakes, to be supported, to have mentors who teach them the industry."

These quotes highlight the necessity of fostering diversity within the venture capital ecosystem, including the boardroom and investment decision-making roles. Cara stresses the benefits of mentorship and authority for female professionals within the industry.

Importance of Resilience and Growth Mindset

  • Cara Nortman is currently reading "Grit" and revisiting Carol Dweck's "Mindset" to reinforce the significance of resilience and growth mindset.
  • She believes in the transformative power of believing in one's ability to learn and grow, which she observed in her co-founder at Seedling.

"right now I'm reading Grit and I've kind of gotten back into reading Carol Dweck and mindset a bit." "Really because mindset, not for all the obvious reasons that people may mention, mindset, growth mindset, blah, blah, blah mindset."

Cara values the concepts of perseverance and the belief in personal development, which are central themes in the books she mentions. These principles are influential in her approach to life and business.

Entrepreneurial Red Flags

  • Cara is turned off by entrepreneurs who focus on exit strategies and financial returns as their main motivator, especially if mentioned in the first meeting.

"An entrepreneur, somebody who's talking about exit in the first meeting, and not exit in terms of... More like they're talking about financial returns and outcomes in a way where it's clear that's their main motivator."

The quote indicates Cara's preference for entrepreneurs who are driven by more than just financial outcomes, suggesting that a deeper passion and vision for their business is essential.

Mentors and Career Development

  • Victor Kaufman, vice chairman of IAC, is cited as Cara's most influential mentor.
  • Kaufman provided opportunities, candid feedback, and support, allowing Cara to take on significant roles and responsibilities at an early stage in her career.

"The biggest mentor to me was Victor Kaufman." "He took a risk on hiring me... He gave me the room to succeed. He gave me the room to fail."

Cara attributes her career progression to the mentorship and opportunities provided by Victor Kaufman, illustrating the impact a mentor can have on one's professional growth.

Reading Preferences and Professional Development

  • Cara enjoys reading various authors on Medium, the Atlantic Daily summary, and Quartz.
  • She also reads "Both Sides of the Table" and focuses on content related to behavior and professional development.

"I'm deeply into medium now and just reading a bunch of different folks on medium." "I read the Atlantic Daily summary every day... I jump around a lot into medium and I'm really into my feed and reading a lot of sort of behavior, professional development type things."

These quotes reflect Cara's diverse reading interests and her commitment to continuous learning, particularly in areas that contribute to her professional and personal development.

Investment Decisions

  • Cara's recent investment in STEM, a company providing real-time equity splits and disbursements for digital creators, was motivated by the company's vision, strong technical team, and potential to disrupt the industry.

"My most recent investment is a company called STEM." "They're sort of trying to become the stripe of the content industry... has built the execution behind it to hopefully be able to go out and fundamentally disrupt an industry that's in a very dynamic state."

This quote shows Cara's investment strategy, which includes looking for companies with a clear vision, technical prowess, and the ability to make a significant impact on their industry.

Acknowledgements and Networking

  • Harry Stebings expresses gratitude to Mark Zeusta and Greg Betanelli at Upfront Ventures for introducing Cara Nortman to the show.
  • Harry also invites listeners to engage with his new blog and on Snapchat for further insights and feedback.

"And I'd like to say a huge thank you to Mark Zeusta and Greg Betanelli at Upfront Ventures for the intro to car stay, without which the show would not have been possible."

The quote shows the importance of networking and connections in the venture capital industry, as it facilitates opportunities for dialogue and collaboration.

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