March 22nd, 2017

Interview: Arielle Zuckerberg

Intro

In this edition of Lived It, we sit down with Arielle Zuckerberg, a new associate partner for venture capital firm Kleiner Perkins Caufield & Byers — where she started October 19th. Arielle credits her move from product management to venture capital to her experiences in angel investing. Arielle has been angel investing since mid-2014, something she began doing after volunteering to be a “guinea pig” for a friend’s informal class about how to become an angel investor.

Arielle may be relatively new to the angel investing space, but her learning curve is sharp. While the 26-year-old suggests that she hasn’t had much exposure to the ins and outs of angel investing, she seems to have found a niche – the food and beverage industry – that has helped find early success.

In this interview, we talk to Arielle about everything from how she got started as an angel investor, to her motivations behind investing and why angel investing can teach you just as much as business school – but for a fraction of the cost.

Meet Arielle

Years as an angel investor: ~1.5 years Number of investments: 7 investments

A day in the life of Arielle

Depends what day of the week it is. Mon and Tues are crazy — meetings all day. My calendar looks like a barcode (I wonder what would come up if I tried to scan it…). I spend Thursdays and Fridays in SF meeting with portfolio companies as well as new companies that we’re considering for investment. I don’t cook, so I’ll typically go out for dinner and use that as an opportunity to catch up with friends. And if there’s a good show at a venue I like, I’ll convince myself that I can stay out late and still feel well-rested for my morning meetings the next day. I’m usually wrong…

First Investments

When Arielle thinks about how much capital she has deployed since becoming an angel investor, she estimates the number at about $85,000 – less than what it would cost to enroll in business school.

“I definitely haven’t had enough exposure, so that’s why I feel very fortunate to have the success that I’ve had so far. I’ve only done seven angel investments, so while you’re learning, I think you need to do more, which is scary. To depart from that much money and potentially throw it into a black hole is very scary, but so that’s where the learning experience comes in.

“If you think of it as you’re supporting people who are solving the problems that you want solved, they’re people you want to support, and you think of the money as an investment in your replacement business school education, then it’s totally worth it.”

Arielle knew that she wanted to work in product management after graduating from college. Her sister, Randi, who is the founder and CEO of Zuckerberg Media (and yes, Mark Zuckerberg is their brother), introduced Arielle to many people within her network who she thought would be willing to hire a junior product manager right after college. Among them was Tyler Willis, the founder of Involver, a social marketing platform. She didn’t know it at the time, but that introduction was the one that would ultimately start Arielle down the path to becoming an angel investor a couple years later. Ultimately Arielle ended up accepting a job at Wildfire Interactive, Inc. When Google bought Wildfire in 2012 Arielle went on to work at Google with the Wildfire team.

“I’ll never forget that it started in my living room.”

She had become an accredited investor after the Google acquisition. After a year and a half at Google, while reconnecting with Willis over coffee, he told her that he was thinking of having this pilot introduction to angel investing class. Arielle volunteered to be one of his “guinea pigs” and hosted the first class in her home, borrowing a 21-inch monitor from a neighbor so that Willis could use it for his presentation.

“I’ll never forget that it started in my living room,” she said.

Already an accredited investor, Arielle said Willis taught her everything she knows about angel investing. Of the small class of about five “guinea pigs,” there were two women, herself included. Arielle said she is still very close to some of her original classmates, keeping in touch through a Facebook group where they send each other deals. One of her former “classmates” is Amit Kumar, the co-founder of CardSpring before it was acquired by Twitter in 2014.

“I learned a ton from that small class because it was so intimate. We experienced the real-world application of what we learned through deals that Willis was doing or evaluating” she said. In the second class, they discussed an investment he made in Soma Water, which produces sustainable, plant-based water filters.

“He talked through the challenges they faced, their pitch deck, why he did the deal, and what he was concerned about. He liked that they have monthly recurring revenue through subscription of filters. He talked about the big challenges they have to face, like working into retail. Do they have to do that in order to scale? He just walked us through his entire evaluation processes and why he decided to invest in the company. Then he went through another deal he was considering, and we went around discussing whether or not we thought he should do that deal.”

In addition to learning the basics of investing, Arielle also discovered how exciting it can be to invest in a startup.

“Something I didn’t realize is how exhilarating it is to write the first check. That feeling was so incredible. It’s so hard to explain, but I felt so much joy after writing the first check. You see the entrepreneur’s joy and you become part of their team. You become part of their family and what they’re working on in a really meaningful way. And all you did was give them some money. If you can solve problems and support people just by giving them some money, it’s really amazing.

“Something I didn’t realize is how exhilarating it is to write the first check.”

“It’s so rewarding to write that check and then see people go off and solve the problems you care about. You can do that with multiple problems at the same time. It really is one of the best feelings in the world to know that you are giving to the community in a really meaningful way and becoming part of a family that’s doing something you care about.

Arielle recently made a career change from product manager to venture capital, taking an associate partner role at Kleiner Perkins Caufield & Byers. She credits angel investing for having given her a crash course in venture capital. “Angel investing can be that foray into changing the numbers in venture capital. I think angel investing can almost provide an alternative to business school in some ways. You learn about all these different business models. You get exposure to a wide variety of businesses, and it’s almost like you’re doing business school case studies.

“During those interviews at VC firms, basically I walked through my process, why I did the deals I did, my investment thesis. And when you can speak like that to venture capitalists, they know that you have what it takes to do it on their investment team. The big difference is it’s someone else’s money instead of your money and you have a lot more capital to deploy.”

Other Investments

“I love food, and I also have a deep concern for the global food supply in the future.”

Arielle’s investments typically center around the food and beverage industry.

“It wasn’t intentional, but looking back, everyone eats three times a day, so it’s a big market. It’s a market I feel like I understood, not the business models but as someone who eats three times a day. I love food, and I also have a deep concern for the global food supply in the future. I think that the way we raise or farm poultry and meat is unsustainable, and we’ll need to find alternative sources to drive the global food supply in the future.”

In 2014, Arielle invested in Partender, software that measures bar inventory in about 15 minutes. So far in 2015, she invested in Bitty Foods a company specializing in products made with cricket flour. She has also invested in LocoL this year. LocoL is a fast food company committed to offering high quality, low cost food to consumers.

“I only have four, but my relationships with the founders in my portfolio companies are way more like a friendships than the relationships they would have with their board members. I try to help when I can.”

Arielle said investing in food-grade insects has been interesting business so far: “Food is a great vehicle for learning about various business models.

“One of the companies I invest in is a physical product versus a service, like enterprise software. One is consumer package goods. One is contract farming. Those are all completely different business models, but all in the same sector.”

Arielle discussed how she quickly developed a reputation for investing in the Food and Beverage market.

“I invested in Tiny Farms, which falls on the supply side of cricket protein. I actually got introductions and became known as “the cricket person” despite only doing one investment. It’s interesting, though. When you find these really niche spaces that you’re passionate and excited about, people can see that excitement, and they’ll just send similar opportunities your way.”

When asked if she was interested in investing in any of the 3D printed meat companies (yes, it’s a thing!) coming out now, she is “definitely open” to exploring the experimental side of the food industry.

“I don’t think they are a competition. I think someone who is willing to eat the fake meat will also be willing to eat crickets. I think those alternatives sources emerging, in general, are going to drive the global food supply.”

Why do you angel invest?

“My primary motivation is that I predictions about where the future is going and I like to help people who are building that future. I want be part of and help guide the narrative, helping to solve problems that I think need to be solved by supporting the entrepreneurs who are spearheading these new products or initiatives. That’s why I wanted to be an angel. The educational aspect of angel investing is my secondary reason for investing,”

“Thanks in part to angel investing, I’m now going to be on the investment team of a VC firm. So it’s a good investment in yourself and in the future you want to see. There’s a also chance you might make money, and you improve those chances by doing many investments. But even if you don’t, you get returns in other ways. There’s just so much upside. It’s awesome.”

Deal Flow

Now that Arielle has developed a reputation for investing in food and beverage she has companies reaching out to her. Specializing has been a great way for her to build dealflow. In addition to companies reaching out to her, Arielle relies on her network to suggest deals.

Who do you go for when you need advice on your investments?

“My first four investments are lone wolf. I recently listened to this amazing podcast by Nick Moran of The Full Ratchet, where he discussed syndicates, angel groups, VC firms, and lone wolf investing — the pros and cons of each. After listening to that episode, I began thinking more and more about angel groups and how that seems like a really easy way to have a cohort that you run deals by and also have the same decision autonomy of doing it lone wolf style. You also get the advantage of your collective expertise from all these different people and you also get a larger line item on the cap table because you’re part of an angel group. Joining an angel group or syndicate is a really good way to get that collective expertise, and to get a part of deals you wouldn’t normally be able to be a part of, which can really boost your reputation early on. I recently decided to try out this route and made an investment as a part of a friend’s AngelList syndicate”

Thesis

Recently leaving her role as a product manager at Humin for her new role at Kleiner Perkins, Arielle is continuing to develop her investment thesis. At Kleiner she will likely focus on investments in the consumer and health sectors. Broadening her focus a bit from the food and beverage industry where she has been very active to date.

For aspiring angel investors

“If you have a full time job, it takes longer to get a sense of the ins and outs of angel investing. I really do feel like you need to see a lot of deals in order to really understand what makes a good founder or a good company. I think it really is helpful to get a ton of exposure to investing. You need to see a lot of these companies before you can tell which ones are good. I realize that I haven’t been looking at enough deals before investing, which is another reason why I want to go into venture capitalism.”

For entrepreneurs seeking investment

“For entrepreneurs who’re looking for funding, I would try to talk to people who you know are going to be excited about your company and about your mission. I think it’ll just be a better use of both your time and the investor’s time if you know right off the bat that the person’s already excited.

For example, my investment in supply side of cricket protein led to a really great introduction with the consumer package goods company because that entrepreneur knew that I was excited about the space and didn’t really need to convince me that this is the future. I was already on board. From this experience I learned that you need to seek out the people who’ve shown interest in the space or have attended events or meet-ups about the space. You don’t have to waste your time talking to people who aren’t interested in what you’re doing.”

For entrepreneurs trying to get in touch

ariellez@kpcb.com

Arielle recommends reading

Dan Primack’s Term Sheet email newsletter, Ben Evan’s weekly email newsletter, Mattermark Daily. I also love podcasts!