Galina Ozgur [00:00:23]: Hello, I’m Galina Ozgur. I’m an international accelerator consultant start-up advisor, and venture scout with Aera VC. To me, what matters is community.
Kelly Kovack [00:00:38]: Bigger. Everything today seems bigger: the investments, the deals, and without question, the exits, and unfortunately, the meltdowns. I’m Kelly Kovack, founder of BeautyMatter. M and A activity in the beauty space has been on fire for several years, leaving the pool of mature indie brands of scale depleted. This has created a rush by investors to make bets on the next crop of young beauty brands. Venture capital, incubators, and accelerators are ingrained in the start-up ecosystem. It’s hard to stand out as a new player, and who you raise money from and the programs you’re accepted into are strategic decisions that provide a competitive age. Venture capital insider Galina Ozgur is a New York-based accelerator consultant, start-up consultant, and venture scout with Aera VC, a seed fund focused on ventures that improve society or the environment. She’s an accelerator trailblazer, an innovator in emerging markets, and an advocate for entrepreneurs and their ideas. Galina’s superpower as a venture capitalist might just be her empathy.
Galina, you’ve spent the bulk of your career in the VC space, specifically focused on accelerators. What is it sort of about the concept of accelerators that compels you so much?
Galina Ozgur [00:02:16]: Yeah. I think accelerator businesses are really interesting because in such a short span of time, let’s say we’ve only had 15 years to develop a brand new concept, get it engrained with the community, and now make it an essential part of an ecosystem that is worth talking about. It’s smart people in rooms together, working on exciting ideas.
Kelly Kovack [00:02:46]: So, let’s talk a little bit about sort of the purpose and process of accelerators, because I think based on industry sort of specifics, or verticals, they sometimes take very different incarnations, and I think that – often, it’s become a word that gets thrown around a lot.
Galina Ozgur [00:03:08]: Yeah, it’s a new word, bad word.
Kelly Kovack [00:03:10]: A bad word in the little sort of nebulous. So, I’d love to sort of dig into that with you, just a little bit, and talk about, you know, what is the real purpose of an accelerator, and what does the process look like, for both an entrepreneur and sort of the VC community that backs it. So, my first question is, as with anything, accelerators, they’re not all created equally, obviously. What should the role of an accelerator be in a founder start-up path?
Galina Ozgur [00:03:45]: Okay, yeah. I think, let’s roll back a little bit and think about the very beginning of the accelerator industry. So, the first accelerators are, as a lot of people in the industry know, is Y Combinator, YC, started by Paul Graham, it’s Tech Stars, it’s 500 Start-Ups, here in New York it’s ERA, Tech Stars New York, many, many others, and originally, the concept of an accelerator was let’s have a beginning date and a start date, it’s going to be cohort-based, there’s definitely going to be an investment involved, an exchange for equity in the company, and there’s going to be a demo day. That used to be the model. It was mostly tech, or something around tech, but things have been changing and evolving. Fifteen years is like dog years in the start-up industry.
Kelly Kovack [00:04:43]: I know, it’s crazy.
Galina Ozgur [00:04:45]: In historical terms, 15 years is nothing, it’s a millisecond. For start-ups, it’s so much. And so we went from something that is catering specifically to tech companies, technology companies, to a wide array of both industries, verticals, types of companies, here, nationally and internationally. When you ask me, what role does an accelerator play in a company’s journey, well, it really depends, what type of company, what type of accelerator, and you’re right, we do throw that word around so much. I remember walking into the bookstore, and the bookstore had a book that said, “What’s an accelerator?” or “What’s the difference between an incubator and an accelerator?” and everybody really wonders. To me, as a purist, as somebody who is classically trained in the accelerator industry, that’s still a cohort-based program, and what that program does or promises, if it’s good, is it gives you access to, well, financing, but not just that, you usually can’t run your business on just the investment from an accelerator. It gives you access to an amazing network, mentors, advisors, other investors, and it gives you promise of community, and if you’re good at building community, it’s maybe your community for life.
Kelly Kovack [00:06:14]: So, it’s really a one-part, you know, I think it also becomes sort of a marketing cue for future rounds, and I think also, like many things, it’s sort of what you make of it.
Galina Ozgur [00:06:29]: Yeah, you’re absolutely right. I think a lot of start-ups these days, especially with the proliferation of programs, say, “What do I need for my team and my company? Oh, I need some free space so I can get to my next round of financing. I should join an accelerator.” And I go, “Oh my god, please don’t take me there again.” If you’re giving away equity to get free space for three, four months, I will be questioning your entire judgment about how you’re running this business.
Kelly Kovack [00:06:58]: I think that also, you know, it kind of feeds into, so sort of off-topic and sort of a larger topic of this sort of short-term mentality that we live in, not only, you know, start-ups always have to think short-term to a certain extent, because it’s a little bit of hand-to-mouth until you get things going, but the fact that someone would look at an accelerator in such a transactional way is sort of the antithesis of why they exist.
Galina Ozgur [00:07:31]: Yeah, absolutely. I think your accelerator experience does absolutely depend on what you make of it. It also depends on the expectations you have of it, but also, on how you’re reading the expectations of the program, and you know what? I feel like founders don’t spend enough time on research. They don’t spend enough time on the website of the program. They don’t look at the requirements. They say, “Come what may, I need the space, I need the financing, let me go. Somebody had a great experience, so therefore I will have an amazing experience,” but they’re not all created equal, and one program is going to be amazing for one company because they’re in the right spot, they have maybe a product, MVP, they’re ready for financing. Another company is a little too early, and that might completely change their experience with the same program.
Kelly Kovack [00:08:24]: So, how does an entrepreneur, or sort of an organization, what should they be considering when sort of vetting accelerator programs? And, what does the process look like for acceptance?
Galina Ozgur [00:08:43]: Okay, I think the process is generally pretty straightforward for most programs. You submit an application, applications are available online, the form and the questionnaire actually give you a lot of insight into what is required, and what the company – the program values in the applicant. What you need to be considering is, how long has this program been around? I do think that companies that – programs that have demonstrated some longevity also have some experience under their belt, so don’t disregard that neckbeard, doesn’t disregard the grey hair, it’s important to have that experience on the team. I would personally look for people who have been operators in start-ups before. The very first accelerator that I was very lucky to join as a program manager was ERA, which still exists today, one of the most successful programs out there in New York, and it was founded by two [unclear 00:09:55] entrepreneurs and an investor, and I thought that was a great mix of talent that also gave founders a lot of security and confidence in the quality of programming that they were being served.
Kelly Kovack [00:10:12]: It’s interesting that one of the things that you would look for is sort of an accelerator that has founders, because I think it’s very different. I think VCs bring a set of knowledge to sort of the conversation or the equation, but being an operator and having done it before, you know, there’s…there’s an experience that can be shared that is so valuable, that the information can only be obtained by having sort of gone through the process yourself.
Galina Ozgur [00:10:52]: Absolutely. I mean, now that we have so many models and so interesting versions of accelerators that are no longer called accelerators, they’re called clubs, they’re called platforms, communities, campuses, they’re run by a variety of people, and they may not entrepreneurs, necessarily, any more. I do think that operational experience on the team is very valuable, first of all, because if you’re saying this, you’re saying, “I know that it’s damned hard to build a start-up. I’ve been there. I know what you need. Come join me.”
Kelly Kovack [00:11:30]: Well, there’s also an empathy that goes along with that, that unless you’ve done it, you will not have that sort of empathetic, or even foresight into what that entrepreneur might need that they might not even realize yet, much more, perhaps, on the psychological, not the financial.
Galina Ozgur [00:11:53]: Absolutely. Empathy is such a big word to me, especially on the community building side. You need to understand what these people are going through, and they are building, growing something that is so important to them. A lot of them are risking relationships, putting everything on the line; empathy absolutely comes first.
Kelly Kovack [00:12:16]: So, you know, I think making the decision to participate in an accelerator program, it’s a time commitment, both sort of in research preparation, and then once you’re accepted, to make the most of it requires a commitment of time. What do you look for, or what do accelerators look for, in sort of the ideal candidate, that someone could think about if they’re in the process of pitching or filling out that questionnaire?
Galina Ozgur [00:12:51]: Yeah, I think the timing needs to be right. When you’re a little bit earlier for an accelerator program, and let’s say you’re really working hard on your product, you’re not there yet, and you know that the next three to four months you’re going to be spending heads down working on some product features, an accelerator program, in a traditional sense, it’s probably not the right time for you to join. Maybe in six months’ time, for another cohort, it might be great. So, timing is of essence, because again, if we’re talking about a traditional accelerator program, there’s a beginning and there’s an end, and it ends so fast. So, three to four months are usually spent on, let’s say, some aspects of business building, like sales, marketing, yes product, absolutely, customer acquisition, testing your assumptions; it’s very intense. So, what the teams at accelerators are looking for is that you come in with a very strong commitment to be there for three to four months. Most accelerators will want you on site, and not just you and not just your co-founders, but most of your core team, and they will want you to actively engage, because if you are there, just say, I’m going to attend a couple of sessions, a couple of workshops, but I’m not going to participate in anything else, you’re essentially missing out on a very core offering. There’s so much stuff happening in an accelerator every single day: there’s mentor meetings; there’s sessions; there’s one-on-ones; there’s pitch practice ahead of demo day; there’s investor meetings, and then there’s that very valuable time that you can actually spend with a management team of the accelerator, because if they’re doing something right, their door is always open, and that is your opportunity to ask a question. You won’t have the same opportunity to engage as much once that program is over. So, what they’re expecting is commitment, absolutely. Second, it’s great – right now, because there’s so much accelerators and because funding rounds, and how much we’re raising and what is expected has changed a little bit over the years, it’s always good to have raised a little bit of capital. It’s okay to raise what we call your “pre-seed round.” Maybe it’s your uncle that gave you a couple of grand. It’s nice to show the team that you are able to raise, that you have gone out and made your first steps, whether you were super successful or not so successful, time will tell, and that can of course correct, but the most important thing is you need to show them that some action has been taken. Three, again, I think commitment, from your team this time. The expectation is you need to be full-time on this. You can’t have this as a side gig. If you have something else going on, it’s likely not for you. And then, it needs to fit the thesis of the accelerator, right? Unless it’s a generalist accelerator that will take every company from fintech to beauty, then you’re fine, but if you’re talking to a travel incubator, to a fintech incubator, to any sort of very specific hardware, obviously, you need to know where you’re applying. It’s not very different from a college application or essentially just qualifying your leads.
Kelly Kovack [00:16:20]: Right. You know, a big part of sort of the incubator process is obviously demo day and pitching. What are the elements of a pitch in your mind that help entrepreneurs sort of stand out in the crowd, and that is sort of in a demo day, or even just in an investment meeting. You know, I’ve seen, I’ve been part of sort of the receiving end of those, both sort of the business plans, the executive summaries, and you know, I’m really shocked at sort of sometimes the lack of preparation in terms of the audience. Like, it’s obvious, like this is the pitch deck, and they send it to everybody.
Galina Ozgur [00:17:08]: Oy, which accelerator was that? None of the ones I work with.
Kelly Kovack [00:17:12]: No, I’m not necessarily saying about an accelerator, I’m speaking about the start-ups sort of looking to raise capital or enter programs.
Galina Ozgur [00:17:22]: Yeah, understood. I think that any company should be able to nail their elevator pitch, and that takes a long time to craft that. I know a lot of founders who are very passionate about what they are doing, yet they take so long to get to the meat of the problem. So, your elevator pitch, your first couple sentences, are crucial, and you need to really practice, write them down, practice in front of the mirror, make sure that it sounds good, and then bother every single person around you for feedback. You need to nail down your one-minute pitch, your two-minute pitch. The biggest thing that I hear back from founders, the pushback is, “Well, my business is so complex, it’s impossible to talk about it in two minutes.” It’s possible to talk about any business in two minutes, and if the team, if the accelerator team is doing something right and they have great pitch coaches and mentors, then two minutes, and even one minute, are possible. Yes, you won’t tell every single little detail about your company, but the point of any demo day actually is not to tell everything about your company; the point is to get people interested, get them to come to talk to you after, because if you told them everything, there’s no reason…
Kelly Kovack [00:18:47]: There’s nothing left to talk about.
Galina Ozgur [00:18:48]: Nothing left to talk about.
Kelly Kovack [00:18:50]: I think that’s a really important distinction that I think often gets lost. I think so many entrepreneurs – there’s so much pressure being an entrepreneur in sort of I think the ecosystem we live in right now, that they feel like they have this one moment and they need to make the most of it, and sort of approach it as a zero-sum game instead of sort of the beginning of a process.
Galina Ozgur [00:19:16]: Yeah, well, I think there’s also a misconception about what demo days bring. I always – when I talk to founders and I tell them, “I know you have great expectations about a demo day, and it’s a very important day, but it’s just one day, and it’s only the beginning of a process called fundraising, which is grueling, tiring, exhausting, and all you need to do, yes, you absolutely need to have a great pitch, you need to be able to interest the audience, but if your expectation is that you’re going to be getting a check right on demo day, you have another thing coming. It is possible, of course, there are cases where founders get checks on demo day, but it’s not an average.
Kelly Kovack [00:20:02]: And, that’s what we always hear about, right?
Galina Ozgur [00:20:04]: Oh, make it rain, just on demo day. And you know what? I know that when we talk about accelerators, we say, well, you just mentioned that a demo day is a very important day, or the most important day for an accelerator. I actually don’t think that. I think that accelerator demo days, while they’re very important, the preparation for it is a lot more valuable to the founder, because once you’ve nailed your pitch, you can repurpose it for later on. Maybe not your demo day deck, because the presentation at demo day usually has a lot of graphics, it has a lot of images, it doesn’t have the meat of the problem; it’s not like an investor deck that you can send to an investor, but the preparation really gets you to a point where you can be a little bit more confident about…
Kelly Kovack [00:20:56]: Sort of the foundation.
Galina Ozgur [00:20:57]: It’s the foundation. And then, demo day is more like, you know, it’s a party. You are there. You’re celebrating your graduation. Get people interested, but know that it’s the first day of the rest of your life.
Kelly Kovack [00:21:11]: So, this is a good segue into, I guess, the day after the incubator, which usually begins fundraising. I think media coverage – and we are complicit in this, because we do a lot of M-and-A coverage, not only M-and-A coverage, but investment, has made it seem like fundraising is easy, capital is, you know, there, there’s like a money tree, you just need to go pick it off.
Galina Ozgur [00:21:48]: There is?
Kelly Kovack [00:21:49]: I know, I’m still looking for it. But, shockingly, it’s made to seem like – and, it also has almost been framed as the way you launch a start-up, where there are other ways to fund a start-up, not necessarily sort of fundraising in the traditional – you can take loans, you can fund it yourself, but those things don’t really get talked about, today anyway, it’s all about reaching unicorn status and valuations, and this idea that you know, if you start-up a business and disrupt, that there’s a billion dollar payday in your future.
Galina Ozgur [00:22:38]: One would hope.
Kelly Kovack [00:22:40]: I mean, I think we’re in a time with sort of the implosion of WeWork that a little bit of reality has set in, but from your perspective, what is the reality of fundraising?
Galina Ozgur [00:22:53]: Well, the reality of fundraising is yes, there is a lot of money out there, but there’s a lot of money that founders look at when they don’t think about it strategically. They don’t make a plan for themselves, their company, and they think that okay, the day they get that check in the door, check in the mail, in the bank account, they get cash out, it’s the day that they celebrate, they pop the champagne, and it’s really the day when you have a lot more responsibilities, you have a lot more people to answer to now, and you now absolutely accelerate your business; you have to go faster and faster and faster, and plan for your next phase, and that’s your job as a CEO, oftentimes, is jungle those responsibilities. So, the reality is, yes, there’s a lot of money, a lot more money, or a lot more access points to capital now than there were 15 years ago. I mean, after all, accelerators were started, and one of the marketing messages when they started was, “Get access to capital. Learn how to get to the right investors. Learn how to talk to investors.” Now that capital comes from a variety of sources, you can say that there is a proliferation of firms and money and all of that, but you still need to do the work, you still need to plan for how much you’re raising, who you’re raising it from, and is that the right decision to raise that much money from that specific investor? What does that investor give you outside of the check?
Kelly Kovack [00:24:35]: You know, can you talk a little bit about needing to have a strategy when you go into fundraising, because in the beauty industry, I’ve seen so many founders that sort of raise money, kind of out of necessity, rather than doing it as part of a strategy, and in the end, lose control over their business, end up walking away. The company may have had sort of a big exit, but they’re not sure if it was inconsequential, and that really goes back to there wasn’t a strategy in place when the capital was being raised.
Galina Ozgur [00:25:17]: Yeah, I don’t think that that’s just a problem that beauty companies experience; I think that certain problems in the art-up industry reoccur from vertical to vertical. However, I do want to say that strategizing does involve understanding how much it takes to make your product, what your product really costs, what the sales cyces are, how much your marketing costs, so on and so forth, and bake that into your plan, and when you’re fundraising, that should be a core thing about your plan: your financials, your projections, and yes, it’s super early stages, investors want to see your financial projections. They understand that you will of course correct over time, not everyone’s projections are going to be correct, right, we’re making a lot of assumptions here, but the strategy does need to be around your understanding of the core elements and triggers of the business. And, the second thing, when you’re raising money and you’re going after, let’s say dumb money, which is the opposite of smart money, is when you take money from people who want to give you cash, but they’re not necessarily experienced, or maybe they don’t know how your business works, they expect returns faster – in beauty businesses, that usually is the case, that there’s a struggle and there’s pushback. And beauty businesses, going into tech, it hasn’t been that long, and a lot of VC firms look at beauty businesses through the lens of tech businesses, which is such a mistake.
Kelly Kovack [00:27:05]: Until the past two years, there have not been beauty unicorns. That was something that did not exist.
Galina Ozgur [00:27:08]: Exactly, and so I think a lot of investors are very careful about looking at beauty businesses, because they try to evaluate, they work with their associates and say, “Go look at the market, see what the market is doing, what are the valuations like?” And, a lot of them are just not bullish enough on the market; however, those that do invest, you really need to look for a strategic. It’s either somebody who understands beauty – the quickest thing to do is, so some great advice from, I think the last person that did this was Jenny Fielding, managing director of Tech Stars, who came up with this entire slide-share about how to strategize about your fundraise, and it’s true for whether you’re a beauty business or insurance business, it doesn’t matter. You build a list – you build a spreadsheet of all of your potential target investment firms. All of the information is online, on Crunch Base, on Angel List, on the websites of those investors. You list the fund size, the average check, the type of businesses that they look at, you need to look at the portfolio, which is always listed, are there any competitors on that list, if there are, it’s unlikely that that firm would go after you. If they’re close, but not close enough, maybe it’s an opportunity, because they’ve already looked at that category. And then, you need to start qualifying your leads. It’s just like a sales process. If you go to any conference venue that has done any entrepreneurship conferences or any other podcast studio – not that any podcast studio exists outside of this, but if the walls could only talk, the advice from investors, resoundingly, is always strategize, write it down, go line by line and figure out, do I know someone who knows this person? What’s the best way to reach out to them? And by the way, it’s not on LinkedIn or cold email, and it’s not through another investor. It’s usually through a company that is part of the portfolio or through somebody who knows that investor well enough to make an introduction that is an informed introduction, otherwise, it just goes into the trash. It’s a matter of timing and time and understanding how the industry works.
Kelly Kovack [00:29:44]: So, you know, once you get through the process of getting some yes’s to intial meetings, the pitch becomes crucial. I’ve had the pleasure of sitting through one of your advisory meetings, and you know, one of the things I think a lot of entrepreneurs don’t realize is that your pitch evolves over time based on where you are in sort of the lifecycle of your business, and what series or round of money you’re looking for, because then that also sort of equates to a specific set of investors. Can you talk a little bit about either what are the biggest mistakes you’ve seen with pitches, or, what are the top three things you think people need to consider about pitches, and then this whole idea about how it needs to evolve?
Galina Ozgur [00:30:45]: Yeah, I think the very early stages, let’s say pre-seed to seed, the conversation still revolves around the founding team, the quality of the founding team, why them, what’s the market opportunity, how big is the market, but why them?
Kelly Kovack [00:31:04]: Well, it’s interesting that you say founding team and not founder.
Galina Ozgur [00:31:08]: Oh, you caught me. Yes! It’s my favorite topic: solo founder versus a bigger team. You know, since we started with accelerators, a lot of accelerators will not tell you this, but they prefer to not accept applications from solo founders. There’s a reason for that: the programs, yes, they’re absolutely intense, you have to be there. What if you get sick and you’re out for a week? You’re missing out on core program offerings. But, even beyond that, when investors talk to solo founders, I think they just, they look – here’s what it is: investors look to derisk a situation, and so if they’re talking to a solo founder, they just have that many questions for a person. Why just you? How are you going to be accelerating this business? What are the next steps? And, there’s that line of questioning that you don’t always want to go down, and you’re just giving them more reasons to say no or to consider someone else who may have a cofounder. Not that I think every single company needs a cofounder, but it just happens that it’s a numbers game, and investors talk to so many companies in the same realm, and if they get to choose, and if they don’t feel confident with just that one founder, it’s possible that that “no” stems from that reason.
Kelly Kovack [00:32:42]: Well, also, I mean, no business is built by one person alone.
Galina Ozgur [00:32:46]: True.
Kelly Kovack [00:32:47]: And, I think that founders play a key role, but sometimes, they’re as good as the team they put together.
Galina Ozgur [00:32:55]: Absolutely. But, also, what I tell solo founders is, go and prove them wrong. Investors operate on a lot of assumptions. They look at patterns; pattern recognition and all of that stuff that happens, how do trend reports come out, right? Oh, you know, Mercury in the sixth house, moon in that, okay, this is going to be famous in the next…so, go and prove them wrong. If you think you can build this business alone, hell yes, go and do it. And, by the way, if one investor tells you no, if twenty investors tell you no, it only takes one yes.
Kelly Kovack [00:33:34]: And, sometimes “no’s” are “no, not right now,” because of some of the things that you’ve spoken about.
Galina Ozgur [00:33:41]: Absolutely. So, going back to some of the mistakes, right, or some of the things to look out for when you’re going out to raise, so at an early stage, it’s absolutely you, your personality, how you’re presenting, do you know every aspect of the business. Some of the mistakes, using too many buzzwords in your pitch – that’s so common. “Oh, we’re building this artificial intelligence engine platform for an it also has this and it’s VR,” you just go, “Can you explain this to me like I’m a four year old? Like Michael Scott from The Office? Maybe explain it to me like I’m a three-year-old, because I’m still not getting it.” So, you really need to condense that pitch into something that is understandable. Also, don’t assume that investors know everything about your business. Unless this investor is very specifically focused on, let’s say software and hardware, and they come with that expertise and they can dive deep with you, don’t make any assumptions. Ask leading questions, qualify your audience; otherwise, what you’re risking to do is you’re pitching investors and they sit through the meeting and they nod, because no one wants to look stupid and no one wants to feel stupid, and then you walk out and they go, “Not now, thank you. Maybe, let’s talk a little bit later,” as they try to get more market – like, this may be interesting, but I’m not excited. Investors feel through a lot of gut reactions after they look at some actual data, so don’t give them a reason to tell you no. Be prepared. Such a common thing. It doesn’t matter which round you’re raising for, so if it’s seed, to pre-seed, focus on your team, focus on the idea, focus on your key assumptions about the market, give them something tangible, maybe have an MVP, maybe you have a waitlist of however many customers out there who really want to try your product. Give them as much information as possible, and talk about your team in a way where they understand that you are the ones to do it, and that does happen through pre-seed and seed rounds, as you’re talking to accelerators, as you’re talking to venture investors who still don’t have enough data to really say, “Well, this is going to be huge,” but they look at you and they say, “Hm, I like this founder. I think they can cook something up, and they’re coachable, but they still have their strong opinion, I like that,” whatever it is that they like, and it’s very hard to feel through what we as the investment community like, sometimes, but then as you move to your further rounds, a series A and onwards, it’s about data and numbers. There’s only…
Kelly Kovack [00:36:41]: Your personality only gets you so far.
Galina Ozgur [00:36:43]: Yes. I mean, there are certain people who are so charismatic, they can coast through some of this stuff, but I think it becomes less relevant. It becomes all about what the market is telling you, if the market is telling you that this isn’t working, what else are you doing, are you pivoting, if you’re pivoting, how hard are you pivoting, do you still have the right team for that pivot, how much money do you have left in the bank? All of that stuff will be playing into the greed versus fear mentality of the investment community. It’s very interesting, it’s very hard.
Kelly Kovack [00:37:20]: I mean, fundraising, you said, it’s grueling, it’s time consuming, and I do think for sort of solo founders, when you’re raising money, you’re raising money. There’s very little time to do anything else.
Galina Ozgur [00:37:39]: Yes, and by the way, I tell foudners all the time, put a timeline on your fundraise. Don’t always be fundraising all year long. If you are unable to close, there is something about the assumptions in your business that may need another look. Maybe there’s something in the market that’s happening that’s not giving investors enough confidence. Maybe it’s something about your product, maybe it’s the pricing, maybe it’s the marketing, maybe it’s the fact that they know that you’ve been shopping around for investment for a long time.
Kelly Kovack [00:38:12]: Well, because, like any other industry, it’s a small industry, people talk.
Galina Ozgur [00:38:18]: Yes. Oh my god, do they.
Kelly Kovack [00:38:20]: And, I think sometimes, when you’re from the outside, you don’t realize that, although you learn pretty quickly.
Galina Ozgur [00:38:29]: You do learn very – well, yes, you absolutely do learn very quickly, and yes, the industry is very small, investors talk, all the time, and I’ve been privy to conversations when investors said, “Yeah, I’ve seen this company before, I’ve looked at them. It feels like they’ve talked to everybody.” So, the signal is, what’s wrong? Why are my buddies not investing in this? Why are my friends not investing in this?
Kelly Kovack [00:38:52]: Because there is a little bit of a herd mentality.
Galina Ozgur [00:38:56]: A little bit?
Kelly Kovack [00:38:57]: Well, a lot of…I mean, I was trying to be kind.
Galina Ozgur [00:38:59]: Thank you for your kindness. I think…no, listen, there are a lot of investors who go out for outliers, for founders that you typically wouldn’t, you know, the traditional VC maybe wouldn’t look at, and I think that’s great. There’s enough money out there for a diversified approach to investment thesis, and thank god for programs and investors who say, “Listen, how about we don’t start another seed fund that invests in the same stuff. How about we give other founders, other industries a chance,” and that’s great.
Kelly Kovack [00:39:36]: Well, you know, talking about the herd mentality, you know, I think it’s an important topic, and I think a really good, perhaps example of it, is what we’ve seen with D-to-C brands. So, there was so much money being thrown at D-to-C concepts, and this is sort of my perspective as an outside, not sort of a financial person on the other side. I come from a traditional background, so I’m like, this is fantastic, but intuitively, I was like, it limits the scale. I don’t care about sort of the internet; it still limits the potential reach if you disqualify traditional brick and mortar retail, even though there was the apocalypse. So, you know, there was so much money being sort of funneled into these D-to-C concepts that entrepreneurs were like, “Well, that’s my strategy. I’m just going to bypass this whole hard distribution piece, and I’m going to sell direct to consumer,” as if somehow that was a shortcut and easier. So, there was so much money going into it, and I don’t know, call it two years, maybe it was longer than that, but at some point, there – so, the cost of acquisition online became so expensive, that they weren’t as attractive, financially. So, you had businesses that raised all this money, and perhaps were starting to get traction, but now, investors are looking at completely different data points, and so I think there is – I guess my question is, how do you kind of future-proof your business and the need for capital against sort of the herd mentality, when, you know, all of the sudden, maybe in the middle of the fundraising for your next round, the herd has gone a different way.
Galina Ozgur [00:41:33]: You know, I wouldn’t place all the blame on the investors, because investors really – it’s in the investment community’s mentality and foundation to look for reports or look for trends. That’s the basis and foundation of that business. For founders, on the other hand, following a trend alone, well, that’s one of the pitfalls; don’t do it. Don’t run after everyone…
Kelly Kovack [00:41:59]: And, you need to understand your business and the dynamics. So, I think this is, perhaps, talking about like understanding your business, and not necessarily just giving investors what you think they want to hear. Maybe that’s sort of the crux of it.
Galina Ozgur [00:42:16]: That is the crux of it, and listen, there’s a lot of extremely talented investors, very insightful, who have seen so much business and so many deals, and they are qualified to give you advice around, “You know what, I think this might be going that way, and I wish you would focus on this or that or the other,” but there’s lots of people in this industry just giving advice, who like the sound of their voice, who like to be listened to, and there’s no basis or foundation for that advice to be insightful or helpful to founders. So, I think, you know, what is great about good accelerator programs is that because you’re given so much feedback in the first months of you being there, you learn to filter through the stuff that doesn’t.
Kelly Kovack [00:43:12]: You have to have the confidence as a founder to believe not only in your business, but in yourself.
Galina Ozgur [00:43:20]: Yeah. No investor knows your business better than you. But, it’s like, take investors’ advice, damned if you don’t, damned if you do. Sort of like that. So, I think as long as you have a spine, and you’re able to show that investor that this is what you think is right, and you can back it up.
Kelly Kovack [00:43:38]: I heard you, but…
Galina Ozgur [00:43:40]: “I heard you and I respect you, what a great question,” which is always a great way to end a conversation with someone. It’s an amazing question, and here are the reasons why I am doing this that way, or that way, and I think that that will gain you more respect than going after someone else’s advice who is really not qualified to give it to you.
Kelly Kovack [00:44:04]: I mean, it can lead to sort of this ping-ponging and constant evolution of, you know, some core tenants in your business.
Galina Ozgur [00:44:12]: Yeah, yeah, and I mean, well, what are you going to do if that doesn’t pan out? You’re going to go back to the investor and say, “Well, you told me?” How old are you?
Kelly Kovack [00:44:20]: Exactly, and they have very selective memories.
Galina Ozgur [00:44:24]: They do.
Kelly Kovack [00:44:27]: So, let’s switch topics here. So, you’re an accelerator consultant, a start-up advisor, and a venture scout.
Galina Ozgur [00:44:36]: It’s a mouthful.
Kelly Kovack [00:44:37]: It is. And, you do it globally, so I think you have a sort of unique perspective. So, you’re pretty tapped into the VC world. What are some of the trends that you think we’re going to see sort of, I don’t know, call it the next 12, 18 months, and what do you think are some of the shifts from kind of where we were in the last 12 months?
Galina Ozgur [00:45:02]: I’ll tell you where there’s a lot of chatter in my world, where’ I’m seeing some interest and where I’m personally interested, is the future of work. I think we’re all talking about remote office, we’re talking about satellite offices, what’s an eight-hour day like, and why does it have to be that way? So, I think we’re going to see a lot of interesting future work businesses come up in the next five to ten years. Personally, as a scout with Aera VC, I’m very focused on everything, future of food, future of education, future of work, carbon free, any ventures that somehow modify societal behaviors and help the environment as well. So, I think that meat grown in a lab, stuff that’s going to be the foundation of essentially, how are we going to be feeding the ever-growing population? Are we going to be helping the farms? Are we going to be growing meat in the lab? That’s a very interesting subject for me. Another topic is the unbundling of LinkedIn, the new social. You’re seeing, you know, some interesting trends with people saying, “Okay, things have happened to Craigslist. Things have happened to all these travel sites. How could we potentially do the same thing with LinkedIn? Could we create interesting vertical solutions?” LinkedIn is not a solution for everybody; it’s not cookie cutter, maybe for white collar, but what about for other jobs? And, especially now that job creation and jobs are such a hot topic that doesn’t go away, there’s going to be stuff happening and it’s already happening. So, I think those are some of the trends for me personally, and on the tech side, there’s of course a lot of artificial intelligence and also cybersecurity, because those attacks aren’t going anywhere. So, I think there’s going to be a lot of interesting tech coming out on that side. Space technology, another one, but I feel like – I went to a NASA iTech competition in Chicago in November. I was fascinated with some of the interesting technology that could be applied both in space and here on earth for the space missions, and I was definitely the dumbest person in the room there, because everybody who was pitching was a PhD, and absolutely fascinating and so smart. And, I loved that, and I think that companies like Hyper Giant are doing some really cool stuff, but I also wonder what technology keeps us grounded here on earth, because I don’t think we’re done with this planet yet.
Kelly Kovack [00:47:56]: I don’t think so.
Galina Ozgur [00:47:57]: Yes, we are on fire. Yes, we are being flooded and it’s horrible, and so many things are going on that are darkening our day, day in and day out, but I think there’s a lot of stuff that we could do here that could change our experiences as humans, and maybe it’s not companies that help us store our sneakers on the way to work, maybe that’s not the type of company – not that I’m discouraging people to build companies like that, but I think that as we’re moving into a new age where technology could really make a difference for us, what is it we’re doing that is super disruptive to our society, not just disruptive to very small communities somewhere in the nomad area of New York City, right? So, I really hope we get to build something like that, more of that.
