Paul Judge on helping lead SoftBank’s $100M Opportunity Fund, the future of VC & more | This Week in Startups Blog
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Top Insights
- Investing over zoom expands the top of the funnel and lowers the barrier to entry for all founders
- Investors can take 2-5x more meetings with founders from anywhere in the world
- Paul’s thesis: Investing in overlooked founders will likely generate outsized returns
- The American Southeast and Midwest include 44% of the US population but only receive 14% of VC funding
- Despite this, 36% of last year’s Inc. 5000 reside in these regions with a median growth rate of 161% year-over-year
- The “either or” debate between making existing firms invest in underrepresented founders from their main funds OR raising “opportunity” funds that are specifically focused on underrepresented founders isn’t helpful, both are necessary to make VC funding more equitable
- Jay-Z had the best Q1 2021 of any entrepreneur or investor
- Tidal was acquired by Square for $297M, he sold 50% of Ace of Spades to LVMH for ~$300M, launched $10M cannabis-focused fund to back black founders, Oatly filed for IPO
Intro
- Paul Judge, Ph.D. is Managing Partner of Panoramic Ventures, a VC fund that invests in “underserved geographies and overlooked founders” prioritizing the American Southeast and Midwest. Paul is also Co-Founder & Executive Chairman of Pindrop, an information security company that provides risk scoring for phone calls to detect fraud and authenticate callers). Pindrop’s most recent valuation was $900m in 2018.
- Paul also serves on the investment committee for SoftBank’s $100m+ Opportunity Growth Fund to invest in Black, Latinx and Native American founders
- Paul is based in Atlanta, but has become a Miami regular.
- Atlanta’s startup scene is heating up:
- Airbnb just located it’s East Coast engineering team there
- Local Unicorns: Calendly ($3B), Greenlight ($1.2B, consumer fintech), Rubicon ($1B, recycling technology), SalesLoft ($1B, sales software)
- Strong talent pipeline from Georgia Tech
The virtual-first investing paradigm shift
“I see more companies than I would have seen otherwise, the top of funnel is wider. From the entrepreneur’s standpoint, it’s easier to get a meeting with an investor than it was traditionally. That means a whole new generation of entrepreneurs that wouldn’t have had access, now have more access to venture capital funds & angel investors.”
Paul Judge
- Paul has made 25 investments in 2020, all over Zoom. He has met 2 founders in person, but only after investing.
- Being an active investor in 2020 required going virtual. Most investors never considered this a viable method prior to the pandemic. Both Paul & Jason discovered that virtual investing offered a new set of benefits:
- Investors can take 2-5x more meetings because intro meeting times went from 2-3 hours to 20-30 minutes. How?
- Commutes and pleasantries are eliminated, and everyone gets down to business ASAP.
- Conversations now start with hard numbers. Entrepreneurs have become more direct in their approach, making the information needed to diligence an investment up-front in their first email.
- Investors now have much greater access to founders outside their city. Travel and cost of living in the Bay Area are high and are no longer an obstacle for founders.
- By taking more meetings from broader geography, investors are able to reduce their bias.
- With more meeting slots available, it’s easier to take a chance on a founder you wouldn’t have met with pre-COVID.
- Virtually, the pattern-matching necessary to be a great VC becomes more about assessing the founder based on their performance, rather than by charisma or presentation skills.
- Investors can take 2-5x more meetings because intro meeting times went from 2-3 hours to 20-30 minutes. How?
How Paul Judge invests
- Paul’s Techsquare Labs was focused on backing top talent (students & professors) from local universities like Georgia Tech, funding founders at the pre-seed and seed stages.
- He is now expanding to be involved at Series A & B both at SoftBank and Panoramic Ventures, which just launched a $300M fund.
- Paul knew 2/4 other members of the Softbank Opportunity fund’s investment committee from being a part of the 2016 class of Aspen Institute’s Henry Crown Fellow Program.
- Stacy Brown-Philpot (previously CEO of TaskRabbit)
- Marcelo Claure the CEO of Softbank Group International (Previously founded Brightstar Corporation, which sold a majority stake to Softbank in 2013)
- Panoramic’s thesis: investing in overlooked founders will generate outsized returns.
- The American Southeast and Midwest receive only 14% of VC funding even though they include 44% of the country’s population.
- 36% of last year’s Inc. 5000 reside in these regions with a median growth rate of 161% year-over-year.
How to make investing more equitable
“Black founders are not just solving black problems, they are solving some of the most meaningful problems that exist.”
Paul Judge
- The “either or” debate between making existing firms invest in underrepresented founders out of their main funds OR raising “opportunity” funds that are specifically focused on underrepresented founders isn’t helpful, we need both to make venture capital more equitable.
- VC firms typically don’t change their partners often (turnover typically occurs with a new fund every 3-7 years), so adding new diverse partners to existing firms is a slow process.
- The industry needs to evolve in this way, while also meeting fiduciary responsibility to limited partners who invested in the fund.
- Purpose-built investment vehicles like SoftBank’s Opportunity Fund have a clear mission and can make an impact right away.
- Another benefit is creating an ecosystem where some of the top underrepresented entrepreneurs can support & inspire each other.
Jay-Z’s groundbreaking Q1 2021
“I was just talking with somebody about who had the best quarter, Chamath or some other venture capitalist and I was was like, ‘No, I think Jay Z had the best, he just sold half Ace of Spades to LVMH.'”
Jason
- Jay-Z’s Q1 2021 by the numbers:
- January – Launched a $10M cannabis-focused fund to back black entrepreneurs, due to people of color being the most negatively effected by the war on drugs – while still not profiting off legalization
- February – Sold a 50% stake in Ace of Spades to LVMH for ~$300M
- NOTE: The original acquisition was partly-driven by the Cristal CEO’s 2006 rejection of Jay-Z and rap culture, “We can’t forbid people from buying it. I’m sure Dom Pérignon or Krug would be delighted to have their business.”
- March – Square acquired Tidal for $297M and Jay-Z joined Square’s board in March
- from the Tidal and Ace of Spades deals, his net worth jumped ~40% from $1B to $1.4B in the span of two months
- As if that wasn’t enough, Jay-Z invested in Oatly at a $2B valuation in July 2020 alongside Oprah, Natalie Portman and others. Oatly filed to go public at a $10B valuation in Feb. 2021 (a quick 5x for Jay-Z & Roc Nation)
“I love that love Jay-Z’s going after industries that have traditionally been unfair to the people that have been creating value. The music industry is traditionally unfair to the creators, so he did Tidal. In food and beverage, the Crystal CEO got shot himself in the foot, so [Jay-Z] went after that. Then if you look at the cannabis industry, I mean, it’s not exactly tech, but it’s creating tens of billions of dollars of value. It’s one of the most valuable crops that this country’s ever seen. But if you look at everyone that’s going public, there’s no diversity, but we all know this country was built on the backs of blacks tending to crops.”
Paul Judge
Companies Paul Shouted Out
- Carbice is making nano-materials for heat sinks, the founder was a professor at Georgia tech
- Vitable is providing a new subscription healthcare model for uninsured and low-insurance patients
- Mayven is one-stop shop for hair extensions
- Squire is providing vertical software to run barbershops
- XSET, a gaming startup recently invested in by Quality Control Music Management
The post Paul Judge on helping lead SoftBank’s $100M Opportunity Fund, the future of VC & more | This Week in Startups Blog appeared first on Jason Calacanis.
