Venture Capital Do's and Don'ts

Venture Capital Do's and Don'ts

Check out the latest episode below. Mr.Biz Radio provides business owners with the knowledge and insights needed to drive their companies forward.

Mr. Biz Radio: Venture Capital Do's and Don'ts

Unedited transcription of the show is included below:


Welcome to Mr. Biz Radio BizTalk for biz owners during the next half hour, Mr. Biz, Ken Wentworth, a leading business adviser, and two time bestselling author we'll cover topics that will help business owners run their companies more profitably and more efficiently. If you're ready to stop faking the funk and take your business onward and upward, this show is for you. And now here's Mr. Biz, Ken Wentworth.


All right, welcome to another episode of Mr. Biz Radio with me, Mr. Biz, Ken Wentworth in this week. We have another treat for you. We have someone who was going to talk to us about a topic that is something that you guys bring up to me fairly often. And honestly, we've been a little bit lax. I've been a little bit lax, I should say, in, in talking about the topic and the topic is venture capital. So we're going to talk to someone who's an expert in the field, not only as an expert in the field, but is a, a a in the vast minority in this male dominated field, she is a female powerhouse in the venture capital space. Our guests this week on Mr. Biz radio is one of them. Diane Yoo, who's venture capitalist, and she's found her partner at parliament ventures. Diane, welcome to Mr. Biz radio. Hi,


Ken. Great to finally meet you here


Today. Yeah, yeah, absolutely. So so I guess let's just get started. We typically do, you know, talk to us about your entrepreneurial journey. I know you went to rice university but talk to us about your, your overall entrepreneurial journey.


Absolutely. So I started almost a decade ago. I actually started in restaurants and started my own firm broke even within six months and native multimillion dollar revenue that year. Within that time, I continued to grow the company. I was on the ground, operating the company, creating operational procedures in the front house, back of the house, and then create a portfolio after that. Everything from franchising, the licensing and understanding the local to national, to international concepts on everything and food and beverage and the, from there, I had the opportunity to go into design. So I went into fashion design, climbed. The houses, went to fashion week, worked for designers. I was in the sweat house, sewing. I was sketching over 52 designs a season. And then I told them I was I was a business person, so they transferred me to the corporate side and I ended up working for luxury fashion houses on the corporate side.


And at that time, Instagram has just come out. So I, they threw, you know, they threw me in the sharks and said, we want you to figure out how to work with influencers and the whole digital marketing. And so I spearheaded digital marketing from there. I got the blessing from the boss to create my own fashion tech platform. At the time I had created a network in the fashion and lifestyle industry. I also was Miss Asia and Ms career before that. And so I had over a decade prior to that in the beauty and the fashion world. So from there firsthand understood the pain points of being an entrepreneur. As I went to hit the road show fund raising, I saw how difficult it was to fundraise for a fashion. Number one, tech number two, a platform as a woman and minority entrepreneur in Houston, Texas.


And so when I would talk to investors, fashion would go over their head in Houston, Texas, and tech would go over their head. It would ask me questions such as what is blockchain. I knew right then and there I was in the wrong room, right? And so I learned a lot. That was my entrepreneurial journey, went into get my MBA at Rice University, which is ranked number one in entrepreneurship. How the opportunity again, to work from the bottom. When I worked as a fashion designer, when I worked as an entrepreneur, I started without any money, any training and figured everything out. And then went from, into becoming a digital tech entrepreneur. Then I got into the opportunity to work in venture capital. I was told, you know, you you'll never make it. There's not enough opportunity in Houston, Texas, especially you don't have the experience or, and on top of that, I was a woman and minority, and I saw firsthand how difficult was the fundraise again, starting from the bottom, learned everything got in as an intern.


I was in my mid thirties, no pay again and worked my way up, worked for firms work for boutique firms and then had the opportunity to be the managing director of an angel fund. And from there continue to work for every area I can learn in and teach myself as I have done in this entrepreneurial journey. And then again said, I'm an entrepreneur. I'm going to do this for myself and started multiple funds. And now I've stayed at the top 1% in the U S as a woman Asian fund founder. There's not many Asian woman fund founders. There are journal partners, but not fun founders. And to, to this day we have private ventures. My previous funds, for example, men and genie, or wasn't punished for the largest medical center in the world. Tmcx the ones before that, I have many other funds for that. So that's my story today.


Interesting. So I got to ask, so how did you go from first of all, what was the, how was the transition from restaurants into fashion? I mean, that's a pretty big change.


So I was always, I was born in a family of entrepreneurs and also creatives, but I never tapped the creative. I never took an art lesson. So yes, I was an entrepreneur given that was in the food Bev industry. I wanted to take time off to tap into the creatives. It was the best decision I made because I was literally in the land of glittery, unicorns and pink, fluffy Coutts, not the business side of things. It expanded my creativity to sharpen the business side and really think outside of the box to come up with great solutions.


That's interesting because, and you know, one of the other things I see it's sounds common throughout your journey that you had so far, Diane is, is true. Entrepreneurial-Ism in that you over from scratch from zero, several times in your career and applaud your way back up to the top several times.


Yep. Yeah. And on top of that, you know, it takes a lot, and I always tell other entrepreneurs or other fund owners that I've met work want to get in the scheme, get us much experience as you can't learn everything as you can. When I used to be, I used to be a model. I used to be a runway models, five eight at age 13. Right. You get to the top of the world in beauty as well, started from the bottom. And it's that entrepreneurial heart of learning everything competitively, as much as you can and creating as much, basically, even at a young age leverage to start your own firm. Right? So for example, when I was modeling, it was about how do I beat my competition, create that stage presence and win people over, even as a model. And I made it all the way to the top and then made it was a consultant at miss universe.


And so with that in venture capital, how does that translate as an entrepreneur? Right. I see myself as an entrepreneur, even though my fund founder, it's on everything you can experience, dive into everything. I even became an LP. I'm an LP to numerous Silicon valley funds. I have over 35 personal investments, like managed funds, my expertise as spun management operations as a founding general partner and managing partner. And so through that, I'm able to, even through my own personal portfolio, I see the whole 360, I was an entrepreneur. I know how to grow and upgrade companies successfully. I w I'm now P I'm a fun founder. So I'm able to see all those aspects.


Interesting. Interesting. So we've only got about a minute left here, but I have to ask based on all your experience and your diverse experience and the success you've had, has there been, you know, one or two books out there that you've read that have really been influential to you in your career so far?


You know, there's a lot of great books. We read at a rice business school. One of them being I'd have to think of it. I'd have to get back to you, but there's I think it's called entrepreneurship 1 0 1. I'd have to get back.


Gotcha. Okay. Yeah. Well, no, that makes sense. Right. So as you're, as you said, you're delving into your creative side with restaurants and fashion, of course, and then getting into design and all that stuff coming from the modeling side and the design. And I, I can imagine that gives you a very well-rounded experience. As you mentioned, having the, the model side, the designer side restaurants, which is a super tough business. And and then getting into, you know, being a venture capitalist and learning the business side of things pretty well-rounded fascinating background. So again, this week, as we were talking with Diane Yoo, who's a founder and partner at parliament ventures. We're going to hit a break here, we'll come back. We'll give the Mr. Biz tip of the week as always. And we'll continue talking with Diane Yoo and find out a little bit more about what she does and how she helps women get a seat at the table of a male dominated field.


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All right. Welcome back to the show. And it is time has always been the second segment or the Mr. Biz tip of the week. This week's tip is a little bit of a pricing psychology 1 0 1. And a lot of you have experienced this as consumers, and maybe just never really took a step back to think about this a little bit, but a recent study, it was about two years ago, they did this study and they actually ironically enough, and I promise, I didn't choose the study just because of this, but they did it. It was a vendor who was selling cold beer on a beach at a resort destination beach. And they did some pricing testing and that was, and what they found was that summary of everything and getting to the point here is when consumers have two choices, two pricing choices.


So two price points, 80% of the time when there's two choices, 80% of the time, they will choose the higher price item. When there are three choices, you could probably guess as you're probably thinking yourself automatically, you would automatically think of the 85% of the time. So even higher, they choose the middle priced item. And for lack of a better term, and for simplicity sake, I call it the Goldilocks theory, right? So, you know, a one item is too high, too hot. One item is too cold. So th the theory behind it was when you have three price points that oftentimes consumers think of the lower lowest price as being cheap right now, that must not be that good. It's probably not good quality, et cetera, but yet the, the top one, I mean, it's a lot of the price range, a little too expensive, or too rich for my blood.


And so they kind of funnel into that middle price. And so a lot of times what you'll find, and I, I would challenge you as a consumer to think about this, especially as we were coming through the the holiday season here in the U S is, look at, look at this as a consumer, as you start to see, you'll see this play out many, many times over this holiday season. And that, you know, again, a lot of times that top, that higher price than the three options is almost a throw away. Very few will purchase it with the ideas they want to funnel you into that middle price range, as opposed to the lowest price range. So interesting stuff there, at least I found it pretty interesting. And again, it's very timely to think about this during the holiday season here, as you are purchasing gifts and things like that.


And you're out in the consumer world spending money, think about that pricing psychology 1 0 1. So that is the Mr. Biz tip of the week, this week. So now let's get back into talking to this week's guest Diane Yoo, so who again is a founder and partner at parliament ventures. So Diane, I have to ask you, cause I know, you know, a big part of your push, you know, you had mentioned obviously the venture capital world is very much male dominated, not many females in it, let alone minority females. So you, I mean, hats off to you and kudos for what you have accomplished and what you've done. So I, I've got to ask, you know, regarding the most recent announcement that Sara Blakely and selling a majority share of Spanx as a, you know, female entrepreneur building a business from, you know, using $5,000 of her own seed money to build that business up and then exiting you know, what are your thoughts on that and how do you think that's going to impact, you know, a lot of female entrepreneurs,


Hey, Ken, you know, absolutely. As soon as I saw those stories, I jumped on it and I read it and she's, it's all over the place. I love it. She's a legend, she's gifted, all employees look first-class tickets and $10,000. So, so what is she doing? Right. Look, she has creating wealth for herself. She's providing opportunity for other woman to kickstart, hopefully through that 10,000, it's not much, but at the end of the day, how does this impact entrepreneur, woman, entrepreneurs, she is wearing a opportunity for innovation. And she's a prime example of that as investors on VC side, it, it shows us that investing in areas that will impact women, right? If we were at investment being a while back, it would have created an immense opportunity for, for women, for example, FinTech, as you know, I'm part of a FinTech fund and it's women that are putting money to the table as investors to affect innovation in women's health.


So we need more of those like-minded investors to create innovation in areas that will affect women. And this is where my passion lies. And I'm very passionate about putting more women and diversity at the, even at the top executive levels, especially in finance and venture capital. Right? And so we were talking about putting more women at the seat at the table in a male dominated area. This is why I created identity and build identity in unveiled is a national media platform where we focus on Asian American woman. And how can we empower, inspire them at the top executive levels? You know, throughout my time of interviewing these women, one of the things that's a common denominator, Ken, is that they have, we go off their trouble as in woman, they get their stories out there. And one of the things I say is there's never been someone before me. There's not, there's no mentor in my industry. I am the trailblazer. I'm the one who has shattered that glass ceiling. We need to put those stories out there. And I hope to do that through identity and build and to inspire and empower other people especially Asian women in executive positions, because look, they're, they're highly educated. They're in the Ivy leagues have the experience, but the disparity and the gap drops when it comes to executive level.


Yeah, I would agree a hundred percent. And I would also say that, you know, someone like yourself you had mentioned, you know, inspirational and being inspiring to folks. You know, I would think there's a lot of, of women out there and in an Asian girls that are thinking, you know, maybe without someone like you as a role model to see that what is, what is truly out there. And as a possibility, because, you know, before, as you mentioned, you, you sort of shattered that glass ceiling. You know, there may have been other young Asian girls thinking, gosh, they were really interested in maybe being a venture capitalist, but gosh, that's just not really a field for my, you know, for, for Asian women. So they abandon it and go a different direction. So I think, you know, what you're doing is super powerful


And you hit it on the head kin and it typically we have these stereotypes that we're going to be a doctor. We're going to be a lawyer. Our parents have worked so hard to get here. We are the first generation to maybe in speak English. We're translating, I'm translating for my parents at the restaurant, right. We have to live up to this, these standards, but identity and vellum Armita Papa is here to say, let's abolish it all. Let's put stories out there. A woman have trailblazer as never before in cross multiple industries and put it out there to empower this new generation and to go after their dreams.


Yeah. Where can, where can our listeners find out more about identity unveiled?


I have check us out on Spotify. We have a website got us on Instagram. We do IgE live as well, and we love to interview more women. We have a, a white paper coming out in a book soon in the next year. We're really excited. So contact us direct messages and IgG would love to get in touch with you.


Awesome. Awesome. That is a, that is good stuff. So guys listen out there. Look, you know, anyone out there. I mean, honestly, even, even males, maybe there could be some of you guys out there listening that want to get into a field that's maybe female dominated. You know, this is the, this is a perfect example of how not to have limiting beliefs. And, and again, as Diane mentioned, don't worry about stereotypes. Don't worry about, oh gosh, there's not many males in this field. Or, you know, as a female, there's not many females in a particular field everything's possible now days, especially with the global economy, as things become more and more diverse and diversity is where it's at. I mean, it just gives us a diversity of not only your background, gender, whatever it may be, but diversity of thought. And I think that is maybe the most critical aspect of being successful as an, as a large global organization or even a small organization, but in our global economy, that's so critically important nowadays.


So again, go out and check out As Diane mentioned on checked it on Spotify on Instagram and we'd love to hear more about that. And again, out there, you women out there that are considering some some different aspects in the business world definitely connect with Diane. She's obviously you can hear the passion in her voice about this. And again, she's helping women get a seat at the table of male dominated fields at the, at the top of the house. So definitely hit her up with that. We're going to hit a break here. We're going to come back and Diane is going to heartache some of her infinite wisdom on us, on what what do VCs look for? So as a venture capitalist herself, what do venture capitalists look for in businesses as they make investments. So come back after the break on Mr. Biz radio,


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All right, welcome back to the show. And as we always do in the third segment, as I alluded to at the end of the last segment, we are going to get some absolute knowledge bombs from our guests this week. Who's Diane Yoo again, who's the founder and partner at filament ventures. She is a venture capitalist. She has been a venture capitalist for quite some time. Now. you've heard about her background, you know, her, all of the different things that she's done and all the different funds that she's been involved in. And so I thought it would be really valuable for all of us out there to think about, you know, as you might be a startup and thinking about funding and different funding options, there are obviously VC venture capital is one of those. And so I thought it would be very, very good for all of us to hear, frankly, from an expert in the field, such as Diane of what do venture capitalists really look for. I mean, there's some obvious things out there that, you know, right. But, but I wanted to kind of peel back the onion a little bit and pick Diane's brain with that. So Diana, if you would give us, give us some things that as a venture capitalist, you look for when considering an investment in a business.


Yeah, absolutely can. So there are numerous things we can look for. This is a fun parcel. Let's get into it. You know, one of the first things I look for is I place a high priority on the leadership soft skills or the founder, right? For example, does a founder have empathy, humility? You know, what type of intellectual curiosity and gratitude, right, is the entrepreneur coachable. They teach us that at business school, right? And one of the greatest pieces of bias as a, as a VC mentor told me one time or so watch out for those uncoachable founders. And I've talked, I talk with entrepreneurs day in and day out. I have probably 60 of my inbox right now that I have not come back to. Right. And honestly, Ken it's when we're in due diligence, Hey, we pick them. We were in due diligence.


And then we talked to them and we find out, Hey, they're lying. They're red flags just like dating. When these founders are lying or they become uncoachable, what does that lead to potential litigation? Right? It could be the detriment to the fund. If, if the type of litigation happens, they don't adhere to the advice of the board or the venture partners. And Ken check this out. For example, my mentor, he suffered $150 million, right? $150 million lawsuit at the hands of an arrogant nodal, all entrepreneur, suddenly, firstly, let's move right into the second, right. Is a team. Right? So I look at the thunder and I look at the team. I consult a lot of entrepreneurs. Believe me. I say, look at the founder. And I say, how have you built the team? If I already give you a million dollars today, would you be able to scale and operate quickly?


You have everything in place. If it's a one or two man team, I tend to turn them away. Sorry. Second thing is, you look at the team in order to whittle down just thousands of investment opportunities. It's crucial that they have the right management team because Ken there's really a plethora of ideas, but the team is what rates of best chance with their collective expertise to bring the right product to scale and market. Let's move on to the third. The third is crucial to its exits, right? I'm the official partner actually can to create a government agency Kotara. And they send me, you know, 700 deals, sometime a thousand deals on a yearly basis. So I have to bet deals pretty quickly here, right? And one of the things is, and it takes a lot of quick intuition. I've done this so many times.


It's what is the founder's track record and operational history? Have they had an exit before, if they had great pay, that's a huge bonus on the chuckles these, and I'm giving you the secret sauce for all the entrepreneurs listening out there. We have a checklist that is called a scorecard, and I'm giving you that secret sauce to what we look for so that you can score higher. When you come across a venture capitalist investor, before thing is, who's your investor history, who else is in the pie here? We want to know how credible your other investors are or not. Right. And for, or the flip is that w we see a deal or a VC, for example, a VC can come just say, Hey, you want to come in on this deal? And they're a trusted partner. They have credible, obviously a fund, and we've worked with them or they have a great brand.


So that's another thing, right? Co-Investment opportunities. Or we do a lot of that. And, and that can really speed up the vetting and due diligence processes. As, for example, for, with another billion dollar fund, they have a huge team that can do vetting and due diligence and the fifth. And the last thing is resilience can, it's really crucial that the founder have just an uncanny ability to think swiftly outside the box, navigate hurdles, especially during these COVID times and ultimately grow a very, very sustainable company. So it's, it really is on the crux of the founder's ability to adapt dynamically that will give them an edge, regardless of any economic anniversaries that we have.


Well, I look, I love lists, and there's so many things that you mentioned, Diane, that honestly hit home for me as a, as a, as a fractional CFO and business strategist consultant, working with a lot of entrepreneurs and business owners, myself, you know, the coachability part is just absolutely huge. I learned this, I learned this the hard way myself. When I first started, after I left the corporate world and left JP Morgan and started my own business. And, you know, it was looking for clients and that coachability part, you know, someone who is an owner who is doing what I call it, I call it fake in the font, right? Say, they're telling me, Hey, I need your help. And like, they may be saying to a venture capitalist, such as yourself, Hey, we need some investment. We need your help, but they really aren't coachable.


And they think they know it all, and they aren't going to implement what you suggest to them. And you may have a lot more experience than them in it. And you know, it just makes it a very difficult situation, especially on your side of things where, you know, there's an investment involved. And it's not just that you're playing, you know you, you know, for, for, for all intents and purposes, your role Diane is you're kind of like a shark on shark tank, right. You're making an investment in a business and you're helping that business grow and, and et cetera. And if they're not coachable, gosh, that's gotta be super frustrating.


Absolutely. You're right. We are the sharks in the shark tank. And I was writing an article about this the other day. Can you know how to negotiate with a venture capitalist, right. That's another great topic. We I'm sure we could spend another 10 minutes on talking, but I'll tell you, you know, some quick tips real quick on that as we have we're wrapping up here is when, when you're, when an entrepreneur pitches to a venture capitalist, sometimes they they're like, you know, they're not giving me the best valuation I'm going to walk away. And they think it's all about the money and about the capital stop right there. It's not about the money. It's actually an it's, what can they provide? And we call it smart investors, quote, unquote, smart investors. What is their network? Do they have a previous track record of exits in that industry? And how can I get my company to grow an exit as fast as they can. They might have given me a lower valuation or less capital, but boy, golly, they provide an immense opportunity for me to get fast-tracked. And so when you're going in to negotiate with the charts, think about that,


Diane, look, that is, I'm glad you mentioned that that is absolutely spot on. And I see it on shark tank. I'm sure anyone, you know, a lot of our listeners, I'm sure watch shark tank and you see that sometimes I'm watching the TV thinking, oh my gosh, like the thing that you're missing Mr. Or Mrs. Business owner is what this shark can provide. Right? As you mentioned, who cares, if it's a lower valuation, don't let your ego get in the way when it's someone who can absolutely fill in the gap. You know, I always talk about if, if there are eight different aspects of business to be successful in your business, and you have six of them between you and your team, and those two that you're missing, if you can find a resource to fill in those two, the cumulative impact is just absolutely crazy of how, as you mentioned, how fast you can grow and scale, when you fill in those last two holes and your eight out of eight, the growth is just exponential. That's right.


So, so much preneurs. As we see on shark tank, they get caught up in driving that bottom line. You know, listen to what I'm saying. I'm trying to get my deal close here. That may not be the right approach. Right. And they're caught up in the negotiation negotiation aspect rather than seeing the big picture of, Hey, this invest can bring a lot to the table here and you see them walking away from the deal, right?


Yeah. Yeah. It's crazy. It's absolutely crazy. So Diane look, unfortunately we're out of time, but I so much appreciate you coming on the show. You helped a tremendous amount. I know I learned a lot myself. I was scribbling away as what, there were a couple pauses in there. I was scribbling away notes myself. But definitely go out and check out Diane, thank you so much for coming on the show. I really appreciate it. All right, guys. Well, thanks for listening as always thanks to Diane Yoo, our guest this week. Have a great week and don't forget as always cash flow is king.


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