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Abhinaya Konduru is a Senior Associate at M25, a Chicago-based early-stage venture capital firm that focuses on Midwest-based startups
The Chicago Capital Podcast explores the startup and Venture Capital ecosystem in the Windy City. Each episode will feature a prominent founder, Venture Capitalist, or Angel investor who plays an integral part in the city's entrepreneurial story. Join host Matt Castellini as he chats with guests about their career journey, their perspective on a particular market, and their thoughts on the Chicago VC and startup scene.
[00:00:00] Matt Castellini: [00:00:00] Ebenia thank you so much for joining Chicago capital. Really appreciate you taking the time. Thanks Matt for having me here today. First question off the bat. How does somebody obtain and maintain a 4.93 rating on Uber? Can you give us some tips and secrets? Cause mine surely is not 4.9. You just don't go
[00:00:34] Abinaya: [00:00:34] out anymore at night.
[00:00:39] Matt Castellini: [00:00:39] All right. All right. I like that. Yeah. You know, I moved to New York for four years and my rating went from, I think it was around 4.8 and then I was in New York for four years and it went down to a number that I'm actually embarrassed to say, live on the air. But since I got back to Chicago, we're moving up the ranks.
[00:00:53] I think we're actually making our way back. So, is that your
[00:00:56] Abinaya: [00:00:56] way of saying Chicago is nicer to people than the
[00:00:59] Matt Castellini: [00:00:59] York? [00:01:00] That is my subtle way of saying it. Yes. That is exactly what I'm doing here. Well, thanks so much. I think it'd be helpful for everybody. If we could just hear a little bit about your background and your path to M 25 and Metro capital.
[00:01:12] Abinaya: [00:01:12] Yeah. My past to venture capital is a short one, pretty young in the industry and also what I'm learning here, but to kind of give you a bit of background, I grew up in India, but moved to us in high school. So kind of went to high school, high school here in the suburbs of Chicago. And then during that time I really got into trading trading.
[00:01:31] My parents' portfolio really got lucky that my parents allowed me to do that. And. W was saw that as like an okay thing to do. I will say that I didn't lose any money for them. So I feel like I did okay. On that portfolio, but that interest of trading of parked my major interests, which is after high school, I wanted to kind of explore various opportunity opportunities in finance, but more so around all the metrics.
[00:01:59] When I was [00:02:00] trading, I wanted to automate some of my traits and that's honestly how I got into coding first. So when I was kind of picking at a school to go to, I ended up choosing university of Illinois at Chicago, just because it's downtown, have a ton of opportunities to explore. And I did that throughout college.
[00:02:16] I think I did like six different internships, just exploring bunch of different financial institutions and, uh, various jobs. But throughout that process ended up not liking any of the things that I was doing it. I get to say this now, but I think I figured out what I want to do, what I didn't want to do more than what I wanted to do.
[00:02:38] So junior year came to an end and I was trying to look into what I wanted to do after college. And I wasn't really finding anything. So I ended up, uh, taking up a creative project, which is to make YouTube videos. I think I secretly wanted to be an influencer. So, um, started making some YouTube videos of falling [00:03:00] other entrepreneurs, right.
[00:03:02] I would make a vlog class documentary style. We have about another person tenant telling their story of what they did on a day-to-day basis, because this is also very, very selfish reason. Anyone to ask somebody out, just buy coffee, to learn what they did actually wanted to see and explore, because that was the best way for me to figure it out.
[00:03:22] What do I like? What do I don't like? And. So I did that. And after telling 10 stories, uh, I was kind of repeating the same story or over in Oregon, but the one commonality across all of those stories was access to capital, but access to good capital. So that's when I learned about VC. Can I switch the video series around?
[00:03:45] It's like, Hey, let me go make these videos for VCs and started reaching out to a bunch of local VCs here. I never got a chance to make a video, but made some really good mentors and met some awesome investors here locally. Uh, that had really [00:04:00] helped me realize what we see is, um, are a. Friends now that that's what I would say.
[00:04:06] But at that time I came across some 25. I ended up applying for a row, went through the interview process and joined the team, I think literally the day after graduation. So that's my background and my path into venture here a little bit.
[00:04:22] Matt Castellini: [00:04:22] It sounds like you had the idea for Chicago Capitol years before I had the idea for Chicago cap, but I'm talking to like the O G Chicago capital person right here.
[00:04:33] Abinaya: [00:04:33] Exactly. It's a very fun thing to do. I really enjoyed it. Like the amount of time that you spend with that person, just like the whole day, you get to learn ins and outs of their role.
[00:04:45] Matt Castellini: [00:04:45] Yeah, I love that. Oh, it's almost like, do you remember that documentary series that MTV had called the world of GenX? This was like eight or 10 years ago.
[00:04:52] I'm a huge fan of it. So I'm not sure if you've ever heard of it, but basically kind of. Okay. Well, there you go. There's a suggestion for you. You got to check it out [00:05:00] some time. Did you realize how challenging getting into VC is while you were going through it or after the fact. When did you realize, wow, I really accomplished something that statistically is very hard to accomplish for any sort of person, you know, early in their career.
[00:05:16] When did you have that kind of moment of, of, you know, sort of realizing.
[00:05:21] Abinaya: [00:05:21] I think it was a year into VC. Actually, I was pretty naive when I was thinking about VC, because when I first heard about it, I was kind of exploring it from a perspective of, Hey, I want to learn, I want to see what this is. But once I started doing that, it really aligned with what I wanted to do and kind of how I envisioned my role to be both quantitative and qualitative type of work.
[00:05:44] So I didn't really see it as like a challenge at first. A year into the role. Like I started getting a ton of emails from other folks are trying to break into VC. I'm like, that's when I realized that I definitely got lucky
[00:05:57] Matt Castellini: [00:05:57] here. It sounds like you [00:06:00] started out though, more interested on the public side of investing.
[00:06:04] I'm just curious. When did you realize you wanted to be closer to early stage investing? You know, I know you did the internships, but I guess what was sort of the core learning that you had that, you know, inspired you to move earlier stage?
[00:06:19] Abinaya: [00:06:19] Yeah, I think this was also a time when I was exploring what my life thesis was a little bit kind of thinking beyond just making money.
[00:06:27] What would it mean to be happy? What would it mean to give back to the community, which is a huge core pillar of my thesis. So this was around the time I was kind of thinking like, what would that be? The one that I settled on that I've been pretty close to is kind of, how can I help people find extra time in their day that brings them joy.
[00:06:49] It's the worst thing. It's the worst feeling in the world when you want to do something, but you can't because of lack of time, lack of resources, lack of money, all of [00:07:00] these things, and kind of saw a bunch of capitalists, like a perfect merger of all of those things. To give back and also give more time back to the people, which is the most valuable resource in the world.
[00:07:12] Matt Castellini: [00:07:12] I think that's so interesting. I think a lot of people I have on the show, they have investment thesis and you know, we talk about that, but, but you are somebody who's very outspoken about this idea of a life thesis. And almost sounds like a calling, not just an occupation that you D you were lucky enough to discover at realistically, such an early age.
[00:07:32] Abinaya: [00:07:32] Absolutely. It's evolved a little bit on like how I want to enable that thesis, but the core team of it is still there.
[00:07:40] Matt Castellini: [00:07:40] Yeah. I'd love to hear a little bit more about some of the initiatives you've taken on to enable that thesis. You know, anyone who follows your Twitter, you're so active on the side hustles.
[00:07:49] You're so active on, you know, finding extra time throughout the day. Just would love to hear about how you've sort of gone about embarking on that journey or embarking in bringing that [00:08:00] thesis to life.
[00:08:01] Abinaya: [00:08:01] Yeah. So before I go out to preach, I want to do it myself. Right? This is like the biggest topic, which is we can get into later on, which is Kareo VC versus operative.
[00:08:13] Founder turned VC for me. I would consider myself as a career VC just because I've gotten into venture right after undergrad and kind of that's been my thing. But in terms of going back to your question around why. Focusing on my life thesis and like how that's evolved. I wanted to do it for myself.
[00:08:32] Like I want her to explore all the different opportunities. I wanted to explore all of the different things that I was interested in and trying to enable that. And part of that is lack of money as well. Right? Like I have time, I have resources, but I don't have an infinite amount of money. So what does it mean to make more money?
[00:08:53] Was my focus for a couple of years. So the first couple of years into VC, I did [00:09:00] a ton of social media work. All of this is kind of like an anonymous name, but also helping a ton of friends who are you tubers and who are influencers. So kind of watching their behind the scenes and being there, learning and helping them.
[00:09:15] So that's one way I did that. And then after that, I want to do a little bit of myself. I wanted to focus a little bit more on my skills and how can I monetize them. So that's kinda where my side hustle passion comes around. Kind of thinking about various income streams investing is a great way to make money, but at the same time, what does it mean to have passive income, even at an early age or young as a new
[00:09:40] Matt Castellini: [00:09:40] person?
[00:09:41] I think that's fascinating. It sounds like over time. I'm not sure. The creator economy had been dubbed yet, while you were going through this journey, had it been at that time, was there a, sort of a name for this side hustle economy at the time that you were sort of realized you wanted to spend time and try to sort of build out this [00:10:00] thesis?
[00:10:01] Abinaya: [00:10:01] No, I don't think the word was there, but passive income is the word that's been existent for a while. This is also a very cliche thing on any of the social media that you're on. It's like, look, get quick, get rich, quick schemes, basically. So I want to stay away from those because any one that says. Rich really quick.
[00:10:21] They're lying to you. So trying to think about what does it mean to have a sustainable passive income has been my focus on that front, but part of doing all of those is to learn more and dig into industries more kind of like figuring that my own rabbit holes and digging into. Most recently I was working on my side hustle for June, which is a card game for startups and VCs, but more than the game itself, I got a, I learned a ton about shipping logistics industry, figuring out TPO, figuring out what does it mean for small business owners [00:11:00] through small business owners to figure out shipping and logistics.
[00:11:04] Which is a huge industry at the moment, but looking at all the solutions definitely identified some pain points that I've been digging into. So this kind of leads into my VC work, which is, Hey, if I ever come across this company or I'm looking for other companies trying to solve these pain points, so kind, kinda have that first touch of pain point that I could dig into a little bit more.
[00:11:28] Matt Castellini: [00:11:28] So it's almost giving you kind of firsthand knowledge, firsthand experience in the we'll call it the creator economy, the side hustle economy, and that informs your ability as a venture capitalist to go out and see and find pain points that solutions are potentially being built towards. Is that kind of how you're pairing, I guess, your extracurricular activities with your venture capital full-time job.
[00:11:50] Abinaya: [00:11:50] Exactly. This goes back to why even started making YouTube videos in the first place. I wanted to learn when I'd experienced those pain points that like, so all of these [00:12:00] experiments or side hustles that I do allow me to figure out what it is that I need to
[00:12:04] Matt Castellini: [00:12:04] focus on. I think there's a lot to be said there.
[00:12:07] I think Jackie, no, auntie was on the show and she talked about, you know, when she wants to learn about any particular sort of new tool for either the enterprise or the consumer, such as NFTs, she actually went out and she minted an NFT. She went through that process, you know, guy Turner from her. Talked about, you know, trying as many consumer apps as you possibly can taking as many demos from enterprise software companies, as you possibly can, as opposed to a lot of what they teach you in business school.
[00:12:35] Or a lot of just, I feel like the general conversation in VC is. Read as many investment thesis on medium, as you can read as many sub stacks as you can, it seems almost like you are more so in the camp of, you know, get out there and get your hands dirty experiment, tinker. And that will sort of inform you as a VC.
[00:12:54] Abinaya: [00:12:54] Exactly. And this goes back to one of your earlier questions, public versus private companies when it comes to [00:13:00] investments and finance as well. It's great to be in the public markets, but I think private companies allow me to thinker or figure out some of those early stage companies a little bit more.
[00:13:09] Matt Castellini: [00:13:09] Yeah, absolutely. And I think, you know, speaking now again on, on private companies, I guess that's a good segue into . I would kind of love to hear about the types of private companies, the types of early stage companies that invest in, you know, the thesis behind that.
[00:13:28] Abinaya: [00:13:28] Yeah, we're usually the first institutional check into a company.
[00:13:31] We focus at pre-seed and seed stage. You might be wondering what the definition is, right? So for us, it's, uh, anywhere between, when I found rates looking to raise anywhere between $500,000 to $3 million, that's kinda where our pre-seed and seed stage kind of lives, but we're a pretty strict general evaluation as well, below 10 million pre-money post-money valuation is kind of how we look at the pre CNC.
[00:13:57] But to kind of give you a little bit more on criteria we're [00:14:00] generalists, but we focus on investing solely in the Midwest. Think about traditional Midwest map and that's where, uh, lean Mustang. Our typical check size is between two 50 to 500 K and we lead at the pre-seed stage and co-invest at the seed stage.
[00:14:17] Matt Castellini: [00:14:17] So below 10 million post-money I think first off it makes total sense. You prioritize the Midwest. Um, I think nowadays it's pretty hard to find those types of valuations on the coast. What are the advantages in your mind of being so geo focused, you guys put out a lot of content at, in respect to the Midwest, you know, you run the summit, which I'd love to talk about a little bit further along, but what do you think are some of the big advantages of being so geo focused in today's venture capital landscape?
[00:14:47] Abinaya: [00:14:47] Yeah, we're kind of taking what we pre-trade like focusing on one niche area. Uh, so as a VC generalist fund, when you want to go out everywhere, we wanted to focus on Midwest because of the [00:15:00] opportunity that's here. You get to hear 10 of those on like wide Midwest or why Chicago even. Which is around the idea of like, Hey, we have a ton of, uh, computer grads here, a ton of companies, a ton of fortune 500 companies.
[00:15:14] But one thing that we need to recognize is the flywheel ecosystem. The flywheel ecosystem is at its highest at the moment in the area, whether that's companies exiting and then founders starting or minting new founders from those companies. And, uh, as far as the investors. We're seeing an increase in investors, especially emerging managers in the area, but still have a long way to go on the latest stage investing at investor side.
[00:15:43] But we're starting to see some of those come to fruition on the ecosystem of flywheel effect.
[00:15:51] Matt Castellini: [00:15:51] Yeah, I think that's, that's something I'm in, there's been, I think, nine unicorns minted in Chicago alone in 2020 ones. So [00:16:00] I think it's an extremely exciting time and probably, you know, uh, a great catalyst for, you know, future, you know, founders coming back, investing in more companies, growing those companies here in Chicago and funds like yourself who are so geo focused, you know, having built those relationships over the years, it probably gives you.
[00:16:18] Have great access to founders and helps you sort of distinguish yourself amongst, you know, kind of a sea of options, but I'm curious a little bit about the, I guess, tactical approach. You all take at M 25 and you're public about it as well, which I find so amazing. You know, your score card analysis. Uh, could you walk us through the scorecard analysis that uses when analyzing your pre-seed and seed stage?
[00:16:44] Yeah,
[00:16:45] Abinaya: [00:16:45] so we're pretty public about it. When, so before I kind of go into scorecard analysis, I'll kind of describe what our must know processes. So you'll kind of get an understanding of when and where we use the scorecard. So we start off with an intro, call it usually 30 [00:17:00] minutes, somebody on our team. Uh, if we decide to move forward, then it's a first senior team meeting.
[00:17:05] After the first senior team meeting is when we do our scorecard analysis. So by the time we did the first unit team meeting, we understand more about the company we understand about their business pain points. What they're looking to raise, why they think is the right amount. So we're using all of these data points to be collected in these two meetings and putting them onto a sheet.
[00:17:26] So we can track that. As far as what the scorecard analysis is, we divided up into five different categories of scorecard. So looking at team market, product, exit growth up, uh, finance opportunities and a little bit around the business. So would you be up to scorecard into five different sections? And each section has about 10 to 20 different data points that we collect.
[00:17:52] So for example, when we look at teams, look at number of co-founders, but we also look into what is the founder's [00:18:00] mindset or what is founder's growth mindset. So all of these different value valuables, uh, variables that we collect. This helps us decide, is this the right time for us to go forward, which is into a second team team meeting.
[00:18:18] Our scorecard is more of a guidance rather than a strict, uh, yes, sir.
[00:18:24] Matt Castellini: [00:18:24] Yeah. So I guess first follow up. How do you maybe, how does the firm, or how do you weigh that kind of hierarchy of scorecard buckets? What do you try and sort of validate first? What, what's the most important thing in your mind to validate?
[00:18:40] First on that scorecard
[00:18:43] Abinaya: [00:18:43] team team is the highest rated, um, section in our scorecard. So it's team market and product are the three that we care the most about. When you think about the pre-seed and seed stage, the companies are changing their business model, changing their business every week. [00:19:00] So it's really hard not to put emphasis on the team and their ability to make those pivots, to find what's working.
[00:19:07] What's not working and iterate on it. That's why teams usually rated the highest.
[00:19:14] Matt Castellini: [00:19:14] And so are you looking for domain expertise? Are you looking for prior entrepreneurial pursuits that they maybe had success with? I guess digging a little bit deeper. What are some of the things that you love to kind of, you know, green flags for the team?
[00:19:30] So
[00:19:30] Abinaya: [00:19:30] it's a combination of everything. Uh, it's not hard. Yes or no. It's more of a scale. So we look at, when you look at teams, the teams experience, whether that's founders or executive team, we're not just looking at ex founders, we're looking at first time founders and everybody. So it's more of a scale of how we look at those founders.
[00:19:52] Matt Castellini: [00:19:52] It's kind of funny. I feel like you started off your investing career, you know, algorithmically trading, public stocks, and it almost feels [00:20:00] like what a difference it is between VC and public investing. And I have friends in public markets and it's sometimes hard to even get them to wrap their minds around that.
[00:20:08] It really does come down to, especially the seed stage. So much of it is the team. I mean, it's kind of, it's interesting for you too, because you spent so much time in college, around entrepreneurs and, and seeing them how they go through their processes day by day. So it really does seem like for you, it's kind of this perfect confluence of your past experience.
[00:20:27] Abinaya: [00:20:27] Exactly. And a lot of it kind of comes down to that intuition. Uh, once you start to see enough companies, you've kinda started to notice some patterns. Sometimes it's good to follow those sometimes it's not. Uh, but that's why, uh, the scale and the range is really important. So you're not just sticking with one thing, but more, more so analyzing all the different variables that are available.
[00:20:52] For
[00:20:52] Matt Castellini: [00:20:52] your learning curve. I mean, you started right out of college and this has been your full-time sort of career ever since. What was the most challenging [00:21:00] part of your learning curve? You know, what took you the longest to be able, or maybe you're still working on today? Uh, the most challenging part of, you know, going through the scorecard, I'm just curious about that kind of development for you.
[00:21:11] Abinaya: [00:21:11] It's that pattern recognizing, right? There's no. I'll take that back. There's no way to say this is a good company or bad company. You can come up with an excuse to say no to any company and kind of see that play out. So as a person of learning, I started kind of digging into why we're saying no, or like the reason behind why we wouldn't invest in that company.
[00:21:41] So that, that took a long time for me to kind of learn. And, uh, I feel like once I kind of figured out all the different things, it's been a little bit easier, but also very open-minded to keep in mind that there is bias and everything in all of the decisions that we make.
[00:21:58] Matt Castellini: [00:21:58] Yeah. That's that's so true. I [00:22:00] think bias is, uh, it's.
[00:22:01] It's an interesting word. When applied to early stage investing it's. A lesson that I learned very early on, especially in the consumer space is you have to sort of broaden your horizons and you have to get a diversity of opinion and a diversity of thought in order to analyze most seed stage, especially consumer investments.
[00:22:20] A lot of the time, you're not the target customer. And so it can be hard because you look at an investment and you say, this isn't really for me, but I still feel like the business model is bad. Something about the viability doesn't make sense, but until you talk to sort of that sweet spot, that ICP. It feels like you're always going to kind of be biased in your decision making.
[00:22:37] Is that kind of how you thought about it over the years?
[00:22:39] Abinaya: [00:22:39] Yeah. And it's even harder to do that when you focus on investing in multiple different industries, because yes, you get to connect those dots from one industry to another industry, but each industry has their own language that you have to learn about whether that's keywords or whether that's digging into it, like finding out [00:23:00] differences and finding out, uh, what is a good question to ask for each industry is something that.
[00:23:06] It takes a while to understand, and also build that, uh, background on that specific industry.
[00:23:14] Matt Castellini: [00:23:14] Yeah, absolutely. I think speaking of industry, you know, I'm curious about Tam, you know, market analysis. Do you guys have a minimum Tam size that you need to see either bottoms up or top down? How do you, how do you approach the market component of the score?
[00:23:30] Abinaya: [00:23:30] We focus more on Sam than 10. So kind of looking at what does this industry are like, what, what is their addressable market? So a Psalm is kind of like their immediate target. And then Sam has kind of like if they were to deal really well, what would their Sam be? And then Tom is more of a guidance for us, but what we focus on is.
[00:23:52] The target markets that they are addressing right now is kind of what we focus on. Uh, we do do those, uh, analysis. [00:24:00] Uh, we want it to be ideally $1 billion plus a Sam market, but it'd be, have done a couple of investments that are right below, but we knew that they could expand into multiple different categories once they started to find their product and market fit.
[00:24:16] Matt Castellini: [00:24:16] And if you see a smaller Sam, I imagine. If there's a bunch of competitors are already kind of going after that same piece of the pie, can usually, is that a deal killer for you? Or how do you view that? And the competition aspect when taking into account, you know, the size of a Sam.
[00:24:35] Abinaya: [00:24:35] Yeah, I signed a deal killer, but that's when we start to really dig into what is this company's unfair advantage in winning that market?
[00:24:44] What have they done so far to prove that they will win in the market? Or what does the, what is the team capable of that nobody else in the market is doing and what are some metrics that can. To say yes or no for that. [00:25:00] So we spend a little bit more time digging into that. Uh, it's not a deal killer for us, but, um, we definitely talk about it with the founder and kind of decide and learn more about his initial focus.
[00:25:12] Are you building on top of it? So really understanding the vision is the key.
[00:25:17] Matt Castellini: [00:25:17] Yeah, absolutely. I I'm curious about the sourcing mechanism at M 25, is it mostly inbound because you're so kind of prevalent in the Midwest ecosystem. You have such a well-known name now in Chicago, especially to the summit.
[00:25:34] I'm curious about how sourcing works. Do you spend a lot of time sourcing?
[00:25:39] Abinaya: [00:25:39] Yeah, everybody on the team spends sourcing. I would say majority of our, uh, of our deal flow is inbound. So investors switching up thunder, switching out community champions, accelerated programs, all of the different players in the ecosystem, but we do do a fair amount of outbound.
[00:25:56] We reach out, but they're usually they don't [00:26:00] usually convert that. Well, the ones that convert the most are the one-third inbound for us.
[00:26:07] Matt Castellini: [00:26:07] Got it. Yeah, no, I mean, it makes total sense. I think one thing I'd love to touch on, because I think most VCs in Chicago have heard of it is your summit. You know, what was the Genesis behind that?
[00:26:19] Can you walk listeners through sort of what it is, what it entails?
[00:26:23] Abinaya: [00:26:23] Yeah. So I'm trying to find summit is a, you bet, both for investors and our portfolio companies as a way to come together and meet and learn together. So the first day is all about one-on-one meetings between investors and founders. And second day, we split up founders and investors and just have their own content and investors get to meet with other investors in the ecosystem.
[00:26:47] So the reason why we started out was because of our own portfolio. We wanted to give our perfor company an avenue to have touch points with as many investors [00:27:00] as possible before they go out to raise their next round or whatever that is, but more. And so this gives them opportunity to learn more about the market and importantly, meet other people in the ecosystem.
[00:27:15] As you can imagine being a founder, a lot of people talk about how lonely it is. So we, this is one of the touch points on how as say portfolio. We make sure that founders have, and the people around them so that they could reach out and learn from each other.
[00:27:33] Matt Castellini: [00:27:33] Was it virtual last year? Is it going to be in person this year?
[00:27:36] I'm just curious about the plans for it.
[00:27:39] Abinaya: [00:27:39] Yeah, we usually do it twice a year. Uh, for the past year we've done a quarterly. We modified the summer to live a bit, but we're really excited to bring it back in person. This. So I'm really excited for that. Um, so we have ton of investors and founders, all the RSVP for it, uh, excited to have everybody come together, meet, but also take those one-on-one meetings.
[00:28:00] [00:28:00] The, to kind of give you a scale of, uh, the summit, we usually have about 200 and investors and 60 to 70 portfolio companies come down and meet with each other. And we usually host about 600 or so one-on-one meetings between founders and investors and add problem. We're a hundred with investor change last year introductions,
[00:28:22] Matt Castellini: [00:28:22] and you don't have to be, do you have to be, you know, actively raising as a portfolio company?
[00:28:27] Or when would you advise if I'm an entrepreneur listening to this, you know, when would you advise, signing up or, or making the time to sort of attend this. Yeah.
[00:28:36] Abinaya: [00:28:36] So the summit is solely for I'm 25 portfolio companies. So we would have to be investing in them for the founder to be able to attend. Anybody can attend.
[00:28:46] We encourage all our portfolio companies to attending. If they're not raising it, if they're in the middle of raising, uh, asphalt, we might do a little bit of, uh, Programming for some [00:29:00] of the companies that are not in our portfolio, but that's TBD for now. So the moment is just for our co-investors and our portfolio company.
[00:29:10] Matt Castellini: [00:29:10] Got it. Got it. And, you know, speaking of the portfolio and the fund, congratulations on, I think raising your third fund was 32 million, uh, back in may. That's very exciting. Is there, uh, any new kind of initiatives you guys are taking on with the new influx of capital, any kind of new two areas of focus you're adding on?
[00:29:30] Or are you just looking to sort of build what's already kind of organically been built and just increase the scale of portfolio companies you're adding.
[00:29:38] Abinaya: [00:29:38] Yeah, our thesis for fund three, hasn't changed too much from our previous thesis, but what has changed significantly is our check size. Previously, we were doing a hundred K checks, but now we'll do anywhere from two 50 to 500 K.
[00:29:52] So investing more money, getting a little bit of more ownership and having that capital to really back, uh, some of the [00:30:00] founders, our goal is to invest in about 50 companies or so in the fund with a small follow-on deserved.
[00:30:08] Matt Castellini: [00:30:08] It sounds like the summit is going to be a Bonanza coming up in the future. I mean, 50 portfolio companies added onto what are you already have?
[00:30:15] It's going to be the must go to event in the Midwest. I feel like,
[00:30:19] Abinaya: [00:30:19] yeah, no, we have about 110 portfolio companies that we've invested to date in the past five years. So it's definitely the place to be. Um, if you're a 25 portfolio founder or a co-investor.
[00:30:31] Matt Castellini: [00:30:31] It's also indicative. I think it's just an exciting time for the Chicago ecosystem.
[00:30:35] I mean, with, with your fundraise, it feels like, like basically every major Chicago venture capital fund has raised an impressive amount of capital in 2021. As I mentioned, you got nine unicorns. Does it feel like to you, the ecosystem is kind of maybe hit an inflection point in some ways, and it's really sort of poised for some impressive growth in the coming years.
[00:30:59] Abinaya: [00:30:59] Yeah, we're [00:31:00] just getting started. If you asked me that, I think there's more room to grow. There's more opportunities to come by, especially with a flywheel effects that we're starting to see. I think that's where the emphasis comes in around why Chicago will win even going forward. And the fact that we had so many unicorns valued companies is a signal on continuous, more fun.
[00:31:28] To be building here and also raising more capital here.
[00:31:32] Matt Castellini: [00:31:32] And I'm curious about, I guess this goes back to the foundation of M 25, or at least since you've been there. You know, was the, was the geographic focus? Was it born out of, you know, Victor's love of the Midwest and he just wanted to sort of keep all of the investments in the Midwest or, you know, was there really strategic thought put to, you know, there are actually advantages to these companies here in the Midwest, you know, maybe they're bootstrap longer or the, you know, [00:32:00] return on capital just seems more advantageous.
[00:32:01] I'm curious about that kind of strategic versus, you know, qualitative versus quantitative analysis. We're looking at the ecosystem.
[00:32:09] Abinaya: [00:32:09] It was very strategic. I think if you go out to see some of our older blog posts that we've put out back in 2015 and 16, you'll kind of see what our vision was. I think we've been staying true to that and modifying it here and there.
[00:32:22] But Victor really had that vision of, Hey, what does it mean to be a pre-seed and seed stage and muster here in Midwest? So going back a couple of years, if you're a founder looking to raise capital at the early stage, It was one of the hardest thing to do because you didn't have many funds here locally that are true.
[00:32:42] Pre-seed a state. So you would have to go out to coastal or go find angels in the network. So the other side of the problem is not many angels were educated on what does it mean to back a potential VC back. So there was a lot [00:33:00] of education that was lacking in the ecosystem, but we did have a good system, uh, the middle stage.
[00:33:06] So kind of think about that seed. Plus there's use a type of investment investment company, but nothing at that. Pre-seed and seed. So, uh, I worked, I definitely saw that as an opportunity and kind of changed the model a little bit around being a very collaborative firm and syndicating grounds with everybody in the ecosystem to make sure that a lot more people are getting funded and also getting more visibility around it.
[00:33:34] This is part of the reason why we host, I'm trying to buy summit as well. We want to beat that signal. We want to provide a, Hey here. A hundred companies in our portfolio that could be a potential fit for that later stage investor, whether that's here in Chicago or outside of Chicago. So kind of showing that as a signal was also a part of something that we wanted to do.
[00:33:55] Yeah. One of the things that we started doing in the beginning, uh, in terms of being [00:34:00] collaborative is sharing or the guilt's not many people, not many VCs share their deals, right? So this goes back to being the Midwest roots, but also kind of how we were changing that pre-seed and seed ecosystem. We were very collaborative.
[00:34:17] Every month we sent out a couple of deals that we were looking at, um, 25 to our investors as a way to syndicate as a way to signal as a way to increase our visibility in the ecosystem. So that founders, even if we don't invest, they're getting some of that invisible do with our core investor.
[00:34:36] Matt Castellini: [00:34:36] How did you guys go about finding those co-investors that you built these relationships with?
[00:34:42] You know, what, what sort of built the trust over time to the point where you were so open and collaborative, how did that kind of evolve? How does it evolve with your co-investors? It
[00:34:52] Abinaya: [00:34:52] will happen naturally, but as long as they're a good human being, I think those things happen more often, but [00:35:00] what was really important for us was we were pretty new fund as well.
[00:35:03] So when Victor first started, uh, the first fund, it was more about trying to learn about access to deals. And second one, the second, uh, second fund was proving out that we were able to get into deals. And third bond. I think, uh, what we're trying to prove here is that not only can we see deals, I'll look into get deals, but we can get that an ownership.
[00:35:26] And, uh, we are able to lead some of those investments. So we're really collaborative in the sense that we want to work with everybody in that ecosystem. And people recognize that. So it's a two-way street. We send more deals, people send us more deals and as a collaborative way, that trust builds over time.
[00:35:45] Have
[00:35:46] Matt Castellini: [00:35:46] you noticed more coastal VCs or VCs from outside of the Midwest, you know, coming in as potential co-investors or, you know, interested in, in the summit. I curious about 20, 20 and 2021 thus far, you know, how you viewed, [00:36:00] I guess, not competition, but, um, you know, the influx of, of, you know, geographically, you know, disperse, capital, you know, different VCs from different areas of the country coming to Chicago.
[00:36:13] Abinaya: [00:36:13] We've definitely started to see a little bit of that, but I think for the smaller. Because of remote work and remote investing, more people got comfortable around it. We definitely had some coastal investors say no to companies because lack of flight access. That, that was a reason for a, for a fund to say no, but, uh, given that we're changing the way the, we work, the way that we're investing more people are looking at the Midwest to look at potential deals and to look to potentially invest even more here, going forward.
[00:36:54] Matt Castellini: [00:36:54] It's something where I used to hear that, um, seed stage investing is just such a local game. And you had to be able to sort [00:37:00] of walk down the street to the, to the office in order to, you know, check in on progress, because there was so much hand holding that might, or they're just, you know, so much room for active invested, you know, being very active with these companies because they're at such an early stage of the company formation life cycle.
[00:37:14] But no, I think it's a really fascinating kind of change that we've seen. Uh, and we've especially seen it too in the last nine months, but, you know, I think it's probably only for the better, it's only for the better that more capital is coming into the ecosystem. And, and, you know, more, capital's finding, finding founders who otherwise, you know, in the past may not have had access to it.
[00:37:31] And I think on that note, I'd be curious if you think there are kind of any major, you know, aspects that you think are or any major, actually, I'll rephrase that. Do you think there are any sort of components of the Chicago tech ecosystem that you'd like to see change or any challenges that the ecosystem faces today that, you know, still needs to be kind of reckoned with in the future?
[00:37:53] Abinaya: [00:37:53] Yeah, well, one of the bigger ones that I've seen more of recently is that later stage capital, if [00:38:00] a company is doing well at the series a stage, where did they go next? We don't have too many funds here in Chicago that are big enough to kind of take that market. So founders have to look for that capital elsewhere, but what also comes into play is that brand equity, would you have a very well-known VC?
[00:38:22] Fund, uh, leading it round or a just getting started fund. So that difference is very noticeable and I think it will get better over time, especially as some of the existing funds in the ecosystem are growing upward and leading more of the bigger rounds. So that's one, uh, that I would say is something that our Chicago ecosystem is lacking, but is also on track to change and improve further.
[00:38:53] Matt Castellini: [00:38:53] And on the industry side of things. Are there any industries that you feel Chicago has established [00:39:00] itself as the leader or in or in the future? Do you think that will take place for any particular industries? Curious to hear your thoughts on it?
[00:39:07] Abinaya: [00:39:07] I think we're still early in figuring out what the Chicago ecosystem is known as if you would ask me, I think we have wide, where do you have companies, which is a good thing because there was finding that industry is very important and not focusing on one or two in terms of in the future.
[00:39:23] We'll see. Um, we're starting to see a ton of logistics companies here or real estate focused one and maybe consumer in the future.
[00:39:33] Matt Castellini: [00:39:33] Yep. Love that. I also think personally, um, I'll touch on this in a minute, cause I would love to hear your favorite restaurant recommendations, but I think, and I take a lot of pride in Chicago's emergent says potentially the food tech capital of the U S but I think we got some of the best foods, some of the best food founders, aside from our pizza, which is a hotly contested, uh, item.
[00:39:53] Uh, I hope not to get into too big of a debate with anybody one day in the future. Cause I do not like Chicago deep dish, but you know, that's [00:40:00] a conversation for a different day. I hope you're not a huge fan of Chicago deep dish, and I didn't just greatly offend you. I, uh, curious about you had a blog post and I think it's something you do maybe once a year about the lessons you're kind of learning as a VC.
[00:40:15] Um, you have a unique background and that you, this is your been your first and your only career. So I would love to hear about some of the biggest. Lessons that you've learned since undergrad, you know, as a young VC. Yeah, this
[00:40:28] Abinaya: [00:40:28] is something that I do every year. This year, I kind of focused on what are four things that I learned from being an undergrad to here, because it's been four years since I joined them 25.
[00:40:40] So kind of focusing more on the day-to-day aspects of being a junior VC on the team is kind of how I went about that. So, The first one is kind of thinking about acid new VC. When you recommend companies for a team meeting, really thinking about what does the firm blond more than? What, what do you personally [00:41:00] like?
[00:41:00] So that's one, the second is finding your super power SLDC. Why would somebody want and plenty file on their cap table, but more so why would somebody want a benign out on their capital? So thinking about that value, add beyond capital, but really honing in on that, that comes across as a superpower on why that founder wants you on their cap table and keep asking why or why we did certain things a certain way, why we're doing certain things certain way, but more importantly, asking that why around, why we need to do this now or system.
[00:41:41] And, uh, lastly being open to it, we talked about this a little bit earlier. Uh, when you think about biases and pattern matching, this is a key skill to have an open mindset and. Have the possibility of being wrong, but also recognizing all of the different variables that you need [00:42:00] to be aware of.
[00:42:01] Matt Castellini: [00:42:01] Uh, first off I love the post.
[00:42:03] Uh, we're definitely gonna link it in our show notes and there's so much there to unpack that we might even need another hour for, at some point, but you know, one particular part. You know, uh, sort of tying it together with what I've sort of viewed as maybe potentially your superpower for a young VC, who's looking to find their super power.
[00:42:22] Do you think it's important to start with your natural passions and what you love? What you love to think about what you love to do? You know, you talk a lot, you know, your interest in the side hustle sort of economy, you know, your fascination, you know, creating the card game. Is it important, do you think for young VCs to figure out what's unique to me?
[00:42:40] What do I love and go from there?
[00:42:42] Abinaya: [00:42:42] Absolutely. Um, I think a key question to ask is what is something that you do that doesn't feel like a job, right? That doesn't feel like you have to do it, but you just naturally do it. I think that's where a lot of the superpowers come from. But at the same time, you have to think about the [00:43:00] teams.
[00:43:01] So think about the core team members and what are their superpowers, what can you be complimentary? Or what can you add on to the existing team members superpower? So that's another variable that you have to keep in mind when you're trying to think about building out or experimenting with a bunch of things, right?
[00:43:18] Because you're not going to know your superpower immediately. You have to work on that. You have to experiment and keep iterating
[00:43:25] Matt Castellini: [00:43:25] on it. I love that. And I mean, it reminds me a little bit too. I'm not sure if you've read much of his kind of, you know, his blogs or his podcasts, but Neval Ravi cons talks a lot about this particular topic and just echoes a lot of what he has to sort of say on super powers, venture investing.
[00:43:41] But I love the blog post. I love your kind of perspective on it. And I, as we finish up. As I mentioned going to have to hear about your favorite Chicago restaurants. If you have any, you know, I lived in New York for four years, so I'm still trying to build out my repertoire of Chicago eateries. So anything would be helpful.
[00:44:00] [00:44:00] Abinaya: [00:44:00] Oh, there's so many. I have to keep, uh, I have to check if some of these are open now or not. Uh, given the COVID I've just been back into the city for a couple of weeks now, but I'm a huge sushi person. So.
[00:44:17] Matt Castellini: [00:44:17] I'm assuming you're going to say Momotaro.
[00:44:21] Abinaya: [00:44:21] I honestly have like a budget for a sushi every month.
[00:44:24] Like I shouldn't go over this, but one of my favorites is around me, um, is very good, uh, association decently. Well, that's very nearby pies on, uh, is another one. There's one, I'm forgetting the name of which I'll get back to you on, but those are my go-to. So she places
[00:44:44] Matt Castellini: [00:44:44] love it now. Yeah. I think a Chicago sushi, very underrated.
[00:44:48] I would agree with that. Sushi shot sushi sawn love that place. That's a great recommendation. And then lastly, any, any kind of. Thought leaders or people you love to follow for their musings on [00:45:00] VC, on life, on startups, any resources that you love that you would write? Yeah.
[00:45:05] Abinaya: [00:45:05] Uh, I don't have any particular people that I recommend.
[00:45:07] I think more so I, I subscribed to the curators of the world who curated some of the best content for me. One of my favorites right now is SA Sandhill, which I'm forgetting the website of, but Ali at equal lunchers curates that. Newsletter, and I absolutely love it. I feel like I get the best content from there.
[00:45:29] That definitely challenges my opinions and thinking about the markets.
[00:45:33] Matt Castellini: [00:45:33] Yup. I completely agree. It hits my inbox every Sunday and it's the fastest open I have in my inbox for sheriffs. So completely agree with you there. Thank you so much for joining us on Chicago Capitol. We really appreciate it and cannot wait to, uh, to do this again in the future.
[00:45:48] We're going to have to dive way deeper into your, uh, your four lessons, blogs, and just really kind of. Glean as much information as we can from someone who's been doing VC since jump street, basically.
[00:45:58] Abinaya: [00:45:58] For sure. Thank you for having me. [00:46:00] And this was a
[00:46:00] Matt Castellini: [00:46:00] blast take care.