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Elizabeth Yin is co-founder and general partner of the Hustle Fund, a fund for software entrepreneurs. Prior to that, Elizabeth was a partner at 500 Startups, where she invested in early-stage companies and led the Mountain View Accelerator. In her previous life, Elizabeth was co-founder and director of an advertising and technology company called LaunchBit (acquired in 2014). Elizabeth earned her BSEE from Stanford and her MBA from the Massachusetts Institute of Technology (MIT Sloan).
In recent years, Elizabeth has analyzed over 20,000 startup presentations around the world and helped many portfolio founders raise hundreds of millions of dollars. His work and articles on fundraising for startups have appeared in numerous publications, including TechCrunch, Forbes, Huffington Post, BetaKit, and many others.
In an exclusive interview, Elizabeth said:
I am on a 30-40 year mission to democratize wealth through entrepreneurship. And it excites me. If I can help bring a group of other people together – both builders and sponsors who have the drive and zeal – it’s exciting and motivating.
I think right now, as a startup founder, you need strong networks to successfully access resources, knowledge and funding. If I can influence and democratize the way the founders have access to all of this, I will be very happy.
To me, founders who work quickly and energetically, regardless of their origin, deserve access to these things, and that’s my goal.
Read on to learn more about Elizabeth Yin and her journey.
What is your education and experience in this field?
Elizabeth Yin: I’ve worn many hats. So I’m not sure I have experience in this area. I have a degree in electrical engineering from Stanford and an MBA from the Massachusetts Institute of Technology (MIT Sloan). I have previously worked for large technology companies, including Google. But in late 2008 I was eager to start a start-up, so I quit my awesome job at Google to start a company, and I’ve been a founder for most of my career since then.
When did you first think of establishing a fund?
Elizabeth Yin: I didn’t start considering becoming a fund manager until late 2016 or early 2017. At the time, I was leading an accelerator program for 500 startups, and I noticed that a common problem was that many startups just weren’t able to raise funds.
Anyway, I started thinking about how I could help solve this problem. I was looking at it from the founder’s point of view. How can I help all these coughing founders (who work with focus and speed) get resources and money? And for us at the Hustle Fund, setting up a fund is only part of the solution.
In which companies/sectors have you invested so far?
Elizabeth Yin: Over the years I have invested in 500 start-ups, in investment funds and as an angel investor in many different companies. I have invested mainly in software companies. These include B2B, high-tech and healthcare companies. More recently, for example, we invested in Vinovest, an investment platform for wine.
But I’ve also invested in new types of food, e-commerce and equipment. For example, I am a personal investor in a company called Immi that makes instant vegan ramen.
In which companies would you like to invest? And what is your mental model for investing?
Elizabeth Yin: At Hustle Fund, we focus on investing in software companies and in particular in companies that can make money almost immediately. Because we are very early investors, we need to think about what happens if the company cannot raise more funds. Essentially, we hope that the company will be able to start up and not need other venture capital firms to survive and prosper.
Our investment model at Hustle Fund is very fast paced and once we get to know the company, each of us in the partnership can make an investment decision. Usually, within 48 hours of meeting us, the founder decides if we want to invest.
If we decide to invest, we will invest $25,000. Then we usually work with the founder on a growth project. This is an element that will help the company acquire customers. We typically do this in our Redwood School, a free in-house school for our portfolio companies to help them acquire clients on a tactical basis.
Sometimes we decide to invest more than $25,000 either weeks or months later or even in the next cycle. We believe that founders and investors should get to know each other better through collaboration and then decide together if they want to invest more in the relationship.
What is your usual investment range and in how many start-ups do you invest in total per year? In addition, can start-ups with a foreign headquarters get financing from you?
Elizabeth Yin:
- 25,000 for the first test
- $100,000 to $250,000 if we decide to write a second check.
- We invest in some 70 to 100 new start-ups every year.
What are the key performance indicators (KPIs) that you typically test for startup growth? It may vary by sector, e.g. LTV, CAC, MoM, etc. Would it be useful to know more about your additional investment factors?
Elizabeth Yin: I don’t care about KPIs when we invest. Usually, when we invest, there is no traction or income.
One of the things I’ve learned over the years is that desire is very misleading at first. Traction is good to see if the founder – can handle the work of customer acquisition and has the necessary work ethic and drive. But traction doesn’t help you understand if the product is what a lot of people want, which is necessary for venture capitalists to make money. The numbers are too low in the early days. So investing before and after exit carries the same risk, and I would prefer to get in earlier and go for a lower valuation because the market risk is the same.
I make many of my investment decisions based on my intuition about how easy or difficult it will be for me to attract a customer to this business. As a former founder, I’ve tried and failed at many startup ideas, and in all of those failures it was because I was building something that didn’t interest many customers.
How do you deal with the situation surrounding the COWID 19 epidemic to ensure the continuity of your foundation?
Elizabeth Yin: It is interesting to note that the pandemic has not changed too much for our foundation(s). We have always been a remote foundation and have always met our donors virtually. While many other venture capital firms had to set up and learn video conferencing tools to communicate with founders, we always did it remotely.
Some of our businesses have struggled and we have spent a lot of time with them helping them manage their cash flow and helping them make some important decisions for their business. At the same time, the pandemic is stimulating the activity of some of our other activities.
Immediately after one becomes an investor, as in the beginning, it should be difficult to launch the first fund and launch the second or LPs good returns. If there has been such a difficult time, please let us know and tell us how you (or your team) overcame the difficult times?
It’s too soon to give back to our foundation. Investing in startups is a very long journey. It is difficult to set up a fund as a new fund manager, both for fund 1 and fund 2, and I have also heard that it is difficult for fund 3.
I’ve written a lot about it here and here….
What mistakes do you think the founders made in fundraising?
Elizabeth Yin: Fundraising is a full-time job. One of the biggest challenges in fundraising is taking a lot of time to meet, grow and constantly improve – in addition to managing your business.
I think the best fundraisers can put their work aside, but it’s hard to do. This is the best way to raise funds: delegate all the work to another member of your team and then take turns meeting with each investor.
If you think about it, fundraising is a matter of supply and demand. It’s as much about the supply of your turn as it is the demand of investors. The only way to create urgency with investors is to prepare your meetings one by one and make it clear that your funding round may not be available tomorrow and that every investor needs to make a decision very quickly. And that’s the only way to raise funds. So if you want to raise money, you better prioritize fundraising.
What advice would you give to entrepreneurs who have the opportunity to meet investors like you? What are the three most important questions you always ask founders?
Elizabeth Yin: I like to spend my time discussing a problem. The way the founder thought about the problem and communicated with the customers really impressed me.
Here are a few questions from my list:
- Tell us a little about your background and your co-founder(s).
- How do you all know each other?
- How long have you been working together and in what capacity?
- What is the specific problem you are dealing with?
- Why is that a problem?
- Who has that problem?
What is your general view of the term global and what are the important factors (criteria) that local seedlings should consider when developing internationally?
Elizabeth Yin: Like anything else, you need to understand your customer. Your local customer is often different from the international customer in terms of language. The work / workflow / daily life / problem / etc can be totally different.
I think a lot of founders want to go international, and I admire that great ambition, but if you only understand local customers, sometimes it’s better to focus on what you know. There is also much less competition at the local level.
Which start-up or technology sector do you think will develop in the future, e.g. B. in 2 or 3 years, make an impact on the world?
Elizabeth Yin: I think we will see a lot of global companies – both in terms of where they operate and the customer groups they target.
We will see changes in workflows and more new tools designed to work better remotely.
How do you stay motivated every day?
Elizabeth Yin: I am on a 30-40 year mission to democratize wealth through entrepreneurship. And it excites me. If I can help bring a group of other people together – both builders and sponsors who have the drive and zeal – it’s exciting and motivating.
What are the three most important life lessons you would like to teach your (future) sons and daughters?
Elizabeth Yin:
- Would you be so kind
- hard work
- Be curious.
Why do you want to be remembered?
Elizabeth Yin: I think right now, as a startup founder, you need strong networks to successfully access resources, knowledge and funding. If I can influence and democratize the way the founders have access to all of this, I will be very happy.
To me, founders who work quickly and energetically, regardless of their origin, deserve access to these things, and that’s my goal.
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