Venture Capitals are always on the lookout for startups that have innovative ideas for revolutionizing products and services. One popular industry for startups is technology. We speak with Dan Conner, a general partner at Ascend Venture Capital, to learn more about what types of companies VCs invest in and how new founders can have an edge in securing funding for their startups.
What’s your story? What excites you most about supporting and scaling companies?
I was 18 when I caught the VC bug; I had just logged in to my freshly opened investment account (established with the final paycheck from my last summer as a camp counselor) to surprisingly discover that it had grown by a tiny bit. At that moment, I was hooked – I couldn’t wait to find the next move, to plot the path ahead, to craft the right trade, to notch another step up and to the right. And not a day has since passed that I haven’t checked in on my nestlings for growth.
20 years later, having carved out a niche as a fund manager, Ascend is now getting a reputation as unicorn hunters. As venture capitalists, we readily recognize how privileged we are to be in the business of early-stage investing. Beyond the thrill of gainful employment, so many reasons propel us to the office each day in excited service of our LPs. Whether it’s diving deep on technology and letting loose the imagination to extrapolate trends into the future or keeping company with the incendiary leaders responsible for starting transformative companies, I truly couldn’t imagine doing anything else.
What are some memorable investments you have made in the past?
We’ve made three investments that have generated greater than 10x returns to date: FreightWaves, Arbol, and OXIO. All three are results of our process: maximized outbound search, optimized selection, and building ironclad relationships with the founders from day 1, which ensures our spot on the cap table in future rounds.
Like any firm, we’ve made some mistakes along the way. Early in my career, I was very bullish on a company that worked with Chinese restaurants to standardize and aggregate their ordering. But after a contact gave me a stern lecture about his views on the Asian restaurant market, I ended up passing up on it. That startup happened to be Chowbus, a Series A company that serves millions of happy customers and has now raised more than $68 million from some of the top investors in the industry. Lesson learned: no one has a monopoly on being right.
Which types of businesses do you invest in?
At Ascend, we target companies that are positioned to power the future state of an entire industry through a data-centric paradigm shift. As a micro-VC, we can’t afford to make bets in highly contested arenas, so we avoid industries with numerous, well-funded competitors in play. We have recently targeted companies in cellular data and connectivity, supply chain and logistics, Insur and FinTech, and energy systems. We typically avoid health tech, cybersecurity, and D2C or B2C companies.
We also look for startups solving problems that rank among their customers’ top 3 strategic priorities. If your hair’s on fire, I could argue that you could use a sandwich at some point, but it’s more mission-critical to offer you a fire extinguisher. This all typically translates to pre-seed/seed investments in startups founded after 2018 with less than $2 million already in the capital stack.
What are some key traits for new business founders to have?
The most successful founders I know are great storytellers. They take every opportunity to practice evangelizing about their company through conferences, interviews, pitches, and follow-up calls. Successful founders must learn to seamlessly connect the future of their company (and whatever it takes to grow) with its history and founding principles.
A strong sense of foresight is another key trait. Deep foresight takes time to cultivate, so founders must make space in their schedules to ponder their industry’s big picture and long-term arc. A great example of deep foresight is Zoom; the company set out to transform an unloved industry (videoconferencing) and was positioned to seize that opportunity when it suddenly arrived. Zoom was designed for the future, evidencing just the kind of foresight it takes to grow in the face of changing global circumstances.
Lastly, the ability to adapt is often what distinguishes successful founders. To build for adaptability, founders must design operations that approach problems systematically and can be optimized for flexibility. Also, always criticize processes, rather than people. It’s also a good idea to have several parallel strategies in place to insulate yourself from any single point of failure. The best startup founders don’t crumble in the face of adversity; they overcome it one step at a time.
How do you decide on what businesses to invest in?
Rather than putting company founders through an endless cycle of interviews, product demonstrations, and meetings that might lead nowhere, we take on the responsibility for information-gathering on our own. In fact, we don’t even speak with founders until we’re convinced a company could have significant merit. This approach isn’t only a courtesy to the people who could potentially become stewards of our money, but it’s also a response to a question that we’ve wrestled with at length: How do we reduce bias in decision-making?
We also don’t dismiss founders simply because they don’t boast a record of past successes, a vast network of potential customers and funders, rare domain expertise, or other attributes. Similarly, we won’t willingly look past strategic, competitive, or business shortcomings just because those attributes are present. After all, every one of the individuals who have those attributes were once unproven themselves, and if the firms that backed them in the beginning believed pedigree was so important, these former first-timers might never have received the funding that propelled them to success — and those firms would have failed to capitalize.
Do you have any tips on how companies can make their pitch decks compelling enough to secure funding?
Your pitch deck is not a novel. Far too many entrepreneurs overload their VC pitch deck slides with colors, pictures and an overabundance of words. For better results, force yourself to strive for fewer than six bullet points per page and six words or fewer for each bullet. Add visualizations, if necessary, but never exceed 36 words as part of your bulleted points.
In most cases, VCs spend less than four minutes looking at pitch decks, so keeping your deck short keeps VCs actively listening to what you have to say. Try not to exceed 15-20 slides.
Finally, invest in professional VC pitch deck design. Think of it this way: It might cost you more than $1,000, but the money you spend on the pitch deck design can produce untold returns if a VC is moved to contact you after seeing it.
Any advice you can give to young entrepreneurs?
Your choice of venture capital partners is more important than you think. Money isn’t the only factor in ensuring success, after all. The most exemplary venture capital partners will provide assists that could prove invaluable when sourcing leads, hires, and resources and when navigating the many obstacles on the startup path.
Before you select a VC to partner with, it’s a good idea to vet their expectations in an investment partnership. Be sure you’re in agreement on what their contribution will be after making the investment. Otherwise, you might find yourself with a silent partner despite big talk about involvement prior to their investment.
What are your business plans going forward?
We just launched a $25 million Opportuntiy Fund to invest in underrepresented founders. By doubling down on Black, Latinx, women, immigrant, and LGBTQIA+ founders, we can empower a new generation of leadership and help level the playing field in venture capital. Just 2.5% of venture capital dollars have been garnered by diverse founders since 2015, despite a demonstrated history of up to 63% better returns and valuation multiples. We feel that this work couldn’t be more timely.
Any other information you want your readers to know about Ascend Venture Capital?
Ascend is the world’s leading proponent of ethical venture capital practices. Our vision is a set of standard principles of ethical investing in venture capital shared by all investors. That is why we propose to establish the standard through a voluntary code of conduct. Together, the tenets of the code provide a rubric to help decide what is and isn’t acceptable conduct — the first step toward promoting professional behavior throughout the industry. The core tenets of the code are: Act ethically and with integrity, prioritize investors’ interests over personal interests, administer job obligations, act professionally and encourage professional behavior in others, strengthen the integrity of capital markets and abide by the rules that govern them, and sustain and develop professional knowledge.