Mat Vogels (00:10)

Welcome to another episode of fundraising where we talk to the best early stage investors and ask them all the questions that you as a first time fundraising founder want to know about the fundraising process. And today I have Leo from Humba Ventures who's going to break down the process from both their perspective and what they see. But I'm sure there's going to be a lot of tidbits in here that could be applicable across your entire fundraise. So Leo, kick us off a little bit with

​

a little more information about Humba and yourself.

​

Leo (00:42)

Absolutely. I'm excited to be here. I'm excited to record this episode now.

​

Yeah, so quick background on me is I used to be a software engineer for about 10 years. I was one of the first hires at LinkedIn in the early 2000s, then worked at Google and another startup called Factual. And got an adventure about 13 years ago, kind of by accident. Thought I'd do it for a year and go start a company and then said, really fell in love with investing. And so I co-founded a software fund called Two Subventures that's been around for a while. We backed software companies like Robinhood and Flexport over the years at Seed. And then about four years ago, I just kept getting more more interested in the

​

in the deep tech landscape. And so I started our sister fund, Humba Ventures, which is currently a fund that usually writes checks on the 750K range, like give or take. We'll do anything around deep tech or adjacent industries often. I would say like American dynamism is a good catch all, but like adjacent industries like defense, manufacturing and energy. And yeah, it's a little bit about us, yeah, we're very, very journalists on the deep tech side. So we've done, know, bio and robotics and space and, you know, defense and you name it.

​

Mat Vogels (01:41)

Yeah, Humbo was one of the few, were one of the few investing in deep tech before it was cool. So now that it's cool, you were there before anybody. Let's go into a little bit more on the introduction side. You talked a little bit about what you were doing before you got into VC. So let's talk more about what you currently like and don't like about the job itself. What are some of the highs and lows of being a VC? Pull the curtain back a little bit.

​

Leo (02:04)

you know, I think that frankly, like there's a lot to love and not that much to dislike. I think, you know, favorite parts are like,

​

meeting founders and like learning about the companies and what they're doing. And, that part's really fun just because there's so many cool technologies out there, especially in the deep tech world. I think when we work with founders, it's really fun to work together and try to see if we can like help them out a little bit here and there. Like frankly, like the founders doing 99 % of the work, but if we could, you know, move things along, like an extra one or two or 3 % here and there, like it feels really satisfying. and then, and then also like just watching founders succeed over time is also very like very, very satisfying.

​

rewarding just to see like somebody's like working really hard you know like they spent a lot of time they like kind of go through the first few years and then they do really well and it's like awesome to see that. Least save our parts probably just saying no right because we have to say no to most of the founders we meet and that always sucks because there's a like we wish we could invest in more companies but we can't.

​

Mat Vogels (02:55)

in a similar vein there, because we have to say no a lot. One of the questions that lot of founders were asking was to maybe pull the curtain back a little bit more from an insider, something that maybe you wish as a VC more founders were aware of. Why we have to say no is maybe one of them, but what are some things that you wish maybe more founders were aware of to develop a little bit more of that understanding with working with VCs throughout the process?

​

Leo (03:18)

That's a good question. mean, I think like one thing that comes to mind, especially cause the theme of this podcast is like fundraising strategy and tactics. I think just having a sense of like.

​

what is on a VC's plate, maybe like helps you figure out like how to write emails or how to stand out. Cause you know, like for example, we get something like 50 to a hundred cold emails every week, probably another 20 or 30 intro like offers from like warm intros. And like we're not even like the most, you know, well known VC by any means. I'm sure like if you go to Andresen, they probably get like, I don't know, 10,000 cold emails a week or something. So, but I think sometimes like people write cold emails or do outreach

​

or do things like that with sort of this assumption of like, we're just sitting on the beach with a lot of free time. And like every email we get, we respond to and like say like, hey, can we chat later today? And like, unfortunately, I wish I had more time in the day, but we get like these like 100 potential companies we could meet every week. And we'll probably pick like four, six, eight, something like that, just based on time constraints. So whenever you're trying to reach out, trying to get somebody's attention, you should think about the fact that there's a hundred other people trying to reach out this week. And it's like, what can you emphasize about yourself?

​

your company, your industry, your traction, things like that, that would get somebody excited where they're like, hey, this is one of the best companies I'm gonna encounter this week. I should definitely have a meeting and learn more.

​

Mat Vogels (04:34)

Yeah. And we'll talk more about how they can stand out in that process as well. Last question for the intro portion. Why would somebody or why should somebody want Humba Ventures on their cap table? Just a quick little pitch on why they should choose you.

​

Leo (04:47)

Yeah, I-

​

I mean, there's a lot of good funds out there. we, you hope that we're on that list for a bunch of folks. Um, I'd say like a few of the places where I think we stand out, I'm, uh, I'm technical. There's some technical, uh, partners on the deep tech side of the world, but a lot are not. And I think that's like an interesting background, especially if like for founders that are technical themselves. Uh, my partner, Anna is an amazing writer. So she's really good at helping companies tell their stories and like, kind of get their, you know, get their, get their pitch out there in a very legible way, which I think is hard for technical companies and deep tech companies.

​

a lot of the time. And then we are, we work together with SUSE where the investing teams are separate and do their own thing, but we share a lot of resources on the back office, the operations team, the physical office. I think it actually gives us like a lot of outsized resources for a fund of our size. like the way we pitch it to folks, which is we have the check size of a $40 million fund with the resources of something close to like a $150 million fund. Right. So you can like, you know, get help from our events person or our finance person, all these other things that, you

​

Normally if we had a standalone $40 million fund, wouldn't have resources like that that we can share.

​

Mat Vogels (05:51)

Yeah, that's

​

great answer.

​

So now we're going to the fundraising process. I like to break it up into kind of three different sections or three different areas. The first is a lot of the founders listening are first time founders. They have no idea how they can get in the room, get that first meeting from some of these VCs. You already mentioned that some of these folks are getting hundreds of pitches a week. How do they stand out in that? So that's the first one. The second one is now that they have that meeting, how do they make a good impression in all those intro meetings and get the process going? And then the third is essentially pushing it over the finish line. ⁓

​

of

​

those meetings, you have multiple VCs that are circling, how do you actually get them committed and close out the round? So starting with the getting in the room, a lot of founders, what they do is they kind of make this list almost like a CRM of all the VCs that they should be reaching out to or want to reach out to. Do you have any feedback or advice for them on what they should be looking for? What are the characteristics or traits? What should they be indexing on for the founder, sorry, the VCs that they're going to reach out to?

​

Leo (06:51)

Yeah, I think that a couple of the most important things are like kind of appropriate stage, and check size, right? So, you know, usually whatever you're trying to raise, like, let's say it's a $5 million round, like most of the funds you target might be something like, you know,

​

five to 30 times that size, right? So like a hundred million dollar fund, a $30 million fund, maybe a $200 million fund. Those are, those are probably the right size funds to talk to about a $5 million fund. It's probably not like a billion dollar fund or like a $5 billion fund. like the kind of check size you're looking for is not that meaningful to them. It works in the other direction too, right? Like if you're trying to raise 50 million, you shouldn't go to like a fund that's, you know, 30 million in size. Cause like they're just too small to be able to like, to be relevant.

​

think want to pick a fund that's sort of like the right size check and the right focus, like stage focus for your area. I would say also like depending on what you're building and whether it's like something that every investor is interested in, like maybe it's just like AI for business. Or if it's a more, more like specific category, like maybe it's, you know, hardware for the energy grid. The more specific the category, the more you want to see that somebody's done like invested in businesses kind of like yours in the past, which doesn't mean that like, you know, maybe you make like, you know, batteries.

​

for like factories or like for long-term storage. A VC doesn't have to have invested batteries for long-term storage for factories. It's more like, they done hardware? Have they invested anything like in the energy space? And if they haven't, like you might be able to land an investment from them, but you'd be the first and it's usually a much higher bar. And often the bar is actually like, you know, very like so high that like no one's going to cross it because the VC just like hasn't invested in space because they're not that interested in it or stuff for them.

​

Mat Vogels (08:31)

Yeah. You want to make sure that you're, you're at least indexing on VCs that will invest in you and have the capacity to, and all these things, because you don't want to waste your time as much as you can in this process. Going into the, like the pitch deck process, because that typically is the kind of the first door opener for, for a lot of us when we're getting these, it's the first thing we can kind of look at to better understand what they're doing. What I find is a lot of VCs kind of have either a slide or a metric or something that they look for.

​

when they get these introductions or get these cold emails that are sent to them, do you have that slider thing that you immediately scroll to that kind of gets you into the position of like, okay, this is something that I'm gonna spend the next five minutes looking at versus like, nah, it's not a fit, then you're gonna move on.

​

Leo (09:15)

Yeah, you know, honestly, I usually like just going through the deck in order because I think it's...

​

Like part of it's like, helps me understand the story a little bit, right? Cause you know, like you look at a team, like, for example, like that's probably the most important part of the pitch is like, who is the team. But even there, like you have to understand it in context. Right. So like, like going back to the battery example, if you have, you know, like, if you just look at the team side, you're like, wow, this team has a ton of experience, like batteries and energy and blah, blah. And then you look at the company and you're like, they're building like, you know, like a CRM for, you know, salespeople. And you're like, well, like it's an awesome team, but like maybe it's

​

a great team for this project. And so I think as you go through the deck, you're trying to see the narrative and trying to see that it's like cohesive, it fits together. Ideally, you kind of feel this sense of inevitability, whereas you're reading through it, you're like, wow, that's like an awesome idea. The team is great. The progress they made so far is really interesting. So that's like what you're hoping for. And so, but like I'd say like the team slide as you go through the deck is probably the most important one because at an early stage, like the founders are like, you know, such a huge part of the underwriting that an investor makes.

​

Mat Vogels (10:17)

So is there anything personally when you look through that you get excited about when you see those those pitch decks for the first time that gets you excited to reply to the email and then move forward with potentially a first meeting?

​

Leo (10:28)

Yeah,

​

I would say actually like, the good storytelling piece is like something I really appreciate, right? Where, you know, sometimes you see these slide decks where like, it's a collection of facts, but they seem kind of random and disjointed and it's hard, like hard to follow what somebody's saying. And it's like, you know, if this is, if this is what you produce after spending a lot of time trying to figure out like, what's the best way to communicate your story, maybe that's not a great sign. Uh, or sometimes I'll see like slide decks where I just feel like somebody's focused too much on like something that's doesn't matter. And then they like, don't spend enough time on the things they do.

​

So for example, like we'll see decks where, you know, like 20 slide deck and like eight slides on why, you know, energy is like a big industry. And it's like, don't have to convince people on that, right? Like everyone knows it's like trillions of dollars or whatever. So like, you know, like I think you want to just see that like appropriate attention is spent to the things that matter, that everything fits together. I think that's something that, you know, we really like to see.

​

Mat Vogels (11:20)

Yeah, I like that. You have to be quick to the point at the same time. You know, a lot of VCs, can't spend minutes and minutes on this. the further, the clearer you can present that, the better for sure. Are there any mistakes that you see commonly in pitch decks that founders make that they should try to avoid?

​

Leo (11:37)

Yeah, would say like, actually maybe what I was saying is like one, right? Which is spending too much or too little time on things.

​

Right? So like if the market's obvious, don't spend 20 slides on the market. But the opposite is also true, right? If you're like, we're going after this market, nobody knows. You can't just be like, oh, this like, you know, like saw blades for saw mills or a trillion dollar industry. And you really let me continue because people are going to be like, is it like, maybe I want to see more data. like, you kind of have to like understand like the audience, you know, they know a lot about investing was the time they know they've seen a lot of early stage startups. They probably don't know your specific industry that well. And if it's an

​

Mat Vogels (12:01)

you

​

Leo (12:13)

that's like well understood to be big or like how it works, then you don't have to spend a lot of time on it. If it's really complicated or it's like, you know, misunderstood, I think that's where we're gonna spend more time on it. But like also like you see this in other slides, like the team slide, right? Like if your team is awesome, like you really want to showcase that. And I've seen people kind of miss out, right? Cause they'll be like, the team is Leo and Matt and like Leo worked at Google and Matt worked at this fund. And that's like, you know, it's like two fund logos and that's it. And you're like, you're like underselling it. Cause like, like what did Leo do?

​

Google was he a janitor or was he like VP of engineering, right? Or like, you know, and, so I think you really want to showcase your strengths, right? And so I think you want to make sure that you don't spend too much time with the things that are not useful, but also you don't spend too little time with the things that people want to know about. And I think the team slides actually where it manifests the most, like I see a lot of slide decks where the team slide is like, it's two pictures and two names and nothing else. Or like two pictures, two names and like a couple of company logos, but it's like, you know, like, like in an AI world, like you could just generate different pictures and names.

​

that gives me the same amount of information, right? You really want to convey what's the thing that's special about you guys.

​

Mat Vogels (13:18)

I've also seen the opposite where they put like Tesla, SpaceX, and it was like a one month internship where they were there too.

​

Leo (13:22)

Yeah. Yeah. felt

​

like Tesla scale model three and you like, you look them up and you're like, it like an intern in the finance group for three months or something.

​

Mat Vogels (13:29)

Yeah, exactly right. Exactly.

​

All right. So those are some mistakes maybe to kind of through any other advice that you would recommend for founders during this phase of just getting in front of the right VCs, getting, you mentioned there's hundreds of them that are going to be coming across your inbox every week. What can some of the ones that need to stand out do or what have they done to stand out?

​

Leo (13:49)

Yeah, I mean, I would say like it's in a few places. Like one is the reach out matters. Like warm intros are very nice, but cold emails work as well. But for cold emails, the bar is a bit higher, right? Cause it's like, it's not, you don't have a friend being like, Hey, I met this person. I think they're great. You should talk to them. It's like a cold email in a sea of cold emails. And so it really has to stand out. So I would say like they're, you know, succinctness and again, sort of like what information you're prioritized is really important.

​

I think a lot of cold emails, like you read them and they're like multiple pages. And you can tell that somebody's just trying to explain like everything they can about their company upfront. And the truth is like, I think most of those don't get read by most VCs. because again, if you get a hundred emails a week and each one's like five pages, like you can't spend like, you know, 10 hours a week reading cold emails. And so I think what you really want to do is treat it almost like as a teaser or like a, almost like a movie poster, a movie trailer versus like a really long synopsis of a movie. Right. Because what you want to do.

​

is just convey like, here's two or three things that are like, these are the three most exciting things about us for the most compelling things. So that somebody can read those three bullet points and being like, wow, that is really exciting. Like, let me reach out and like learn more. and so I think like probably the biggest mistake on cold emails is like, you know, going too long or like, you know, explaining too much versus just being like, Hey, like, you know, I previously sold a company for 30 million and I know this space, like the back of my hand, cause I worked here and we've already got our first like three pilot customers. Like that's like a perfect cold email.

​

It's really short and succinct, but like very compelling.

​

Mat Vogels (15:15)

Yeah, and think

​

the reason why that can work is that it might not be that every VC index is on those points that you just mentioned, but a lot will, and you're better off at least serving up what, you know, decent percentage of them will immediately appreciate than trying to boil the ocean and get everybody interested. It's just, it's going to end up being too long of an email or too much to digest for most folks.

​

Leo (15:36)

I think

​

actually it's similar to me to like marketing sites, right? Which is like.

​

Sometimes you see a marketing site for company and like scan the homepage, like the top screen and you're like, it makes so much sense. And other times you're like, the company, like it's a big focus on technology and they're like, we use this sensor, this thing. And you're like, you scroll down page by page. You're like, what do they actually do? And at some point you're like, you know what? Like, I'm just going to like, you know, check something else out. Right. So I think it's the same thing. It's like, you have to understand your audience and like, what's their time constraint? What are they looking for? And then you want to play into that, like, you know, what you're offering.

​

Mat Vogels (16:06)

Yeah, we built a pitch deck reviewer and the most common piece of feedback that it gives is that it's too vague. It's like we're the next generation energy source. And it's like, it's those types of things and it's so hard to really understand. So yeah, there's a line to walk there for sure. All right, so they've.

​

Let's say that they've done everything they need to do to get in front of you. You're interested. You're now going into a scheduled meeting. What are some of the things that you look for from a VC perspective that you want to accomplish from that first meeting so that founders can come to them fully prepared?

​

Leo (16:40)

Yeah, it's a hard question to answer because in some ways it depends on what we already know or don't know about a space. Like I'd say the less familiar a space is to us, the more we want to just like understand it a little bit in terms of.

​

Like what's the customer need? Like, how did you figure out that was a customer need? You know, like, do they have other solutions? Like, what are they like, what do they pay for those things? Just to understand the landscape better. And we'll try to prepare a little bit with like Google and AI tools and things like that. But it's still nice to hear like, you know, the founder's perspective. Um, if we do know space well, we tend to focus more on like, what's the technology? Why are you interested in the space? Like, like, you have experience here? Do you sort of know what you're doing or you kind of figure out in the fly? Um, you know, a bit about the team, but, know, fundamentally I would say like we're really looking for.

​

pretty unique solutions that can be really valuable and where the team feels, you know, like extremely well qualified to like, this is going to be the uniquely like good team to build this. So we're kind of trying to like assess those three boxes in initial meeting. And then, you know, we're kind of assessing them more and more in subsequent meetings as well. like that first meeting is basically like, is this an interesting, unique idea where like the team and the potential feel pretty special? ⁓

​

Mat Vogels (17:43)

Do

​

you try to guide those meetings so that you can get those things out or do you let founders essentially not stumble through them, but they kind of go in and maybe they don't accomplish that. Like how much does Humba when you're going in, so if somebody's wanting to have a call with you, are you guiding that versus letting them kind of run their own show?

​

Leo (18:02)

You know, I'd say like we skewed towards slightly longer meetings because we like hearing the story. So usually like all of our meetings ended being about 45 minutes. We found that like 30 is like a little too fast because either just do questions and there's no pitch or you just do the pitch and there's barely time for questions. So like 45 worked well where usually we'll do intros. We'll try to read the deck. If there's a deck beforehand, like we'll read the deck beforehand and try to prepare a bit. That's always the case. Like sometimes we don't get a deck and so we're just like, don't have a lot of context.

​

Mat Vogels (18:10)

Yep, awesome.

​

Leo (18:32)

But if there's context, we'll try to do some research up front. But then we'll ask the founder to give like, you know, a five or 10 or 15 minute overview, because it's nice to hear the story in their words, kind of like what motivates them, how they got here. And then we'll just do questions for like half an hour. And that's worked pretty well for us.

​

Mat Vogels (18:46)

That's great. I feel like that seems almost more rare. Most VCs, I feel like they do more meetings, but they're going to be shorter. But I agree. You kind of know right away and you wish that you would spend more time with the ones that you pick. So I think that's a better approach for sure. Are there any? Yeah. ⁓

​

Leo (18:59)

Yeah, I sometimes get cold

​

emails where people are like, here's my pitch deck, here's some bullet points, can I have like 10 minutes of your time next week? And it's like, I actually don't know what I do in 10 minutes. Like I don't know how to decide, like, you know, on either side, like this is a good match in that little time. I think it's nice when you could spend a little bit more time together.

​

Mat Vogels (19:16)

Yeah, they're trying to do it to be polite, but it's like, well, it's not going to help me accomplish anything. What are the characteristics that you see really good founders have and that they can kind of show during that first meeting? So like a green flag characteristic or something that you like to see from the founders themselves.

​

Leo (19:19)

Yeah. Yeah.

​

Yeah, I'd say there's a bunch, know, like a bunch of things, like we don't have to see all of them, but anytime we see some of them, we're pretty excited. I think one is like, you know, people that are pretty deliberate and methodical. you know, so like.

​

It's harder for us to invest if it feels like the company is of stumbling around and maybe they're getting lucky. But you're oh, you're launching in Atlanta, why Atlanta? And they're like, well, I live here. like, best friend told me was a good place. You're like, OK, but maybe it's like the 40th best place if you just looked around. So we like people that make decisions liberally. There's this term, idea maze, that we like, which is like, hey, there's all these different directions you could take the idea. It's like, do you make hardware? Or do you buy the hardware, make software? Do you sell through retail?

​

resellers

​

or direct or like, you do you use something else? And we love it when founders have sort of like thought through a bunch of these, right? And you can be like, Hey, why don't you sit like, why don't you lease the hardware? And they're like, well, I thought about this. Here's why it doesn't work or like why, why it does work well. like, so we like it when people are like very thoughtful about that kind of stuff. And then finally, like, I think this is more rare, but we're like, like, it's really impressive when somebody has like just mastery of like their business on a bunch of scales, right? Where a lot of times, and this is pretty common. It's not a bad thing, but you have like the CEO and they're like, I can answer the business questions.

​

Mat Vogels (20:26)

Yeah.

​

Leo (20:47)

and they're like, I can answer tech questions. But sometimes you get like kind of this rare gem of a founder where you could be like, let me ask you about the technical side or the business side or the regulatory side or like the history of the industry. And they just like know it all. And that's always like a very like awesome confidence inspiring thing.

​

Mat Vogels (21:03)

Yeah, those are always great when you get the unicorn of a founder that can talk to both. And even if they aren't, if you're a CEO and you're not technical, if you can speak to it as if you were, that's also beneficial. We're not saying that you need to be super technical and business savvy, but if you can talk to both of them, then that's a rare trait for sure. It actually goes back to something you mentioned earlier is one of the potentially the value adds that you as a fund can bring is that storytelling narrative. Because I feel like today, especially so many of these incredible founders are so

​

technically driven and they're solving a very technical problem. And it is hard to pull that out into something that can be in a very good storytelling narrative type of way. So as a founder, if you can tell a good story, I think that automatically puts you in a category in its own. Are there any other pitfalls that you see founders come into in these initial meetings that you think they should try to avoid?

​

Leo (21:47)

Yeah, absolutely.

​

Um, I'll give two, like I think one exaggeration is always like a bit of a, like, uh, you know, a downer and

​

Like the example you gave earlier, right? Of like, Hey, maybe somebody interned at Tesla, they talk like the way they describe it. It sounds like they like did a lot over years, but it turned out it was like a few months. Like those are the kinds of things that really, reduced confidence, right? Because what happens is when you went, like somebody talks about their like amazing Tesla experience and you'll look them up on LinkedIn and you're like, you're there for two months. Like as an intern, like six years ago or something. Then you start thinking like, well, they exaggerated that. Like what else are they exaggerating? Or maybe like, you know, not being.

​

maybe even not being truthful about. So I think that's like, that's definitely one thing that's tough. Um, the other one is I think, I think you should have a good story and you should have like a pitch that you can give. That's like, maybe it's five minutes, maybe 15 minutes, but you should be able to have like a good narrative about the company. Um, one style of pitch that for me has been sort of like more difficult and frustrating at times is like, you know, like somebody will like, there's no deck, there's some website that just says like, like you said, you know, oh, we're doing like, we're the future of energy. And then you get on the call and they're like, yeah, like, so we're

​

building like power plants, like what do want to ask us? And I'm just like, I don't even know where to start. like, and it's like, it's not even that I don't even know where to start. like, have like some stock questions I could ask any company, but like as a founder, think one of the goals of a good pitch is like, you should lead the VC to like, what's interesting about you. And I think that's where the storytelling matters because maybe like the really special thing is like your team has these amazing connections in the industry that are like not obvious, but if you don't give me any context and you're like, ask me anything,

​

Mat Vogels (23:08)

Yeah, I didn't know where to start.

​

Leo (23:33)

I'd be like, how does the tech work? Like, what's the regulatory environment like? Maybe I didn't ask you like, hey, do you have a Rolodex of like amazing connections? And then I walk away from the meeting and being like, like that wasn't that special. But like maybe if like, maybe if you pointed me at what was special, like I, you know, I'd realize I was very wrong.

​

Mat Vogels (23:48)

Yeah, it kind of goes to another thing I see.

​

sometimes commonly where founders come in with this sense of like, I'm the one that you should be pitching. And they have this like weird thing where it's like, I'm here. What do you want to know from me? It's like, it's, it has to be, we obviously as VCs, we do want to give you money and you are important. but it has to kind of go, go both ways. So that's a, that's a good one. What about the questions that founders should ask? Not necessarily in the way that when you, when they ask them, you feel like, that's a, you know, checkbox. I like that, but more because it is something that should

​

go

​

both ways. Founders should get questions or answers to questions about their own process and things like that. Are there any questions you would recommend founders? Maybe they ask Humba, but certainly and maybe other VC meetings what they should at least ask if there's enough time.

​

Leo (24:33)

I think there's

​

There's the low hanging fruit, right? Like what's your process, maybe where can you help or how do you differentiate from other funds? I think those are like interesting directions because, you know, it gives you a sense of like how fast somebody is, or maybe if you're talking to lot of investors and have, you like more interest than you think you could handle, it helps you prioritize like who to work with or maybe, maybe who to like try to go through the process with sooner. the other one that I think is always fun is like asking, asking for feedback and less of like,

​

Hey, like, are you going to invest or like, what did you think of my pitch? I'm more of just like, you know, I like it when people are like, Oh, you know, like, what do you think about this idea? Or have you seen anyone else try it? Or do you see any pitfalls? Cause I think it's like, it's useful one where, you know, you get some constructive feedback and maybe, maybe it ends up being useless, right? But maybe it's useful. Like you get some feedback on your idea or your pitch and that can be useful even if like the fun passes. Uh, you know, frankly, like, you know, for V for founders pitching funds for funds.

​

pitching LPs, mostly you get passes. So it's like nice to get something constructive out of it. The other thing is also like a good way to see like if the list like BC is listening or like understands your business. I think it's like a good limousine test of how would it be as partner.

​

Mat Vogels (25:46)

And

​

this is kind of the most important part of the phase too, because you're always iterating and getting better. So yeah, the more that you can learn from that, you can sharpen for the next meeting and so forth. So let's say that they've done a good job. They've had interest. They've had some really good first meetings. It goes into the next phase, which is more kind of the diligence and getting the conviction. Can you talk a little bit about what Humba does during that phase and what the diligence process might look like for a founder?

​

Leo (26:09)

Yeah. So like for us specifically, it's about the two week process. We'll usually do, you know, four ish meetings end to end. so the first one is more like it's intro is it's hearing the pitch is asking some questions. And then if it feels like it's, you know, in our wheelhouse and a good fit, usually we'll have two or three meetings after that. And each one is basically asking more questions each time and kind of drilling in on the things where, you know, maybe we understand them the least, or maybe like that's where we have the most hesitation. and then at the very end, sometimes we'll try to bring in like a domain expert.

​

to join the call as long as there's not some kind of conflict of interest or a competitive conflict there.

​

Mat Vogels (26:42)

I like that. Do you think that there's something that founders maybe get wrong during the diligence process? It could be a common mistake or pitfall, but what's something that, especially as a first time founder, you'd urge them to be more aware of so that when they go into it for the first time, they don't make those mistakes.

​

Leo (26:59)

You know, I'd say like probably like the biggest mistake I see is more high level, is like chasing investors that are not that interested. Um, cause like one way to think about it is, you know, depending on the fund, they might invest in like, I don't know, 0.2 to 2 % of the, like the meetings they take or something like that. Right. And

​

Mat Vogels (27:06)

Mmm.

​

Leo (27:18)

If you hit it off and you think you're in like the top 5 % of their meetings based on their excitement and engagement, like you might be able to convince them you're in the top 1 % and they should invest. If they like, if they just don't seem that into it they're like, ah, like it's not for me. Like they probably like, you're probably nowhere near the top 1 % for them. And even if you can convince them that like, you're not 50th percent how you're really 80th, like they're still not going to invest, but you're going to burn a lot of cycles. And it's one of those things where like that ranking is, you know, there's some objectivity to it, but there's a lot of subjectivity.

​

activity.

​

So it's like Sequoia might think you're top 1 % and I might think you're bottom 50 or vice versa. Investors don't always agree with each other. It's just more like you don't want to spend a lot of your time with the people that are not that into your idea. You want to spend the time with the people that really excited and engaged.

​

Mat Vogels (27:55)

Yeah.

​

I also see the pitfall where founders over index maybe on like a really popular brand or name because they think that they're really interested and they kind of get pulled through this process. They do everything that this fund wants to do, maybe alienating other funds in the process only to have like a, I'm sorry, we couldn't get there. And it's like, you thought things were going well, doesn't happen. So it can kind of go both ways on that side too.

​

What is something that kind of during the closing of the round, founders, it's a good problem to have, but a lot of times they might get to a point where they have to make some decisions on who they let in and who they leave off a cap table. This happens a lot more common, I think, than founders think. It's not because you might be vastly oversubscribed because you have, you know, $5 million you're raising and there's 50 million interest. It's like you have, you know, half a million dollars more than you need and you kind of have to start picking and choosing a little bit. What advice would you give to founders on maybe what

​

they should be looking at with some of these funds and maybe what they shouldn't be looking at necessarily when making those final selections for their cap table.

​

Leo (29:02)

I think there's a bunch of things worth looking at and evaluating and it just helps you prioritize investors a little more. Maybe one thing I'll say is a lot of this stuff is negotiable.

​

so, you know, maybe like you have five investors that each want a million dollar allocation and you only have like 4 million in room. Like you might have to kick one out or maybe they're all willing to do 800 K. Right. So you should like explore some of these options as you're, as you're like figure out how to structure your round. but you know, think rapport with the investor is important. you know, cause a lot of times people are like, like what's the value add and like, you know, what's the check size. like, if you really don't like the person that's like, that's a big factor. If you do like them, that's also a good factor. Cause maybe you'll actually

​

want

​

to spend more time with them, they'll like, they'll help you more. I think that's a good like two way street. I think ideally they could help in some way. could be fundraising, could be their network, it could be customer intros or anything else, but like, you know, ideally they're not like just like a passive check. and then if they're not a passive check, ideally they're also complimentary to the rest of the syndicate. Right. So you have a bunch of investors. In my opinion, like what you want is like complimentary skills and value add. So you don't want like, you know, I have a robotics business. I just got six robotics funds on the cap table.

​

It's like well, like maybe like the first one or two are gonna help me a lot and the next three or four are more redundant in terms of where they can help and so maybe it's better to have a fund that like really knows go to market or really has like like we want to sell to like hotels and this fund has a ton of hotel and like real estate connection so I think you want to like try to structure your syndicate to like help your company the most. And maybe the last one is like I do think stage appropriate funds are better. I'm obviously biased because like all the single stage funds think that and all the multi-stage funds will tell you like multi-stage is better.

​

But I do think there's a lot of risk from taking money from bigger funds, especially if they don't do your next round and it's sort of a bad signal to the market. So I'm personally a big proponent of state-specific funds.

​

Mat Vogels (30:48)

I think that's

​

true. And the one mistake I always see founders make is like, but you know, this large tier one gave me a check. It means that it'll be easier to raise the next round. It's not that it's not true, but it's not, that shouldn't be the reason why you do it. And if you execute at a high level, the humbuzz of the world, all these early stage funds.

​

have direct act, have great connections to big funds that will certainly lead your rounds. If you do the work and do a good job, there's plenty of opportunity. You don't have to take a multi-stage fund check because you're gonna look at that as a way to secure a seed or a series A and go from there. So let's say they've,

​

Leo (31:22)

Yep. Yeah. I actually, hadn't thought about this before, like as a way to

​

frame it, but so our seed to series a graduation rates, like 65, 70%, um, which is like a pretty good rate, like basically about two thirds of the companies like raise a seed or raise a, but if I look at the ones that, know, they have like a multi-stage on their seed, maybe like,

​

Mat Vogels (31:34)

That is, yeah.

​

Leo (31:44)

15 % of the time, that's the fund that led their A. Right? So it's sort of like, you know, we in general, or like, you you being a great company and like us, like, you know, being lucky enough to work with you, like we can help you find a great Series A investor, but it's actually more likely not going to be the multi-stage fund that did your seed round. And additionally, like them not doing your Series A is going to make it harder for you to like raise a Series A from everyone else. Cause they're going to wonder like, you know, why isn't the insider doing anything?

​

Mat Vogels (32:10)

that happens all the time where it's like, you know, not to pick on like a Sequoia or Andreessen, but they led your pre-seed and they're not involved in your seed. It could be a negative signal for sure. agreed. All right. Let's say they've closed the round. Everybody's happy. Everything's good. It lasts for a minute before the real work kind of starts. But let's talk specifically with Humbo. What does that relationship look like with the companies after you invest in that relationship going forward?

​

Leo (32:37)

Yeah, in our case, try to, we want to be helpful, but not get in the way. So usually we try to do a half hour catch up call with every CEO, like once a month. Um, and then we're available outside of that. If anything ever comes up, that's like time sensitive or urgent, or you just want to like feedback on something between calls, like it's not, it's not just during the calls that you can chat with us. Um, but I think that monthly cadence is pretty good because we can get a couple of minute update on like what happened since last month. And if there's, you know, questions or challenges or other things that somebody wants to think through, like we can help them out. And if we can't help them out, we'll try to.

​

sure you'll us a video.

​

Mat Vogels (33:08)

Are there any common mistakes that you see founders make immediately after they close their rounds and then maybe the following few months after?

​

Leo (33:15)

Well, I'd say like maybe I'll flag two. One is like not managing spending well. And usually that means, you know, it's kind of like.

​

obvious, but like either overspending or underspending. cause especially if you've been lean up to now, like either you raise a bunch of money, but like, even though you have the money, you're not using it like as a weapon, right? You're just like still in, you know, like really lean mode or you go the other way, which like we've been lean so long, we finally have money, like let's go buy a bunch of stuff. And that's also usually a mistake. So you want to like manage spend carefully, like ramp it up, but like not, not in a crazy speed. And that's something I think investors can give good feedback on. so I would say like, that's probably one big thing that's short term.

​

like that starts pretty early after around. the one that's longer term is I would say like not doing investor updates or some cadence of, you know, like telling investors what's going on. I think that ends up being a mistake where if things go great, then fine. but if things like, not even if things go bad, if things are going decent, but you need some help, but like nobody knows what's going on for like a year and a half, like, know, just like it ends up kind of hurting your company. Cause like people can't help you that much. And then also if you're doing regular updates, even if you're like doing

​

like people appreciate the communication, they're more likely to give you a bridge round, or if you're doing great, they're gonna mention you to all their friends, because they hear every month how great you're doing, and then like, you know, the next round of investors will like have you on the radar sooner, and if you don't do that, like I think you're just kind of missing a really easy opportunity, you know, to like to help your company.

​

Mat Vogels (34:37)

Yeah, if things are going well, sharing that good news just helps everything. If things aren't going well, to your point, you need to be able to articulate those and talk about it because you're on their side too. I think that's the other mistake is founders think of VCs oftentimes like their bosses and you know, it's usually meant to be the other way around, but we're there to help you and want to help you. We're tied to your success. And I think smaller funds more, more specifically, like I think that if you are a smaller fund, every check matters that little bit more.

​

and we want to make sure that you succeed for sure.

​

Leo (35:09)

Yeah, I think that's actually where like the multi-stage conversations comes into play. Cause I think emotionally, like all of your investors want you to succeed. Right. But in terms of their stake in the company relative to their fund, you know, like I think there's a different alignment of incentives. Cause like the multi-stage fund, maybe they invested a million at your seed because they want to do 20 at your A. And that's like a little bit harder to be transparent with them. Right. Cause you might be like, well, if I tell them about a hairy problem, they'll help you with the hairy problem, but they also won't do 20 million now.

​

because they're anxious. But with a smaller seed or pre-seed fund, it's kind of the opposite where most of their check is usually in that first round. They're kind of like, if you get diluted or do well or do poorly, they get diluted or do well or do poorly. And so I think it's much easier to get advice from them because they're not trying to see if they want to do 20 million in the next round. They don't have 20 million. They just want to help and get you in the best place possible.

​

Mat Vogels (36:01)

Absolutely. All

​

right, last question here. What are some of the common pitfalls you see founders make that ultimately lead to the startup itself failing? Obviously, most startups don't fail. They kind of normalize failure a little bit there. But what are some of the big reasons why you see that happen?

​

Leo (36:15)

I would say like poor hiring and firing is a big one.

​

You know, like I would say like poor hiring is less common. Like most people have like a good bar, but sometimes you make mistakes. And I think poor firing is like one that hurts a lot. Cause you have someone in a key role. Like you hope they would be an A, they really would be minus, but like, you're like, well, maybe if I just give them six months, like it will be a B plus. Sometimes they will, but a lot of times they won't. And you still actually should have tried to get an A. and I think those are tough because you spend a lot of time and cycles and like frustration and you know, usually it doesn't work out without person anyways.

​

But in the meantime, like whatever pivotal thing they were supposed to do is like not getting done or not getting done well. So I think, I think like not, not firing fast when you know you should let go of a person because it's not a good fit. I think that's a big mistake that can, you know, over time, like that really like erodes companies in terms of, you know, it hurts your runway, it hurts your progress or hurts your rate of progress. Yeah. I think that's probably like one of the biggest ones I've seen. It's just like not, not being fired but you've never done it.

​

Mat Vogels (37:09)

And it's especially important early on because you typically are hiring

​

these people into like director level roles. And if they aren't doing those roles, it's the awkward moment of having to like hire somebody over that person that was like meant to be leading those things. So avoid that by hiring the right people when you can. All right, Leo, yeah. Yeah.

​

Leo (37:15)

Yeah.

​

Yeah.

​

Well, a lot of times these are like single points of failure too, right? Cause you're not like,

​

if Google hires a bad engineer, like they have 50,000 good engineers or whatever, like it's not going to make a rake them. But if you're like, Hey, I'm like building a hardware product. There's a hardware person, a software person, and like a electrical person. And I hired a bad electrical person. Like, well, now it doesn't matter that the software person, the mechanical person are good. Like your product's not going to work. Right? So it's like the roles end up being really pivotal in the early days.

​

Mat Vogels (37:51)

Yeah, and the quicker that you can identify those is important. So, Leo, awesome. Thank you so much for doing this. Any last things that maybe we didn't cover, pieces of advice for fundraising founders to leave with?

​

Leo (38:03)

I think we covered a bunch of stuff. think it was a really good, chat.

​

Mat Vogels (38:04)

We covered a lot. We covered a lot. There's a lot of pieces in there.

​

All right, any place where people can continue to follow Humba, you, best place to find you online.

​

Leo (38:15)

Um, let's see. Well, uh, on Twitter, I'm less active these days, I'll pull events. My first initial last name, uh, I'm Leo at Humbaventures.com. And then we have a good blog where we like cover founder stories and deep tech industries. That's a, uh, I think it's blog.humbaventures.com.

​

Mat Vogels (38:28)

You really do, yeah.

​

We'll link them all in the show notes anyway, so that's perfect. Leo, appreciate it. We're recording this on a Friday afternoon, so hopefully you have a good weekend, and we'll chat again soon. Bye.

​

Leo (38:44)

Thanks, you too Matt. Bye.