019 - Zach Coelius, Managing Partner at Coelius Capital
Forward Thinking Investors Podcast Recap
Published:
Duration: 22 min
Summary
Zach Coelius, a former entrepreneur turned venture capitalist, emphasizes the unprecedented opportunities for starting companies in the 2020s while addressing the traditional barriers in venture capital for aspiring founders. He shares insights on his investment journey and philosophy, particularly...
What Happened
In this episode, host shares insights from Zach Coelius, a managing partner at Coelius Capital, who reflects on how the 2020s present a unique opportunity for entrepreneurs to launch startups. He highlights the ease of accessing resources online, utilizing platforms like Bubble and Adalo for product development, and leveraging social media for marketing without significant costs. Despite these advancements, Coelius notes a gap in understanding venture capital, especially for those outside major hubs like San Francisco and New York. His goal with the podcast is to demystify venture capital and equip aspiring founders with the knowledge needed to raise funds effectively.
Zach recounts his transition from being a seasoned entrepreneur to a venture capitalist. After spending two decades trying to launch companies, he stumbled into investing when he put up a $200K allocation on AngelList for a company he was advising, Branch Metrics. This initial investment, which quickly filled, marked the beginning of his journey as an investor. He mentions that his big win came from investing in Cruise Automation, a self-driving car company that was acquired by GM for a billion dollars. This success opened doors for him in the investment world and allowed him to leverage AngelList to access more deals, which has been vital for his growth as a VC, investing approximately $20 million of capital annually, achieving impressive IRR for his backers.
Coelius emphasizes that his focus is primarily on B2B software, drawing on his extensive experience in the sector. He explains that having a deep understanding of the problem sets and customer needs in this space gives him an edge in evaluating potential investments. He believes that this empathy for the business model is crucial, particularly compared to consumer-focused ventures where he feels less adept. His journey showcases the evolving landscape of venture capital and the opportunities for new entrants to navigate the complexities of funding and investment strategies effectively.
Key Insights
- The 2020s are an ideal time for startups due to accessible resources.
- Venture capital understanding is crucial for aspiring entrepreneurs.
- AngelList democratizes access to early-stage investments.
- Empathy for B2B software challenges enhances investment decisions.
Key Questions Answered
How did Zach Coelius transition from entrepreneur to VC?
Zach Coelius shares that he considers himself a 'washed up entrepreneur' after 20 years of trying to start companies, with his last venture being in ad tech. Following the exit from his company in 2015, he found himself uncertain about his next steps. His introduction to venture capital came through AngelList, where he made his first investment in Branch Metrics by proposing a $200K allocation, which filled within 24 hours. This experience marked the beginning of his career as an investor.
What was Zach's first big success as an investor?
Zach's first significant success came with his investment in Cruise Automation, a self-driving car company. He had a prior connection with the founder, Kyle, and was able to recognize the potential of the business early on. When GM acquired Cruise for a billion dollars, it validated his investment approach and led to increased interest in his capabilities as an investor, allowing him to scale his investments.
How does AngelList change the venture capital landscape?
AngelList provides a unique platform that allows emerging managers like Zach to present deals directly to investors. This model allows individual investors to choose which deals to participate in on a deal-by-deal basis, addressing the traditional challenges of trust and capital allocation in venture capital. This accessibility has opened doors for new investors and enables them to engage with high-quality opportunities typically reserved for established VCs.
What is Zach's focus when investing in B2B software?
Zach emphasizes the importance of understanding the B2B software landscape, having spent considerable time as a founder in this domain. His experience gives him a deep empathy for the challenges faced by businesses in building enterprise solutions. He prefers investing in B2B software because it aligns with his background and expertise, which he believes enhances his ability to evaluate potential investments compared to consumer-focused ventures.
What strategies does Zach use to achieve high IRR for his backers?
Zach has structured his investment approach to leverage platforms like AngelList, allowing him to access deals that would otherwise be difficult for emerging managers. By selecting high-potential investments and focusing on B2B software, he has been able to deliver impressive IRR—over 40% annually—for his backers. His strategy emphasizes a long-term perspective and a commitment to understanding the businesses he invests in.