Ask A VC - Kathleen Utecht, Managing Partner at Core Innovation Capital
"Ask A VC" is an interview series by SoGal Ventures, featuring prominent venture capitalists around the world. We hope to inspire diversity in the tech community -- empowering our generation to grow into exceptional entrepreneurs and investors.
by Pocket Sun (@pocketysun)
Kathleen Utecht is a Managing Partner at Core Innovation Capital, a venture capital firm, with offices in Los Angeles and San Francisco, investing in high-growth financial technology companies. Previously, Kathleen was an Entrepreneur-In-Residence / Investor at Comcast Ventures and investor at WVP Ventures. Prior to her venture roles, she invested in and led Green Rock Entertainment, an online / offline commerce startup whose main product was Cahootie. Before her operational experience, Kathleen was an investment banker in the financial services group of Raymond James and a graduate of General Electric Capitals Financial Management Program. Kathleen holds a Bachelor’s Degree from Babson College and an MBA from The Wharton School of the University of Pennsylvania.
“I love ambitious teams that are bringing market-based solutions to real world problems.”
Why do you love working at Core Innovation Capital, and what do you enjoy the most about being a VC?
I have the best job in the world for my personality! It fits perfectly with my calendar ADD - I can spend two hours talking to a company, another hour doing due diligence, and another hour connecting people. So fun!
The Core family is awesome. My colleagues elevate me and my thinking daily. An extension of our core team is our portfolio companies, who are all tackling big challenges. While there are many varied personalities, I love that everyone is smart, intellectually honest, candid, and trying to consistently improve. I LOVE that we are an emerging fund. It’s like working in a new company!
“The greatest part of the VC lifestyle is the people. I am so fortunate to get to meet so many of the most passionate and the brightest people in the industry. People that act. People that are trying to incrementally improve their fellow citizens lives.”
We just talk about world-changing ideas all day. Most of our portfolio company founders are world-class serial entrepreneurs who are improving inefficient financial services for everyday people. I’m not a fan of another me-too app. I want to make meaningful investments, and cannot care less about AdTech.
What’s your story of getting into business and finance?
We had a family business when I grew up, so we talked about cash flows and how to make money all the time. I loved conversations of business at a young age. I knew that I would be running or operating something. When I was 5 years old, I was not allowed to leave a grocery store until I could add up all numbers correctly. The better I got, the sooner I could go home and have food.
My mom used to get many calls from my teacher because I would push back on doing things that did not make sense. I’m straightforward, and I dislike bigger investment committees since they can be political.
“I like to spend my time working with entrepreneurs and companies, and letting the merits of the deal shine through, not the politics.”
Tell us about lessons from mistakes you made in your early VC career?
There are so many! Ignoring red flags and strong gut feelings are some of the biggest mistakes. There have been times I loved 95% of a team, and the company was in a space that I really wanted to be in, but there was something glaringly wrong. Now, if ever I see an ethical issue in a founder, I will pass even if everything else is perfect. There are some non-negotiables.
It’s important to understand everyone at the table. I should have gotten closer to board members to know where they were coming from. We as investors spend so much time with CEOs and co-founders, but we should spend more time with the rest of the team. This way, you’ll know who’s good and who’s not. Building relationships with them will do you a lot of good.
What’s your advice for first-time fund managers?
1. Have strong relationships with your mentors! As a VC, you will need to do reality checks with others, because it’s impossible to know it all. Strategic partners, compliance, law firms, and industry experts will be helpful for due diligence. Don’t hesitate to reach out to them and ask what they have learned and seen.
2. Build a strong counsel for your fund. It takes time to get great people, be patient.
3. Always get pro-rata rights and information rights.
4. You can’t run a company you invest in. Not scalable!
Any tips on fundraising for a VC fund?
I had no reference point for how the process works the first time around. I was very fortunate to have a great counsel and mentors to give me their perspectives. Cultivate your network and have smart, trusted people behind you!
- Do the preparation work a year before and build a solid target list. Get to know them better. Track all the progress with Excel or CRM tools. Big institutions are different - they want to know you. Update them every 6 months, because LPs have allocation, too. Make sure you put yourself in their heads! Tell people who you are and that you’re raising next year.
- Know who are dealing with. Things look so clear afterward, but most people (including myself) had to go through it to understand. For example, LPs are in great funds, so why invest in you if you only co-invest? You need to figure out how their fund is structured and how it works.
- Take advantage of your current LP network. Your friends who are LPs can suggest other LPs. Family offices tend to know each other as well. Once you get one family office onboard, you can get introduced to more.
What’s your suggestion on a first-time VC fund structure?
Do the budgeting and know how much you need to run the fund. No one in a small fund gets rich from management fees. It’s your responsibility to incentivize all the stakeholders. Some first-time funds use a hurdle rate (normally 6–8%) to attract LPs, which means you return the hurdle fees first before you deliver carry or sell a portfolio company.
Lean on targeted, quality resources. Our fund pitch deck was reviewed by my college friends who are LPs. We talked to many people who had done it before, including people at Sequoia, Andresson Horowitz, etc.
What trends in FinTech are you really excited about? In your opinion, what types of entrepreneurs are most likely to disrupt the space?
I am excited that we are moving from democratizing financial services to really empowering financial services.
Americans need help with income smoothing since their income doesn’t match with their expenses and spiky cash flows can be catastrophic for financial health. There are several startups tackling this challenge. Included in that are businesses serving the 1099 worker. With the large shift in our labor force from W-2s to 1099s, it’s great to see startups serving this segment and tackling challenges caused by the shift. Check out our whitepaper on the 1099 economy.
I’m excited about businesses helping with financial health — startups bringing insurance, savings, and retirement plans to the mass market.
We are into credit businesses as well. Personal credit, SME financing, healthcare and auto financing are all extremely large markets for innovative entrepreneurs to enter.
Infrastructure plays that can change the rails of our financial services system excite me too. It’s crazy that if I give you a check, it still will take your bank 3 days to clear it and get you the money and it can cost you money to cash that check. Financial services is a large — 8% of the GDP, touching all our lives — and fascinating space.
“Best entrepreneurs to tackle these challenges understand the ecosystem, including knowing the players and rules in this highly regulated environment, and have the contacts to do so.”
How do you see Venture Capital as an industry changing in the next 10 years?
I hope and am starting to see more entrepreneurs that are going after real problems in important fields such as healthcare and financial services, and VCs that pursue investing in impactful ideas.
“Within the next ten years, my fingers are crossed that really smart entrepreneurs attack significant issues and abandon their pursuit of another me-too app or serving us a better ad. We need the smartest, most ambitious people to go after issues that can incrementally improve people’s lives.”
I think we’ll also see more local ecosystems popping up and entrepreneurs being funded by local community angels and VCs. All good things for our country.
SoGal Ventures is the first female-led millennial venture capital fund for diverse entrepreneurs in the U.S. and Asia. Connect with us on Twitter at @pocketysun and @sogalventures, or drop a note at hello@sogalventures.com!