Megan Guy — King River Capital

Wednesday, June 29, 2022
Megan is one of the founders of King River Capital, an LA-based fund investing in Series A and later companies.  
They are investing out of a $100M Fund II. Megan shares how they are able to leverage their LPs for significant co-investment. 

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Megan Guy is a partner and co-founder of King river capital  where she’s investing out of a hundred million dollar Fund II. Prior to starting King River Megan was at The Nature Conservancy and the Angelino group where she led venture and growth equity investments.  Prior to that, Megan was an investment banker at Goldman Sachs, where she launched the firm’s global environment markets group. 

Megan, thanks so much for joining me today.

It is a pleasure to be here. Thank you for inviting me.

Great. Did I get the introduction? Correct.

Perfect. It made me laugh a little bit. I just started watching Shit’s Creek there’s an episode where they’re filming a commercial for a winery and she gets drunker and drunker in the word slur.  Flashbacks.

Thanks. I’m doing well so far. Awesome. let’s, let’s start with King River rather than having me talk anymore. Just maybe you can give me the base or a little bit of the history

Yeah. Yeah, sure.  So we launched King River about two and a half years ago. It’s myself and I have two investing partners and co-founders, they are based actually in Sydney, but both are Californian by birth.

We got together because we saw an opportunity. Both, to really capitalize on an emerging entrepreneurship market and , uh, pretty exciting startup scene in Australia. Um, but also because obviously , uh, there’s just a fantastic venture community , um, in LA, in California and beyond in the U S.

Companies don’t sort of have to have a core thesis that touches on both Australia and the U S but obviously we can be particularly helpful to them , uh, in those two geographies. Um, so our first fund was about ,40 million and we did about 50 million of co-invest on top of that.

Uh, we invest in software businesses, series a through series C , um, and all kinds of different business models, really within that category.

Got it. And, and you’re at the start, have Fund II now.

Yes. Yes. We just had a first close on our second fund , uh, which is going to be a $100 million fund. Uh, we still have to do a lot of co-invest there. So I think, you know, we’ll probably end up when all is said and done having, you know, a a comparable amount , um, that’s directly being invested by our LPs alongside us into deals.

Um, and so that allows you to be investing in these, what you said, series ABC companies,

because you’re right. The larger techs. 

Yeah,  um, we’ve had a lot of flexibility and how we can do that to date , um, really because of the co-invest program. in, in our new fund , um, our average investment we want to make in a company over his life is probably 10 to 15 million out of our core funds. And then we could do, multiples of that in co-investment.

Um, so first check, probably 3 million on the low end, , and, and up to probably 10 , um, on the high end, but we don’t have any requirements around ownership, percentages, we can lead, we can follow, we can be pretty flexible.

That’s great.  And so tell me more about the companies that are sort of in your sweet spot.

Yeah. So I would say we’ve done a fair amount , um, in AI, not as much as you guys, but that’s been a pretty consistent and strong theme. Um we have a fair amount in FinTech. Um, um, and then healthcare, digital health And then I would say , uh,  we’ve gotten really excited about a number of companies that are sort of addressing , um, , the long tail of , uh, SMEs and SMBs , um, and helping scale up and provide services to them.

And I think that’s a segment that’s been overlooked 

 Do you sort of think about sort of minimum levels of traction or anything like that, that you’re looking for?

Yeah, I’d say we’re looking for post revenue generally. Um, and probably like a million plus in error, I would say is. The low end of our sweet spot. Um, but the big thing really is like, we want to see evidence of product market fit and starting to get traction and expansion with key customers. Um,  , uh, you know, we tend to get excited when we really start to see that evidence of, you know, the proverbial flywheel turning , um, and you know, growth both within a customer base.

And then, expanding the customer base as a whole too.

Great  , um, any fun ones from fund one?

Yeah, I mean, I I can mention one, um, , uh, there’s a business called Lark health , um, that we , uh, uh, led their series C round, but actually got to know the company , um, probably almost 12 months earlier. Um, and we, we basically did a bridge note , um, to put us in pole position to ultimately lead the C  LARC is a super exciting business.

Particularly at this moment in time , um, they provide a fully AI solution to help people living with chronic illnesses, manage those more effectively, more consistently. Um, and frankly, like more empathetically. I think, you know, you know, what got us really interested in the business was that the software and the technology they had built , um, was actually.

Helping patients to engage , uh, and stay engaged with the app  um, and so they’re serving several million patients at this point.  . Um, and we saw really strong evidence of them being able to go from sort of a small pilot to a larger pilot, to, you know, scaling up to population levels.

Um, that just got us very excited 

um, and so how, tell me more about what you said there about , um, leading a bridge note, which allowed you to lead the round. Um, 

yeah, we had gotten to know Julia for a while. Um, and actually it’s a sort of a good example where , um,  for me in working at King river versus my previous experience at , uh, Angelina group. Angelina is a great fund.

Um, has about a half a billion under management. But much bigger check sizes and a much more institutional LPV. So as a whole, I would say Our LPs for the most part are high net worth individuals. People who’ve often been entrepreneurs themselves. , and so actually one of our LPs is a guy named Dr.

Jonathan fielding , uh, being in LA, you may have heard about him. He’s fielding school of public health , uh, at UCLA is named after him. , and he’s , uh, Wonderful man. And , uh, you know, really , uh, incredible physician. And , um, he had gotten to know LARC alongside us.

He’d helped us with some of our diligence and actually ended up going on to so their advisory board . Um, 

 you know, we wanted to make sure that we were in the mix , um, and we’re able to get, you know, Pull position kind of , um, in helping lead the company’s next round 

So you’re now pull position. You’re leading the series C but you’re a $40 million fund and you’ve got this co-invest can you educate me on the mechanics there?

We kind of make it commitment. We tell the entrepreneur what we want to invest out of our core fund. Um, the fund always gets primacy. And then to the extent that there is more space in the round or the company is open to taking more capital  ,  we , can run a pretty, pretty tight process and in a couple of weeks kind of touch base with our LP base and figure out how much , um, demand and additional capital we can bring in. And, and that’s, that’s why, you know, $40 million fund is able to lead a series C round 

But the company isn’t getting all of your LPs as directly showing up on their cap table, right. It’s still  run through King river.

 Uh, it’s managed through King river. Um, , uh, yeah, the mechanics of that are a little bit different within the continents, geography and , um,  , uh, with this particular one, people were able to invest directly , but, but basically we manage , um, a lot of the rights and decisions around that.

So it doesn’t create additional burden for the entrepreneur or for the company to manage those shareholders. Um, they basically just worked through us

it’s reasonably similar to how an SPV works.

reasonably similar. Yes.

Uh , um, okay, great. 

Well, let’s count that as the basics of King river, and let’s go backwards and talk about your background. 

Yeah. So I think , um, the two things I’d say that sort of like defined me as an investor or one, I like, I just, I love really complicated and interdisciplinary problems. Um, which I think is what makes. Venture really fun for me. . and then the other thing I’d say that’s been a really common thread through my career is I’m very , uh, mission driven, I would say, as a person and an investor. Um, that was obviously a nature Conservancy, which, you for anyone that doesn’t know , um, is the law, the world’s largest global , um, conservation organization.

How big is it has a huge operating budget. Doesn’t it?

It’s huge. Yeah. You know, I don’t even know off the top of my head anymore, what it is, but like when I was there, you know, they ran a $5 billion capital campaign , um,  you know, this is a very large business, probably on the order, I would guess of, you know, a a billion dollars a year in top line revenue.

Um, and with operations across. You know, I’m going to get the number wrong again, but you know, 70 countries or something like that. Um, and just really, really top tier , um, scientists and thinkers kind of across, across the spectrum of what you need to ultimately succeed in, in the conservation world. Um, and so I joined them , uh, actually at the time the CEO was a guy I had worked with at Goldman , um, starting the environmental markets group there You know, he was very passionate about bringing more private capital into conservation because there’s just a huge gap between the philanthropic capital that that space receives and what we actually need to invest to address climate and all of the other ancillary environmental problems that flow from that and social problems.

Um, and so my role was really about trying to figure out how do we get companies engaged in this space? How do we create new , um, investment structures and products that , uh, enable them to, you know, think about them the same way that they would think about another capital investment or , um, you know, a project that they wanted to do and start to bring, you know, much more significant order of magnitude dollars into this space, not just to TNC, but to companies committing money off their own balance sheet , uh, you know, to improve their operations and , um, deliver climate results.

I was mostly focused on climate.

Two thoughts for you. One is there’s a thud when you hit the table sometimes.

Oh, sorry.

just if you can hit the table last, whatever, sorry,

I have to make my

I know you do occasionally you do make your point. Um, but no, this is all really interesting. Um, and so within that, so is, is TNC bringing in some expertise to sort of help the corporates , build out these programs.

Yeah, so TNC , um, again, I’ll get the exact numbers wrong, but when I was there, it was something like, you know, maybe there were 4,000 people in the organization and. Like almost half of them are PhD level scientists. So, you know, just really, really top tier , uh, thinkers that are able to build, you know, semester, like building a financial model.

It’s just an ecological model. So start, right. Whether you’re looking at , uh, the return on, you know, doing a big reforestation project and trying to understand what’s the value of the timber that you’ll generate or the jobs you create , um, as well as like the carbon that ultimately gets sequestered there.

Uh, those are the  some of the types of experiences and expertise that, that the nature Conservancy brings, plus that on the ground, expertise , um, which of course, you know, Any project you’re doing, I think in the environment space has to be supported and really led by local communities.

And so having those relationships , um, and being able, you know, not just to get input, but leadership , um, from those that are going to be most directly impacted.

, before TNC, you were at the Angelina group, you were an investor there.

Yep. Yep. Yep.

What are the interesting sort of sub sectors, I guess, in clean tech? Like if you were, you know, looking in the future, doing more investing, what do you think is, is most interesting?

Oh, good question. Um, I think there are a whole bunch of areas. So while I was at , uh, Angeleno, you know, one of the bigger areas people were missing was in the hardware space. Right. So whether it was. New better solar cell technologies so that we got more efficiency out of panels or new battery chemistries , um, to enable us to store more energy , uh, or do it more safely.

Um, there was a lot of that kind of innovation happening and that’s tough, right? It’s capital intensive. It’s very long. Um, timelines often , um, What is super exciting to me right now, I think about the energy space and the clean tech space is we’re now like ready for this whole awesome application layer and like consumer layer, frankly, to sit on top of all of that hardware that now , um, is out there, you know?

In the field and has been working , um, for many years. And so I think there are really cool innovations that we’re going to see. I mean, one is an example of a business called OhmConnect , um, that my friend, Cisco leads , uh, they have been able to help , um, individuals moderate their power usage , um, so that  on the days where we’ve got like, you know, the.

Crazy Santa Ana winds and I have to power down , um, or they’re worried about fires. Um, it’s enabled the load to actually stay below the points where we have to get triggered and have blackouts in the state. And they do that by gamifying it by, you know , um, educating people by doing a ton of outreach. And it’s actually also really neat cause it’s a lot of lower and middle income families , um, that are getting paid quite a bit of money in some cases.

Uh, to help help manage the grid. And they’ve been able to do it with enough predictability now , uh, that they can actually bid into the grid services market and it’s effectively a virtual power plant. Um, so I think, you know, there’s a lot of technologies there on the AI side, again, applying like consumer tech that we’ve seen on, you know, gaming or whatnot.

Like I think , uh, one of the founders of OhmConnect is a, an ex you know, one of the senior leaders at Zynga , um, And so it’s just, it’s awesome to see these really great minds. applying a lot of what we’ve seen work and the software space , uh, now to some of these big global problems, 

So you needed these like multi-billion dollar , uh, physical infrastructure type projects, and now you can have software solutions selling into them.

Yeah, exactly. I mean, we’re going to see we’ve got electric cars now, right? That , uh, we’re seeing huge uptake and electric trucks that are on the horizon. Uh, you know, I think Ravion’s supposed to go public, uh , uh, later this, this month as a rumor , um, edit that out. Cause that might not be right. Um, but anyway, you know, we’ve got ton of batteries now they’re starting to be out in the field.

So we had storage solutions. Uh, we’ve got solar on people’s roofs , uh, and there’s kind of a whole intelligence layer that I think we’re just at the beginning of overlaying on top of that. Um, and then the other space I’d mentioned, actually that I think doesn’t get a lot of attention, but to me is like every bit as exciting as.

Thinking about climate mitigation is , um, you know, what’s referred to as like climate adaptation. So what are the types of products and technologies that are going to help people adapt better to a changing climate? Um, 

Yeah, but when do you rather mitigate than adapt to floods and fires?

a hundred percent, a hundred percent. Uh it’s but it’s not an either or right. Like we’re, we’re living with it already. 

Oh, maybe we should all just be clean tech investors. Oh, boy. Yeah. Well, you had these experiences at TNC and Angelina group at Goldman 

And then you got together with Zeb and Chris and decided to start your own fund. How did that come together? 

 we came together at seven. I obviously had worked together , um, at Angelina and I

He’s one of he’s one of the founders of Angeleno

Yeah, he was one of the founders of Angeleno. Um, we met, I think actually when I was at Goldman , um

, uh, anyway, we reconnected down here when I got out of business school and have just really enjoyed working together. And, you know, he moved to Australia. Um, we had a couple of investments in Australia and we had both worked there on and off in our , um, earlier careers, um, and anyway, so he moved there probably. It must be like six or seven years ago now  um, but we always just said like, it would be really fun to work together again. I think we were very, we have very complimentary skill sets and mentalities as investors like.

Really different approaches, but I love that about working with him. Um, and Chris, he and Chris had ended up, I think, in as angel investors or seed investors in a couple of deals. Um, Chris was running a fund. Chris was ex Goldman , uh, ran Goldman’s financial institution group in Europe, and then , uh, had spun out and started his own venture fund , um, out of London.

And so he ends up, had gotten to know each other through a few deals. , And, and that was kind of how the three of us came together.  

I said, I love,  the interdisciplinary nature of this work and, and the mission piece. And I think we all really shared those values. You know, we’re not an impact fund, but I think we all tend to get excited about companies that we feel like are working on pretty meaningful,  significant problems, um, and , uh, we also all love, you know, Australia and California and the opportunity to be able to work really across those two geographies. Um, I think was pretty compelling for us. 

And,  we like having a really small partnership and team. Um, you know, we’re not kind of. I think ever going to be a firm that has a hundred people working here, you know, for different strategies. Like that’s, that’s great. And that works really well for some, but , um, we really like sort of more , like, like the benchmark model, right?

Where everyone like does their own work and it’s a pretty small, tight knit group. Um . So , um, we.

go ahead.

Um, no, I was just gonna say, I mean, I think all of us having been at much larger funds before,  well, well, you get, you know, you know, the benefit of being able to write a much larger check.

I think that can also be. Tough. Right. Like , um, cause it’s not always the best thing for a company to take $20 million or $30 million. Right. 

 Um, so you said you guys have different approaches, so where, where are you? Like, what’s your, you know, are you the cerebral one or the ,

no, no, I wouldn’t say that. Um, I think we just, we have different things that like, we get really excited about, you know , um, like I think Zev, I love about Zeb. He is like this eternal optimist and he just is able to see , uh, really like the big vision.

 Pretty early on. Um, and it takes me a lot longer to get there.

 Like, you know, you know, I was an investment banker before I became a venture capitalist. So I’m like in the weeds and the details. And , um, and I think like that combination for us has always worked really, really well. Um, Chris kind of straddles both worlds a little bit, but I think , uh, What’s great about him is he’s got a really rich network and sort of the AI and the FinTech space and a lot of experience there.

Um, and so, you know, as a whole, I think our partnership just, I wouldn’t say any of us get really excited about like the same businesses at first. Um, and so it’s a great test to kind of have like, have we done our diligence? If we get more than one of us to be like, wow , this, this is a really compelling, exciting opportunity.

 anything else coming from the investment banking world, that’s just been a, a big change in the, in the venture world  

Maybe it’s like a big organization to small organization thing. cause I think both. You know, Goldman and the nature Conservancy , um, Angelina to some degree, you know, it’s not a big team or anything like that, but it’s a lot of money and it’s definitely, um , uh, an institution at this point.

Right. Um, I think the biggest thing has just been like, We have to do everything ourselves like beginning, right? I mean, it was like when we first started the fund, unfortunately, both my partners had started funds before, so we weren’t completely flying blind, but you know, still, it was like, we were our own back office for a period of time until we found someone we could hire.

And, you know, we had to like, Find and test out different lawyers and tax people and , um, just, you know, everything has to get done by someone. And then when there’s only three of you, uh that’s that’s, that’s the path. And, um, I wouldn’t trade that actually for anything I learned so much in the last two years, you know, I had never really thought about starting my own fund before and now I’m like, Oh, I can do that.

We did that. Right? Like we’ve raised the second one now. and it’s given me. So much more empathy for entrepreneurs and just, you know, the ups and the downs, like, we had actually right before our last close on the fund one was when COVID hit and all the shutdowns basically. and so, you know, that was a roller coaster to experience like, fortunately we got it done, but , um, you know, I just think it, it made me a much more.

Empathetic investor 

Anything else adjusting from sort of the banker side to, you know, being an emerging manager.

Yeah. And the, I think the other thing I’ve really had to learn , uh, you’re really in sales as an emerging manager and like, You have to get very comfortable promoting yourself, promoting your fund, promoting your companies , um, and from being a banker like that was so unnatural to me, you know, I was very it’s like, you don’t say no forward looking statements.

Right. Uh, so you’re kind of strange to just be super, super disciplined about message and , um, you know, everything’s treated, this is the same in venture, but , um, You know, You know, it’s very confidential and like confidential, even, you know, when you talk across your team about the deals you’re working on as a banker.

 When you start a small fund , uh, for your first time funds, that’s kind of kind of the name of the game, right?

yeah, it’s the opposite of no forward looking statements. 

Yes. Exactly. Exactly. It’s all about the forward looking statements, 

one thing you told me that I was a little jealous of is , um, you’ve been part of the emerging manager group. I think you have a group , um, as part of all res


what have you learned there? What have been some of the interesting discussions? What am I missing?

well, you should join. Uh, always for listeners who maybe aren’t familiar is. Uh, you know, a Uh, you know, a nonprofit that was started a couple years ago by a bunch of top women in venture, trying to bring more women and people of color , um, into the investing and the founding community.

Um, and so it’s fantastic set of resources. Um, you know, I’m part of, there’s like an emerging managers, Slack channel. That’s been really helpful you know, people share like what’s market now and some of the terms as you’re bringing new LPs in, or thinking about raising a new fund  or , uh, just kind of lessons learned.

Um, and then I’m also part of a partner cohort ,  and it’s been really, I think, helpful for all of us to just sort of hear each other’s experiences , um, to share deals like we’re really trying to focus on how, how do we make this whole group successful 

Any good meaty discussions lately or specifically, how did you think about setting up your co-invest program?

Oh, good question. Um, Yeah. I mean, I mean, calling us is one that I actually talk with people about a lot. Like I was talking with a friend actually at a really big asset manager the other day, and he was asking about how we did co-invest and  

so , um, are there lessons learned on the co-invest side that, you know, if someone like me is thinking about, you know, bring my LPs in 

Um, I mean, I think I was chatting with my friend was actually having a, a credit line , uh, to fund co-invest. Has it, you know, we can do it pretty quickly on our end because we’re working with individuals. And, you know, as I said, like it’s, they’re able usually to rely pretty heavily on our diligence you know, my friend works more with institutions , um, and. That’s a really different and longer process. And so , uh, you know, for them, I think they’ve had a risk sometimes if they want to do a lot of co-invest, they may lose a deal , um, because they won’t be able to move as fast or there’s some uncertainty around that amount of capital and the allocation.


 How about, uh, any good insights on valuations or, for your investments in Australia? Is the Australian market at least a little more reasonable. 

I mean, , what I’d say that it’s funny is funny is not the right word, but, we’re seeing it in Australia too, , it’s, it’s not just a Silicon Valley problem. one thing we all struggle with is like valuations and just the nature of this industry at the moment is, is pretty crazy.

Um, You know, whether you’re at seed stage or your growth stage and, you know, talking to the specs, it’s like, I think everyone is kind of scratching their head a little bit, what it takes to get a deal done. 

 I think like we try and be pretty disciplined. Like we’re certainly not value investors, right. Where we’re nickeling and diming, like building really detailed models where it, we’re not on the private equity side, 

uh, did you talk about specs? Did you just mention specs and how that’s changing the later stage rounds? Or did I miss hear that?

I did, although I’m not super educated on it, frankly. So it’s probably not the best place for me to expound. Uh, I mean, I just, I know a lot and we’re hearing like inbound interest , um, with some of our companies, you know,

um, . Um, but, and I was curious to see how it starts to trickle down, cause all these things right. Always end up trickling down to earlier rounds. So just sort of like trying to get smarter now , um, 

Right, right. Um, another thing you said , uh, uh , uh, maybe on a panel I listened to, you said you really disliked the notion of that’s market


tell me what you mean by that.

, I think that was in reference. Um, , Because we were talking about diversity maybe 

I know it was a Saster event. And I think at one point, yeah, we were talking about diversity and , um, and I think part of, for me, like solving that problem is also rethinking, not just the structures around how we hire, but like how do we pay people?

How do we compensate them for the knowledge or the experience they bring when it may look different from the experience I bring and. You know, for people who’ve come from a more traditional background. Um, ,  I feel like I’m just, I’m very tired of.

Being told something, shouldn’t be this way or can’t be done that way because it’s not like quote markets. Um, and the fact is market, but you know, has been set, basically play by a bunch of highly educated, like affluent white men for the most part. 

Well, well that’s market. when you think for yourself, what you want to build, what you want to be known for, what does that look like? 

, yeah. I mean, I want to be just known by the people I work with both as co-investors , uh, the founders and the employees of the companies as just like somebody who showed up for them. Right. Um, I am not, uh , Like, Like, I probably should focus more on building VC brands. Um, but like, to me, my brand is , uh, how I show up to your meetings and when you have a good day and when you have a bad day, like I want to be the first person that you call , um, And, you know, I’d love to build a firm, obviously, you know, I mentioned benchmark before just in kind of their structure and that’s obviously a firm that’s got a fantastic brand and history and they’ve had some huge successes.

And as I said, I’m mission driven. I want to be Solving important problems in the world and doing it in a way that, has really high integrity and ethics. And, I feel like you can be a really nice person and also be a good VC. That’s that’s my hope. 

what do you mean by , um, benchmark as an example? So I think of them as having a flat structure What do you think of when you look to them as an example,

I think the way that they have brought new partners in and transitioned the old ones out , uh, I don’t see others do  mean, there are a lot of firms where the people whose names are, for the door or whatnot, haven’t been active for a long time, but, you know, , they’re still taking a significant , um, Kind of the Kerry and they’re a really big piece of kind of influence and direction setting at the firm.

Um, and I just like really admire that they, you know, didn’t set out to build a firm that had people’s names on the door. They set out to build a firm that was going to be a great partner to companies . And , um, You know, I think it’s, it’s pretty impressive that they’ve been able to entirely turn over their partnerships several times and, that brand hasn’t.

um, okay, one more, couple more questions. Um, so what w when you’re not investing, when you’re not working, how do you spend your time?

Ooh, good question. Um, I. Have been a big runner. Uh, , um, he’s trying a couple of marathons a year. I have two dogs and one is a retired sled dog who actually like ran the, I did a road back in the day. So she is now , uh, retired to the beach and running much slower, shorter distances with me.

Um, so yeah , . Yeah, it’s been an awful lot of time with my dogs this year.

What beach do you bring your dog to?

Oh yeah. You go down to Huntington.

 It’s kind of a a hall. 

It is a hall, but it’s awesome. Like they are so happy there. It’s just, when you have a bad day, honestly, like I feel like Huntington dog beach with just all these dogs, frolicking in the waves and digging and like, they’re so happy.

It just makes everything feel very , uh, petty and small 

totally. Totally. Well, 

I usually ask people , um, how someone should get in touch with you if they want to get in touch, 

But instead today, I’m going to read from your LinkedIn. It says, if you are a founder raising a series a or later, then please send me a thoughtful DM. I really like that

Well, I mean, I mean, you would believe you get them too. I’m sure. But , uh, there are a lot of just like mass DMS that aren’t thoughtful at all. Like it takes two seconds to actually read my LinkedIn and see what it is I’m interested in and I invest in. So , um, yeah, I try and be really good about responding to that.

So I would love to hear from. LA based or, or other places , uh, founders that are working on cool problems that I might be able to help you solve.

Well, that’s great, Megan, it’s been great to get to know you and have you on the podcast and looking forward to more from you and King river.

Yes. Thank you so much for having me.