Inside the Mind of a New York VC

Earlier this summer, I sat down with Bart Clareman of AlleyWatch for a wide ranging interview. We talked about my accidental path to venture, the evolution of the tech ecosystem in NYC over the last decade, my human-centric approach to investing, how Primary provides a unique approach to supporting our founders and much more.

Below is the full transcript of the conversation. Enjoy!

Bart Clareman, AlleyWatch: Tell us about your journey into the venture business and how you came to be a partner at Primary Ventures?

Steve Schlafman, Primary Venture Partners: I would say that I didn’t really have the desire to become a venture capitalist, it all happened by accident. I was in the right place at the right time at a few points in my career. Luck and serendipity have definitely played a big part. I started my career at Microsoft, interning for six months on the Deal Governance team, which monitored all the strategic investments that Microsoft had made in the dotcom era. That was really my first exposure to the venture capital business.

After graduating from Northeastern University, I went back to Microsoft and spent four years working in Redmond [WA] and living in Seattle. The first two years was in a corporate finance-leadership rotation program where every six months I would rotate into a new area of finance. Then I spent two years effectively doing strategy and M&A for the Microsoft Business Division, which was responsible for Microsoft’s Business Applications such as Office and SharePoint.

After nearly five great years at Microsoft, I wanted to move closer to family and friends – I’m originally from Boston – and I wanted to get a taste of the startup life. That brought me to New York for a first tour of duty here in the city. I worked for a company called Massive, which was an advertising network for video games. It was the first ad platform for connected consoles and PC games. We worked with some of the largest publishers, including EA, Activision, and others, and served ads into games like Call of Duty and Madden. In this role, I was able to marry two of my passions: new media and video games.

I was about one year into my job at Massive, when an unexpected opportunity literally fell in my lap: I had a chance to move home to Boston to work for The Kraft Group. They own and operate the New England Patriots and a number of other businesses in sectors ranging from paper and packaging to real estate. My role at The Kraft Group was to support Mr. Kraft and his son Jonathan, who is the President & COO, on a variety of strategic projects that ranged from venture investments all the way through to digital media strategy to incubations to acquisitions and even random one-off projects. It was a perfect blend of investing, operating and strategy roles. I have to admit for a while it was my dream job. During this time, we made a number of direct investments into startups as well as some venture funds. This was my first real taste of the venture business. I owe a huge amount of gratitude to Mr. Kraft and Jonathan for giving me a shot. At the time, I didn’t really know what I was doing.

While I was at The Kraft Group, we made a number of investments and strategic partnerships with companies in the New York ecosystem. I saw first-hand the burgeoning community that was growing here and I wanted to be a part of it. It was impossible to ignore all of the startups and innovation that was happening here – around 2009 and 2010. As much as my wife and I loved being in Boston, we both knew New York was where we wanted to be long term. You could just feel the wave that was coming. Betaworks had just gotten formed, there were a handful of relatively new funds and some incredibly innovative companies were being started like FourSquare, Tumblr and Kickstarter to name a few.

I was recruited by Seth Goldstein and Billy Chasen to join an early startup as effectively the first business hire. It was called Stickybits, and it was backed by First Round Capital and Chris Sacca and a bunch of other well-known angels. I was effectively responsible for Business Development, Finance and other admin functions. I helped broker partnerships with Pepsi, Ben & Jerry’s, Unilever, Toyota and some other amazing brands. About nine months into my time at Stickybits, we pivoted into Turntable.fm, so I lived through that whole experience. It went viral, but I ultimately didn’t want to be in the music business for a whole bunch of reasons. I like to joke that all of our servers were named after dead music ventures, so that was kind of the writing on the wall.

At that point, I had the very good fortune of joining Lerer Hippeau as the first investing principal. At the time it was four partners and an admin, and they brought me in to help build out a lot of the infrastructure for managing the deal pipeline and the support platform. It was a wild time.

I was at Lerer for roughly 2.5 years. While I was on the team, we made about 100 investments, 40-50% of which were in New York, the other half were spread throughout the rest of the country. We invested across every sector imaginable, including e-commerce, software as a service, hardware, healthcare, media, marketplaces, and everything in between.

After an amazing run at Lerer, I was recruited to join RRE Ventures to focus not just on Seed but also Series A. I figured it was a great opportunity to see which stage of investing, Seed or Series A, was right for me in the long term. I knew I loved Seed investing from my time at Lerer – we were effectively making an investment per week, if you can believe it. At RRE it was a more traditional Series A fund, where we made two to three investments per partner per year and no more than ten per year for the entire fund. Essentially, I wanted to know whether Seed or Series A investing was more compelling to me if I was going to make a career in venture capital.

My four years at RRE were incredibly productive. During that time, I sourced more than twenty investments and was on the Board of a handful of those companies. I was fortunate to partner with a pretty eclectic group of founders and companies, including Boom Aerospace, Bowery FarmingHightower (which merged with VTS), Giphy, Brightwheel, Managed by Q (sold to WeWork), Breather, Groups, theSkimm, Care/of, Citizen – those are some that come to mind. While I was there, I also made a number of angel investments in companies like Zipline and Lola.

I left RRE roughly 2 years ago. I took a year off to find myself and figure out what I wanted to do with the rest of my life. I actually considered leaving venture altogether for a variety of reasons. About three months after I had left RRE, I went back to school to get trained and certified as an executive coach. I just love nothing more than helping founders and executives in transition bring their visions to life.

After months of reflection and soul searching, I decided to join Primary Venture Partners which is one of the top seed funds here in New York City. I initially joined as a Venture Partner which allowed me to focus on both investing and coaching. But after three months, Ben and Brad convinced me to come on board as the third partner. I’ve now been at Primary for about fifteen months

My mission and my life’s work is to marry venture capital with human capital. The venture capital comes from deploying capital into companies, and the human capital comes through the leadership coaching and really focusing on a human approach to not only picking companies but also partnering with founders to help them navigate the everyday challenges of company building.

You’ve been in New York City’s venture investing community for nearly 10 years. How has the ecosystem here changed in that time?

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Startup Pitch Decks

A few weeks ago, Alex Iskold of TechStars NYC asked me to talk with the Winter 2017 class about constructing an effective fundraising pitch deck. I jumped at the chance because this is an important topic that often comes up with first time and even repeat entrepreneurs when they’re about to embark on a fundraising process. In my short career as a VC, I’ve reviewed thousands of pitch decks and helped hundreds of founders refine their pitches. Additionally, I’m often approached by founder friends to provide feedback on their slides before they go to market. Given pitch decks are frequently discussed and they’re essential in the fundraising process, I thought it would be useful to create a simple guide to building an effective pitch deck.

Our goal with ‘Startup Pitch Decks’ is simple: to provide founders with a simple framework and reference guide that can be utilized before kicking off a fundraising process or when you’re in the throes of drafting your pitch deck. We dive into a number of topics including the ideal format, a sample build process, tips and tricks, advice from RRE founders, and even things to avoid. We’ve tried to make the guide as comprehensive as possible but realize it’s impossible to include every piece of advice and address every question. As such, we’d love to hear your questions, suggestions and feedback. Our aim is to evolve ‘Startup Pitch Decks’ with your help and input so it gets more useful over time.

All that said, it’s my pleasure to present Startup Pitch Decks. Hope you find it useful, thought provoking and perhaps even inspiring.

(Finally, I’d like to thank my colleagues at RRE — Jason Black, Alice Lloyd George and Cooper Zelnick — for providing feedback and adding some polish to the final product)

Tinybop: Educating Kids In Every Country

Several years ago when I was at Lerer Ventures, Sam Gerstenzang, our summer intern, recommended  that I meet with Raul Gutierrez, Founder CEO of a Brooklyn-based creative studio called Tinybop.  When Sam explained that Tinybop was building educational apps for kids, I was immediately skeptical because I’ve seen hundreds of companies in the space and my identical twin brother founded a children’s media studio, CloudKid.  After some back and forth with Sam, I begrudgingly agreed to meet with Raul but promised that I would keep an open mind. Over the course of the next two years, Raul and I spent countless hours talking about the future of children’s media and his vision for building the next great education brand.  To Raul’s credit, he was able to transform me from a skeptic to a believer.  Despite the space being hyper competitive with thousands of app publishers, I truly believe that Tinybop is the one percent of the one percent.  That’s why I’m incredibly excited and proud to announce that RRE has led Tinybop’s Series A Financing with participation from TwoSigma, KEC, Brooklyn Bridge Ventures and Kapor Capital.  

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Why Saying No Is Hard

Being an investor isn’t easy for a number of reasons. But the hardest part for me is saying “No.” I meet hundreds of entrepreneurs each year, and at RRE Ventures we invest in only a small percentage of them. VC’s generally invest in less than 1% of companies they meet. So if you do the math, you know I have to say “No” a lot.

There are countless reasons why we choose not to back an early stage venture. Market size. Wrong team. Bad timing. Competition. Traction. Lack of monetization. Little or no competitive advantage. Outside our expertise. Valuation. I could go on. 

But regardless of whether I exchange a quick email with a founder or spend hours getting to know him or her, passing is the worst. It’s the only part of my job that I truly hate. And it’s not just because I lose the option to invest down the road. I hate passing because my daily work with entrepreneurs has given me a good look into their struggles…what founders sacrifice daily to ensure that their company is in a better place tomorrow than it is today. It becomes personal, emotional…it's only human to feel for the founders who…

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My Goals for 2014

A mentor once told me that I should always jot down my intentions and goals so I can hold myself accountable and track my progress in life. Despite this sound advice, I’ve never taken the time to write down my personal and professional goals even though I always enjoy discussing them with others during the holiday season.  

With 2014 less than a day away, it’s time to finally buck this trend and put the proverbial pen to paper.  I’m doing it for three reasons.  First, I intend to check this list throughout the year to see how I’m doing relative to what I think is important right now.  Second, if I make my goals public, I’ll likely feel a big sense of failure if I don’t tackle everything I set out to accomplish.  Finally and most importantly, I hope you’ll get to know me better based on the areas I’m focused on and the things I’d like to achieve in 2014. 

Without further ado: 

Life    

  1. Read one book per month: Because reading tech and business blogs alone doesn’t really feed my brain.   
  2. Travel to two new countries: I’ve found the best way to learn about the world is by experiencing it. 
  3. Volunteer twice per month: Adopt a non-profit and contribute on a monthly basis so I can give back and feel good about it. 
  4. Attend two intensive classes: Explore areas of interest such as painting, cooking, and graphic design.  
  5. Spend less time working at home: Throughout 2013 I spent more time at home working than being focused on my life. 
  6. Get rid of clutter and focus on quality: I find the more “stuff” I get rid of the happier I become (e.g. clothes, twitter followers, etc.).
  7. Build a long term financial plan: I’ve been fortunate to save some cash but now I need to devise a long term investment plan. 

Work

  1. Blog monthly: I’ve had a longtime phobia of writing and it is time for me to get over it. 
  2. Take fewer meetings: In 2013 I took thousands of meetings so I’d like to cut that number in half and spend more time thinking, researching and creating. 
  3. Find a coach / mentor: It has been years since I have had a formal mentor and my gut tells me now is the time to find one. 
  4. Help a founder daily: assist a new founder every single day and expect nothing in return.  
  5. Launch a resource for NYC Tech: I’d like to create a new resource for the NYC tech ecosystem (think online community, newsletter, etc.). 
  6. Invest in fewer companies: I plan to be hyper selective in 2014 so I can focus on providing high-touch support to my founders. 
  7. Build RRE brand: I’m going to implement a half dozen ideas to foster community within the RRE portfolio as well the NYC tech ecosystem. 

QUESTION(NY)AIRE With Steve Schlafman At Lerer

New York City’s Silicon Alley has claimed a place among the ranks of top tech-hubs across the country such as Boston, Dallas, Seattle, and of course, its namesake and the “mothership”, Silicon Valley. While each of these start-up communities boasts its own set of advantages, Silicon Alley benefits from New York’s buzz and density people, which, in the past few years, has played into the hands of the social media phenomenon. Yet in many ways, the most important feature of any tech boom-town is the availability of funds.

Enter: the venture capital firm. Steve Schlafman is a principal investor at one of these firms, Lerer Ventures, which focuses on funding companies in the “seed-stage”. That is, Lerer trudges through the weeds of all start-up hopefuls to find entrepreneurs with “product vision, consumer insight, focused execution, and unwavering ambition.” Although he is now in the position of the lender, Steve is no stranger to the experience on the other side of the table. His work experience spans from startups such as Stickybits and Turntable.fm, to more traditional environments such as The Kraft Group and Microsoft.

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