Each week on The Cap Table (TCT) we highlight investors, operators, founders, and industry leaders in the private markets to share their tribal knowledge of how to get onto “the cap table.” Know someone we should feature? Let us know here!
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We are thrilled to announce this week’s exclusive with Jeff Morris Jr., Founder and Managing Partner of Chapter One! He was previously the VP of Product, Revenue at Tinder where he led the revenue team and directed one of the top grossing products in mobile history. Jeff is an active angel investor through his fund, Chapter One, and has invested in companies including Lyft, Roam and Superhuman, to name a few. Largely considered “the” product person to have on the cap table, we sat down to discuss:
His first angel investment and advice for first time investors 📈
The inspiration behind Chapter One and how he built deal flow 🤝
How the LA venture scene has evolved over time ☀️
Cap table advice ⼏
What “The Future of Work” might look like in 2030 🔮
TCT: Thanks for sitting down with us, Jeff. Let’s jump in.
How did you start off with regards to your career?
I started my career in tech as an operator in 2011. I was a Growth Marketing Lead at a company called Zaarly, which raised over $30 million from Kleiner Perkins along with a handful of other known investors (Meg Whitman was on our board as well). That company launched in 2011 and at the time, I was desperate to get a job in tech. I had applied to work at Uber, Airbnb and Twitter, all within a few months (what would have been an early employee) and didn't get any of those jobs.
I flew to SXSW (South by Southwest), slept on somebody's couch and met the Zaarly team. They interviewed me the next day and offered me a job with the stipulation that I had to move to Kansas City within 24 hours. I took them up on the offer and ended up leaving the Bay Area. I was there for three years, learned a ton about products and was doing a lot of performance marketing and was focused on optimizing different product funnels and just became obsessed with everything product-related.
After Zaarly, I then went on to General Assembly, where I learned how to code and did that full time for five or six months and ended up working as a Front End Web Developer at a few startups as just a consultant (I wasn’t good enough to get a full time Software Engineering job at that point). At that time, I was also doing a ton of product launches and three of those products ended up #1 on Product Hunt and that created buzz in the product world, and eventually Tinder hired me to lead all of the retention marketing efforts.
I was originally hired within the marketing org but quickly transitioned to the product team. Eventually, as we were assigned to turn on our monetization at Tinder through subscription revenue, I was asked to lead the revenue team. We then went on to become the top grossing app in the world, generating $1+ billion dollars in ARR by the time I left and it was the definition of being on a rocket ship (and also being in a great seat on the ship).
How did you get into investing? What was your first angel investment?
I got into investing around 2013. At the time, I didn't have a lot of money at the time to invest in startups, and when I was at Zaarly, I met a company called Jetlore (acq. by PayPal in 2018), which consisted of three Stanford PhDs, and they were pitching me on software for us to buy at Zaarly, and it was AI to help you merchandise your homepage better. First off, I wanted the product for our company. I desperately wanted the software for our marketing team but I also quickly knew that I wanted to invest in them. I ended up investing a small amount in Jetlore and ended up doing a couple other investments in similar ways of just being in a tech hub in the San Francisco Bay area and meeting other founders and entrepreneurs out and about.
And then, AngelList came out so I started to take investing a little more seriously. I still didn't have a ton of money to invest in companies but I ended up investing $1,000 in a handful of companies (6 to 8 companies, if I recall), and from there I started to see the lifecycle of angel investments and gained an appreciation for kind of how long it takes to get to liquidity and the path to liquidity.
I also got lucky — I invested in a few things that have done quite well (Branch Metrics was one of my first investments that performed really well). Angel investing becomes addicting. After you write your first check you can't wait to do more and more and then also, I felt like after I wrote my first check that I could call myself an investor. Then, I felt like I had the right to email founders and ask them to hop on a phone call. Suddenly, I thought of myself as an investor, which is really important.
As I transitioned to being more of a well known operator at Tinder, I launched one of the early syndicates on AngelList and had ~500 LPs backing me and started to do a lot of SPVs. The table stakes grew and we were then starting to write check sizes up to $300k into early stage deals and so the transition to managing other people's money was a big moment for me and again I started to feel more and more like an investor.
The last piece, before Chapter One, I was a scout for Index Ventures for about a year and a half. That was my first experience managing a portfolio of a pool of capital which changed the economics and the math quite a bit, so another great learning experience for me from an investment point of view.
What was your inspiration for starting Chapter One?
This really came out of my love for investing at the earliest stages, combined with my love for product and product development. Leaving product to become a full time investor was hard for me and I knew I'd miss being on the product team so I tried to structure the focus of the fund and our value add to align with what I actually love to do, which is to help early stage entrepreneurs. This includes developing their strategy and roadmap to helping recruit early stage product people and everything in between. The intent was that Chapter One would be the first phone call a founder would make if they have any questions related to product or building.
The tagline of Chapter One is “we’re the product person on your cap table”, which is a signal to entrepreneurs where we can help them. When I was doing a lot of my early stage investing before Chapter One, I would ask founders why they wanted me on their cap table and they said they wanted a product person on the cap table. I just kept hearing that time and time again so I thought to myself, there should be a fund that only focuses on product and the value they offer. I really didn't see anyone position themselves in that way so I'm going to keep pushing as far as I can go.
Side Note: there were other inspirations for Chapter One. I spent a weekend with Mike Maples from Foodgate at their office in Palo Alto and we spent time diving into portfolio construction and his learnings from 20+ years of managing an early stage fund and he seemed really happy to partner with entrepreneurs in the earliest stages. I find myself drawn to that stage too because I think there's so much influence you can have over the company at the early stages, whereas at the later stages, the companies are a bit more mature (at least in terms of their product strategy and vision).
“Chapter One is the product person on your cap table” is the first thing you see on your website. How does Chapter One work alongside other investors on the cap table?
We work together on everything: fundraising, product strategy, hiring, etc. Basically, whatever it takes to help the company build and mature, we work alongside other investors to ensure we’re doing everything for the founder(s) to succeed.
Generally speaking, I see a lot of the same faces on the cap table so we know each other well and know each other's working styles and we all have a certain level of trust with each other. I’ve enjoyed collaborating and continuing to work with emerging managers like Harry Stebbings (20VC), Todd Goldberg and Rahul Vohra (Angel Fund), Josh Buckley (Solo Fund), Ryan Hoover (Weekend Fund). All of us work really closely together so we all know each other and know what we bring to the table.
While I do pride myself on helping with all things product related, it's definitely not limited to that. In terms of the companies who want to work together on product, it’s generally doing bi-weekly or monthly product sessions. We try to replicate what a product session would look like at a growth stage organization. I really enjoy those relationships and seeing founders progress over time from an investor's point of view is really exciting.
In summary: early stage investing is competitive but it's very collaborative. We (the group I mentioned above) all respect each other and a lot of us are actually really good friends outside of work.
Tell us about your deal flow. How long did it take to build a sustainable pipeline for Chapter One? How has this evolved over the years?
For me, this comes down to three areas.
The first has to do with building really strong relationships with other investors. I mentioned that there's a handful of folks I work really closely with and we genuinely want each other to win. We know each other's investment styles so we share deals that we think could be interesting for each other.
The second part of the pipeline is building relationships with founders we've backed. I’ve invested in around 75 companies and when you include the investments prior to Fund I at Chapter One, it’s even more. Founder referrals are a huge part of it (I always say that my favorite referrals come from Chapter One founders because that means they trust me enough to recommend me to their friends and former colleagues). I generally find that the deals that founders from Chapter One send me are super high quality.
The third part is around building a voice online. I have a large audience on Twitter, Medium and ProductHunt and that helps drive inbound leads and discovery new companies and founders.
If a genie granted you one wish and said you could join any cap table you wanted, who’s cap table would you join, and why?
I've always been infatuated with Figma. Dylan Filed (CEO of Figma) was also a scout at Index Ventures in the same cohort as me so I got to know him through emails and also sat next to him at a dinner when it was just an early growth stage company and we got to know each other. Since we were both investors in the same cohort and doing early stage checks, I didn’t even think to ask him to invest. When I did ask, it was too late. I'm obsessed with the Figma product. I think what they've done for creative collaboration has been nothing short of incredible. The adoption curve since ~2017 has been amazing to see. They've created a whole new genre of software, which is way more collaborative, it’s web based, and really easy to adopt.
You don't win them all; I've missed out on so many investments and I made a joke on Twitter the other day that my anti portfolio is becoming larger every single week. It’s just part of the game and you live with those mistakes and ultimately you're happy that you at least saw the deal.
What’s the #1 metric you need to know about before investing in a company?
I invest primarily in Pre Seed and Seed stage companies, so there's not a ton of data and there's not a single metric for every company at those stages.
One big question I tend to ask is, do the founders have the right framework for what they're measuring relative to their categories? I like to start by asking the founders what metrics they care about because that's really revealing about how they think about product and their overall product strategy. The metric I like to dig into (and this might be a little bit controversial early stages) is figuring out how founders think about monetization.
I think that comes back to my background at Tinder leading revenue. I care deeply about monetization and this is more than just wanting to make returns as an investor, but it's because it's what I obsessed about for four and a half years at Tinder and I love that part of product building. You’ll hear a lot of early stage investors tell you about growing user bases as large as possible and then figure out monetization later but I think it’s important to talk through early on. Even in Pre-Seed conversations I'm always asking founders how they’re going to monetize in future.
How has the venture capital ecosystem in Los Angeles evolved over the last few years?
Venture capital in LA has changed dramatically over the last few years. When I moved back here in 2015 to join Tinder, it felt like there were just a couple of large funds in there and now there’s more than I can even keep track of which, which is pretty phenomenal.
There's also a lot of people are moving to LA right now so we have one on entrepreneurs and people like Travis Kalanick from Uber, Peter Thiel, who famously moved here a couple years ago and you’re starting to see more star power down here from a tech and venture perspective. People ask me a lot about whether it's necessary to be in the Bay Area and being honest, it’s still something I think about and not sure if I can answer that (just yet). I saw a tweet the other day talking about tech funds in 2012 v. 2020 in LA and it was something crazy like a 5x increase.
What industry is ripe for disruption from a product/UI perspective?
It's hard to pick one industry because there's so many large companies and dominant incumbents that still have really terrible product experiences. The most obvious ones to me are healthcare and insurance. We've seen an explosion in the consumer healthcare space in the past couple years but there's still a lot of work to be done. When it comes to insurance, I just signed up for a policy the other day and the experience was pretty poor. Whenever you spend money on a website that feels antiquated (which for me still happens quite a bit), you know there's there's room for disruption and that presents a ton of opportunities across multiple industries.
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How would you describe your relationship with founders you invest in?
I'd love to say that we’re more than just an investor and it’s more than a standard founder/investor relationship. Best case, we actually become real life friends. Every founder relationship is different, just like every friendship is different and every work relationship is different. Some founders love to have text message banter and they like to really engage on a daily or weekly basis, some founders like to have a specific space and communication lane. I make it very clear with founders that I'm not there to look over their shoulder or to waste any of their time and encourage them to let me know when they need help. My goal with every founder I invest in is to become actual friends.
To me, investing is much more than just writing checks and seeing business outcomes. This is inherently a relationship driven business and I get a lot of happiness out of developing the relationship with the founders and being there with them through every stage of the emotional journey that is starting a company.
What tips do you have for first time angel investors in 2021?
The real tip is to just start investing. There's no amount of articles or simulations that you could do to know what it’s like to invest in early stage companies or startups. You need to figure out a way to start writing checks. I mentioned AngelList earlier, but even if you set aside a couple thousand dollars a year to invest in tech companies, you could write, you know, three or four $1,000 checks and suddenly you're on a cap table.
I always tell people who want to be venture capitalists that you need to start investing. If you don't have that amount of money to invest in startups, you could also build a portfolio on Robinhood or something similar with lower dollar amounts and just show that you can manage money and and have perspective on different industries and start to build a track record that you can show to potential employers or LPs if you think about raising your own fund.
What’s your secret for getting on the cap table?
It’s important to keep in mind that this is a long term game. I try to be super collaborative with other investors. I try to be as helpful as I can with the founders I back and as I mentioned earlier, founder referrals are a huge part of it. I'm competitive, so I’m really passionate when I'm pursuing a founder about why I want to invest in the company and I try to try to provide value before writing a check. This seems obvious but not a lot of people do that.
The other week, I got onto a really competitive cap table because I helped the team hire their first engineer through an intro I made to the founder. There was a large fund competing to get on the cap table and I happened to get one of the spots because I showed the value before writing the check. It's competitive and you have to be a competitor to win in this industry. And for me, this is what I love to do and I work really hard to find great companies and love what I do.
On the flip, what’s your biggest cap table “mistake”?
I wouldn't call it a mistake but as a Solo GP, my time is unfortunately limited. I think the biggest mistake you can make is spreading yourself too thin and investing in too many companies, especially if you're doing it on your own. It's hard to be a great service provider (which is what venture capitalists are) if you’re on too many cap tables. I've had to adjust my mindset from writing smaller checks to focusing on a core investment.
A really tangible example is if you're running a fund and you get a 25k allocation in a hot deal, you really need to figure out if that's worth your time. Setting the right expectations with the founder when you write that check is important because at the end of the day, you're still on the cap table and you need to to perform but ultimately the $25k check probably won't return your fund. In summary, I think it’s important to focus and manage your time accordingly and don’t spread yourself too thin.
The year is 2030. What's the future of work look like?
The world's changing exponentially every day right now in terms of what work looks like. We're seeing that employees prefer to have more flexibility in terms of where they work and what hours they work.
I think we'll have a hybrid model and every large tech company in the world will be offering a remote work option and more distributed work so there's going to be many many more tech hubs, all throughout the country and world.
You'll see employees who might work at multiple companies because distributed work will allow them to be more efficient with their time, especially for more specialized skill sets. I've seen a lot of people hint that this could be a possibility that there's something between being a full-time employee and being a freelancer or a contractor where you may work for a couple different companies on a hybrid role of being more than a contractor but less than a FTE.
I think we’ll all be spending a lot more time doing creative things on video. Zoom is a great communication tool but I don't think we've quite cracked the code for doing creative work in a distributed way. In my mind, creative work is more product design work and the highly creative aspects of building products. I don’t think we’ve quite mastered how to do this in a distributed manner, so I’m excited to see how this evolves over time.
For more insights into startups, VC, and anything product related, follow Jeff on Twitter (@jmj)
Deal News 12/5 - 12/4
Crowd Data Systems: $500,000 led by RLC Ventures. Crowd Data Systems (CDS) offers a new approach to treasury management.
Tumble: $250,500 led by Hivers and Strivers. Laundry startup.
Synctera: $12,400,000 led by Lightspeed Venture Partners. Synctera is a banking company that connects financial institutions with fintech companies.
Einblick: $6,000,000 led by Amplify Partners. Einblick is a visual data computing platform that provides the fastest way for organizations.
Candu: $5,000,000. Candu is a product experience platform for software teams who want to design, refine, and personalize their application’s user interface.
Ursa Computing: $4,900,000 led by GV. Ursa Computing empower data teams and accelerate data science, machine learning, and AI work.
Aglet: $4,500,000 led by Sapphire Sport. Aglet is a digital platform that connects sneakerheads, creators, and brands through virtual sneakers.
Homelister: $4,500,000 led by Homebrew, MetaProp NYC. Gives you all the tools you need to sell your home and save money! Get all the tools of a pro, for a fraction of the price.
Ava: $4,500,000 led by Initialized Capital, Khosla Ventures. Ava empowers 400M deaf & hard-of-hearing people to have accessible in-person conversations, anytime, anywhere.
Remix Therapeutics: $81,000,000 led by Foresite Capital. Remix Therapeutics is a biotechnology company that develops novel small molecule therapies.
Graphiant: $34,000,000 led by Sequoia Capital, Two Bear Capital. A Silicon Valley venture-funded stealth startup working on next generation networking technologies
Boast.AI (Boast Capital): $23,000,000 led by Radian Capital. Boast.AI helps companies in the US and Canada recover their product development and R&D costs from the government.
Deepcell: $20,000,000 led by Bow Capital. Deepcell uses AI to isolate and capture cells based on morphological features for multiple research and translational applications.
Skyflow: $17,500,000 led by Canvas Ventures. A privacy API for all your sensitive data. Built on a customer data vault.
Bionic: $17,000,000 led by Battery Ventures, Cyberstarts. Bionic is the leader in application intelligence.
UserLeap: $16,000,000 led by Accel. AI-powered, continuous research for product teams.
PrinterPrezz: $16,000,000 led by Berkeley Catalyst Fund (BCF), D. One Vision Management. PrinterPrezz designs and builds advanced medical devices by leveraging expertise in metal 3D printing, nano and semiconductor technologies.
Arthur AI: $15,000,000 led by Index Ventures. Arthur AI is a platform that monitors the productivity of machine learning models.
Modal: $15,000,000 led by American Honda Finance Corporation. Modal provides digital commerce for auto dealers and brands.
Linear: $13,000,000 led by Sequoia Capital. Linear allows users to manage software development and track bugs.
Cyrano Therapeutics: $12,800,000 led by Lumira Ventures, Remiges Ventures. Cyrano Therapeutics is developing an intranasal product designed to restore function in patients with a chronic loss of taste and smell.
battleface: $12,000,000 led by Drive Capital. battleface is a rapidly growing tech-enabled insurance startup.
Parallel Domain: $11,000,000 led by Foundry Group. Parallel Domain is a synthetic data platform designed to facilitate autonomous vehicle simulation.
Verana Networks: $11,000,000 led by Spark Capital. Verana Networks develops an innovative 5G Radio Access Network solution for service providers.
Kevel: $11,000,000 led by Fulcrum Equity Partners. Kevel provides APIs for building custom ad platforms, so you can control and drive more revenue.
Akasha Imaging: $10,750,000 led by Khosla Ventures. Akasha Imaging is a deep imaging technology company.
Career Karma: $10,000,000 led by Initialized Capital. Career Karma helps people find career advice and job training to navigate their careers.
RayzeBio: $105,000,000 led by Venrock. RayzeBio is focused on improving outcomes for people with cancer by harnessing the power of targeted radioisotopes.
Reneo Pharmaceuticals: $95,000,000 led by Abingworth, Novo Ventures. Reneo Pharmaceuticals a clinical stage pharmaceutical company
Orca Security: $55,000,000 led by ICONIQ Capital. Orca Security provides instant-on, workload-level security for AWS, Microsoft Azure, and Google Cloud Platform.
Cleo: $44,000,000 led by EQT Ventures. Cleo is the financial assistant designed for Gen-Z that's fighting for the world's financial health.
Sundae: $36,000,000 led by QED Investors. Sundae is a residential real estate marketplace focused on helping sellers of distressed property get the best price for their home.
Tecton: $35,000,000 led by Andreessen Horowitz, Sequoia Capital. The data platform for machine learning, from the creators of Uber Michelangelo. Build a library of great features, serve them in production.
Centivo: $34,000,000 led by B Capital Group. Centivo offers a digital health plan aimed at self-funded employers looking to provide employees with quality care they can afford.
Salt Security: $30,000,000 led by Sequoia Capital. Salt Security provides an API protection platform designed to prevent attacks using machine learning and AI.
Fairmarkit: $30,000,000 led by GGV Capital, Insight Partners. Fairmarkit is the intelligent sourcing platform that empowers organizations to more efficiently purchase the goods and services they need.
CodeSignal: $25,000,000 led by Menlo Ventures. CodeSignal develops an objective automated skills-based assessment platform that can be used as a standard for technical recruiting.
Gorgias: $25,000,000 led by Sapphire Ventures. Gorgias is a multi-channel helpdesk integrated for online merchants.
GetAccept: $20,000,000 led by Bessemer Venture Partners. GetAccept is an all-in-one sales enablement solution that assists B2B sales reps in closing remote deals.
Pico: $135,000,000 led by Intel Capital. Pico is a provider of technology services for the global financial markets community.
Dragos: $110,000,000 led by Koch Disruptive Technologies, National Grid Partners (NGP). Dragos is an industrial cybersecurity company that respond to threats in industrial controls systems to protect critical infrastructures.
Edgewise Therapeutics: $95,000,000 led by Viking Global Investors. Edgewise Therapeutics is a new company harnessing proven expertise and understanding of skeletal muscle.
Calm: $75,000,000 led by Lightspeed Venture Partners. Calm offers a global health and wellness brand application designed to help its users meditate and relax.
Squire: $45,000,000 led by ICONIQ Capital. Squire offers a barbershop management and POS/Booking mobile application that connects barbers and clients nationwide.
LeafLink: $40,000,000 led by Founders Fund. LeafLink is a wholesale management platform for the cannabis industry.
At-Bay: $34,000,000 led by Qumra Capital. At-Bay is an insurance company for the digital age
Ohmconnect: $20,000,000 led by Sidewalk Infrastructure Partners. Our electricity grid operates under the antiquated assumption that the only thing that can change is turning on and off power plants.
Lukka: $15,000,000 led by State Street. Lukka is a next-generation software company that delivers the leading middle and back office solution for the crypto asset ecosystem.
LeanTaaS: $130,000,000 led by Insight Partners. LeanTaaS develops software that increases patient access to medical care.
Pear Therapeutics: $80,000,000 led by SoftBank Vision Fund. Pear Therapeutics is a software-based digital therapeutics platform designed to treat disease and enhance the efficacy of pharmaceuticals.
Gotham Greens: $42,000,000 led by Manna Tree. Gotham Greens designs, builds, and operates commercial scale greenhouse facilities for fresh vegetable production.
SingleStore: $80,000,000 led by Insight Partners. SingleStore is a provider of a database for operational analytics and cloud-native applications.
Fundera: $20,000,000 led by FundersClub. Fundera is a marketplace for small business financial solutions.
DataRobot: $50,000,000 led by Snowflake Ventures. DataRobot brings AI technology and ROI enablement services to global enterprises.
Sources: Crunchbase, Twitter, LinkedIn
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