Trailer Episode

How to Find Your Niche as an Emerging VC with Jeremy Baksht of DataFrame Ventures

Jeremy Baksht has a rich history in finance, from banking at J.P. Morgan to several entrepreneurial ventures. His specialty is data and FinTech, and his newest company is DataFrame Ventures. Over the years, Jeremy has learned that he has a good eye for investing and generating LP interest in his niche.

In this episode, he talks about the importance of generating interest, curating a funnel, and deciding what type of CFO you want to be in today's ever-changing environment.

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Key Takeaways

2:53 - Invest in high-margin, repeatable businesses

Early in his career at J.P. Morgan, Jeremy saw companies getting out of investments in businesses with poor margins.

“You typically want to be in that high-margin, repeatable business and get out of the clunkier businesses. So every time I talked to these businesses, they all wanted to know, what do you see in IoT? What do you see in sensors? What are you seeing in clean-tech? And even though I hadn't been an investor personally at any stage in this formation, I kept coming back to tech and data, SaaS. These are all changing the world, they are the highest multiple companies. Whether they're B2B or B2C, you have to get into these businesses. Coming up with ideas is hard, but seeing what was happening in capital markets in the early 2010s, some colleagues and I from Citi joined up with one of their former colleagues and we created a private markets exchange.”

6:15 - The value of automation

When Jeremy set out as an entrepreneur, the best advice he received from CEO Peter Williams was to look for ways to streamline clunky processes.

“The first step was automating a process. When you see a process that has very repeatable patterns yet involves a ton of people, it doesn't often make sense to have all those people involved. Whether you're a real estate broker or private placements broker, you're just thinking about if you could map all the funnels of the 20 things you need to know, maybe some offering documents, and put all the investors or interested parties in one place, and then, hopefully, they can transact in a more automated way. So, I think step one was recognizing there was no leap of faith there. You have all these people and an expensive, clunky process. Can you automate that? That really spoke to me.”

8:40 - Get people to show up

When you deal in marketplaces, you need to generate interest and demand. That’s what led Jeremy to focus on access to Series A and B companies early on.

“All marketplaces are massively 'chicken and egg,' and you need to time very carefully which curated product do you have. How do you stoke the initial deals? Whether your eBay finding a beanie baby or Craigslist with San Francisco apartments, you have to have some reason for people to show up. So for us, at first we started to do LPs assets in hedge funds. We realized that was a fun market, but one that wasn't that liquid. People aren't necessarily looking for those unless there's a big secondary discount. What we did try to do was more company stuff, where people are excited about a Series A or a Series B, and they can't get access. This was really early. I know it's very common now, but that was our thesis 8-9 years ago.”

11:57 - Create a curated funnel

When he founded DataFrame Ventures, growing trust with LPs quickly led to more time sources deals and less time needed to promote them.

“Two partners and I stood up DataFrame Ventures at the end of last year. We've done 17 deals, a few million in capital deployed. It was almost by happy accident. We would find something we found interesting in a data-oriented company. We'd put it up to our LP group. The first few deals took a lot of stoking the well, and calling people, and actually acting as agents in a way like, ‘Hey, we put this deal up. Are you excited about it?’ But by the fourth or fifth deal, we kept finding as you layer on LPs, they understand your thesis. As you build up trust, deals are moving faster and faster and faster. We spend almost all of our time finding interesting deals and zero time promoting them. Because they don't really require a promotion if you have a really curated funnel.”

12:55 - Being a unicorn is overrated

Jeremy recognizes that some people will achieve unicorn exits, and some won’t. But there’s nothing wrong with a successful multi-million dollar exit, either.

“Starting a fund is no different than starting a company. It's a little less focused on some crazy unique idea. It's more putting your ideas onto paper and actually framing those and wrangling LPs and getting people excited about you. So I think the rest of my life, I will probably mostly be an investor. I find that to be really fun. And then look, between us, I've started or been a part of some really interesting companies. I don't know that I'm a next-level founder. You try it a few times, and if you don't have a unicorn exit, you know, society tells you you haven't succeeded. I see a lot of my friends and more people in the industry accepting a 50 to multiple hundred million-dollar exit. As long as you're really helping and influencing people or building a unique product or something interesting and remunerating your LPs, you've done really well. As we've talked about, 95%, or whatever the number is, of companies in the seed stage don't get to the Series A stage. You don't always get to win. So having an exit 10-million plus, as long as you didn't raise 10 million, is probably a good thing for everybody involved.”

18:58 - You need trust, a platform, and distribution

When working on Qineqt, Jeremy started a conversation with Bloomberg to see if they would be interested in a partnership. He ended up starting a job with Bloomberg and working in the pioneer days of their enterprise data portal.

“I kept coming around to, 'Wow, there are lots of different data sources. Nobody knows how to find them. There are very few people that can pay for and use them. How do you wrap all this into a bow and package it?' I thought it was using the data structures and being more technical. But what I realized was after a year of trying to make that business go, it was you need trust and you need a big platform and you need distribution. I was talking to Bloomberg and a few others about acquiring the company or somehow working with us. I ended up being lucky enough to join Bloomberg, and spend about three years there with the enterprise data access portal and putting a lot of unique data sets in there. It was the beginnings of what is now a pretty large all-data practice, but it was early for Bloomberg. One of the industry telltale signs is if you're putting a unique product into one place and thousands of people can access, is it really unique anymore? And I think the answer really is, I guess not. In a way, we call it all external data, not alternative data now because you're putting unique things in one place and maybe some of the alpha bleeds out on a one-to-one basis. But at the end of the day, everybody's got the ingredients and they cook together.”

23:32 - There are many types of CFOs

From big companies to small companies, process-focused to funding-focused, the type of CFO you become is up to you. Jeremy has also seen CFOs transition to the CEO role.

“Are you really good at process, and having a very big group of people reporting to you? Are you very good at being strategic and getting through tough and confusing transactions? Those are some of the bigger company CFO attributes, certainly on the private equity side or others where you're in a changing industry or the dynamics are moving against you. Do you need to be a very tactical, money-saving CFO? That’s another one of the elements. And then, of course, there's the young company CFO that almost acts like a COO or CEO, and has to be very tactical from a different perspective. So when I look at the modern CFO, it's almost, what do you want to be when you grow up?”

27:27 - Find your hedge

The world of capital today is converging and changing. The important thing is to find your hedge, whether that’s crypto or something else.

“Hedge funds are getting into venture capital, venture capital is getting into private equity, private equity is getting into public markets. Everybody's converging. So, being crisp on finding new assets and frankly, hedging yourself against inflation or where it's at. You know, Mike Alfred's a friend of mine and I heard him on a podcast yesterday, look, anybody that doesn't understand crypto, I just tell them it's an MMT hedge. It's basically an MMT hedge. And if you don't get that, fine. You don't have to like crypto specifically but find your hedge. And a lot of people are finding it in crypto, including some of the smartest people in the world that have gone on record saying that.”

31:11 - Focus on funding

If people aren’t investing in you, you won’t succeed. That’s why it’s important to differentiate and generate interest.

“Whether it's a company or a fund, it's always finding the funding. You've got to find people to believe in you. Lots of people will tell you that your baby’s pretty, and then walk away and not really invest in the baby. And it's very easy for VCs, family offices, institutional LPs, to say this is interesting, but not right now. Come back to me in six months. It's very easy for them to give you optionality. It's very hard for you to convince them that there's urgency and you need to wire now. I think that's the hardest part—creating a product, creating the product marketing, imputing that vision into who you want to follow you and invest in you, and then providing the FOMO. You know, 'Hey, this is going away in 60 days. We're fully subscribed.' That kind of marketing conversation is really challenging. And maybe for me, I'm not sure that my product is the most differentiated in the world. I believe it is. I'm an entrepreneur, so I have to believe in that and I think I do generally. But getting other people to resonate with that, I think is the toughest.”

32:21 - Learn where to double-down

As an investor, Jeremy has hones his instincts for deciding who and what to invest in. Often it comes down to your gut and your belief in specific founders.

“I play in the angel and seed space right now, and you really believe in people. And I've seen rounds now, multiple millions going into pre-product companies. And you're only relying on your gut, the knowledge you have of that person, and their ability to execute. And that's a really hard bet. Anything you can do to parse through the signal as fast as possible and product-market fit. That's really what I look for. It's like trying to find a company where you can get a few access to a few of their early customers, and really get a sense for is this something that you would double down on. And do you think a hundred people in your industry need it? That's where I spend most of my time. But spinning it backward, I would say creating a product, creating a vision, getting a website thrown up, convincing two or three or four people to join you, those things were all hard. But actually taking that and getting an LP to wire you money, that's always the hardest.”

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