20VC Why VC Is A Lifestyle Not A Job, Why You Must Do Postmortems On Good and Bad Deals & Why Society Is On A Downgrade with Kathleen Utecht, Managing Partner @ Core Innovation Capital

In this episode of "20 Minutes VC," host Harry Stebbings interviews Kat Utek, the managing partner at Core Innovation Capital, a fund revolutionizing financial services with investments in firms like Nerdwallet and Payjoy. With a background in investment banking and startup leadership, Utek shares her journey from aspiring car entrepreneur to venture capitalist, emphasizing the importance of backing ventures with meaningful societal impacts, particularly in regulated industries like fintech and healthcare. She advocates for entrepreneurs to tackle significant challenges like financial inclusion and urges VCs to be deeply committed to their work, viewing venture capital as a lifestyle rather than a job. Utek also discusses the risks of ICOs and the necessity for startups to respect regulations, highlighting the role of sector-specific funds in navigating complex legal landscapes.

• Kathleen "Kat" Utek is the managing partner at Core Innovation Capital.
• Core Innovation Capital is a venture capital fund that focuses on revolutionizing financial services.
• The portfolio includes companies like Nerdwallet, Payjoy, Fundera, and Maven.
• Kat's background includes roles at Comcast Ventures, WVP Ventures, and as an investor and leader at Green Rock Entertainment.
• She has experience in investment banking at Raymond James.
• Richard Chen facilitated the introduction for this podcast episode.

"I'm thrilled to welcome Kathleen Newtek to the show today. Now Kat is the managing partner at Core Innovation Capital, to me, one of the most under the radar but immensely exciting funds in market."

This quote introduces Kat Utek and her role at Core Innovation Capital, highlighting the fund's significant yet understated impact on the market.

• First Republic Bank offers infrastructure and support systems critical for early-stage startups.
• They provide a network of VC firms for fundraising preparation.
• Startups get a dedicated point of contact and access to exclusive events and networking opportunities.
• First Republic's clients include Instacart, eshares, and Wish.

"First Republic's resources, network and expertise allow entrepreneurs to customize a solid foundation for your business across all stages."

The quote explains the comprehensive support First Republic Bank offers to startups, emphasizing the importance of a solid foundation for business growth.

• Segment allows for the collection of data from various platforms.
• It integrates customer data into tools and destinations for effective use.
• The platform includes over 200 sources and destinations.
• Segment is used by leading companies like Atlassian, New Relic, and Creighton Barrel.

"Segment really is the last integration you will ever do, and that's why the world's best companies use segment to drive growth and revenue."

This quote describes Segment's data integration platform as a comprehensive solution for companies, suggesting it could be the final integration a company needs to enhance growth and revenue.

• Kat grew up in Connecticut with a business-oriented father and a creative mother.
• She worked as a car salesman and thought she would become a car dealer.
• Attended Babson College, known for entrepreneurship and family business focus.
• Her first job was at GE Capital, where she rotated through commercial finance positions.
• Realized she preferred financial services over retail and did not want to work in large companies.
• Kat's background is in financial services operations and investing.
• Core Innovation Capital invests exclusively in financial services for everyday Americans.

"The short answer is it seems inevitable given my mix of add OCD, curiosity and love of entrepreneurs can really be an entrepreneur and invest in them."

The quote summarizes Kat's natural gravitation towards venture capital due to her personality traits and passion for entrepreneurship.

• Kat Utek and Harry Stebbings discuss society's current state and innovation cycle.
• They reference Peter Thiel's comment on expectations of flying cars versus the reality of social media.
• The Atlantic article about smartphones' impact on a generation is mentioned.
• The importance of being aware of unintended consequences of innovation is stressed.
• The startup ecosystem needs to consider its role in societal changes and accountability.

"I think it's important with innovation to be aware of unintended consequences."

The quote emphasizes the need for innovators to consider the broader impact of their work, beyond the immediate benefits of technology.## Empowering Financial Services

• The thesis focuses on empowering people through financial services.
• The goal is to address serious world challenges, including financial inclusion, healthcare, and education.
• There is a push against creating more apps or distractions and towards meaningful solutions.

"Yeah, our thesis is right, investing in empowering financial services. So we like the idea of empowering people. We don't want to be too paternalistic or hopefully paternalistic at all."

The quote emphasizes the thesis of investing in financial services that empower individuals, avoiding a paternalistic approach and focusing on impactful solutions.

• No single person or entity is to blame for the societal downgrades; it's a collective issue.
• The startup community, media, and politicians all play a role.
• Startups should challenge themselves to create meaningful change.
• The quote highlights the collective responsibility of various players in society, including startups, media, and politicians, in contributing to societal issues.

"I don't think there is a person to blame. I think it's all of us that are enabling each other and enabling some of what's happened."

The quote underscores the shared responsibility in the startup ecosystem and beyond for enabling societal challenges.

• Startups should have clear goals for societal impact and measure progress towards them.
• Companies in the speaker's portfolio saved people significant amounts of money.
• There is a need to understand and address the financial struggles of people across the country.

"Really what gets measured gets managed. So really just having like a goal, what do you want to influence and then tracking to that goal and measuring it and making sure that you're investing in things that will only help with that goal."

The quote stresses the importance of setting and measuring goals to manage and achieve meaningful societal impact.

• It's crucial to step out of one's bubble and understand the struggles and perspectives of various communities.
• The speaker shares experiences of interacting with people in different socio-economic situations to gain insight.

"And so I think it's important for us to realize and kind of get out of our own bubble and realize what is going on in the world and try to help other people."

The quote reflects on the importance of understanding diverse perspectives and experiences to effectively address societal issues.

• VC funds need to be aware of the time required to bring game-changing solutions to fruition.
• It's possible for impactful companies to fit within the typical ten-year fund cycle.
• Technology can help make financial services more efficient and cost-effective.

"Our fund will ten plus two. And you could see how in some of the things that we're funding that they're going to take a full ten years."

The quote addresses the time horizon for VC investments and the compatibility of impactful ventures with fund cycles.

• Fintech-specific funds are often part of good deals because they understand the ecosystem and regulatory landscape.
• Sector-specific knowledge is crucial in highly regulated industries like healthcare and financial services.
• Good companies in these sectors typically include sector-specific funds, while others may lack this due to regulatory challenges.

"You really have to understand how that ecosystem works and how you fit into it."

The quote emphasizes the necessity of sector-specific expertise in understanding and navigating the complexities of regulated industries.

• Having a meaningful voice in a company is essential, which can be achieved with or without a board seat.
• Investors should understand regulatory challenges and provide connections and guidance.
• Regulators aim to prevent bad actors and protect consumers, which investors should support.

"I think you need to have a meaningful voice. I think you can do that without a board seat."

The quote suggests that while board involvement is important, the key is having a significant influence, which can be achieved in different ways.## Investor Advocacy and Entrepreneurship

• Investors can play a crucial role in liaising with regulators on behalf of entrepreneurs.
• Entrepreneurs are often preoccupied with various issues, making it beneficial to have an investor advocate for them.
• Advocacy by investors can be more effective than entrepreneurs trying to pitch directly to regulators.
• A meaningful voice in the business is necessary for investors, even without a board seat.

"And an entrepreneur is working on so many different issues. So if they have an investor that has the ear of the regulator, that can say to the regulator, hey, listen, this is what company x is doing. This is why it's good for people."

This quote highlights the importance of investors having a relationship with regulators to support and explain the entrepreneur's business, demonstrating the value of advocacy.

• The fintech industry often adopts a "move fast and break things" approach, but this doesn't apply to regulations.
• Regulatory sandboxes are being used to test new technologies and financial services.
• Regulators aim to prevent bad actors while enabling good actors to innovate.
• It's crucial for businesses to operate within regulatory frameworks and engage with regulators if necessary.
• Companies can fail for various reasons, but non-compliance with regulations is not tolerated.

"You can't hack regulations. We have a zero tolerance policy on that."

This quote emphasizes the strict stance on regulatory compliance in fintech, indicating the serious consequences of attempting to bypass regulations.

• Post-mortems are conducted for both successful exits and failures to understand what happened and to learn from it.
• The process of reflection and learning is embedded in the culture, with weekly meetings focused on improvement.
• Detailed analyses help in understanding the reasons behind company failures and successes.
• The goal is to refine the ability to evaluate teams and leaders within the investment space.

"We always do post mortems, both in good exits and bad."

The quote reflects the practice of thorough analysis after any significant event within a company, indicating a commitment to continuous learning and improvement.

• Being a VC is considered a lifestyle, not just a job, due to the level of commitment required.
• Successful VCs often have personal relationships with entrepreneurs and other VCs, blurring the lines between work and personal life.
• VCs need to be available to support entrepreneurs at any time, reflecting the intensity and dedication of the role.

"This is a life. And I think if you're going to be a good investor... you have to realize that because the entrepreneurs that we're backing, they're working, they're pouring their hearts and souls, they're putting all their energies, a lot of their financial potential into ten years in one thing."

This quote conveys the depth of commitment expected of VCs, highlighting the parallel dedication seen in the entrepreneurs they support.

• Entrepreneurs should test potential VCs during the diligence process to ensure they are responsive and supportive.
• VCs should respond promptly to requests and provide connections and insights as needed.
• The way a VC behaves during the courting phase is indicative of their likely behavior post-investment.

"Ask the VC to do something. Ask them for a connection, ask them for their opinion about something."

The quote suggests practical ways for entrepreneurs to gauge the commitment level and responsiveness of a potential VC, which can be critical in the decision-making process.## Investment Philosophy

• Kat Utek emphasizes the importance of investing in people that she likes, not necessarily people who are similar to her.
• She highlights the significance of shared values within her team and the entrepreneurs they fund.
• Values such as being fun, kind, and humble are critical to their investment strategy.
• There is a firm stance against arrogance and bullying, and a zero-tolerance policy in place.
• Kat acknowledges that success in investing can often come down to good fortune and timing.
• The ability to work with people they love and respect is prioritized over potential profits.

"Yeah. So I don't want to invest in people like me for numerous reasons, but I do want to invest in people that I like. And I think that's really important because there's a lot of people that can make us a lot of money, and life is short, and so working with those that we like matter a lot."

This quote explains Kat's approach to investing, which is rooted in personal connections and shared values rather than solely financial gain.

"We're fun, we're kind, we're humble. We're all a bunch of misfits. We always say we love investing in other people that are misfits, so they don't have to look like me or sound like me, but it has to be someone that we share values, and there is going to be these values or respect."

Kat describes the core values that bind her team and their investment choices, emphasizing the importance of respect and a shared ethos.

"And so having this shared set of values of, like I said, fun, kind, humble, that's important to us."

This quote reiterates the critical role that shared values play in their investment decisions.

• Kat Utek recommends "The Westing Game" for short flights and "Atlas Shrugged" for longer journeys.
• She believes "The Westing Game" offers perspective on seeing things differently with more information.

"Well, my favorite book is the Westing game. It's really a kids book, so you can do it on, like, a 30 minutes flight, read it twice, and it's one of my favorite books from when I was a child because it doesn't make you see the same things differently when you just have more info."

This quote reveals Kat's favorite book and the impact it has had on her perspective.

• Kat encourages those interested in venture capital to dive in and start doing the work rather than following a traditional career path.
• She highlights examples of individuals who have successfully broken into the VC world by just getting started.

"Yeah, if you want to do it, just do like all the time. People explain are asking me how do I get into this? I mean, look at you, you got obsessed. You did a podcast, you did it."

Kat offers advice to aspiring VCs, suggesting that passion and initiative are the keys to entering the field.

• Kat expresses concern over Initial Coin Offerings (ICOs) and the potential for people to lose money.
• She points out the risks associated with non-experts investing in complex and speculative ventures like ICOs.

"So they scare me. I think there's going to be some really great ones, but I think people are going to lose a ton of money."

Kat shares her apprehension about ICOs and the associated risks for everyday investors.

• Kat believes it is possible to achieve financial success while also doing good in the world.

"I mean that's our whole thesis, that you can do well and do good at the same time."

This quote sums up Kat's fundamental investment thesis, combining profitability with positive impact.

• Kat's favorite blog for a rainy day read is avc.com by Fred Wilson.

"Avc.com. I love Fred Wilson."

Kat shares her go-to resource for insights and information in the VC space.

• Kat wishes to see more companies that matter and a greater emphasis on respect in the startup and VC world.

"Yeah, obviously what I talked about before, people investing in and running companies that matter. And then I think just more respect."

This quote reflects Kat's desire for a more meaningful and respectful startup ecosystem.

• The most recent significant investment was in a company aiding people in choosing the right health insurance plans, chosen for its exceptional team and potential for market impact during a time of change.

"The team is just absolutely amazing, inspiring. I love working with all of them."

Kat explains the rationale behind their latest major investment, highlighting the team's qualities as a deciding factor.

• Kat Utek and Harry Stebbings express mutual appreciation for the discussion and share their contact information for further engagement.

"Kat, it's been such a pleasure to have you on the show."

Harry concludes the interview by thanking Kat for her insights and contributions to the conversation.