MFV PARTNERS Interview Series: Cleo Capital

Rob:

Hi everyone, welcome to the Motley Fool Ventures partner fund interview series. I’m Rob and so glad you’re all here to join us today. Motley Fool Ventures has been making limited partner investments in other venture funds. And we’re excited to highlight these rising star VCs and their investing strategies. And I’m here today with Sarah and Matt from Cleo Capital. Thank you both so much for joining us.

Sarah:

Thank you.

Matt:

Great to be here.

Rob:

So to get started, I would love to just kick off with short introductions. Just tell us a little bit more about yourselves and a little bit about your fund and Cleo Capital’s thesis.

Sarah:

I’m Sarah Kunst. I started Cleo Capital in 2018. We are a pre-seed fund and we focus primarily on… Now we are able to focus primarily on leading deals. And so we’re generally writing half a million to million dollar checks where we’re taking around 15% ownership. So very, very early-stage companies. Prior to starting Cleo, I was a startup founder and executive. I was an investor at Mohr Davidow Ventures. I’ve been an advisor at Bumble, the dating app where I helped them launch their corporate VC arm that focused on investing in women of color back in 2017 and early 2018. And just been on a board at Michigan State University, a foundation board doing limited partner investing. So all of those experiences came together when it was time to start Cleo. And I started fund one as a solo GP but now I’m very, very excited to be adding Matt, a former boss and investor of mine, an advisor to the fund who’s now coming on full-time. So I’ll have him introduce himself to you.

Matt:

Hi. And I’m… I’m Matt Pauker. I once upon a time was a halfway decent computer scientist that got started in the Valley doing my undergrad in computer science at Stanford. Built a couple of companies of my own over the last few decades. The first was a cybersecurity and a product software company called Voltage Security. That was a spin out [inaudible 00:02:12] research. We sold that in 2015 to HP Enterprise and the second was a company called 21 later Earn.com was one of the big early bets in the crypto space that we sold to Coinbase in 2018. Had been an angel investor and advisor to a bunch of great startups for a number of years and among those Sarah’s startup and had always been a big fan of what Sarah was doing with Cleo. And so now super excited to join as the second partner for fund two.

Rob:

That’s fantastic. Thank you, Sarah. Thank you, Matt for the intros. To help our viewers get a little bit more detail on what you’re doing, would love to hear about maybe a couple of your recent investments just to help us understand even more about some of the companies that you’re looking for.

Sarah:

One investment that we made a little while ago that we’ve been incredibly excited about is Planet Forward and Planet Forward’s a company started by serial entrepreneur, Julia Collins. She was the first and I still… I think still only a black woman to be a founder of a unicorn company at her prior companies, Zume. And now she’s building Planet Forward which is a regenerative agriculture company.I was a long time admirer of hers and had gotten to know her. So when she left Zume, we had breakfast one day and I said, “What are you doing next? Because I want to invest.” And she said, “Don’t you want to know what it is?” And I said, “Maybe what it is will determine the investment amount but I know that you’re amazing and I know that I want to back you.”

And so she’s just been an incredible entrepreneur. We’ve been lucky enough to have her as an entrepreneur in residence at Cleo. And she’s just been a really a great founder and her new company Planet Forward is also launching snacks in the regenerative agriculture space called Moonshots. They’ve been backed… We were the first check in but Precursor and Emerson Collective and others have invested since. And we just so, so enjoy working with Julia and Planet Forward to save the planet.

Rob:

That’s fantastic. And then the last question to give some more contrast around Cleo Capital. So when you’re meeting with the founder and you know that there is a lot of interest even if it’s an early company, what are some of those key differentiators, those key attributes that are so important for you to share with that entrepreneur in those early moments of starting a relationship?

Matt:

I think that one of the things and Sarah touched on this earlier is, we are very much conviction based investors. We like to be of… First check into a company. I think one thing that’s very different about what we’re doing at Cleo is because of that conviction, we want to be actually leading the rapid pre-seed. There is certainly lots of capital available at pre-seed much of it’s angel capital, some institutional capital but we find that very often a founder who’s trying to raise let’s say 750,000 or a million dollars for their first round is spending months and months raising that money, passing the hat around to get to their total. And that’s unfortunate because that’s time that the founders should be building not raising money and it just eats into your runway.

So it’s not good for anybody and so what we ought to be doing at the fund too at Cleo is writing a series and of those half million to million dollar checks. We’re happy to do the entire round or take the majority of the round plus some other strategic investors but get those founders back to work faster, allow them to go build. And then obviously from our perspective as former founders and operators really lead in with those founders. We like to say that we’re going to be the extra founder around the table, working alongside of them, helping them think through everything from how do you think about building out your team? And how do you think about product strategies and go to market strategies? And ultimately, how do you think about raising that next contract capital to keep the company growing?

Rob:

What’s the response? You’re coming in with a story that not many other early investors are delivering. What do you typically hear back when you start to have those conversations?

Sarah:

With founders I think that there’s some excitement and relief. It is very hard to raise money and there are so many amazing pre-seed funds and super angels and they are… We love them and we love coming investing alongside them but often it’s hard to string together 10 of them at a time to get your 100K check from everybody or your 10K checks from people. It takes a long time particularly for founders who are outside of Silicon Valley who 92% of our portfolio of founders who are women and people of color and immigrants and LGBTQ and based outside of Silicon Valley and all of those groups depending on where you are and what you’re building can face an additional layer of hardship when it comes to fundraising.

So having a capital partner who we’ve both been founders, we understand how hard it is and we are excited to help make that process a little bit easier. And I think that limited partners have been really excited by that because it’s also a huge opportunity in the market. When you look at companies that are achieving hundred million… Hundred billion dollar private market valuations close to, the thought of having an investment in a fund that goes early enough on some of those that they even by that point still own multiple percentage points that they bought for a million dollars, that’s a pretty exciting ROI. So founders love it and investors love it and we love doing it.

Rob:

It’s a huge point. Thank you for that. And that’s something that we’re talking with our LPs about to understand when you’re investing, the percentage ownership, et cetera. So that’s a great point. Thank you for that Sarah. Really this is fantastic. I do have one other question just because this comes up or we get this question a lot from LPs. The name, can you just talk about Cleo Capital and what the name means? How you came up with it? And that’d be great.

Sarah:

So I needed a name because you can’t do a first close because you can’t get money wired to a bank account if you don’t have a Delaware entity, which means you need a name. And so I’d been thinking about it for a long time, had played with a lot of things that weren’t right. I couldn’t get the URL or they were already used. And I was thinking, we’re going to make money. So money’s green. What else is money? And what else is green? And then emeralds are green and I Googled emeralds. And the largest Emerald in the world is the Cleopatra Emerald. It’s about the size of a six month old baby. And so I was like, I too like jewelry. And then I just started to do some research. Of course I knew who Cleopatra was but started doing more research. And it was really inspired by the idea of this woman, really hundreds of years, centuries before her time, who was an African queen doing things better than the men around her. And that sounded familiar for some reason. So I decided Cleo it is. It’s also very easy to spell and remember.

Rob:

Awesome origin story. We love those. So thank you Sarah for that. This is great. The one last thing I’m going to ask is for everyone who’s watching, what’s the best way for them to follow you online, connect with you on social media? What would be the best way for them to do that?

Sarah:

So on social media, we are @cleocap. So C-L-E-O C-A-P on Twitter and Instagram. I am just at @sarahkunst on Twitter and Instagram as well. And then Matt can share his too.

Matt:

Yeah. And I’d just add that matt_pauker on Twitter as well. So we would love you to follow us.

Rob:

Excellent. Well thank you, Sarah. Thank you, Matt so much for sharing the story of Cleo Capital. We are so thrilled that you’re a partner with Motley Fool Ventures and for everyone who is watching, thank you. We really appreciate your time and interest in all of these investments.

Sarah:

Thank you.

Matt:

Thanks pal.

Rob:

All right. Thank you both so much.