How do you find the next big market, not the next unicorn?

Jason Kirby (00:03.056) Hey everyone, welcome back to Fundraising Demystified. Today we have Caitlin Donnelly, GP and solo GP of Avalanche. I don't know why I butchered that, sorry. Cut that out. Everyone, welcome back to Fundraising Demystified. Today we have Caitlin Donnelly with us, GP over at Avalanche Ventures. Welcome to the show. Katelyn Donnelly (00:13.646) It's okay. Katelyn Donnelly (00:24.536) Thanks so much for having me. Jason Kirby (00:26.626) I'm excited to have you. I think you have a, why I brought you on is I think you have a unique thesis that you coined the concept of avalanche. And just to jump straight in, I want to talk about why you're not chasing unicorns and you're actually trying to either, I guess, create avalanches. Is that the mission there? So again, give the audience a little bit of context on what an avalanche is. Katelyn Donnelly (00:45.528) Sure, so an avalanche is a massive sector trend that is sort of inevitable and you can see the invisible changes underneath the surface, but people aren't sure exactly when the avalanche is going to be set off. And so what we hope to do is invest behind those massive tailwinds that can create huge outcomes for our investments. I think the unicorn moniker to me is less interesting because there are ways that you can manufacture a unicorn or even like the term itself is sort of meaningless now because it used to be this mythical creature that, you know, would be very rare and now they seem to be not so rare. And so I think a more useful way of thinking about early stage venture is being like, how can you find the big changes that are happening in society driven by technology and invest before other people see them? Jason Kirby (01:39.002) So let's talk about that a little bit. How do you find these markets? How do you find these sectors and identify them? Katelyn Donnelly (01:46.636) Well, I keep my ear to the ground and really think, I mean, first I, I been just like kind of obsessed with market trends. I don't know since like college, maybe even before and like making predictions about where the future is going and being like, how can I be at like the earliest stages of those predictions and see things before other people? and one of the areas. that I've gone deep on traditionally as an education. And so one of the most powerful avalanches that we've been investing behind that we saw coming is the movement towards alternative education, which we call alternative education goes mainstream. And it's like, if you'd looked at the data, you could see this buildup of dissatisfaction with the public education system and a new class of parents wanting to give their kids a more personalized different set of experiences. And you never know exactly what the inflection point could be, but the big ones for that avalanche were COVID, where parents could see what they were getting at public schools and realize that they could potentially even homeschool or pursue alternative education. And then secondly, a new political administration that has made school choice front and center of its education agenda. That's an example of like a big trend that you could see coming. And then there've been these inflection points in the last year that have made it a very obvious future. Jason Kirby (03:24.167) So yeah, I love that example and being able to kind of see, there's a bet or like there's like the inklings of what could become an avalanche. But a couple of things, guess, when it comes to like picking a winner or like kind of, well, they need to kind of identify, but timing the avalanche and then also being able to survive an avalanche. How do you think about when making investments as an investor into these markets that you've identified? Katelyn Donnelly (03:36.077) Yeah. Katelyn Donnelly (03:42.979) Yes. Jason Kirby (03:52.36) How do you think about the timing and the allocation to what you think the winner will be that survives? Katelyn Donnelly (04:00.674) Well, one of the things we look for and underwrite are founders that are building their life's work. So what that usually means is like they have committed their entire career to a sector and building behind it and believe that they've now found a, or they are finding a company that is building the future that they believe needs to come forth in their sector. like within the alternative education avalanche, we've backed both Odyssey Education run by Joe Connor and Tether Education run by Chris Nielsen. And both of those founders are serial entrepreneurs who are building their life's work in school choice matching algorithm platforms to coordinate a more decentralized world. like both of them are people who have kind of like been through, have been in this space for over 10 years, actually their entire career. And then secondly, they're like just never gonna give up because if they didn't do their company, like they would do, they would just start the company over again. And I think they would have just like found a way to be capital efficient and to like make resources go farther until the like proof points materialize in order for them to raise the capital to capitalize on the avalanche. Jason Kirby (05:21.324) I like that. And to kind of give the audience a little bit more context on you and kind how you got to building Avalanche Ventures, tell the audience a little bit about your background at Pearson and part of that what led you to building the firm. Katelyn Donnelly (05:35.714) Yeah. So I started my career at McKinsey doing tech and finance turnarounds after the great financial crisis, and then left with a senior partner to join Pearson in 2011, as they were really going from being a print publishing business to a full service education technology firm. And I then co-founded Pearson Ventures, where we invested in ed tech and education companies all over the world, but then also did a lot of thought leadership around where the future of education was going both from K-12 and higher ed. And one of the papers I wrote was actually called an avalanche is coming higher education and the revolution ahead. And we predicted the rise of Teal Fellows and Y Combinator being a powerful brand on par with things like Harvard Business School, that MOOCs and technology would be a disruptive force to universities to challenge them to provide more than just the content. And so The success of that paper was one of the things that allowed me to think, well, if you can get these, if you can predict the future, you should be able to invest before it happens. There's a lot of upside in that. And then at the same time, coming from corporate venture, I wanted to get back into the industry from the vantage point of being an exited founder myself. So I saw a market opportunity. with my boss to co-found a company called Delivery Associates to work with governments to drive outcomes and implement technology. And we grew that to 200 plus people, clients all over the world, profitable and sold to private equity in November 22. So, and I should say Delivery Associates was definitively Michael Barber, my boss's life's work. He developed the methodology under Tony Blair. It was kind of an idea whose time had come. And I think you even see that to, you know, it was an avalanche in itself that we were very early to, because now you have DOGE is like, you know, maybe a more aggressive, less polite sort of like delivery associates type method. But the public dialogue is now centered on government efficiency and achieving results in the public sector. So both of those experiences at Pearson, seeing like how you can underwrite big trends that are coming, Katelyn Donnelly (07:56.298) And then also building a company and having a financial, a very successful financial exit to a financial buyer. put me in a spot to be able to partner with founders at the earliest stages when they're building companies that are part of their life's work. Jason Kirby (08:11.48) I guess tell us a little bit about Avalanche's thesis and check size and stage. so in case founders are listening that might be interested, they can have some context. Katelyn Donnelly (08:22.7) Yeah. So we, are relatively small fund around $5 million. We invest between a hundred to 300 K in, pre seed to early seed companies that are building behind an avalanche theme. And, I've written, a lot about what we consider avalanches on our blog called obviously the future. So you can, go on the website. You can check that out. I, and then kind of update them. then, but beyond that, at least today, like we needed to start somewhere. I mean, there's a lot of avalanches out there in the world, but I wanted to start with ones that I felt I had a clear point of view on and could help founders tactically. So we invest primarily in companies that transform how people learn, earn or own. And those are three broad categories. that really serve under the umbrella of empowering people to be able to take charge of their lives and be successful in a capitalist society. Jason Kirby (09:26.288) I guess define the years we talk about learn, but for like grow and own, or sorry, earn and own, sorry. What are some examples of the avalanches you see happening in those categories? Katelyn Donnelly (09:29.816) Yeah. Katelyn Donnelly (09:33.262) Let's earn. Yeah. Katelyn Donnelly (09:42.072) So in earn, we have one called everyone is an entrepreneur or they'll have to learn to think like one. So I think Gen Z very much gets this that like, you know, there's no such thing as a career pathway anymore. Like change is a constant that you're going to have to constantly be adapting to and that your career may look more like a portfolio career and a job that you have in five years may not even be invented yet. Like no one, you probably use the term prompt engineer. like more than three years ago, you know, that wasn't something that existed. Like if you pegged your career and be like, I'm going to be a software, a senior software engineer, like the nature of that whole career and its progression of has changed. So, um, the underlying ethos is that you have to be an entrepreneur. You have to be adaptable. You have to see where the opportunity is and, uh, position yourself accordingly. And so from that come a sort of series of entrepreneurs. opportunities that we can underwrite at Avalanche. So like one company that's still very early and sort of in stealth is called Loma, which stands for local marketplaces. And they work with people who own very niche communities on social media to be able to allow their community to transact in a marketplace. And then they take a cut of the commerce. So for example, they've started with like with automotive sectors. So there might be someone on Instagram that has a hundred thousand people that are obsessed with Jeeps. And people who are obsessed with Jeeps, like probably have like, you know, spare parts or different accessories, or maybe even want to sell like their Jeep for a different Jeep. And that sort of economic activity might've happened on Craigslist before, or like Facebook marketplace. But the key person that is convening both the buyers and the sellers is a curator of the content and ideas behind a niche. so traditionally, that person probably hasn't earned any income from all the work that they'd been doing on top of one of these platforms. And so we think that the future is that people will be compensated and find ways of earning a living for the work that they do. Katelyn Donnelly (12:04.13) particularly online in the platform economy. Jason Kirby (12:08.26) Yeah. I guess to put a term around it, like creator economy, like is that kind of the adjacent category, but leaving you a little bit of flexibility, not calling it creator economy and, using. Katelyn Donnelly (12:20.908) Yeah, I mean, we like the word we've been using the word curator a little bit more. don't like creator economy could be another one. Yeah, I think there's like a whole class of I like the term digital native jobs. Like, okay, if you just like worked on the internet or for providing value for people online, like how do you how do you turn that into a job? Jason Kirby (12:45.014) And then when it comes to the own space, what's kind of the thesis behind own? Katelyn Donnelly (12:50.21) Well, so only is potentially very broad. Like at its most like concrete, is things like helping people maybe gain access to home ownership or RSUs, like understand RSUs, like start businesses that they actually own. But within that also for us includes GovTech because public, you know, there's like public ownership. of lots of dollars out there that could be more efficient. we invest behind like government efficiency, procurement tech, and then we invest in technology that allows people to own their own data or their instance of their self online. So we were seed investors in the decentralized social network, Blue Sky. That has, you know, I think that's a really good example of most people didn't think that it was important to own, you know, your Twitter handle or you know, your Facebook account and then, you know, the election happened in November and people realized like, well, maybe actually I want to be in charge of my own algorithm and I don't want like my links to be throttled. And it's like, if someone follows me online, I want to actually be able to have access to them. And so now like they went from 5 million users to another, like 32 today. Jason Kirby (14:09.808) That was a quick ramp up. Katelyn Donnelly (14:11.522) Yeah. Well, it's one of those that looks like it's an overnight success 10 years in the making. Jason Kirby (14:17.902) Yeah, no, there's that. Well, yeah, he's been around for a little while, but to kind of see that ramp up and the dueling of social media platforms has been an interesting kind of world to be observing big tech companies going in and playing into that. So, you know, nothing you've done that's kind of unique and is going solo, you being a solo GP. What's that experience like when it comes to both going out and raising your fund, also deploying capital and kind of being that, that one point person. Katelyn Donnelly (14:51.022) Yeah. I mean, I, um, when I started, I, I kind of wanted partners actually, like I'm a bit more of a team player, but it's really, first of all, starting a fund is very hard, very difficult. Like you basically have to forego salary for a year, maybe more. Um, and, uh, you know, it's, like high risk. It's like starting a company and, um, not everyone. is like cut out to be a VC or like they might have like a slightly different perspective. So I actually had done like quite a bit of GP dating over the years and just never found like the perfect match. And I think the advice that people, that I give people or that I think is right is just like when, like when it comes to romantic relationships is the same thing as business relationships, which is like, if you can be in a great marriage, that's amazing. But if you can't be in a great marriage, then it's better to be single than to be in a bad relationship. And so. I think like for me, it's like I'm going to be single until I find like the right marriage or partnership. And then I also think that like the tools of today make it more, make it so much easier to be high leverage as an individual because you're constantly like collaborating with other people in the ecosystem. Like your, my accounting systems and legal are, you know, handled by, sector specialists in those areas. so I think it's easier forever than ever before to be a solo GP. I also think though, I mean, the flip side of that is like, just like being a solo founder, all of your strengths and weaknesses are really amplified because you don't have, someone that's like balancing them out. So, that is just like a challenge that you find ways to deal with, you know, Jason Kirby (16:44.048) How does AI help you with that? Katelyn Donnelly (16:46.19) I wish AI helped me more, actually. Jason Kirby (16:51.248) Yeah, it's seeing it to be an amazing tool to kind of like make me stronger at what I'm already strong at, but building those gaps, I, you know, I'm not too sure on. Katelyn Donnelly (16:57.869) Yeah. Katelyn Donnelly (17:01.482) Yeah, you can't be two places at the same time, right? That's still a struggle. Jason Kirby (17:07.824) So kind of going back to the areas of focus that you have, like when it comes to underwriting deals and kind of being able to see the unseeable in terms of the avalanche forming, how do you underwrite these opportunities, these markets? Katelyn Donnelly (17:25.662) What do mean exactly? Jason Kirby (17:27.886) Yes. When you're digging and you're looking for, you see a bunch of deals coming your way and you're analyzing these founders, you're analyzing that, you know, they kind of adjacent to the learn earn our own base. How are you validating that there there's an avalanche coming? Katelyn Donnelly (17:33.26) Yeah. Katelyn Donnelly (17:40.003) Yeah. Katelyn Donnelly (17:45.41) Well, I think to be frank, like there's a lot of people that can potentially see an avalanche. Like, you know, like you can see that school choice is coming. You can see that everyone is an entrepreneur or they'll have to learn to think like one. But what you're looking for in venture are really outliers and outlier people who maybe see that avalanche clearer than I do, you know, that have like, pushing it forward in a faster way that like have thought about the problem or the opportunity in such detailed nuance that they've clearly been like in the trenches with customers. They've been building technology, like they're educating you. And I think that there are frankly a lot of, know, especially at the early stage, like people or founders that just don't have it all together. Like they haven't like thought it all through. Like there's certainly like an archetype of founder that is like, kind of throwing spaghetti against the wall and like seeing what sticks. And so I think that like, you can like, you'll get that, like, I'll get thousands of pitches this year. Like I probably get like a hundred emails a day of people like pitching some sort of like company that they're founding and you, you know, the best opportunities are often like outbound or they're ones that like you see and you reach out to a founder or like a trusted contact has, um, uh, worked with them for a while and thinks that you would be like a good match. And so I think focusing your attention on the right things that can truly be outliers is the most important part of this game. And the reality is that like there's lots of potentially like good ideas out there, but if they're not like an amazing idea, then it's just not gonna move the needle. Jason Kirby (19:35.472) So let's take a step back. You mentioned like, you get a hundred emails a day. Every founder is, you know, they're desperate to make connections and desperate to build relationships and expand the networks. But the other day they make a desperate attempt to, you know, at least take a shot and get in front of you. Has that ever, like, have you opened up a call to email and been like, wow, I need to seriously consider this? Katelyn Donnelly (19:57.9) Yeah, I think like the right cold email can be incredibly effective. like before my current fund, had like a small, an even smaller demo fund and have made a ton of angel investments. And I remember one founder basically was like, look, we have, we have a hundred connections in common on LinkedIn. could find a warm intro, but like, here's the reasons why you'd be a fantastic investor for this company. And he was highly credible. It was like a serial entrepreneur, highly credible team. and it really did like hit, like he'd read my. my writing and it really did hit. And so we, you know, had a couple of meetings and I invested in that company. But I think like the reality is, is a lot of these emails, a lot of emails that people send are not, you know, they're really not that good. Yeah. Like, yeah, they like, you know, they're like, congratulations on your great work. Let's explore synergies or like, can you jump on a call? And you're like, like, you know, when I was, first starting to get back into the, Jason Kirby (20:42.372) Not good. Katelyn Donnelly (20:57.024) into this, I would have more time and pay, had more time and I had more patience and I was like, okay, well maybe, maybe I can like dig into this. But now like the minute I sniffed that someone doesn't understand the game, I don't even have time to like answer it, answer the email anymore. I used to be like, I need to answer every email and be super professional. But now like, I'm a one person shop. I'm working for my LPs and my founders. And you know, if, If it's not hitting the like top 5 % or 2%, then it's just like, I don't even have time to respond. Jason Kirby (21:28.846) I think it's incredibly valuable to one, respect your time that way, but also kind of set the bar for founders. And you mentioned something that I want to unpack more is like, if you don't understand the game. So, and I want to understand how, how you identify that in an email that you receive call as you maybe skim through your emails, like how do you identify whether someone knows the game or doesn't know the game? Katelyn Donnelly (21:52.482) Well, any email that's more than like 250 words don't understand the game. Anyone that uses my first and last name doesn't understand the game. know, anyone that's sending me something that's like med tech, egg tech, you know, like doesn't understand the game, you know, asking for a call, not sending a deck doesn't understand the game, you know, doesn't lead with like track. Like if, if someone sends me something and it doesn't have like clear traction or like why I should care, like front and center doesn't understand the game. Jason Kirby (22:28.912) Well, that is some great advice that I hope people actually listen to. I very much agree. as founders are in their own little world, like this is the best thing in the world. It matters so much. Everyone's going to love it. But the reality is you as an investor are getting a hundred of those a day. And it's just like, you have to find a way to stand out and speak the language. to kind of earn those 15 seconds that you give them to buy another 30 seconds, to buy another 30 seconds. Not a one hour call. Katelyn Donnelly (23:03.628) Yeah. Yeah. think the other thing is like, you know, I boot, we bootstrapped delivery associates. And so like, I believe that you should be able to, especially if you're in a sector like education or government, like you need to sell before you raise money. and like find ways of like de-risking and showing why, why people are going to care, like what the traction is. so. I think that's the other thing is like people is the one of the biggest flags is when founders focus on raising money from investors before they focus on customers. Jason Kirby (23:41.07) Yeah, completely agree with that. And when it comes to the deals that do get across the finish line, not finish line, but that bought another five minutes from you, what's been something that has stuck out to you that, there's one example you mentioned earlier that you actually ended up writing a check-in, but what are you kind of seeing where it's like, I want to take a meeting for that one. What's been an example? Katelyn Donnelly (23:41.452) and users. Katelyn Donnelly (23:52.685) Yeah. Katelyn Donnelly (24:06.872) Well, every early stage investor, you're underwriting like fantastic founders. so, and I want to understand like, is this, like, and we also underwrite founders who are building their life's work. And so it's like, okay, if you're building your life's work, then your previous work better be really impressive. And so part of it is like, you're like, do I want to meet this person anyway? Like, are they interesting? Like, do they have a unique point of view? Would I want them to be in my network and my friend and what I want to track what they're doing? Because I think it's going to be really big and impactful whether I invest or not. Jason Kirby (24:44.048) Yeah, it's a, it's a, it's a hard truth that I think a lot of founders have to realize that, you know, you don't have, if you haven't done anything previously, and this is your first company, it's going to be a grind. That's, you know, that's the filter. Yeah. Great filter that, you know, most founders never pass and therefore, you know, don't deliver, you know, return or, know, don't deliver an outcome. Um, it's that first step if they fight through that and. Katelyn Donnelly (24:58.999) Yeah. Katelyn Donnelly (25:08.024) Yeah. Jason Kirby (25:11.576) and then they take another swing at it, then there's maybe something there that they could break through. But it's important. Katelyn Donnelly (25:17.198) Yeah, I guess I just want to make sure that people get the point is like, you don't have to be old, right? Like there's so many young people that are like incredibly impressive. know, think like if you like 1517 has an incredible track record for investing in Thiel fellows and like college dropouts. And so you can have very impressive credentials at a young age. In fact, sometimes I think that can be, it's almost like easier because you can give them like the younger person like discount or whatever and be like, wow, you're 18 and you built all this stuff. But like you have to have something like. Jason Kirby (25:49.08) Yeah. And you have to put yourself out there. You have to try to build something unique, test something, have a cool side project or have, you know, demonstrated the ability to build in some capacity. Switching gears here, looking at venture market overall. I that was something we were talking about before we got on. Katelyn Donnelly (25:54.829) Yeah. Katelyn Donnelly (26:08.334) Mm. Jason Kirby (26:10.052) You're based in Austin right now. That's a community that's developing and growing in the startup and venture ecosystem. Like what are you seeing in Austin in particular in terms of the startup and venture ecosystem as opposed to like say San Francisco or New York or some of the other more common networks? Katelyn Donnelly (26:26.476) Yeah. Well, one of the great things that I like about Austin is it has sort of like a cowboy mentality, which I think is sort of actually better suited to the entrepreneurial experience or entrepreneurs will be successful in the next 10 years. I mean, the reality is, is like San Francisco has been come and it maybe always was like a very clubby place. Like you need to be in the in crowd. You need to come from certain schools, like all this sort of stuff. think Austin is like. It's for Cowboys and there's a lot of solo GP like in the terms of the venture ecosystem, like there's a lot of solo GPS here, but there's with small funds like me, but there's also like a lot of capital here from family offices and larger funds that are looking to make a dent in the world. And so, and in real sectors. like you have capital factory and like lots of people doing like defense tech and then, know, SpaceX and like Tesla, all the Elon companies are in Austin. You have quite a few like American dynamism type firms. then mean, Dawson also has a bunch of consumer too, like Knight Ventures, like Mucker Capital, like a lot of people, a lot of firms that you might think of in terms of being like LA Coastal firms have a Austin based partner. Jason Kirby (27:43.344) It's interesting. when you kind of see the, like, how are you thinking about venture as an asset class from your perspective? Katelyn Donnelly (27:51.862) I think that, I mean, it's interesting when you look at the data and you see that over 60 % of the capital has gone to like five firms this year. And I think that the reality is that is a different asset class than early stage venture. That that is an asset class, like maybe series B and beyond that 20 years ago would have been public markets and now is like solidly growth equity, not really venture capital. And so there's like before product market fit and after product market fit and venture capital is really like before product market fit. Like it used to be called adventure capital, know, like way back in the day. And you're also potentially looking for markets that like don't have a category definition yet. Like people haven't heard of, they seem really scary, you know, like, and those are pre-avalanches. So like some Like a generalist investor was asking me last week, like what I thought about crypto from like a pre-seed seed perspective. And I'm kind of like, think crypto is kind of done from a pre-seed seed perspective, you know, like those big gains on those projects, like either like the crypto projects are rate are coming out of the gate with like 10 to 20 million already in the bank because they're large soft, like enterprise software infrastructure projects. or they're kind of like scammy, mean coins, consumer gaming things. I was like, to the extent that crypto, like crypto as an asset class is kind of established, like it's not going to have the same return profile that it did in the last 10 years. Jason Kirby (29:33.226) I'm glad you bring this up because this is something I see all the time where, I see either various different funds or what their allocation strategies are, but like venture is, as you say, like to really bet on the things that haven't been proven yet. And I feel like there's so much capital to be deployed that that's not really feasible. to have that level of emphasis and probably explains why there's, you know, as an asset class, it's underperformed as, you know, in terms of like, I think it'd be like top, quartile, they even actually return money, or make money. And so I think it's very interesting outlook to, can one call that out in terms of what are the real markets actually worth betting on? And then it comes down to like, how do you pick the winners and get out location? So when you think about Katelyn Donnelly (30:20.472) Mm-hmm. Jason Kirby (30:23.14) the early stage and just how competitive this space is in terms of money coming in. How do you think founders should go about picking the right investor or approaching the right investors that are going to be the right partners for them in the long run? Katelyn Donnelly (30:39.308) Well, one of the madras that I think is really right, both for fund managers and for entrepreneurs, is that capital raising is a matching process, not a convincing process. So you have to find the investor that's right for you. and And that's like, it's very hard to give generalized advice because every company and founder is totally different. Jason Kirby (31:07.866) What would you say matching? And not a convincing? I guess explain that to a founder what the difference is. Katelyn Donnelly (31:16.866) You need to find like believers, like people who believe in you and what you're building. Like you're not going to convince skeptics. So, you have to find those people who believe, and develop relationships and potentially the reality is I think you have to be potentially honest with yourself about where you are in the venture ecosystem. You know, like if you did not, if you were not at a high growth startup before that has made a lot of money for investors, you're walking up a, like a very steep slope in like general, in general technology, you know, like there's always these mafias, right? Like the PayPal mafia was very venture backable. They're the Uber mafia was very backable. one of like the hottest seed managers right now apparently is like, Dylan Field from Figma. So those tech ecosystems are very, that have shown to be very valuable are one that people continue to invest venture dollars in. If you've never been part of one of those big stories before, then you're walking up a steep mountain. And so you're going to have, potentially raise your first round at a lower, valuation cap, might start more with like angels and first believers, and then you might need to show like traction and numbers and product market fit before you get into like the big dollars or get the attention of large VCs. Jason Kirby (33:00.656) No, I think, think it's valid. also want to kind of point out the, um, like when it comes to investing and write these checks, like there's so many founders that feel they have to convince. Investors like, no, no, no, no, you don't understand. Here's 40 more pages on why you should invest. Um, and yeah, when you see that kind of behavior, obviously you've kind of mentioned before, like, you know, cold email responses, stuff like that, but like, um, what would be your advice to those founders to. Katelyn Donnelly (33:10.926) Hmm. Katelyn Donnelly (33:15.275) Yeah. Jason Kirby (33:28.154) maybe reconsider their time allocation towards the convincing versus matching. Katelyn Donnelly (33:34.008) Go back to your customers and your users and keep building and post some big growth numbers. Venture is about finding fast growing companies. The minute you prove that you're really fast growing, things can change very quickly. I've seen founders and companies go from cold to hot super quickly once they proved out that there was strong customer demand and the market was big. But before that, it's... tough, you know? And why should someone bet on you? Jason Kirby (34:13.84) With those founders that don't have the breakouts and are in that stage of developing and kind of growing. Katelyn Donnelly (34:27.234) Venture venture capital is not for everyone. That's the other thing is like, there's a lot of startup founders out there that should not raise venture money and should bootstrap or, you know, maybe have some sort of like debt arrangement or, or whatever. like, venture capital is a very small asset class meant for high, very fast growing big market companies, sometimes with like a real technological edge to them. And if that's not you, that's fine. Jason Kirby (34:29.872) That's very good. Katelyn Donnelly (34:56.11) But don't expect to raise venture and like delivery associates the company that that I built like we never raised any money and we had a fantastic economic outcome to private equity and And, uh, yeah. Uh, and that was, that was that. So I don't like think that I think one of the things that people have been confused about is that it was like prestigious to raise VC. It's like, Oh, I'm a venture backed founder. Like you even see it in, see this in some people's bios. For me, it's a bit of a flag. They're like, Oh, well he raised $50 million from VCs from his last startup. And you're like, you're right. And how many dollars came back? Like, you know, Did that person make real money for themselves? Did they make money for their investors? Maybe, maybe not. But I don't think that, I think as an ecosystem, we've given too much prestige to the ability to raise money versus produce outcomes. Jason Kirby (35:49.87) And I think the point I was trying to get to is markets. Like, are you in a market that's worth backing? Like an avalanche market, as you're referring to, that maybe hasn't been established yet, that's maybe worth gambling on, or like a shiny market that's already been pretty AI, everything AI. But there's just a lot of good markets that are out there. You can build a good business, but that's not necessarily venture backable. Katelyn Donnelly (35:53.528) Yeah. Katelyn Donnelly (36:05.516) Yeah. Katelyn Donnelly (36:14.284) Yeah. I will say that we have a couple of, I have underwritten investments in our portfolio that are more in that category, but they were at lower valuations and I underwrote them to like a 10. I'm like, okay, I think this is a lower risk 10 X. and it has the potential to be a hundred X. Like it's possible, but like, I think that it's lower risk, like potentially capped for award and, I was okay with that because a lot of the like venture back founders are now at such high prices or they come out of the gate with such big rounds that that doesn't necessarily make sense for my fund either. Jason Kirby (36:59.824) Yeah, you have the obligation to return the fund on, you know, ideally each, each bet you make or come close to it. And a lot of founders just don't realize that they're like, well, everyone else is raising on a 15 million pre. Why don't we like, well, are you going to sell for at least a billion? You know, like probably not, but if you sold for 50 to a hundred, that could be a great outcome. If everyone invested at a $3 million valuation. Um, and you know, also what I think founders don't realize is the pressure it takes off them by. Katelyn Donnelly (37:05.475) Yeah. Katelyn Donnelly (37:10.754) Yeah. Katelyn Donnelly (37:15.053) Yeah. Jason Kirby (37:29.584) coming in at a lower valuation and treating your investors right by giving them an appropriate valuation. It's a conversation that just doesn't happen enough. It's seen as like, you're a failure. didn't raise it of super high valuation, but it's like you're building a company that should be doing something other than just validated that you can raise money. Katelyn Donnelly (37:35.224) Yeah. Katelyn Donnelly (37:49.206) Yeah. I think also some found a lot of founders don't because they're like technologists or they understand the market, like they don't understand like what the expectations are in terms of what investors need to really like make a commercial case for giving them money. Jason Kirby (38:07.396) No, they don't, in most cases. They're just like, give me money. I need money, so you have it. Give it to me. Not a great way to start a conversation with investors. And just as we kind of wrap up here, I want to have a fun question. When it comes to the, let's just say the next 12 months or next year or two, Katelyn Donnelly (38:11.811) Yeah. Katelyn Donnelly (38:15.168) Yeah, yeah. Jason Kirby (38:29.488) With the current administration that's coming in and kind of completely changing things and going to have a massive impact across multiple industries, what are you paying attention to in terms of markets or sectors or movement that you particularly have your ear to the ground on? Katelyn Donnelly (38:46.897) We, mean, this, the latest election has been a great inflection point for a lot of our avalanches. You know, we saw the influx into blue sky of like people wanting to own their own instance on the internet. also like, I mean, gov tech, government efficiency, procurement tech, like private sector delivery of public goods. Those are all like big mega trends. And then I think everyone being an entrepreneur or having to think like one, like you can see that there's this push at the federal government to like, ask people, what did you do this week? you know, maybe you, like the job you thought you'd have for life. If you don't want to like work in, in an office, like you're going to have to find a different, like alternative arrangement with more flexibility because the demands of employers on their like full-time employees are going up and they'll probably have less of them. So I think that what the, this new administration has done is it's opened up people's eyes to avalanche trends that are obviously the future, but people were really fighting because they, you know, cause they're scary cause change is scary and, and they kind of want to hang on to the way things were, but. like structurally things have changed a lot. Jason Kirby (40:11.92) You know, your avalanche metaphor has so many ways to be interpreted in terms of like, alveges are scary. They kill people. You know, it's like, like, they create a lot of momentum, but you gotta have got to be a complete expert to navigate them. And so, you know, that's something that really appealed to me about your thesis and what you guys do. And it has so many ways to be interpreted, I think that are appropriate for, for venture in particular. You know, because once that avalanche comes, if you're still crawling up the mountain, when that avalanche comes, oof. Katelyn Donnelly (40:19.298) Yeah. Yeah. Jason Kirby (40:41.456) That's going to be a painful experience. So you got to move quick, to be there at the right time. Sometimes it might be a lot of waiting. so I appreciate you coming on here and sharing your insights with the community. Before we go, what would be the best way for founders or investors to learn more about you and what you're doing at Avalanche? Katelyn Donnelly (40:48.376) Yeah. Katelyn Donnelly (41:02.796) Yeah. So you should just go to our website, avalanche.vc. We post content and lay out what our investment theses are there. I also write a weekly newsletter called Declarative Statements. So you can see that at declarativestatements.com. And then I write periodically long form essays about avalanches that we think are obviously the future at obviouslythefuture.com. Someday those will all be in one package. Jason Kirby (41:26.564) Very good. It did seem like a little over-jointed, but yeah. Katelyn Donnelly (41:31.746) But today I'm a solo GP and I think part of the exciting things about what we do is that the future is unpredictable, but we're in the mix and you gotta be adaptable and flexible to go where the avalanche is pushing you. Jason Kirby (41:53.008) think that's very valid. Well, okay, Lynn, it's been an absolute pleasure having you on the show. We'll make sure to include all those links down in the description below. And thank you. Katelyn Donnelly (42:00.93) Thanks so much, thanks for having me.