Early Signs of a Great Venture Capital Firm
Courting investors isn’t just about throwing pitch decks at a hundred firms. People love to say pitching is just a numbers game, but that strikes me as crass and simplistic. Deeper things than just money are at stake.
I don’t just need the first check I can get. I need a great partner.
Yesterday, I had an above-average experience researching a specific firm. Their company made me feel deeply understood as an entrepreneur and human, and I just need to rave a bit.
HALOGEN (@halogenv) is a venture capital firm in Los Angeles focused on early-stage B2B businesses with a female founding member.
The VC Vetting process
Anyone can claim they mentor. Effective mentoring should manifest as systematic strengths in partner companies, right? So I embark on a meticulous journey through each firm’s portfolio, watching for trends in what all their businesses are doing well.
This isn’t just a cursory glance; I download apps and use them. I sign up for anything I might be interested in. I browse partner websites, study their funnel, and read their blogs.
I read about every item they’ve invested in. I’m hardly an expert at the end, but it’s like meeting someone’s friends. Maybe it’s accountability and mentoring, or maybe it’s pre-funding standards, but either way, health and progress in partners is a good sign.
The portfolio dive also helps me understand what each VC firm values in practice, and assess what kinds of industry problems they’re willing to tackle with the right leadership.
This is what sets Halogen apart:
1. Above-Average UI
The first thing that stood out about Halogen and their partners was exceptional user interface (UI) experience.
It’s a small thing, but when you hover over items in Halogen’s portfolio, it summarizes each business. I didn’t have to open new tabs for every business. Overall, their website design was smooth and visually appealing. Everything I needed was at my fingertips.
Halogne’s UI impressed me on its own, but the partner websites shared the same level of excellence. All links work, which is surprisingly uncommon. I don’t get security warnings, error messages, or dead URLs.
The first Halogen-associated app I download (Toucan) installed quickly and worked effortlessly, sparing me from the frustration of tech glitches. The user experience was educational and extremely well-designed, pointing me to one next step at a time. A non-pushy wizard-like process that made sure I knew how to turn their product on and off easily.
I loved their attention to detail and commitment to providing a truly seamless experience for their users.
2. Innovative Value Propositions
The next thing that stood out about Halogen was the quality of concepts they backed.
When I studied Business Entrepreneurship in college, I saw a deep disconnect between entrepreneurs and customer desire. I watched classmates pitch kinetic-energy-capturing sneakers that could charge your phone, countless mobile apps that monetized with aggressive ads, and insanely overpriced meal subscriptions. Having lived through desperate years on very little, the difference between exploitive offerings versus true solutions was very clear to me. It surprised me that my peers couldn’t see it, and my heart ached for all of them, knowing the sacrifices of entrepreneurship that lay ahead down paths that held no treasure.
Sometimes venture capitalists share the same myopia. In a FOMO pressure, many firms jump on innovation trains late. Some cave to peer pressure and assume an idea is good enough just because everyone else is investing in it.
I remember watching venture capitalists throw millions of dollars into Blue Apron, despite meal kits at-your-door never being cash-positive. In 2016, the meal kit industry generated $1.6 billion in revenue — but zero profit for any company. As a customer who lived on food stamps once, I understood the price-to-value ratio of meal kits were missing the mark. Too expensive for the food you got. People literally just wanted more calories. They wanted leftovers. Throwing extra pasta in each box to increase the calorie count would probably have doubled subscriber retention.
Yesterday Blue Apron sold for $100 million, a loss from their Series D of $135 million, marking that venture a massive failure, despite the hype. I was sad for them, but not surprised.
Sometimes the rush to monetize kills a great idea, too. I recently had lunch with a friend who bemoaned the death of a company she cofounded. It died because an incubator pushed her partner to monetize early in a way that undermined their fundamental value proposition.
Great venture capitalists understand average people. I don’t want partners with poverty brain, obviously, but I’d love to work with people who understand what people in poverty are going through. Teams who are passionate about the fortune of the bottom of the pyramid. People like Mo Ibrahim. Teams like Unilever.
So when browsing a VC’s portfolio, I’m looking for a particular niche of intelligence. I’m looking for a glimmer of hope that the VCs understand what makes value propositions truly useful to an end consumer. I don’t want to build a flash-in-the-pan. I want to build infrastructure.
Halogen seems to get it. In their portfolio:
- Toucan understands adults are too busy to study, and that study is inefficient language acquisition anyway. It’s a radically different approach to language learning, and I love it.
- StyleRow understands the difficulty of penetrating the fashion design industry, and wants to empower those entrepreneurs to get started in niche or at scale.
- Ellevest understands that women deal with a different financial reality than men. We’re charged 0.5% more APR on credit cards, we earn 18% less than men for the same work. We live 6 years longer on average, and 80% of us die single. We have different financial priorities, and we sometimes get talked down to in financial discussions. Ellevest is a female financial-management haven.
Conclusion
Halogen’s unique combination of user empathy and deep market savvy makes them an attractive option for visionary entrepreneurs. It’s unclear if the strengths in their portfolio come from high standards, accountability, highly effective mentoring, or a lovely cocktail of all three. But regardless of the source, the consistent presence of those strengths in partner companies is a great sign.
I’ve pitched to many great VC firms this month, and many have been welcoming, warm, encouraging, and sensible.
Halogen simply stood out because they’ve gone the extra mile to deliver seamless delight to website guests. Plus, their portfolio is innovative, not just reactionary. And their partners seem to be thriving in similar ways, which deserves kudos. Halogen gets things right on all fronts I can see so far, making them a compelling choice for those seeking to make a meaningful impact in their respective industries.
