Cindy Padnos, Illuminate Ventures: Venture Chemistry

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• What overall categories does Illuminate Ventures invest?

At Illuminate Ventures we have a focus on early stage software & internet companies primarily.  I will define that a little further because that’s a pretty broad definition.  Within the software  world we tend to focus on companies that would be in software service category, companies that have a real time analytics program to them.  Frequently companies that are delivering their product or services in the cloud.  And if you think about what some of the common themes in that grouping are, they have to be companies that may be targeting eitherconsumers or business customers, not necessarily b2b or b2c.  But most of them have the capacity to build their initial offering very capital efficient.  They are typically leveraging open source technology, cloud computing, some new capabilities that exist today that simply didn’t exist even 5 years ago – that is where the real time analytics component may come in.  Most of them have some relatively deep underlying technology even if they are an application.

• What do you look for in women entrepreneurs & startups that indicate interest to you in investing in their businesses?

We have a very inclusive deal flow strategy.  We open the door wider. We dont close the door to anyone.  If you look at our investments half of them have women cofounders involved & half of them don’t.  That number however is an order of magnitude higher than our peers in the industry.  So how  did that come about because we really do go open the door very wide to look at all the opportunities out there including women entrepreneurs.  But it absolutely does not mean excluding male entrepreneurs.  The data we’ve seen is very compelling to show that teams that are made up of diversity & gender outperform.  They have more innovation, they have creative ways of doing things, they learn from one another & leverage that.  And so we are enthusiastic about that, but we don’t exclude an opportunity for that reason at all.

I don’t think for our firm that a woman entrepreneur needs to do anything differently than a male entrepreneur & I mean anything.  There may be other environments where they do.  But part of what we pride ourselves in is providing that level playing field.  Not only giving women an opportunity to come in the door, but to be evaluated with exactly the same criteria.  Our investment criteria is completely gender neutral.  I’m not sure that everyone can say that, but ours is. So our expectations are not that the woman has to be better or that she has to prove herself at a higher level. But our bar is high for everyone.

• Advice for pitching for venture is often correlated with dating.  What sort of chemistry makes for a good match & is a success for both entrepreneur & venture capitalist?

Great question, I think that chemistry is really important.  I’ve been on both sides of the table, I’ve been a CEO raising capital & now I’ve the good fortune to be an investor deploying capital.  When you are an entrepreneur, when your on the side of the table raising capital, you have to be really, really aware that the people who are your investors are also your Board.  The CEO, the founders report to the Board.  Its not exactly like dating, because hopefully its not the man or the woman who is in charge, its a little bit more of a peer relationship.  But effectively a Board doesn’t have many jobs other than to hire & fire the CEO.  As a founder CEO in particular you are looking at that person & you are assessing ‘Do we have the same goals?  Do we see the world in the same way? Do we have a common set of aspirations for this company?  If I see that I want to take this company public & that’s going to require $20 or 30m of financing over a period of time but my investors don’t see it the same way.  If on the other hand, I think there is an opportunity for that IPO but I want to be really a bit conservative about how much money we put into the company early on so that we still preserve the option of a nice M&A exit that will satisfy my investors & me as a founder.  Again you want alignment of goals between you & your investors.

I strongly recommend that any entrepreneur interview, screen & reference their investors in the same way that their investors are doing with them.  I encourage them to call not just the entrepreneurs whose Boards they may currently sit on but those prior including those who failed.  And to ask the hard questions what happened when the company was failing?  How did that Board member interact with you?  Did they sit across the table & say ‘What are you going to do about it?’ or did they reach across the table & say ‘What can I do to help?  What are we going to do about it?’  There’s a huge difference there & its very important to know who your investors are.