What Is A Success Mindset? with Joanne Chen
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Episode Summary
When it comes to successfully making a pitch, you need to establish your own success mindset – and that involves not letting rejection affect you more than it should. Learn how to spot the characteristics of a founder: grit, tenacity, and of course the ability to tell a good story, which is what the successful pitch is all about. Joanne Chen, a venture capitalist at foundation capital in Silicon Valley, talks about this in a discussion of her journey, and how her company is transitioning from being one of Netflix’s early investors to getting a head start in the future of artificial technology.
Joanne Chen’s passion for technology developed very early. Her parents taught her how to program: her dad, who was a mathematician, and her mom who specialized in computer science. By the time Joanne was nine, she turned that into a business, making her first webpage for a client. This glimmer of entrepreneurial ability soon sparked as she began her career as an engineer at Cisco Systems and then later at a mobile gaming company. She spent many years working at Wall Street at Jefferies & Co. She had also been an angel investor for two years, and now works with passionate entrepreneurs who want to disrupt businesses by leveraging data assets.
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Our guest is Joanne Chen who’s a venture capitalist at Foundation Capital in Silicon Valley. I had the pleasure of being on the Coca-Cola CMO Summit panel with her and she is smart and fun. She will talk about the mindset you need to have when you pitch which all boils down to not taking rejection personally. She looks for two characteristics in a founder: grit and tenacity, and the ability to tell a good story which is what The Successful Pitch is all about. Enjoy Joanne’s journey and how she and her company were one of the early investors in Netflix and what they’re doing in artificial intelligence.
Listen To The Episode Here
What Is A Success Mindset? with Joanne Chen
I’m thrilled to have Joanne Chen who is at Foundation Capital in Silicon Valley. She and I met at a Coca-Cola CMO Summit and I instantly knew I wanted to have her as a friend, as a guest on this podcast, and let you hear what she is doing with her life and in the tech startup world. She has a passion for technology that she developed very early when her dad, who is a mathematician, and her mom, who is in computer science, taught her how to program. By the time she was nine, she turned that into a business and made her first webpage for a client. That entrepreneur blood was in her from the beginning.
She began her career as an engineer at Cisco Systems and then later co-founded a mobile gaming company. She spent many years working on Wall Street at Jefferies & Company in which she helped tech companies go through the IPO and the M&A process. She has been an Angel investor previously to joining Foundation and she works with passionate entrepreneurs who want to leverage data assets to disrupt businesses. She knows what she’s doing and she’s worked a lot with people in SAS, drone tech, and virtual reality. In fact, some of the other companies that she’s worked with include Zen Gaming and something we’re going to ask her about called Mya. Joanne, welcome to the show.
Thank you, John. It’s my pleasure to be here.
Can we start by taking us back to those early days of your childhood when you were nine years old and watching your parents as you say, “I’m going to learn how to code and start a business?”
Thanks for bringing that up. It’s always a fun story. My father left China to pursue his PhD at the University of Montreal. He was initially supposed to be in Montreal for just a year to do a study abroad. Then what happened was the whole Tiananmen Square incident happen and then he decided to stay. Eventually, my mother and I was able to join him in Montreal and we lived the life of an aspiring PhD student. We were in this one-room apartment in Montreal in this terrible neighborhood and that’s how they started their careers in tech. My father was initially a professor; my mother was a programmer. Both of them eventually moved into the industry. At a very young age, I was influenced by both their passion and their tenacity in the space as well as content-wise. I was very influenced by computer science and tech.
When the first version of the internet was available, we got this clunky and slow computer and we got online. My mother taught me how to use file systems, access DOS, and play very simple games. Eventually, when webpage making became a little bit simpler, she taught me how to use HTML. At the same time, I was working part time at Pennysaver. That was the only job that you could get as a nine-year old, delivering newspapers down the street. As part of the reward for delivering newspapers, they let me post one ad of my choice for free and so I thought about that.
The other experience and realization I had at the time was I created this terribly ugly website that I brought to my second or third grade classroom. I showed this to my classmates and teachers and not a single one of them knew what it was. That sparked an idea in my mind which is, “We’re early in this evolution. I’m sure there’s probably a lot of people don’t know what this is, or if they do, they don’t know how to make it.” I decided to post the ad offering my services around website development. A week later, I got my first client.
You then went on to get your BS at the University of California in Berkeley and then went to get your MBA at the University of Chicago School of Business. I’m from Chicago and I know the contrast of the weather from Berkeley to Chicago. That must’ve been a shock to your system.
It was certainly very cold. I remember there were two days during the year where the school advised us not to go outside because more than two minutes outside would have given us frostbite.
When you were getting your MBA, did you know then that you wanted to become a venture capitalist?
Success Mindset: Never give up. At some point, someone will see the beauty of your business.
Yes, the reason why I went to business school was to think about that career transition. I had always known that I wanted to be in tech. I studied Computer Science at Berkeley and Electrical Engineering. The first exposure to venture capitalists was at Berkeley, not University of Chicago where I had no idea what venture capitalists did. Berkeley had this competition called The Venture Capital Case Competition. As part of that, we had to submit a company that we were excited about, I was maybe nineteen or twenty years old at the time, and present to a panel of VCs who will judge how we did as VCs. Three friends and I got together; all three of them eventually became entrepreneurs. We knew one of the early people at Mint.com which was one of the first, modern-day fintech companies and proposed that Mint as an investment candidate.
The funny thing was I believe Mint was in stealth mode at the time. It wasn’t a company that most people knew about, but a few of the VCs were looking at Mint as a potential investment opportunity in real life. They were impressed with how we found this company. We eventually won the competition. That stuck in my mind. I enjoyed the process. I thought it was very easy to get to that point. A couple of years later, Mint was acquired by Intuit for $170 million, which was at the time a huge acquisition in this space. At the back of my mind, I had always thought about venture capital ever since that experience. After working at Cisco as an engineer, working on Wall Street advising tech executives, starting my own mobile gaming company, I thought about the combination of my experiences, what I really loved, and decided that I wanted to give it a try at investing.
Fintech was your first expertise level and public still continues today and the kinds of companies you invest in?
My firm, Foundation Capital, is a very strong investor in fintech companies. We have lending club, lending home, and financial engines back in the day in our portfolios. We’ve been very lucky in the sector. For me personally, I focus primarily on B2B enterprise companies that leverage data and machine learning to create hopefully self-driving software that sells into different functional units or different verticals. I focus on that world.
What lessons did you learn about what a good pitch was when you were first being exposed to that because you’ve been on both sides of the table, it sounds like?
It’s very enlightening to get the investor side, especially when I first started as an Angel investor in 2012. Lessons learned? Let’s see.
What makes a good pitch?
You’re the expert on this topic, but for me personally, a couple things that I look for in a 45-minute to a 60-minute meeting for an entrepreneur, one is that he or she has a very interesting problem statement that they are communicating and that this problem is either large today or going to be large very soon in the near to mid-future. This is a problem in market size description that’s compelling. The second piece of it is a reason why this person or this team of people are the right folks to solve this problem, some secret sauce or insight that they have.
Perhaps it’s them as individuals or as the team, perhaps it’s their experience and therefore relationships and networks in the particular domain, or perhaps it’s because they’re amazing technologists who are just better than everyone else in the world. Some secret about them that lets them solve this problem. Third, it’s their ability to tell the story in a compelling way. We are story-driven creatures and they have to be able to tell the story to me, to potential customers, to potential people they hire in a compelling way, especially when data is not there in the very beginning. Those are the three things I look for in a 45 to 60-minute meeting.
That storytelling element is everything. Most people think, “Let me just show you how this app works,” and they’re not telling you a story as it relates to what problem they’re solving for people. It’s like, “Isn’t it cool that this would work?” You’re like, “Yes, but would anybody want to use it and why? What problem is it solving?” If you haven’t thought that through, then the technology works without understanding what’s important to someone like you, which is how am I going to get my money back? Is this market big enough to scale, is someone going to buy you, or are you going to go public, or whatever the issue is? That’s important. Is there one mistake that you typically see when people pitch that you could share with us to make sure the listeners avoid doing it?
I don’t think this is necessarily a mistake, but more a frame of mind that people, in my opinion, don’t consider as much. I believe investing and picking both entrepreneurs and investors is like a dating exercise. The reality is there is a big percentage of it in investor’s decision that’s rational and there’s a significant percentage of the decision making that is not rational. It’s based on chemistry or emotions or something else, just like dating. That part of it is hard to predict, hard to control, hard to necessarily filter for. As an entrepreneur, I would not take rejection as necessary correlated with the business entirely. It could just be because of the personality fit or a lack of chemistry or something. That is an important element that entrepreneurs don’t think about as much.
[Tweet “Don’t take rejection personally.”]
I talk about this a lot. Don’t take rejection personally, whether it’s a date or a no from an investor. It doesn’t mean you need to start rejecting yourself or your business model or your idea, it just means it’s not a fit. If you’re going to get up and start talking to someone else at a dating situation or as a potential other investor, you have to hit the reset button every time. It’s almost like, if you go on a date with somebody who just broke up or got divorced and all they talk about is their ex, that’s a horrible date. You have to clear your mindset that that wasn’t a fit onward and start remembering the times when you did get a yes.
I love that you brought that up because it hits my sweet spot of what I like to do when I give keynote talks to companies, especially when I talk to people in sales. It’s the same thing. You cannot take rejection personally. For me, the big lesson is never reject yourself just because someone has said no to you. We tend to do that. Even if people say, “It’s hard not to take rejection personally.” I tell people, “What’s the cost of taking it personally?” You’re depressed and you’re down for however long it takes you to shake that off, so it’s important to develop some skills. Let’s dive into some of the companies you said yes to, starting with one that I’m particularly intrigued about called Mya.
Mya is a company that is in the recruiting space. What they offer is an AI-driven conversational solution to help recruiters become more efficient. They are a recruiting assistant, if you will. If you think about the problems in recruiting, especially around hiring high turnover, high volume jobs, like staffing Amazon fulfillment centers or Nike hiring retail store associates, they can’t hire more than 10,000 retail store associates per year, for example. It’s a massive problem because there aren’t enough recruiters and recruiter time to go through these candidates in a timely fashion. At the same time, there isn’t a shortage of candidates that are interested in these jobs. Mya is able to source, screen, and place these candidates into an in-person interview, eliminating 75% of the grunt work that recruiters typically have to do. In addition, it delivers a better experience to these candidates because it’s able to tell candidates, yes or no, this or that, right away.
If you’ve ever applied for a job online and not heard back, it’s frustrating. You just assume it’s a no. It’s like dating again. There’s no response. It’s killer.
Mya is able to make judgments within milliseconds of having these conversations.
Does it apply for bigger companies that maybe have to hire some quality, high-skilled labors as well?
It certainly applies to the high-skill labor market as well. The challenge in the high-skill labor market is a little bit different from the high frequency, high turnover talent pool. In the high frequency, high turnover talent pool, there isn’t a shortage of supply. In the high-skill labor market, there’s a huge shortage of supply. The matchmaking there is much more difficult because you had taken fit and personality and social data and a bunch of other things which makes someone a good candidate. The focus areas are different, but Mya is totally applicable to both. They started off at the high frequency, high turnover market and they’re going to be expanding more and more into the high-skill labor market.
What was their pitch like? Do you remember anything that made it stand out that you went, “This is for us?”
I met Eyal the CEO in early 2007. He is one of the most articulate, crisp presenters of this problem statement and what he’s envisioning. I liked his storytelling capabilities. The second thing that I was very impressed by is Eyal grew up in the recruiting world. His parents ran agencies that did exactly that, and as a kid, he followed them and shadowed them. He helped them source and screen candidates. Even though he’s only 30 years old, he’s intimately familiar and had over a decade of experience in this particular space.
The domain knowledge was incredibly attractive. The third part that I was very impressed by is Eyal started a company called FirstJob before he created Mya. With FirstJob, he ran the company for a number of years and grew it to quite a nice size but realized that the bigger opportunity lied in Mya. He made the hard decision to pivot despite growing FirstJob to a sizable company. The tenacity, that desire to succeed and keep going and go for the bigger opportunity is a trait that all successful entrepreneurs have and that he exhibited.
Success Mindset: The tenacity and desire to succeed and keep going and go for the bigger opportunity is a trait that all successful entrepreneurs have.
It sounds like, in addition to being a great storyteller and having tenacity, he also was able to zoom out and see the big picture and not get caught in the weeds that he didn’t see the need to pivot. Tell me a little bit about Tubi TV.
Tubi TV is an interesting one. They are a company that has a long history with us. What they offer is, think of Netflix, they offer a free Netflix, ad-supported TV network, the replacement for cable, if you will. For the consumer, it’s free. For advertisers, they can advertise on Tubi TV. For content providers, like MGM and Paramount, this is how they view as next generation cable television. If you think about the trends that have been happening at the macro level, it’s fascinating because on the consumer side, I know that I prefer streaming and on-demand and a place where I can watch where I want to watch and when I want to watch it and control what I want to watch. Tubi is on IOS, Android, Apple TV, Amazon, Roku, pretty much everywhere where you want to consume content. It’s an experience dictated by the consumer. Consumers are more and more interested in that and less and less interested in subscribing to cable. Cable is dying. Linear TV is dying. On-demand streaming is on the rise.
From the content providers’ side, it’s an interesting opportunity because if you think about where studios and these content providers monetize, most of their revenues came from movies and cable television, historically. Now that cable is dying, they have fewer opportunities to monetize. Netflix, which was one of our earlier investments and very successful, invented the new business model which is that they unbundled all these different shows and created this subscription service for consumers. In the early days, these studios would be able to sell their content to Netflix, and Netflix will use that and offer it as a subscription. What has happened is Netflix is becoming more like a studio, like a content provider, as they’re making their own original programming, etc. For these traditional studios, like MGM, they’re thinking, “I have fewer opportunities to monetize via Netflix as well or the likes of Netflix.” Now they look at Tubi TV and they think, “This is the next generation cable television that I can partner with and monetize my content under.” That’s attractive from a content provider perspective as well.
Tubi TV is never going to be competing for an Emmy like Netflix or Amazon, correct?
That’s correct. They don’t have any original programming. Think of them as the replacement for shows that you will see on afternoon cable television.
Anything about that particular pitch or the founder that stood out that made everybody go, “This the right team.”
Farhad who’s the CEO of Tubi TV is incredibly gritty. The context there is interesting because Tubi TV was spun out of a different company called adRise which was selling software to studios and content providers. This was in the 2010 or 2011 so quite a while ago. In 2014, Farhad decide to pivot the company from a B2B company into a consumer offering, realizing the big opportunity behind creating Tubi. He’s been doing this for quite some time. It’s been seven years that he’s been working on this and he hasn’t given up. After the pivot, we looked at his performance and what he’s been able to achieve with this new product and decided to double down and co-lead this $20 million round along with Jump Capital earlier this year. His tenacity from a pitch perspective stood out.
[Tweet “Tenacity and grit are the keys to success.”]
It’s a combination of tenacity and grit. That’s a similar theme coming across here. The last one I want to ask you about is Localytics, the mobile app marketing engagement that’s so popular right now. I would love to hear what is it about that platform that made you and your team decide that that was a winner?
Localytics is a company that I work with, along with my partner, Ashu, who’s a board member there. Localytics is a mobile analytics engagement platform based in Boston. If you think about consumers, we spend a lot of time engaging with our apps. The app provides a better experience because it’s able to personalize and send push notifications to us and do a bunch of things that are interesting to the individual user. Localytics enables brands to be able to do this at scale, both sending the messages to consumers as well as personalizing that experience and then serving analytics to these brands to help them understand how their consumers are behaving.
Are there any final tips that you have for people who are saying, “Is this the right time to be pitching?” Are there any suggestions you have for them on trying to figure out timing? I know that’s very important.
Timing is a difficult question. The most important part is to understand yourself and your business first and foremost. Understand what it is that you need from a cash perspective and then give yourself a 50% buffer because something’s going to go wrong. Let that dictate when you fundraise and how much you want to raise. You want to plan for 18to 24 months. That’s a time period in terms of cash needs for every single route. Be sure to be internally-driven, first and foremost, versus externally-driven. That’s the first thing. The second thing is fundraising is going to be one of the most difficult processes that an entrepreneur will go through. I rarely hear that people love pitching for a fundraising. At the same time, it’s a very good experience in terms of reflecting what investors think about and what are some of the business fundamentals and perhaps even longer term vision of a business.
[Tweet “Tell a compelling story of why you and why now.”]
The second most important tip is never give up. At some point, someone will see the beauty of your business. I still vividly remember this one entrepreneur who did not have a network in Silicon Valley who wanted to get a meeting with me and with my partners. As a way to get noticed, he sent us this envelope that he created out of a Lumascape, which was a landscape of different companies in a particular space. It was marketing tech. He wrote a letter with this envelope telling us why he deserved fifteen minutes of our time. I remember that very clearly even though I didn’t think his business was the right fit. I called him and gave him advice on what he should do in the future with investors. Eventually, he raised money even though his starting point was perhaps more challenging than other folks. Never give up. Always have the tenacity and then things have a way of working out.
And being creative, it sounds like, a little bit. What you touched on about being internally-focused versus externally-focused, if we’re externally-focused on feeling good about ourselves, that’s when we take the rejection personally. If we know who we are, we’re internally-focused and our mission and our why can keep us on track. Joanne, thank you so much for being generous with your insights, your stories, and your passion for making the world better through technology and getting entrepreneurs to make their dreams become a reality.
Thank you, John.
Links Mentioned:
- Foundation Capital
- Joanne Chen
- Zen Gaming
- Mya
- Mint.com
- Eyal
- FirstJob
- Tubi TV
- Farhad
- adRise
- Jump Capital
- Ashu
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