Posted by Early Growth
March 20, 2020 | 8-minute read (1465 words)
Alice Cheng, Associate at Upfront Ventures.
In our first written series of Meet the VC, we spoke with Alice Cheng an Associate at Upfront Ventures. Cheng began her career in biomedical engineering and later worked at Boston Consulting Group. Her passion to connect science and technology led her to southern California to work in venture capital.
Cheng shared with us how she prefers to connect with founders and when she knows a company is a good fit for her portfolio.
Early Growth: What did you do before becoming a VC? And what led you to be on that side of the table?
Alice Cheng: I started my career on the academic side. I got my Ph.D. in biomedical engineering from Georgia Tech, where I studied how altering the physical properties of 3D-printed metals could affect biological response and tissue regeneration. Turns out our bodies do a great job designing things naturally, and we found time and again that "nature-inspired" materials worked best. I loved being at the cutting edge of technology, but was also highly involved in extracurricular activities. I joined the Rare Genomics Institute, a nonprofit that helps families with children with rare diseases get genome sequencing.
At the time they were launching a social platform called RareShare, where I got to jump in and help the team with business development. It made me realize how much I also enjoyed the business side of science, which got me interested in management consulting. I joined the Boston Consulting Group in its San Francisco office, where I focused on biopharma and enterprise technology. I also worked on other projects in financial services/fintech, consumer retail, and in the nonprofit space. It helped me get a well-rounded view of different industries, and build my business toolkit. However, I still felt like I was missing that cutting edge science since I was further away from the bench. Venture was the best way for me to use my business skills, love for science, and extroverted personality to find and help companies grow.
EG: You’ve looked at lots of decks and have heard tons of pitches. Thinking about the ones that stood out, how would you advise entrepreneurs to create a memorable deck and email pitch that may lead to a meeting with you?
Alice: I’m still open to cold emails, because I know I wrote quite a few when job-searching (and I still do today!), and I always appreciate it when people respond. Not everyone has the right networks to get an introduction in the timeline they need. However, a cold email must be thoughtful and targeted toward me. That means there is a reason why I got it and not my colleague (who I sit next to, so we can check!), and vice versa. Sometimes entrepreneurs will email to ask for feedback, and then give a hard pitch once we get on the phone. I usually try to preface by saying “this isn’t a good fit for us, but I’m happy to provide feedback,” and if that still happens it can be challenging. VCs have to turn down most pitches, which is one of the worst parts of the job (and we can be wrong!). But if you come in and totally kill it during the “feedback” session, then of course it becomes interesting for us to learn more and potentially invest. The short of it is that EQ really matters when dealing with anyone in this space, including your investors, employees, and vendors.
EG: How do you/the firm make decisions on investing in a company?
Alice: There are many factors at play here, and can be investor-dependent. Upfront invests early, so we focus a lot on the founder / founding team. It can be difficult to accurately predict the market in the next 5 years (no one thought coronavirus would have such an effect on the economy in 2020), but if the founder is someone who is passionate, thoughtful, and willing (and able) to be agile, that gives us more confidence that we have the right person steering the ship. Any unfair advantages also help, like previously working in the industry, having an understanding of regulatory frameworks (if it’s applicable to the business), or having a strong and relevant pre-existing network. On the scientific side, we look for platform technologies that have the potential to be applied across multiple indications. We also love it when the post-doc or grad student working on this technology joins the team, because it shows a commitment to the project from the original scientist.
EG: What’s the first thing you would want a founder to do after closing their round?
Alice: Get to work!
EG: How do you work with companies that you invest in?
Alice: One of the biggest challenges of starting a company is hiring the right folks. Upfront has a great Head of Talent to help CEOs with this critical piece of company-building. We also have an amazing Head of Marketing that can help with things like scheduling and positioning a funding announcement! Since we are lead investors, we usually also take a board seat. This helps us be a strategic thought partner, not only in good times, but also bad. This is a bit overstated but still true — it’s so important to have an investor/board partner that will be there for you when you need to make a challenging decision or when things are going south. It can really make the difference when deciding on your last pivot, or there is a coronavirus pandemic, or just making sure you are surrounded by the right people to move you forward.
EG: What will entrepreneurs like least about your evaluation and/or due diligence process?
Alice: We typically ask for both business and personal references as part of the diligence process. We take into account who these people are and why they might say certain things about you, but it helps us get a well-rounded view of the founder and also determine if we would be good working partners. It seems obvious, but many people underestimate the power of references.
EG: I just raised a round of funding for a business that you would be an ideal investor for in the next round... Looking back at your best and worst investments, what's the one thing you would advise me to do over the course of the next 12-18 months to get you on the team?
Alice: I will quote the infamous Mark Suster phrase, “Lines, not dots.” It takes time to build a relationship, so get started early. Use the first meeting to introduce yourself, the business, and get to know who we are. Use the next meeting to catch up on important progress you’ve made on the product, critical team hires, amazing sales, logos, etc. If you can build interpersonal trust and also show you the business is performing, then usually it’s us that jumps first!
EG: Is there any uncommon piece of advice you would like to give entrepreneurs?
Alice: Understand yourself and your business, and determine if you even need venture capital funding. Venture capital can be a huge bolster for a high growth company. However, I’ve also spoken with some CEOs that just don’t seem interested in sticking with this company for 10 years. And I’ve told them that. And it’s OK! We see this in the sciences a lot. It is totally fine if you want to just license out your tech, or do some early experiments and find a decent acquisition opportunity to move on to your next thing (which could be the next 10+ years!).
Some businesses are cash flow positive out the gate and just need debt to get to their next stage. Of course, I am an advocate for venture capital, but we see many instances where it is truly not a good fit. Venture capital has become so sexy that getting declined can feel like a huge failure. That is absolutely not the case. Please do not equate your personal value with whether or not you will receive venture funding. On the other hand, there are instances where we see an early-stage company (sometimes an idea) that could really do well with venture funding. It’s always a conversation, and true to our name, we try to be upfront with you :).
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