On this episode of Build, Maggie sits down with Brittany Davis and Bryan Landers from Backstage Capital. Maggie’s been in product for a while, and one thing she hears over and over from her peers is that they want to start their own project. So she decided to bring in Brittany and Bryan – two VC pros who are actually out there evaluating and funding startups – to see what their advice is on what makes for a good startup.
Brittany and Bryan talk about how they evaluate and score for grit, how Backstage approaches pattern matching differently than other VCs, and how to future-proof businesses with diverse teams.
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Maggie Crowley: Welcome to Build. This is Maggie, and today I’m really excited because I’m joined by two members of the backstage capital team, Brittany Davis, the director of deal flow, and Bryan Landers, the COO. Because something I hear over and over from people in product is that they want to start their own thing. So I wanted to talk to the people who are actually out there evaluating and funding startups to see what their advice is on what makes a good startup. So Brittany and Brian, welcome to the show.
Brittany Davis: Thank you. Thanks for having us.
Bryan Landers: Thanks so much for having Maggie.
Maggie: Excited. So I want to focus on how you both evaluate startups and founders and you think about your investment strategy and an idea that we talked about before about how to future proof businesses with diverse teams. But first, can you both just tell us a little bit about backstage and the approach that you guys have as a team to investing?
Brittany: Yeah, I can start. So Backstage Capital is a VC fund and we have invested in 100 companies to date and have used about $5 million to invest across those hundred companies. And we really focus on the founders. We’re investing in what we consider the best startups that happened to be led by underrepresented founders. And a lot of people know our founding partner Arlan Hamilton, who started the fund. Back in 2015 she was just noticing the gap and the lack of funding, the lack of capital going to certain types of founders, which happened to be people kind of like her. People of color, women, LGBT founders that had great ideas. Clearly innovative, their companies could be big, but they were not getting into the right rooms to talk to VCs and not getting the capital that they needed to grow. So she started the fund and brought us on. I am on the investment team, director of deal flows. So thinking about building out our investment pipeline and constantly looking for that next investment that we make, looking for the best under represented founders.
Bryan: Hey everybody, I’m Bryan. You already said I was COO, so I guess you know that now, but in addition to what Brittany already introduced about Backstage, we also just launched a four city accelerator. Backstage accelerator is in Detroit, Philadelphia, Los Angeles and London. We are actually right in the middle of … Maggie, you caught us right in the middle of launching our accelerators. We have just introduced the backstage Los Angeles team here in the cowork space where we’re going to be having the program and next week is London, the last of the four.
Maggie: That’s super cool. Yeah, I’m really excited to hear more about sort of how you guys are structuring that and again, selfishly from a product perspective, like what your take is on that. So kind of to start there. As you think, Brittany, as you’re evaluating these investment opportunities, and then Brian, as well as you’re helping these new companies that you have invested in or that are part of the accelerator, how do you evaluate them and particularly when you look at their products, what do you look for when you’re looking at that?
Brittany: Yeah. So as I mentioned with the companies that we have invested in and that we are investing in through the accelerator, they’re quite early. So if you think about the stages of VC, we’re coming in at that pre seed level really. So typically it’s the founders, they have a really strong vision and are solving a compelling problem in a growing market. And in terms of product, it’s a bit of a range. So we’re industry agnostic so we can see some products and if it’s a consumer product can be already out with consumers and some type of early test phase, but then also work with some more, I guess resource intense companies where it might be something that they are in a research phase thinking about health companies or some other energy companies for example, that might have still some trials and R&D earlier in the product development phase.
Brittany: So that’s just to give you some context.
Brittany: But in terms of evaluating, given that stage, we’re very founder focused.
Brittany: So I feel like our team spends a lot of time getting to know the founders and we’ve structured that even in our application process when we launched accelerator, thinking very carefully about the questions that we asked each, each founder and their applications to learn about their background. And what we’re really looking for is that they’re a really strong founder solving a problem that they’re the best one to be solving.
Bryan: First of all, just want to say that Brittany is like … She didn’t talk about her background very much, but this is not the first time she’s run selection and application process for accelerators. She worked at Village Capital before tech stars, a couple of other accelerators. So she was super instrumental in just implementing how we literally do scoring for instance for the over 1800 applications that came in for Backstage Accelerator. And there’s some really wonderful things on there that I think are … It’s almost like kind of listening to just like you would instruct founders to listen to their own heart and listen to their gut and trust that, we have like a score for grit that Brittany came up with in a score for gut from the perspective of the reviewer. But grit is a big, big one.
Bryan: And what I would say to continue on with what Brittany was saying is that a lot of the backstage companies we call our portfolio companies headliners. We have a lot of on brand names that we kind of roll with the music. Music industry names. So our headliners are … They have amazing missions that are … It’s kind of like what Brittany was saying about you wake up every day and you want to make this product. It’s almost like they’re calling, and they just won’t stop until they see this thing exists in the world. And that’s the kind of focus and just energy you need to get through the challenges of launching something from nothing and especially getting to something scalable, which is what we consider startups to be.
Maggie: So yeah. How do you evaluate grit? Because I think it’s interesting, everything that I’m hearing from you guys, I’m trying to interpret. As someone who’s trying to build products, which is sort of entrepreneurship on a smaller scale in some sense, how can I learn from how you guys evaluate that as people who are going in and looking at someone who’s trying to solve a problem? So how does that manifest in someone that you’re talking to you? Like how do you evaluate for that?
Brittany: So I think of it in two ways. So one is the founder’s personal story. We want to know you. So a lot of the grit story can come from the founder’s background and their ability to tell their personal story. So I’m usually engaged just by understanding some of their background, what they’ve … Their personal circumstances, what they’ve been able to either teach themselves or get through in terms of the challenges that they’ve personally faced to build a product or to get to where they are in life. I think that’s very interesting to me to see kind of that background of grit.
But then I’m also looking for it and what they’re building currently. Like if they’re pitching a startup to me it’s about, what have you done so far? And I understand that everyone’s at a different place and it comes from different circumstances, but we’re also looking for people who can create a way out of no way. Seeing what you can do, even with limited resources is what is very attractive on that grit score.
Maggie: How important is the idea specifically that these founders have or is that something that at the stage that you’re investing in just doesn’t matter as much as the founder in the market?
Bryan: That’s a great question. This is kind of a debate in the VC world. You get some people arguing idea doesn’t matter that early, idea’s everything and that’s like all I pick. Because you’ve got to remember a lot of venture capitalists invest within a specific sector. So we do not. We’re sector agnostic. So we have everything from drones that stop bullets to beauty products and everything in between. And I would say that it’s a bit ridiculous to say that idea doesn’t matter because, I mean frankly, that’d be pretty fun, right? If you could just launch products and they all worked.
Maggie: Yeah, that would make my life easy.
Bryan: Sign me up. Right?
Bryan: But as anyone who’s tried it knows, it rarely works like that. If it does, it’s probably luck. Maybe some privilege that got you to a place where you could experiment and find that luck. But in the reality and real world, like it seems like it’s a big struggle to even come up with something people like, to find that audience, to build something that they can use. So I think it’s super important and it’s not just that. It goes so deep because imagine you’re going to spend all day, every day and it takes … What is it? Brittany probably knows better than I do, like five to 10 years for a company if it works. So you’re going to be dedicating that many years of your life to it. You’re going to have relationships that you have as long as you have your significant other in your life, for instance, and you spend more time with people at work than probably a bunch of people in your family. So to me, I don’t see how you can trivialized an idea, but also just the fact is, some ideas get really successful in some don’t. So there clearly is something to that. So does that put the whole thing to rest? Can we not argue about it anymore everybody?
Brittany: Oh my god. So I have one other thing to add. Even if it’s a great idea without the right founder, I’m out personally. But you kind of can’t do the founder without the idea because it actually shows how they think and why, how they even came up with the problem that they’re solving or that idea. So that’s just a little bit more about-
Maggie: Yeah I think that makes a ton of sense. Like that combination-
Brittany: A little bit more about how we became-
Maggie: Yeah, I think that makes a ton of sense, that combination of the founder and the idea, and how a founder might be uniquely positioned to solve for the probably that they are thinking about. But how is the way that Backstage invests different than a typical VC in terms of pattern matching? So it sounds like you guys are approaching it a different way than maybe a more traditional VC would be.
Brittany: We’ve seen how a lot of venture funds essentially look for a founder profile. Maybe they have a certain background in engineering, and then they worked at certain firms like Google, and then maybe they look a certain way. That’s how pattern matching has gotten us in this place where, essentially, a lot of capital is not going to people who don’t fit that mold.
Brittany: But clearly the world of innovation is much bigger than that, so we still pattern match, but for different things. So back to how we mentioned grit and this strong founder profile, that’s what we’re looking for. And it doesn’t fit a lot of how the pattern matching has been defined with a lot more traditional VCs that exist.
Bryan: I mean, we can just call this out too. For the longest time, VCs have been looking for Mark Zuckerbergs, right?
Bryan: It’s a bit of a loaded thing now, because of the way Facebook has played out and the current sort of climate around that, and just the sort of changing landscape of how we relate to products. Are we the products, with advertising, ad-based business. Or do we want to pay for a product, and that’s how we engage with the value that we’re getting from it. But yeah, there’s a huge section of the population that does not look like or in any way resemble Mark Zuckerberg. And that’s a good thing. And they have plenty of good ideas. Let’s talk about just gender for a second. There’s, what, 52 or 53 percent of the US population is women? You’re telling me that … What is the percentage that goes now to women, Brittany?
Brittany: Two percent.
Bryan: So two percent of VC. That’s like saying two percent of the best ideas in business for product, that’s all that’s capable of 52 percent, the majority of the population. I find that absurd, personally. So yeah, we pretty much can’t look at any of those things that I think are traditional. And the beauty of having a diverse team is you don’t have to, because when Arlen, who’s our founder, looks at a black woman who’s come through all these challenges to get to a similar place as, say, a white male counterpart, they are just 10 times as resilient. They’ve gone through so much to get there.
So we pattern match for something else, because humans are pattern matching machines. It’s part of how we survive. There’s so much data and noise coming at us all the time. We have to filter through stuff. So there’s always going to be bias, but if you have more people making decisions about who gets access to things like capital or even just opportunities, it’s going to be a much more diverse group, because they’ll look for themselves in that. So that’s why, honestly, too, the best solution is always to get people in positions of power who are also different from each other, because then you’ll sort of harness the strength of all those people for whatever it is you’re creating.
Maggie: Yeah, and I think it’s a really important topic, not just for obviously what you’re saying about the way that VC money is getting allocated, but also again thinking about when we’re building products. The idea that the world that you’re building for, and your customer base, and your user base is probably much more diverse than the team that’s building the product. And so I’m also wondering if, by founding these more diverse companies who are from different backgrounds, that the products that they build are better suited for their markets because of that perspective. So have you guys seen that as well?
Bryan: Great question. Yeah. I think it has to be stated first: this is the future. We’re heading for a time, 2040 I think is when the US population, at least, flips to majority minority. So everyone who is statistically a minority before will now be the majority of our population. So no matter what industry you’re in, no matter what kind of product you’re building, whether it’s consumer or a SaaS product or enterprise, anything, your customer base will be more diverse than, let’s say, the venture capital industry and who traditionally gets funding. So you’re kind of burying your head in the sand if you’re not at least putting forth some effort to reach that audience sooner rather than later, because by the time 2040 comes, you’ll be way late if you just start opening up to a more diverse audience then.
That’s why we actually have a thesis at Backstage that we’re investing in underrepresented founders, because we think they’re underestimated. They’re actually the best opportunity in venture at all. We’re not doing it for charity. We’re not doing it to make a big impact, although we recognize that that becomes part of it, and representation is a really big deal. If you can see yourself modeled with somebody in the world, if you can see a powerful woman of color as a CEO, girls who are growing up can see that and go, “Oh, there’s someone like me who’s actually in a position of power here.” I’ll pause there and let Brittany speak to our founders specifically.
Brittany: Yeah, so I think Bryan set me up pretty good there. But with our founders, I think with investing in diverse founders you see that … Okay, so there’s one group that are solving problems for more diverse customers, a more diverse market. But then there’s others, and I think this is really important, is that there’s our diverse founders that bring their experience that is, by definition, more diverse that maybe the solutions that are already out there, and they’re bringing those to the global market, so anyone. So one company that comes to mind is called Uncharted Power, and it’s started by the founder, Jessica Matthews. So she is Nigerian, in terms of where she comes from originally, and I think that has had an influence in how she’s even been able to recognize a solution to a global problem. So this company essentially creates kinetic energy and uses that as a form of renewable energy for anything as small as plugging in an appliance in your home, and she’s also building a platform that essentially an infrastructure for cities, and could be huge in solving global energy challenge.
So this solution came from the fact that she saw, you know, kids, poor children in Nigeria playing soccer every day, but then coming home and not being able to plug in a light bulb, or charge their cell phone, because there’s no energy. And I remember when she told me this story of how she came up with the product, she was saying, “How can I have a flashlight that I can shake, and the light comes on, create energy, and these kids are kicking around this ball all day, and no energy output? Can I connect those dots?” And the fact that she saw that, kids kicking a soccer ball, to the fact that there’s kinetic energy being created in existing products … Let me combine the two. I think the first iteration of her product, her MVP, was literally putting a flashlight in a soccer ball, one of those shakeup flashlights in the soccer ball, and kicking it around, and seeing if the light came on. And the light came on. And that was the start of Unchartered Power. And again, it’s how I mentioned, from something that an individual can use in an energy poor area, all the way to something that she can work on with city infrastructures. That’s huge.
And a lot of it came from the fact that she’s a black woman who had a background from Nigeria, came to the US, is solving this problem from an angle that you wouldn’t get with maybe a founder that you were pattern matching for, looking for the next Elon Musk when she looks like a black woman. And she would never maybe get that investment from a VC that was pattern matching so narrowly. So that’s how I think about it, where there’s so much innovation that we might be losing, because we’re only looking for … Not we, Backstage is doing it differently, but just VC.
It’s disappointing how narrow that lens is, because it’s been shaped by such a narrow group of white guys that have been deciding what is a good founder, what is a good opportunity. So I’m working at that every day to kind of redefine what makes a good founder and startup, so that we are building for that future that Bryan mentioned. That’s happening, so we should already be thinking about it when we’re investing in founders that are kind of in day one, because 10 years from now, they’ll be solving problems that affect markets that are more diverse, as well as just the challenges that we all have now and will continue to have.
Maggie: Right, yeah, and that’s awesome. And I agree that even on a more micro scale, if someone’s not already a founder, but is building something for a market, you can take that same lesson. If you’re not paying attention to who you’re testing with. If you’re not thinking about the different people that are going to be using your product and how they are different from each other, than you’re probably losing out on a lot of your own market anyway, even if you’re not trying to start a company.
Maggie: It sort of goes all the way down the spectrum.
Bryan: You’ve got it. Let’s talk product, specifically, I mean, user testing, customer research … Not even just that, but things like what you name features within your products. If you have a very homogenous teams you’re going to be blind to some things that are really important to certain parts of your potential audience.
Maggie: Yeah, absolutely. Let’s take a step back. So for the people who are listening to this who are okay, we need to take into account more diverse perspectives, when we’re thinking about building. Thinking about how to better think about who the right people are to fund and how different types of people can better solve different types of problems.
But if you’re going to give advice to people who want to be founders, or maybe who want to get into venture capital, what would your advice be now that you guys have worked in this new type of company?
Brittany: Everyone’s journey into venture is actually quite different. So, I think one is just starting there and that there’s probably value in your current experience that you can bring to a venture fund and you have to hone in on what that is.
So there’s probably something you can already to help founders, and that was my path of getting to VC. I recognized, actually around the same time years wise, that Arlan was recognizing this as well, is that I’m seeing the companies that I use and interact with, the products that I use and interact with everyday, looking at the Apps on my phone, or using anything from Groupon to Facebook to Google and they’re all being started by the same time of white guy.
And I look around and I know people in my networks that are starting things, and building product and companies as well. And why are they not able to get the resources to scale. So what I actually started doing was, once I got to a place of having some connections in my network to venture capital, I started making connections for founders that I thought were high potential to VCs.
So, I would look at their product, I would say any feedback that I had and get an idea of what their current fundraising strategy was or how they were trying to build their company and if it made sense to introduce them to a relevant VC that I knew, I started doing that. And that’s actually how a lot of VCs saw that I had access to founders that they were not seeing.
So that was very unique to me. But I think everyone can do some of that in terms of helping founders. It can as small as providing feedback on their product. That has been helpful to a lot of founders that I’ve talked to where they just want someone to test it out, give them some feedback, stay in touch with them so that if they have updates, you can help them out some more and then you’ll realize your own interests in terms of what industry you like, what types of products you like, what types of founders that you kind of have started to build in your network, so that when you’re approaching VC, you already have a lot of the skillset that they would be looking for.
Maggie: Right. And then what would you tell to someone who wants to be a founder? So, I think it’s pretty typical you know, I’m in product. I’ve been working in product for a long time, you know I want to start my own thing. What would be the advice that you would give me or someone like me?
Bryan: Absolutely. So, I would say, first of all, just start. You have to put … nobody gets anywhere without putting one foot in front of the other. It’s the same for Elon Musk as Brittany mentioned earlier, as like, you there, listening to this podcast, studying drift to get all their awesome marketing tips. Oh by the way, I have to say, shoutout to DC who was on one of the very first podcasts I did, Mission in Values, which is actually how I met Arlan Hamilton, our founder and managing partner.
Maggie: That is a small world.
Bryan: Yeah, go back and listen to it. He drops all kinds of knowledge on us. It was amazing. He’s been brilliant forever.
Brittany: Yeah, there’s a DC bobblehead that’s right behind me, that’s just sort of watching me right now.
Bryan: Perfect. Adorable.
Bryan: And speaking of valuing diverse teams, yeah you all have started that right from the beginning.
Bryan: I mean your founders didn’t look like traditional founders and it was an important part of the DNA of your company, so-
Maggie: Yes, absolutely. Yeah, something near and dear to our hearts here and we believe in it very strongly. So it’s partly why I wanted to chat with you guys is because I wanted to understand what your take is on the subject and how you evaluate companies and what advice you’re giving to the founders that you’re meeting.
Bryan: Yeah, and I’m liking this little tangent, so I’ll go for a little longer, but I just want to shout out that it’s not always easy. You can’t see because it’s a podcast, but I’m a white man, I’m the only one that looks like me on our team, so I’m a bit of the anomaly in our team.
And I’ll be totally honest, I put my foot in my mouth all the time. There’s so many things that you experience in the world, even just as a woman, not even in a woman of color, but just a woman going into the grocery store, going into the gym, that I do not experience as a white man. And I have to kind of learn about those things through hearing stories and going, “Really, that happened to you? I can’t believe that.”
But I’ll tell you, with all the … any of the parts that are uncomfortable, the amazingness of the innovation, just the richness of different experiences and the ideas that that leads to specifically with products, I cannot imagine going back. It would be so boring being in a place where everyone was exactly like me. And I would almost be really craving that sort of energy from the team that sort of just bringing all these different perspectives. So anyways, that was my side rant. Oh Brittany wants to say something, hold on.
Brittany: I’ll add to that. And I think Bryan what he said was really important as a white guy as we talk about this. It’s not that we’re trying to get rid of white guys at the table, they’ve just had so much, they’ve been taking up way too much space at this table I think.
That’s the only thing that I would add to that, is that we’re trying to be inclusive, that’s it. There’s opportunity on the investment side, to Bryan’s point, even working in a more inclusive environment has been enriching. We talked about it on the customer side, how building products for a more diverse market makes financial sense. That’s it. And I think there’s … just to know that Bryan’s here, he brings so much to this team, so as I talk about this typical profile of a white guy founder, nothing is wrong with that, it’s just that we’ve been missing all of the other founders that are also building really great stuff.
So, just wanted to tack that in there, because Bryan’s point of being a white guy in the room is actually what a lot more rooms, essentially just need to be more inclusive, so that more white guys are looking around and seeing like, “Hey, my room looks very homogenous, I’m actually missing out.”
Bryan: And just to finish the advice to founders out there, making a go of making a product, I would also just say, be true to yourself. It’s okay to have a business that makes a couple million dollars a year and you don’t need to get venture capital for it. There’s a lot of businesses that are not a good fit for venture capital and people are often surprised that you’ll hear, we had backstage will ask them, “Are you sure VC is a good fit for you? Have you really thought about what that means for your specific business?”
Bryan: I don’t think there’s any judgment with how you should run your business, what it should be about, who it should reach. I think you have to trust your own internal compass on that and don’t let an investor, don’t let even, maybe let cofounders, but not many other people sway you from where you think the right way to go is.
Maggie: I think for people with a product background, we think the product is going to be the most important thing, so I have to have this amazing idea and the product has to be perfect, but what I’m hearing, no it’s more important that you understand the problem that you’re solving, that you have a good fit for your market and you have a good reason as to why you’re working on that. And if you get those things right, the rest should in theory follow.
Brittany: 100%. And that’s again from our perspective. Which I would like to say is right, but again you’ll talk to different people in venture and they might have other advice for you. But, I really think that of what we’ve seen, in terms of what’s been successful and just thinking about the founders that we work with, that’s 100% true and I would give that advice to everybody.
Maggie: Awesome. Well, thank you Brittany and Bryan. This has been really interesting and really helpful and everyone who’s listening, give both Brittany and Bryan a shoutout in the reviews. Leave them six stars and thank you both for coming on the show.
Bryan: Six stars y’all.
Brittany: Six stars.
Bryan: We won’t settle for anything less.