Ask Me Anything with Entrepreneur & Venture Capitalist, Evan Tana

Transparent Collective is a non-profit that gives Black, Latinx, and women founders access to resources and connections to build successful tech companies. To date, we have helped 50 plus companies raise over $40 million in funding (and we’re just getting started!).

We are dedicated to increasing exposure and access to Silicon Valley for underrepresented founders, and we love hosting events that pull back the curtain on how the entire process works.

In our most monthly Ask Me Anything (AMA) event, we had the privilege of speaking with entrepreneur and venture capitalist, Evan Tana.

Evan Tana is a Founding General Partner of 122 West Ventures, a pre-seed venture capital firm focused on being a founding team’s first lead check and closest partner from inception through the seed. He has been fortunate enough to partner with companies such as Patreon, Shift, Zenly, RunTheWorld, and Material Security, among others.

Evan received his Bachelor’s and Master’s degree in Management Science & Engineering from Stanford University. He began his career at Digital Chocolate, a publisher of mobile games, and Loopt, an early YCombinator startup that launched a ground-breaking social mapping service that was one of the very first apps featured prominently by Apple. In 2009, Evan was part of the founding team at shopkick. He served as Vice President of Product Management until 2012 before joining Greylock Partners as an Entrepreneur in Residence. In 2013, he founded Sparks Mobile, a startup with the mission of connecting people through their common interests and shared storylines. Sparks Mobile was acquired by Dropbox in 2016. Evan led a number of new product initiatives at Dropbox from 2016 to 2018.

Evan opened up and shared with us some of his most important advice for early stage founders looking to raise their own seed. To begin with, he encourages every founder, and even himself, to be able to answer the three “why” questions before looking for investors or investing — why you, why now, and why us?

“For why you, what specific insight or experience do you bring that gives you an inside edge and makes you the right person to build this product. Why now? Timing with startups is everything. Why is this the moment? What’s changed in the market to make your product or software necessary? Why us? This is more of a question for the founder of the business. We want to be convinced that we are the best fit for you.”

Evan also explained how important it is for companies to be able to answer the question “why later?” This is more crucial than ever in regards to the events of 2020. “When the dust settles, is there still an opportunity there? When things retract back to some level of normalcy, that thesis may not hold up,” Evan said.

If you are able to successfully answer these questions and receive early funding in pre-seed, Evan stresses that it’s crucial to invest in the product and the core team.

“It’s a big shift. People don’t realize the amount of time and patience it takes to bring on great people. You need those first two critical hires.”

Building on the “why” questions, we asked Evan about what kind of traction he is looking for in pre-seed companies and if there are some baseline ideas of where he’d like someone to be before he can evaluate.

Evan responded, “When it comes to traction, what I tell founders is that traction is more of a demonstration of any one of those why questions. Oftentimes, the product that we invest in is not going to be the product you end up building. But the product that we seed today (if you’ve made progress there) is an indication of how you think. It’s a demonstration of how you understand the problem then craft the solution. I think as a pre-seed investor, that’s really more of the data that we need to look at versus do you have all the answers.”

Now for the good stuff. Even shared with us three of his investment theses that help him decide whether or not to invest in a company:

• Distance X. Services that are being accelerated toward remote delivery.
• Digitizing old industries. He’s attracted to the un-sexy and likes investing in products that focus on things that are overlooked, but necessary.
• Work smarter and better. Most enterprises have the first order of tools in place, but fundamentally they’re not as efficient as they should be. He looks for tools and services that help teams work smarter and better.

While Evan provided great insight into how pre-seed investors think and what they look for in a deal and businesses, he also shared what founders and start-ups should be thinking about and prepared for when coming to pre-seed firms like his.

“Don’t fool yourself into thinking you’re a company… People think once they raise money they have to both themselves with everything that companies have to do. We try to prevent people from getting distracted because they have a little bit of capital. Keep operating with your northstar being fundamentally making sure you validate there’s a problem and build a solution… Invest a fair bit of time in building out that core team,” Evan said.

That being said, 122 West Ventures will often meet with founders before they’ve even committed to building their company full time. “I don’t think there’s been an example where we’ve written a check when they still have a job, but we will work with people when the idea is percolating and try to workshop it, see if there’s an opportunity there.”

At the end of the day, Evan encourages early stage founders to do their homework upfront to learn who has previously invested in their space, increasing the likelihood that there will be an appetite for what they’re selling, and to keep at it. When working with 122 West Ventures, they are there to support their companies all hours of the day. It’s not an easy road for both parties, but it’s a rewarding one.

For a full recap of the conversation see below:

James Norman:

Today we’re going to be talking with Evan Tana from 122 West Ventures. I think we recently connected maybe even just this year. I’m not even sure if we’ve actually met in person. But he’s been a great resource and very helpful, and so we thought it would be good to do an ask me anything situation with him.

James Norman:

We’re not wildly promoting these things. We want it to be a close enough audience that people can shoot questions back and forth and really derive some value from the conversation. So before we kick off and let Evan lean in on some things, I’m going to give him a little illustrious intro.

James Norman:

Evan’s an entrepreneur turned VC and he’s the GP of 122, and it’s a pre-seed firm focused on being a foundation for teams with a first leading check and helping to close the gap into the seed. And he’s been fortunate enough to partner with companies such as Patreon, Shift, Run The World, and many more.

James Norman:

Evan began his career at Digital Chocolate, a publisher for mobile games, and Loopt, which is a early YC company that had a lot of groundbreaking work around social mapping. In 2009, he was part of the founding team of Shopkick. He started as VP of Product Management there to 2012, before joining Greylock Partners as an EIR, and in 2013, he funded Sparks Mobile, a startup with a mission of connecting people through their common interest and shared storylines, and then finally that was acquired by Dropbox, which is funny because Drew is one of my good friends and he was on the acquisition spree around then.

Evan Tana:

That was the tail end of that spree.

James Norman:

He slid right in there and he led a number of new products at Dropbox. So he’s done his Stanford thing. He’s done his startup thing. And lives in the city now with his wife, daughter, and son. And maybe you’d be I am legend over there, I mean, San Francisco is getting emptied out.

James Norman:

With that, I’m happy to quickly pass it to you to talk a little bit more about 122 West, and then from there I’ll just kick it off a couple of questions to move things along.

Evan Tana:

Cool. Thanks for the intro, James, and thanks for hosting me. I was looking forward to this on my calendar. Just to round out the personal side of things. I was born and raised in San Francisco, so I have no choice to be the I am legend. My whole family’s here and it’s been home since birth. So however it’ll change, I’ll probably still be here.

Evan Tana:

I got the door locked, so we won’t get any surprise visits from my kids, but it’s very 2020 style that we’re actually all here, all on Zoom together.

Evan Tana:

A little bit about 122 West. We’re three years old. First fund was a $8 million fund where we wrote 100K checks in the pre-seed and seed companies. Toward the tail end we saw that there was an opportunity to step into being the lead on pre-seed rounds. More often than not, we found there are a lot of great founders out there who you would speak to who are trying to raise 750 or a million to get going, and you’d find that there was interest in maybe 300K that had been soft circled, but everybody was waiting for the lead. So who’s going to be that lead?

Evan Tana:

It really just spoke to the under supply of full-time convicted investors who were willing to make that leap early, so we started to step into that role in fund one where checks got a little bit bigger, 150, 200, 300, but moreover, we’re willing to be the first to sign and wire and help people get these rounds together.

Evan Tana:

Earlier this year, we raised a $35 million fund to double down on that strategy of being a lead for founders at the very, very beginning. Pre-seed for us, it’s arbitrary, but for us it’s founders raising less than a million, and so we’ve been at it for the year. We’ve made four investments. Our focus is we are software investors, And what I tell people is there are two dimensions that we feel like are a good fit for us, if it’s a to go-to-market playbook that we are familiar with and feel like we can add value to and it fits a market thesis of ours, then we obviously get really excited and convince ourselves that we’re a good partners.

Evan Tana:

On the go-to-market side, it’s B2B SaaS marketplaces and communities and networks and broad strokes, that’s the playbook, and then there are six larger market theses that we’re excited about, which I’m happy to speak to if there’s interest in the AMA, but we really evaluate our fit for a founder on those two dimensions.

James Norman:

Cool. So I’m sure you’ve had your thesis, you’ve been running with it, you’ve been doing it for multiple years, but this year is quite different than others, and so I’d be curious to see how some of your positions have shift around your thesis and where your primary focuses right now considering our first real AMA was near the beginning of the whole shelter in place, and at that time it was like, founders become concerned with your cash. Hold on. Some VCs were like, we’re just going to hold back for a little bit, but now that people realize this is a way of life for some period of time, I’m curious what shifts you’ve seen and what do you feel like the environment is like now, and how you guys are leaning into it?

Evan Tana:

A couple of points there. I mean, I think everybody’s been surprised at how the early stage market has held up.remembering back to March, which feels like, god, 10 years ago with everything that’s happened this year, people were pretty worried that it was just going to be nuclear winter. Downstream investors weren’t going to be following and everything would dry up.

Evan Tana:

I think what we saw was that certain categories were certainly hard hit, hospitality, anything brick and mortar, travel, but there were some categories where it was huge tailwind and it just underscored the why now in your slide, and that was remote work, SaaS, there’s been a resurgence of consumer and social network, and so what we’ve seen in the market is that if you’re in the right category, things are almost as frothy as ever, they’re almost at 2019 levels in terms of people raising their seed in series A well out ahead of… I don’t want to say where they should, but they’re giving the benefit of the doubt because the business isn’t that far along yet.

Evan Tana:

I think one point is surprise, and it’s definitely true that when everything was happening in February and March, the message was conserve, survive. Just on a call with a close collaborator of ours who runs a seed fund and she was joking that she forgot to update the memo because she told everybody conserve, survive, and then three months later, one of the founders came back and was like, “Wait, everybody’s raising boatloads of cash at our competitors, are we still supposed to conserve and survive?” And she’s like, “Wait, I forgot to pass the memo out.”No, if you’re in the right category, step on the gas.

Evan Tana:

To answer, I think, the first part of the question, what’s changed or haven’t changed, to be honest we were always excited, and I should, I mean it’s a good opportunity if you don’t mind just putting I our chat where you’re Zooming in from, that’s helpful. I like knowing that. But we always had this thesis that we were going to invest in founders outside of the Bay area. We feel like there are a lot of reasons that this isn’t the best place to do it. Cost of living, competitive for talent, and so we had already partnered with founders in secondary markets. That hasn’t changed, it’s probably only accelerated, and now it doesn’t seem special because everybody’s doing it via Zoom.

Evan Tana:

Then in terms of our market theses, I don’t think we’ve had a huge shift. Certainly we’ve done a handful more in the theme of distance X, which is just this acceleration of delivery of remote services. But we always had a belief in that. I think, as I mentioned, 2020 has just punctuated a little more of the why now, but yeah, the big thing is just it’s not how I saw the year going in terms of the early stage market.

James Norman:

I know. I completely agree. And from the standpoint of when you’re talking about the why now slides, when we did our most recent cohort for Transparent Collective, it was crazy. It was like someone had called everybody and was like, “Yo, did you put a why now slide in there? We didn’t tell them to do that.” It’s a real, okay, well, if everybody’s going to have these, they start to lose meaning, so when you think about it, when people do have these tailwinds and whatnot, how do you look at people’s financial projections and forward thinking of their company, when they have tailwinds from a current situation that has a finite timeframe to it? How do you evaluate that? Should people lean into that why now? How can they make sure it’s not a little spark in the fire, it’s going to be long-term?

Evan Tana:

With anything, I think it’s got to be authentic and it’s got to be something you just can’t slap on there. So with the why now, one, you have to believe it, and then two, you have to be able to talk in some depth.

Evan Tana:

As an example, I think what a lot of investors quickly caught onto was really both pushing founders to answer the why now, but also the why later. So we may not go back to normal, but we’re not going to be in the 2020 situation forever, and there’s been a lot of good news on the vaccine front so I think 20 21 will look different. And so even for those companies that were trying to lean into this remote work, demographic shifts out of cities, it’s really understanding, well, when the dust settles, is there still an opportunity there?

Evan Tana:

We looked at a handful that were really opportunistic, but then when you push, when things retract back to some level of normalcy, that thesis may not hold up. And then there’s some investments that we’ve made where the thesis behind COVID and that acceleration has been, well, this was always latent demand. This is only accelerating it. And even when some of this goes back in person, this moment in time will open people’s eyes up to the benefits of this sense and the fact that there’s actually more, more inventory, more time and space to fill with a distance offering, and that can be a complement.

Evan Tana:

I think that’s where you really have to be careful about, and be thoughtful about, how you present that why now. It can’t just be this opportunistic, well now is the window, and you have to think past the window as well.

James Norman:

Okay. And so for those who maybe they were inspired by the pandemic and they started building a business and it is based on remote work, or wherever it might be, what kind of traction do you guys look for when you’re looking at pre-seed companies? I know you’re betting on the team and the market and the future vision, but are there some baseline ideas that you have in mind around where you’d like someone to be before you can really evaluate it?

Evan Tana:

Attraction’s an interesting one at the pre-seed because by definition we’re your earliest investors, so there’s a whole spectrum. The way I like to think about it is there’s four why’s that I need to answer for myself when I look at a deal, and I think similarly a founder would want to think thing through. And those four why’s are the broader why of the mission you’ve taken on. Why is it important? Why is it an interesting business? Why is it a big opportunity? That one’s obvious and that one we all try to answer.

Evan Tana:

There’s the why you, and that’s what specific insight/experience do you bring that gives you an inside edge? And sometimes that can be somebody who spent their whole career or their whole life experience struggling with this one problem and their life’s mission is to fix it. Or it could be an outsider who’s looking at it with fresh eyes and they have this new insight. But you really need to like, articulate the why you, and then we just spoke about the why now, and so the timing with startups is everything, so really articulating, why is this the moment? What’s changed in the market? Typically that’s either enabling technology, that’s something with consumer behavior or enterprise behavior that’s shifted, that’s causing this to be relevant.

Evan Tana:

Then lastly for us, and this is more a question for us than for the founder, it’s the why us. And so I spoke to this as, because we’re your lead we want to be convinced that we are the best fit for you. So sometimes you’ll meet a great founder who’s working in a space that honestly… I know there’s opportunity, I’m just probably not the right first call. That doesn’t answer the why us for us. I think that’s the lens that we need to look at these pre-seed opportunities.

Evan Tana:

Then when it comes to traction, what I tell founders is traction is more of a demonstration of… It’s more of a data point on any one of those questions. So oftentimes the product that we invest in is not going to be the product you end up building, but the product that we see today, if you’ve made any progress there, is an indication of how you think, it’s a demonstration of how you understand the problem and then craft the solution. It is a data point on how quickly you can build.

Evan Tana:

I think as a pre-seed investor, that’s really more of the data that we need to look at versus do you have all the answers and do your data points tell me that, because it’s just inappropriate for this stage. And I think as pre-seed investors, that’s the comfort level we like. That’s why we do it, is we’re comfortable with that.

James Norman:

With that in mind, what’s the earliest that you have invested in a company and then what drove you that conviction?

Evan Tana:

Sure. I’ll share the spectrum. We often meet people before they’ve committed to do it full-time. I don’t think there’s been an example where we’ve written a check where they still had a job. Right. But we will work with people when the idea is percolating and try to workshop it and see if there’s an opportunity there.

Evan Tana:

One of the earliest investments we made are to two recent grads, and this was out of fund one, who were really talented technically, very excited about opportunities and privacy. We didn’t love their first idea. They wanted to build a Spotify playlist X-border and we’re like, “I don’t know how big that’s going to be.” We thought they had immense talent, we thought they could navigate that idea maze, so we wrote them their first track. It ended up pivoting into an enterprise solution called Transcend, which is a consumer privacy compliance platform, so it helps enterprises like a Patreon or Indiegogo comply with venue privacy regulations. It just raised a $25 million series a from index S and Excel.

Evan Tana:

But that was really early. It was a bet on them. It was a bet on this broader space. But it was very early. We invested basically knowing we didn’t love what they were working on. The spectrum though in pre-seed is huge. So to the opposite end of that is we invested in this company called Replenish, which is building a recyclable material marketplace. The founder, Mark, bootstrapped the whole thing, had a product Built, was in market, had customers, and was, I think, at the time already doing real monthly recurring revenue. And so there’s just a wide spectrum at the pre-seed, but we’re comfortable with all of it.

James Norman:

With that in mind, being able to stretch out to that far on the spectrum, do you have an upper bounced tolerance in terms of valuation that you look at when you do something like that? Or are you really just look at the best amount of ownership of a great company?

Evan Tana:

For us, we’re a $35 million fund and so our checks are typically 500, 750K. Our primary investment is the lead around of less than a million, and we don’t have upper bounds, but most of our investments have been done at sub… They’re all done on post money safes and so they’ve been done at 7 million post money evaluation caps and below.

James Norman:

Actually I can see how that could workout while. Even if it’s a lower valuation, it’s going to convert at whatever you do the equity at, so it’s fine. And then, so moving on from there, when you are coming into the pre-seed and whatnot, and you get the money, so you had this idea, you got a little bit of stuff going on, you built it really fast, now you get the money. What do you see the most successful companies do that get that money to accelerate themselves through the seed stage and beyond? What is the next step when they get that money?

Evan Tana:

First thing is, don’t fool yourself into thinking you’re a company. Pre-seed you’re still 2, 3, 4, you’re a small team, you’re still scrappy. I think people think once they raise money, they have to bother themselves with everything that companies have to do. It’s a lot of overhead with the admin and set up and acting like a company. You’re not a company yet, and so I think that’s number one, is we try to prevent people from getting distracted because they have a little bit of capital, they have CEO next to their title now, but it’s like, no, we’re still early, we haven’t figured it out, and so keep operating with your north star being fundamentally making sure you validate that there’s a problem and build a solution. And so I think that’s number one.

Evan Tana:

The primary goal at the pre-seed is to demonstrate some semblance of product market fit, and that’s a moving target, and there’s no threshold at which you have product market fit, but you need to be able to start to build, like we talked about, data points. Well now is the time over the next 18 to 24 months to actually build data points that can back up your broader narrative, and so that’s the number one goal. It’s not to start acting like a company.

Evan Tana:

I think the companies that do it right keep that level of focus. They’re also starting to invest a fair bit of time in building out that core team, because that’s another really important measure for the next step. So its product and its core team. And I think that’s a big shift, especially for early first-time founders, is the amount of time and patience required to hire great people. And you’re not talking about bringing on tens of people, you’re talking about that one critical, two critical, hires.

Evan Tana:

I think that’s where we do a lot of coaching, where we find that more often than not founders don’t spend the time required because the feedback loops aren’t there. It doesn’t feel rewarding when you go up all these creeks, and generally speaking, it’s a no, or the person’s not ready. So I think that’s another area where that’s probably the biggest shift in the day to day is, okay, now you need to actually build that core team and that’s going to take time and it’s going to be a different type of investment, and it’s going to be frustrating because it’s not like talking to customers, it’s not like building product, where there’s a little more agency. You just have to invest the time and open up a bunch of doors. And most will be nos and occasionally you get lucky and you stumble on somebody who’s a perfect fit for your team. And that’s a huge accelerant.

James Norman:

Right. Cool. And speaking of teams, do you have a theory or a thesis around what a team should look like when they come to you? Have you invested in the same amount of solo founders as team founders?

Evan Tana:

Good question. We have some hard and fast rules now that we’ve done a bunch on a fun one and that’s not to say every investor has the same or should have the same, but for us what’s important is that we prefer investing in teams of two or greater, typically two or three. I think that’s a sweet spot when it’s a team that’s this party team. Five people with equal split equity, you’re like, clearly haven’t figured out the roles and responsibilities here. We shy away from solo founders. So solo founders we work with we typically will work with and then actually roll up our sleeves to try to help them bring on a co-founder before we invest. That’s a prerequisite, so that’s one requirement, as we prefer teams of two to three.

Evan Tana:

The reason for that, it’s a tough road and I think solo founders, it can be done, it’s just hard. It’s hard to have the skill set to cover all the bases, but it’s also just from a partnership perspective. I think it’s really important to have some one to walk that lonely road with you.

Evan Tana:

The other requirement for us, and look at this from the lens of if you’re building a software business, and some of you may be and some of you may not be, so this may or may not apply, but we’ve actually learned that it’s really important to have a core technical competence on that core team from the get go, because hiring can take a long time and I think sometimes if software is at the core of what you’re delivering and it’s a team that needs to go recruit a technical co-founder or outsource it, the iteration speed just isn’t there, and the name of the game is speed and duration, and so that’s another hard and fast requirement for us.

James Norman:

Well, so would you, I’m going to push it on you a little bit here, so would you consider a technical solo founder with a product? That would be higher consideration for you? Or are you still try to push them through some cycles until they could get the team together?

Evan Tana:

Yeah, I think we’d still prefer to see that they partner up. I mean, we’ve invested in companies where we started the conversation to solo founders and we loved them individually and we loved the space, and in order to unblock the investment, we put in a ton of time ahead to build out a team so that we can invest. So a technical solo co-founder, I think, is a great start because technical at your core. But some of it, I think, is a little bit of a conversation to understand… This doesn’t happen a lot, but when people prefer being solo founders, it’s really peeling back. Why is that?

James Norman:

That’s weird.

Evan Tana:

Can you not work with somebody? Do you need to be the boss? It’s like, no, you want to have a thought partner and you want to have that emotional support.

James Norman:

Yeah, no, I completely completely agree. We could talk on that for a while. I always have a little thesis around that just from the challenges for people of color to come up with teams, just through the people that surround them that lack the risk tolerance to do what they’re doing, so definitely the more you can think about tracks through which you can help those people get the teams that they want. I think, I think it can really expand your pool of, of opportunity.

Evan Tana:

That’s where we actually love… Well, what I would clarify is it’s definitely not a non-starter to talk to us. We’d love to get to know you, and, as I mentioned, that’s a path where we can help build out that team as the prerequisite.

James Norman:

As you continue to develop your sixth sense, per se, of what makes sense for you guys and doesn’t, when do you feel like, or does it ever change, because you’ve already told your LPs one thing about what you’re going to invest in. Do you ever have some strategy drift where a new category comes up and you’re like, I can’t resist, I got to throw some money into this category? How do you look out for those types of things?

Evan Tana:

I guess that’s the fine line game that we play, is we just did this fundraise and you have a thesis and you tell people what your strategy is, and then pretty quickly you have acceptance pop-up.

Evan Tana:

One example, our fourth investment was actually a co-invest, so we split the round. They were raising not one, but they ended up raising north of two, which was outside of our normal zone, but I think what a lot of people will say is venture is knowing when to break the rules, ironically, and so being thoughtful about that, knowing when that will happen, and so, yeah, we broke the rule on our normal model. I don’t think it will become the norm, but I would be surprised if it was the last co-invest we did. So that comes up.

Evan Tana:

But yeah, I mean, to your point, and I think maybe founders play this too, maybe to a lesser extent, is, especially as an emerging manager, we’re still trying to build track record, we’re still learning, is there is a tension with wanting to be consistent with what we just told our LPs we would do. And I’m like, oh wait, no, we just broke that rule.

Evan Tana:

I think a lot of them get it and they’re expecting you to learn along the way, just as we would expect a founder to learn along the way. And so you came back and six months later, you’re like, we’ve done the idea maze, we think there’s actually an adjacent opportunity here, it wouldn’t surprise us. In fact, we expect it. And so I think definitely make sure you have investors onboard who have the same expectation. The same applies for us with LPs.

James Norman:

Makes sense. All right, well, I took the first half hour to get things laid out, now open to some questions. If you have a question, feel free to just shoot a note in the chat. Happy to have you come unmute and speak, and we can take it from there. So anybody out there with the question right now?

Camilla Olson:

Hi Evan. I’m wondering about the sectors. You said that there were certain sectors that you applied in. I’d like to hear a little more about that.

Evan Tana:

Sure. Yeah, no, thanks for following up on that, Camilla. So we’ve got six market theses. I’ll share a few to give you an example, and these are things that we think we’ve struck the right balance with keeping them high level enough to have enough under the curve and that they’re not overly prescriptive, but we feel like they’re longstanding.

Evan Tana:

A couple of examples. One I mentioned was this notion of distance X, so services that are being accelerated toward remote delivery. So one of them, I’ll give you an example, out of fund two is called Groovetime. It is a distance learning platform for movement starting with dance. This is also a great example to punctuate where Kwasi, who is the founder, was a solo founder, technical, highly experienced, but we really wanted to see a team behind it so he wouldn’t walk the journey himself, so we helped him recruit that first hire, and then we led the investment.

Evan Tana:

But that’s an example of distance X. So they’re using computer vision to aid in the ability to deliver dance lessons remote. We think there’s a huge market there. We think there’s growing demand from consumers in dance and it’s just ton of cultural significance.

Evan Tana:

Another one, another category, is digitizing old industries. So we’re profoundly attracted to the unsexy and so folks who are working on things that are overlooked, but massive. So a couple of examples out of fund one, this company called Ganaz up in Seattle that is building a workforce management for agriculture, and so the thesis there was there are all these migrant workers now who actually have internet enabled phones, but they were still being called back to work with phone trees and mailers and literally putting stuff up on buildings. And so they started by building a product that helped farms, better retain and communicate with migrant workers. Very overlooked, not sexy at all, but it’s digitizing an old industry.

Evan Tana:

Another example is one that hearkens to my Dropbox days, is work smarter and better, and that’s this thesis that most enterprises now have your first order suite of tools in place, whether or not it’s they’re using Asana for project management, or they’re using the Atlassian suite for how they build, or they’re using GitHub, they’ve got all the right tooling in place, but fundamentally, and this was an observation I had while there, but also I think across the board is, we’re still not that efficient as individuals and teams.

Evan Tana:

The amazing thing about all these products is that we have an abundance of events and activity of how the work is being done, and so this work smarter and better thesis is tools or services that are sitting on top that maybe are using all the events and activity across that first wave to actually empower individuals and teams to work smarter and better, providing them with some level of intelligence and support on how to run teams better, work, et cetera. And so that’s one of our theses.

Evan Tana:

There’s three. I’m happy to go on. I can also follow up and share some of the other three, but that gives you a flavor of some of the stuff we’re looking at. And I’ll let some other folks answer questions and if there’s real interest in hearing about the other three, I can also come back to that.

Camilla Olson:

I just wanted to mention, we overlap with the last two. We’re bringing speed and analytics to the fashion designer. But are you wedded to the idea of the safe? Do you do any equity rounds?

Evan Tana:

We’re flexible. I think we ended up with fund two… That’s a good question on how we invest. So we do the standard YC post-money safe, and the reason for that was we felt like for founders it’s just a little more streamlined. I think at the pre-seed a lot of people are still incorporating, they’re still getting counsel, and there’s slightly more expense and headache with a price round. And the other benefit to founders is safes are what they call high fidelity fundraises, so you can continue to fundraise, you can increase the cap if you’ve made progress. We feel like it gives people a little more flexibility.

Evan Tana:

We do YC post-money safes. I mean, if, for whatever reason, somebody preferred a price round, we would be open to exploring that. We’ve just found that more often than not, it would be the preference to do it YC post-money safe.

James Norman:

We have one question. She was just asking, how are you meeting founders most of the time? How are your deals coming in?

Evan Tana:

A whole myriad of ways. One, trying to get out there and do things like this and meet new people and new networks. It’s one of those things where I’ve found I’ve only been doing it full-time, I was an operator before, but full-time for three years, that the networks compound, and I spend a lot of time thinking about what pools, what networks, are we not plugged in that we need to be? But the majority of everything we do is some combination of cold outreach or referral, and the referrals come in the form of just broader network that we’re trying to build, like meeting each and every one of you.

Evan Tana:

Our portfolio founders send us a lot of deals. We have a mentor network of 30 plus operators and angels, of which Rahini is one, and when folks they know who are leaving companies, or starting companies, we get to meet them. So it’s a lot of that.

Evan Tana:

I will say, as my partner and I, we love working with partner founders and supporting them, I would say we’re not the best marketers. That’s an area that funds… Doesn’t matter for you as a founder, but for fund managers being great marketers is important. I think we definitely fly below the radar and we don’t have massive Twitter followings and we want to publish more, so those are other tactics we would explore. But a lot of what we’ve done so far is network driven and also just being very deliberate about how we expand our network.

James Norman:

Cool. Let’s see what else we got here. I think we touched on this a little bit, but we’ll expand a little bit more. When you’re investing into a wide range of spaces, how are you gaining comfortability when you do lean into the new space? So if you haven’t done a bunch of investments in a particular sector, how do you gain that comfortability without that familiarity?

Evan Tana:

It’s a good question. I think the short, maybe less satisfying answer is, if we really feel out of our zone, we’re pretty upfront with founders to say, look, we just haven’t had enough reps to get comfortable here. And I think it serves two part, we don’t want to waste the founder’s time, and there’s some amount of focus on our part.

Evan Tana:

I think a new space for it to make sense for us does have to touch one of our high level theses. I’ll give you an example. We met a founder who was building a really interesting business in the gaming business, it’s not one that we are familiar with, but it was a labor marketplace for gaming, and so in some ways it was interesting to us from a thesis perspective of digitizing an industry that had been done in really an old school fashion, but it was a sector that we weren’t as familiar with, and so in that case, we did spend some time and we leaned on people in our network who knew it better.

Evan Tana:

Oftentimes we’re leaning on our portfolio, and sometimes we’ll actually try to facilitate early customer conversations, and they are two part. Maybe they turn into a customer for that startup, but we can also get perspective from a future customer.

Evan Tana:

Those are some of the tools that we’ll leverage when we feel a little bit of our depth. But I mean, the short answer, if it’s something that we just know we’re, ill-equipped, we’ll tell a founder upfront, we’re just probably not the right partner for this.

James Norman:

That makes sense. More questions? We got another one. I think geographic location wise, he might have spoke on that before you got here, they’re open to all over the country. And I think, I imagine, some, at least 30% or more of your portfolio, is outside of California.

Evan Tana:

Yeah. To give you examples, we have of companies in LA, Toronto, Seattle. Recently looked at deals in Austin, Boulder, Pittsburgh. So, yeah, we’re very geo agnostic. I think the one pitch is, even though I said the Bay area is not the best place to start a company, we still feel like having a conduit to the capital and expertise here is really important. There’s a wealth of knowledge expertise, like the folks in our mentor network, and also there’s a lot of capital here, obviously. So that’s the role we try to play for some of these out of market teams.

James Norman:

Very good. We had Danielle had a question, but I think she fell off real quick. So are there additional questions right now?

Evan Tana:

I think Carla. So if you raise your hand, Carla.

Carla Troconis:

Hi Evan. I’m Carla. Nice to meet you. I’m the co-founder of Pinwheel, we’re a film and hardware startup. And my question was, what, in your opinion and experience, are the biggest misconceptions or mistakes that you’ve seen early stage founders stumble upon or have when starting to look for investors?

Evan Tana:

When looking for investors, I think a lot of it is just like we talk about customer segmentation, it’s about investor segmentation, and it’s specifically doing homework upfront to figure out who’s invested in that space. Looking at the portfolio to try to increase likelihood that there’s appetite.

Evan Tana:

I think in your case, I think you mentioned hardware, that’s one where you have to actually do a lot of segmentation. So that’s one dimension. The other dimension is obviously stage. And depending on what stage you’re at and the round size, it’s what route do you take? Do you go find a pre-seed lead like us and then fill it out with angels? Is it a small enough amount where you’re trying to raise 250, that you should just do with angels and friends and family?

Evan Tana:

I think you can save yourself a lot of time by doing that homework. But also that’s also the first order conversation to have with mentors and your network is, hey, just help me triage this list and get smart about who I should be spending my time with.

Evan Tana:

Then for those who are out of stage, there’s the playbook where you’re actually likely to pitch them and then there’s the other where it’s, hey, can you help me? And if you present people with a, hey, can you help me, I think they’re more likely to have a conversation, even though you’re not a good fit, because then they might open up those doors.

Evan Tana:

I’m a big believer in that. Not everybody has this mentality, but I think that tech is unique in this respect, is the pay it forward, and so I think if you can go to people who you know are not in your zone, but present it in a way that’s non-threatening, or you’re not asking for too much, and it’s more of the, hey, help me, people are more than willing to brainstorm alongside with you.

Carla Troconis:

Okay. Awesome.

James Norman:

I’ll throw a couple of notes in on that, because you guys all threw a little donation in the TC bucket so I feel like I got to make a return on that. So when fundraising, he’s right in terms of sectioning out your stuff and build yourself out a spreadsheet. It’s like a CRM, it’s a sales process. So what stage are these people at in the conversations you’re in? Do they fit the specification of who you want to speak to? Do they write the type of checks that you’re looking for? Have they invested in other companies that are in a similar space? How have they helped those companies? How can they help you?

James Norman:

Then I think more recently I’ve just been more tapped into the idea of leveraging stuff like Crunchbase and whatnot to understand where they’re at in their cycle of… As entrepreneurs, we’re always looking at investors as the other side of the table, they got the money, they got the control, and that’s a fallacy that we create for ourselves.

James Norman:

A lot of these people, especially where Evan’s at, they’re startups too. And so they have to raise money. They have to make certain traction and results to continue what they’re doing. So it’s in looking at funds, finding out when did they last raise their fund, because if someone raised their fund five years ago and you ain’t seen a check happen in the past 12 months, these people are fake investors. They’re not actually out here writing checks. They’ve reached their investment horizon and they walking around hoping they can raise their next fund.

James Norman:

In the same way, if you built a product and you ain’t did shit, and then you were out for a year, you ain’t really doing nothing either. So there’s really an analog there, and so you really want to evaluate, who’s a really good capital partner. And it’s not just about getting to the money. And we all hear that, but legitimately, if you come in the room understanding how someone’s part of your story and you tell them how they’re part of your story and what you’re doing is exciting, they’re going to get behind that.

Evan Tana:

The one thing I would also add is, there is a game to be played with the fundraise, and a lot of it is timing and knowing what mode you’re in. So that’s an area we coach a lot is, there’s the coffee chat mode. Stakes are low. You’re trying to build relationships. You’re making it clear. You’re playing hard to get. You’re just like, hey, I want to get to know you. We’re not fundraising, but I want to test the waters a little bit.

Evan Tana:

But then there’s a go mode, and I think people mess this up. In the go mode you want to line everything up so that things are happening in a compressed timeframe, and so the whole trick of the go mode is you want to get one bite to then have dominoes fall, because you get so much leverage when there’s a term sheet. And it may not be the perfect partner, but you can start to play that game of, now I’ve got a term sheet, are you in, are you out?

Evan Tana:

The one thing we always coach people is that in go mode, don’t be afraid of the no, actually accelerate toward the no. Try to get investors to tell you no. Because everybody, well maybe not everybody, I’m fine telling people no, but par for the course is they try to just hang around the hoop and drag it out, and so if you can try to force people to the no, you just cross them off the list, and it’ll make you much more efficient.

Evan Tana:

I think that’s a pretty common thing is we’re all afraid of getting a decline, but in fact, a decline is success. It’s like, great, I’m not going to spend another minute and I can focus. But deliberate about that go mode. And you can really screw it up if you’ve… There might be actually a bunch of, let’s call it seven out of 10 interest, but if you spread it out over three months, you’re not going to get anything to precipitate. You get seven out of 10 interest from three people within a week, you’re going to close, and so that’s the game of it, and I think failing to get that right is huge.

James Norman:

I would say once you’re in that mode with a certain level of volume of people that you’re speaking with, you just naturally get better at what you’re doing. Your energy that comes out in those meetings, it’s not something you can recreate without doing it multiple times a day.

Carla Troconis:

Got it. Thank you guys.

James Norman:

Let’s see, any additional questions out there? Still got about 10 minutes available for those who might have something.

Evan Tana:

Covering the three other sectors. Happy to. So as I mentioned, the first three I mentioned were distance X, work smarter and better, digitizing old industries. Another one, which we actually look at a lot of deals like this is, data interoperability. It’s high level thesis, but it’s this notion that we can build better products and services if we’re allowing data from different sources that talk to each other.

Evan Tana:

Good canonical example, which recently had a huge exit, was Segment. Segment’s whole thing was data interoperability. It was being able to take all this analytics and customer data from all these different sources, normalizing it, and then allowing all these consumers of that data to use it.

Evan Tana:

We’re excited about companies that embrace that notion, and you’ll see that there’s actually some natural overlap when you talk about work smarter and better. Work smarter and better often will pair with data interoperability, where if you’re going to build a service that’s going to allow teams to be smarter, you’re likely going to be taking data and ingesting data from what’s happening in Figma and what’s happening Atlassian, and then making some sense of it. So that’s a fourth.

Evan Tana:

A fifth is web stack 2020, which is more on the tech infrastructure side, and so themes that play into that are this momentum around low-code and no-code development. JAMstack. That’s something that my partner… My partner previously ran a dev tools company, so that’s more of his focus.

Evan Tana:

Then one which we might cycle out, because honestly we just haven’t looked at much, is new cities. Which is a little further out there, but it was this, I think you’re starting to see this macro shift of migration demographic change, but also just rethinking how cities work better. We might cycle out of it because there are a few other things that pop up as more interesting and higher volume.

Evan Tana:

These theses are not written into stone, but we’ve kept them high level enough where we feel like they’re going to be longstanding for at least a couple of years, and they’ll slowly cycle as our interest shifts and obviously as the world changes.

James Norman:

Then from, once you are a locked in person who came in at the right sector, right team, and all that, how long is the process for you in terms of writing the check?

Evan Tana:

It’s just two of us, so we can move pretty quick. The way it works is typically my partner or I will do the intro, we’ll see if there’s a good fit, we’ll debrief. Then we’ll typically either have the other partner do another one-on-one or we’ll both jump on. Sometimes there’s a benefit to that, have one of us hear it for the first time straight from the horse’s mouth. And then usually we could compress follow up due diligence around the idea itself and answering those four why’s that we talked about. So the why, why you, why now, and why us, within, honestly, like a week or two, where we will like to dig in and we’ll ask for a little more detail around certain things, and it’s really more a function of understanding how you think and then how you see the space versus do you have all the answers?

Evan Tana:

I like to make that clear, there are more questions than answers at that phase. And then, because we write a lead check, we have a diligence checklist of basic things where we collect your incorporation docs, cap table, outstanding advisor agreements, standard stuff that legal will look for. That takes a little more time than writing 100K checks where there’s already a lead, but typically we can get it done in two to three weeks.

James Norman:

Once it’s done, you told us the types of things that founders should be doing during this stage, what are you doing during this stage to help the company move along?

Evan Tana:

It’s a good question. Best way to answer that for folks who really want to work with us is talking to some of the companies we’ve partnered with. But the way we describe it is we like to think of ourselves as an extension of the founding team. And both AG and I, part of why we do the stages is we’ve walked this path from zero to one many times, so from a tactic, strategic, and also just probably more importantly an emotional element, we empathize with the challenge and we understand how hard and lonely it can get.

Evan Tana:

So the ways in which we tactically help are, from day one, we introduce that company to our extended portfolio. We’ve got over 65 companies in the portfolios, so there’s community there. We set up WhatsApps between the founders and us, so literally anytime of day, any day of the week, if something comes up, people ask us, and so those can range from, “Hey, I’m trying to hire a lead engineer. What do you think of this profile?” Send us the link and I can give you a quick my reaction to whether or not this person is a good fit. Or we’re needing to jump on a call to talk through some customer feedback. I’m trying to make sense of it. And so we’ll jump on.

Evan Tana:

We also do regular, depending on where that company is, weekly, biweekly, or triweekly, working sessions where it’s really an opportunity for us to check in, but moreso for the founder to, I like to say, give us homework. And so some recent example was they’re about to launch an alpha and a pilot and so they wanted some customer introductions, so our homework was go out, reach out to our network, and see if we can make some of those introductions.

Evan Tana:

Yesterday, I was just on a call with one of our founders and she is really trying to beef up the engineering team, and I think now is at the point where she’s like, I need to get serious about this. It’s been easier for her to focus on the things she’s good at, and recruiting, it doesn’t give her the feedback loops. But she’s like, I need to help, and so she sent us an air table using a template that we’ve created, filled out with 60 candidates. I have a to do to go through the 60 candidates, provide feedback, but also see if we can help add more to it.

Evan Tana:

We really do the roll up our sleeves, but high level categories are helping you with the idea maze and customer development and product market fit. So we cover bulk of our time usually during those weekly, biweeklies, or that, there’s the hiring piece. I’ve interviewed hundreds and hired a ton, and so I’ll even jump on and do closing calls with people.

Evan Tana:

Then the third, which is more the capstone, is helping you get to that next level in terms of that seed and series A raise, and so we spend a lot of time upfront working through the narrative and then when it comes time to, as I mentioned, the go time, we make a lot of those introductions. In fact, most of our pre-seed have raised through our introductions. But we help you with that slide deck, we do the prep, we massage the relationship ahead of time for folks you’re talking to, and then we coach you through that.

Evan Tana:

Those are the three big pillars. And the fourth shadow pillar is because we’ve been founders before, we’re more than open to being that call when shit hits the fan and the times are dark. We want to be an investor you calling and you’re like, “Man, this is hard.” That’s probably where I feel like we add the most value, is that type of emotional support.

James Norman:

All right, any other final pressing question as we wrap up? If not, I’m going to give him his five minutes back because I know it can be back to back out here. So Evan, you want to put your email in here?

Evan Tana:

Yeah, sure. I should mention we’re 122 West now. We’re actually fund two. We’re rebranding, renaming, to Script Capital, so look out for that. But 122 West will work for now and even when we do that rebrand.

Evan Tana:

It’s great meeting all of you and thanks for all the thoughtful questions and feel free to reach out, happy to be helpful and if there’s opportunity to partner that’s great, and if not, pay it forward in some way and be helpful in whatever you guys are doing. So thanks for inviting me. This was fun.

James Norman:

Cool, man. No, thanks for the time. And we’ll always keep you in the loop with the future TC programming as well.

Evan Tana:

Cool. Awesome. Nice to meet all of you.