“What do VCs value in founders?” An interview with Jean Kovacs, Partner at Hillsven Capital
Jean has more than 30 years’ experience directing technology companies, and delivering exceptional results with growing enterprises. She is currently president of the Northern California Chapter of the HBS Alumni Angels, a forum for Harvard alumni to connect with, learn about, and invest in quality early-stage companies. Her resumé includes serving as CEO and Co-Founder of Comergent Technologies, and Co-Founder and EVP of Qualix Group. She was named to the Silicon Valley/San Francisco Business Journal’s list of Most Influential Women in Business and has been profiled in Fortune, The Financial Times, Computerworld, Internet World, and InfoWorld. She holds an MBA from Harvard and a BS from Northeastern University.
Can you tell me a little more about your background before venture capital?
I worked for technology companies in marketing, product marketing, customer support, sales, applications engineering, and then went to get an MBA, thinking that I was going to go to Wall Street. I ended up deciding to come out to the west coast. I worked at Sun Microsystems, which went public, and then Frame Technology, which also went public. Following that, started a company (Qualix), which we took public, then started another company, which we sold to AT&T. I was always on the operations side until I got involved in angel investing. About two years ago I joined Hillsven as a Partner.
What do you look at when you’re looking at a startup?
We typically focus on enterprise companies. We don’t do a lot of marketing of our fund. We typically look for “curated deals”, deals that comes out of an accelerator that we trust or is referred to us by someone that we trust. We’ll do two to three deals per year. We typically go in at Seed and lead the round. We put in anywhere from $500K-2M.
What about MetaData stood out from the rest of the investments you were thinking about making?
I should say that I was not with Hillsven when they invested in MetaData, so this is a little bit of hindsight on my part. One of the things we liked was that Gil started as an engineer then got his MBA and went on to be a CMO, so he actually lived the customers’ lives before he started the company. He had that domain expertise and could talk the CMO language. As he was being a CMO he was thinking, “Why hasn’t anyone developed a product like this?”
We felt he had that unique combination of business experience, domain experience, and technical experience. That experience and vision, combined with energy and tenaciousness, were the right ingredients that lead him to start MetaData.
What are your thoughts on Alchemist?
I like the Alchemist team. They seem to have a higher bar for companies going in, which also results in a higher bar for companies who are exiting.
When I talk to entrepreneurs who have gone through the program, they all universally say that it was really worthwhile. There are a lot of incubators and accelerators. That makes for a lot of noise, but I would say Alchemist is certainly in the top percentile, based upon their results.
Is there anything you’re excited about in the future?
I just think there’s a huge opportunity for what we do. We’re seeing SaaS is leading to the democratization of the enterprise. No longer are business people in enterprises beholden to huge IT departments or huge ERP vendors so that everything has to go through. It’s much more accepted now if you have an application that fits a need in an organization, to go ahead and get that and deploy it within your organization. It’s an opportunity we’re seeing for startups that we haven’t seen for a very long time.
What do you think is the number one red flag that would make you pass on an investment?
We invest very early on. Our number one priority are the founder(s). If we don’t feel good about the founder and the founding team we won’t invest no matter how hot the space is.
What makes a good founder?
First, it’s someone who can articulate a problem and has domain expertise with that problem. Second, it’s someone who can attract and build a great team. Third, the founders and especially the CEO has to be tenacious. Probably less than 10 percent of the companies that get started have an easy route creating a product, bringing it to market and growing sales. There are always ups and downs, so we need to know that that entrepreneur is so passionate that they’re going to forge ahead even when the going gets tough.
Would you be more likely to fund a very experienced team with a mediocre idea or a team of novices with an amazing idea?
It’s about the quality of domain expertise and focus. If they’re novice they have to be coachable, have energy, and be tenacious. We’d rather have someone come in and say, “I know this problem. Here’s how you solve it and here’s who I’ve talked to and here’s who I’ve sold to.” Having early traction in a company is really critical.
Which of your investments are you most proud of and why?
We’re proud of all of our investments!
Can you tell me about how you deal with cold emails and calls?
That’s a tough one. We’re so busy getting curated deals that it’s hard to answer cold emails/calls. We try to get to them, but they typically don’t get the attention that we give to curated deals.
Earlier you spoke about finding deals through references you trust. What makes a reliable reference?
In addition to a few accelerators we trust, we get deals from several sources:
1. Other investors who understand our model and know how we invest in and support our companies
2. Our CEO’s/Founders — They understand our model and we trust their insights.
3. Customers. We keep in touch with enterprises and are always talking to them about the problems they have. If they find a company who is young and helping them solve a problem, we want to talk to that company!
What separates Hillsven from other funds in the area?
We take a very active role. Typically, we lead the round, and always take a board seat. There are three partners here and we all have different skill sets. We’ve all been founders ourselves and our careers have been focused building companies, not just investing. We really spend time getting to know the company, and helping with what they need, whether they want to brainstorm on technical concepts or market fit.
When they’re getting ready to raise their Series A, we also spend time helping them and making introductions.
Bottom line: We view ourselves as partners with our investments, not solely as investors.
What do you feel like your role in the company is?
We’re there to support the CEO and the team. If the CEO comes in saying I’m really wrestling with this or that, we’ll pull in the right partner who can help. If we don’t have a partner with experience in that specific area, we all have networks that we can reach out and find someone who knows a lot more about a specific area.
What you think is the biggest indicator of failure for a startup?
If I were to sum it up, I would say believing your own bullshit. Someone who pulls together a great pitch and says, “if we build this they will come” and not really having that tie into the market and customer prospects. When you look at Gil, he was a CMO and he knows the pain that they have. We have a company called Retail Zipline, another Alchemist company. The CEO of that came out of the retail space. She knows the pain. It really is having that passion where you say, “this is an issue that my team and I can fix, and it’s a big opportunity.”
Is there any one piece of advice you would give founders that you think doesn’t get shared enough?
Do your homework. Look at the VC’s web page, talk to their portfolio companies to figure out what they focus on, get your information all lined up. Then, have the tenacity to, in a nice way, keep on top of the process.
Can you tell me about your experience as a woman in Venture Capital and any advice you’d give to young entrepreneurs and investors?
I would say right now, it’s a fantastic time to be a female in the venture and startup worlds. There’s been so much awareness in the market, that I think people are really realizing the talent pool and are going above and beyond to access it.
Do you have any advice for mothers who are trying to grapple with motherhood and their career?
It’s never going to be easy. One or the other is going to suffer and I think you just have to make peace with that. Sometimes you’re going to be more career-focused and sometimes you’re going to be more family-focused. I think as a mother you’ve got to just come to grips that you can’t be all things to all people, all the time.
About the Alchemist Accelerator
Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley — including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures / year. Learn more about applying today.