Virginia is a partner at B Capital. B Capital recently announced their second fund of $820M. B Capital is known for investing into Series B venture rounds with investments in Bird, Evidation Health, Icertis, Atomwise, Ninja Van and more. Virginia is a partner and also the CFO. And before this, Virginia was at Open Gate Capital, a global private equity firm.



Virginia, thanks so much for coming on.



L.A. Venture, thanks so much, Minnie. I'm excited to be here. Cool.



Well, first off, congratulations on this huge second round of funding. It's you guys have grown a huge amount.



Yes. We're really excited to have fun to finally closed. And, you know, especially in this environment, it's nice to be sitting on capital so we can get back in and do our day jobs of investing in great companies and and partnering with them to help them scale.



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Yeah, absolutely. And fund run one was one hundred and seventy million. $360 million.



I have no idea why I got 70. Sure. Why not today. Yeah, I could possibly the first close.



I think it got picked up and there was some publications around that which was around 170. Got it.



But still it's a big jump from your first round, from your first fund to your second fund, but primarily the same strategy.



I mean, we're we're a single global investing firm focusing on growth stage, B2B companies and founders. We we're now, you know, a billion dollars under management. And, you know, we're looking at tech sizes between 25 and 60 million. We could write earlier, right. For our techs, for and for specific situations or larger tech for it. You know, very specific situations as well.



So does that 25 to 60 million dollar check size.



I said, I mean, your name is B Capital, but does that put you in the series B or I mean, I guess names aside, but sometimes that might be more like a series C type rounds.



Exactly. So we're looking at that. You know, typically what I'm seeing come across the investment team is the series B through D, you know, D getting on the later side for us. But really, it's those growth stage companies that are ready to really accelerate I mean, it's so fun. It's so fun to see so much capital in L.A. is what I was gonna say you.



But at the same time, you know, capital right now, it's not a differentiator. Right. You have to have more than that. And so that's you know what? I think B Capital is in a really good job of growing our team and providing a value add and making sure that, you know, we we've we've grown the team very strategically and very thoughtfully. And that's, you know, to the credit of the co-founders. And, you know, we've started with the investment team when we were small four years ago, when when I started to kind of help with the back office.



And then as we got more portfolio, companies started adding the platform team to work directly with portfolio companies.



No, I totally agree with you on the need for differentiation. And I'd love to hear more about. I think you said there are 70 people on the team now at B Capital.



Close to 70. Yes. Yes. We've scaled quite, quite significantly.



Wow. Yeah, I guess I didn't think I do. I don't think of later stage investors. Maybe it's wrong of me as leaning in as much and really still helping their portfolio companies.



That's that's the differentiation, right. That's that's exactly the firm that we were looking to build. As you know, a group that's different in that can really lean in. That's great.



And actually, you reference a little bit the fact that you've got this team. You've obviously got a big team in L.A. and a big team in Southeast in Singapore. Singapore correct. Then we have offices in San Francisco and New York as well. Who which office has the most people? So I think Singapore and L.A. right now are probably neck and neck.



Just give me kind of the basics also of B capital. And I know Raj and Eduardo came together or, you know, frame it up for me a little bit of the history. Correct. So they were both at Harvard at the same time Raj was getting his MBA. Eduardo was there for undergrad and I believe they may have, you know, passed in some similar circles at the time, but really got started in the venture world when and when Raj was doing some some other activities, investing in venture companies with Eduardo as an LP.



And I think they got to know each other over that period and decided, you know, that it was that the market was ripe for something like B Capital. So the BCG infection came in where, you know, partnering with a more established consulting firm that has access to all of these industry experts and also is able to to partner with a venture firm who can see, you know, what the new trends are, what what innovation is being created.



And, you know, these these venture stage companies that can also help them be on the forefront of technology. So it made sense. And, you know, we didn't see anyone or they didn't see anyone else that was really doing this. And Howard came in early as an LP and it has transitioned to chairman of the firm. So it was always also, you know, very closely involved from the from the beginning and is seen as a co-founder as well Howard is Howard Morgan.



Howard Morgan is he's the he's the founder of First Round Capital.



And then also the founder of Renaissance Renaissance.



Correct. Renaissance technologies.



Great. Which is it? A hedge fund. Correct.



And so Raj and Eduardo and this is Eduardo. I think a lot of people recognize his name.



Saverin.



Correct. He is a co-founder of Facebook.



Got it. So tell me a little bit about the series, the investing or Series B, C, D, I guess.



I think each opportunity is different and has its own story. We're looking for companies that can be the product leader. There's a market leader in their space.



And, you know, we're, of course, looking for that that rockstar team and that entrepreneur that that has, you know, that standout quality. But also we're looking for companies that that want to partner with us and that can take advantage of all the resources that we have built. You know, those are the companies that that we really want to get involved with and help them scale to the next level.



Sure. And, you know, a Series B round, someone might be raising 30 million, have a valuation of one hundred million. Two hundred million. Something in that range. Come on, tell me more about being a CFO. I'm super interested in like what you do as a CFO, especially at a larger fund. Now, a billion dollar AUM fund. Definitely. I see my role as, you know, having having two sides, the first.



I think, you know, I've mentioned it's really about the nuts and bolts.



On the LP and fund side, you know, we have we have a level of service that that we have promised to our LPs and that I hold myself accountable to and my entire team accountable to in terms of, you know, making sure that we get quarterly reporting out, K-1s need to get done. There's just a lot of administrative aspects that I do cover that. But like I said, just need to happen seamlessly.



On the other side, there's the strategic side of the CFO where I'm helping that and the other partners, investment partners, as well as the co-founders, to, you know, determine the strategy of not just the funds, but then the firm in general. So at the fund level, you know, how are we looking at portfolio construction? What's the right size checks? What what are we looking at in terms of reserves and how should we be allocating reserves?



There are different industries. Are we a concentrated of one industry over the other? Do we have geography concentration that we should be rebalancing our FX exposure? And then on the firm side, you know, when should we be raising the next fund? What should the next fund be? You know, in terms of size, stage, etc., it's super interesting.



And so I could pick on any of those. But let's pick on the reserve strategy. You know, has that changed a lot? Have you had to get a lot more sophisticated as you now have raised as much larger second fund? Absolutely, and that's something that Howard Morgan has really helped me with. He's been an excellent just mentor to the firm and as chairman, I think he's really helped us institutionalize a lot of our processes. And that's one that he leaned in in the very beginning and very heavily and worked closely with me on.



And, you know, initially it was a very manual Excel, simple spreadsheet, you know, a couple of calculations to get to investable capital, some recycling assumptions and, you know, plotting out the portfolio and making a lot of manual adjustments. And since then, we've really standardize and formalize the process. So now we have, you know, that the fees and expenses pulling in directly from our financials. We're really forecasting out that the fund life line by line in terms of our investable capital and reserves and recycling assumptions.



And we we right now, we're looking at each individual company in terms of, you know, when they're raising the next round, how much capital they're going to need and where we want to be in that in that ownership percentage. It's dynamic. So we're able to now look at it every quarter and, you know, review with the partners that everyone's aware of where we stand in the fund life. Right now, it's, you know, a low, medium, sorry, low, high base case that we're looking at.



But eventually we want to get to more of a Monte Carlo scenario. And that's, you know, just to Howard's credit and his stats and everything. I think that's that's where we're going. And we're really excited to roll that out.



So I would love for you to be able to just share what we should be doing is so interesting.



And like recycling assumptions. I mean, just ask about that.



Maybe you could just start with the basics of what is recycling and then how do you think about recycling assumptions?



Yeah, so so if you're looking at any funds, you know, say you're starting with 100 million dollar fund size and there's going to be fees and expenses taken out of that. So say you get down to, you know, eighty five million dollars to invest now once fees and expenses are taken out. If you recycle capital so, you know, you invest in something and that money comes back, you can actually reinvested depending on LP is, of course, and provisions.



But you could reinvest it and ultimately get that invested capital amount from eighty five back up to potentially the entire fund size or in some cases even more than the fund size. And you know, we think that it's in the best interest of our LPs because, you know, you want to make back those fees and expenses for them and you want to make sure that they're able to, you know, get higher returns on the same amount of money at it.



So do you recommend do you think it does require liquidity events? Right. It requires liquidity event. So, you know, that's the timing in the markets, you know, off to be very thoughtfully planned out.



Have you evolved? You're thinking like, do you guys aim to have 100 percent recycling? Is that the right way of talking about it?



You know what I'm thinking? The market is most, most CFO that I've spoken to are targeting more of that, 90 to 95 percent invested into the capital, invested it into investments.



Is that because they can't get to 100 or don't want to or. I mean, I guess you can.



I think it's a lot of it's just driven by the market. And can you have liquidity events that can support that? You know, also you want to be. You want to be giving returns back to your LPs, it's a matter of timing, you know, distributions and and making sure that liquidity events happen because you're managing IRR as well as MOIC.



I see it. How about other things with with managing LP is like how do you if you can share.



How do you do capital calls? How do you think about those that sort of communication? Definitely, that's that's something also that's evolved over time. When I started with the capital, you know, we were we were doing a lot of deals in the beginning and we didn't have a line of credit in place. So we were calling capital and deal by deal basis. And as you know, these deals, you know, move quickly. And so in some cases, they were capital calls, you know, twice a quarter, three times a quarter and potentially weeks apart, because these deals just move very, very quickly.



And so one of the first things I did was get a capital call of credit in place. And what we try to do is basically draw on that line of credit line, line of credit over the quarter and then issue quarterly capital calls. It just allows for more seamless planning on the LP part. They know that they're going to get a quarterly call versus, you know, deal by deal. And it just for us, it's smoother because we can make sure that we're hitting funding deadlines.



And, you know, we always get back to kind of the seamless processes. I want to make sure that our investments are funded. And that's just an easy process to it for the investment team. There's considerations that you need to have in place where we fall under the venture capital exemption. So we cannot have that outstanding for longer than 120 days. So that that quarter quarterly call is really, you know, that the max that we stretch it and it's you know, it's working well sometimes depending on the activity.



You might not have a quarterly call on that board. Only three times a year. But we try to do more than four times a year.



Yeah, no, I'm very interested in you know, you talked about talking to other CFO or talking to Howard Morgan. Are there other interesting best practice type things that that either Howard Morgan has brought to be B Capital or that that you've learned over the course of managing this fund?



I mean, there's so many things, I think that the venture community, especially coming from private equity, but the venture community especially, I think is a really nice, tight knit community that's looking to build each other up. So in terms of networking groups, you know, I'm involved in something called PE/CFO, which is it's run by Citizens Bank. I'm actually on the board of the L.A. chapter there. And that's been been a super helpful, you know, connection.



And they had a forum up until a couple weeks ago that they sort of revised. But that was a way for a CFO to really connect and share best practices and thoughts. Our banks that we work with are also excellent at bringing people together and and, you know, sharing in those ideas. What else was there? Those are the main ones. And also just people are more willing in venture to speak to each other honestly. It's a very friendly environment.



So over those koban period of time, you know, I've made a point to do just reach out to, you know, certain colleagues that I've met along the way to check in and see what they're doing and see what else they can share.



Yeah. So we're going to come back to that PE versus venture because I'm super interested.



But like the PE/CFO group that you're part of, what have been some of the meatier discussions or like what are the areas that people really have that sort of agenda, topics that come up a lot there? It's a lot on valuations. You know, it's always this question of the quarter. You know, in terms of valuations, you're going to be looking at those. That's also something that Howard's been super helpful on because he's just seen so many different funds and, you know, been involved in and in that process at many different firms



So that would be like, are valuations at a series B coming down in a post-Covid world or is it like how you're carrying your portfolio? Or neither.



How you're carrying the portfolio. Exactly. It's that that fund gap, you know, as the 20 and how we're how we're actually valuing the portfolio in our financial statements.



Maybe you could give a little bit of best practices there around how you carry your portfolio. Let's say if there hasn't been a markup recently, when do you mark down? When do you mark up? How do you think about that? Definitely. So we're looking at the quarter or at the portfolio on a quarterly basis. We do. About two years ago we brought in. And now on an annual at least once a year, every portfolio company is valued by an external valuation firm.



So that's just, you know, checking against ah ah ah internal figures and making sure that we are consistent with the market. And those experts have know provided their analysis as well. And, you know, there's there's different there's different inputs that go into our valuation. So, of course, the most visible input would be if there's another financing round. And even then, you know, you need to determine how the value is allocated. Right. As it comes your equivalent method, or is it then allocated based on OPM?



You know, we are audited by Big four. So I think, though, the conservative approach is typically unless it's a company at a certain stage and milestones to do the OPM. And so that's what we've typically seen for for our companies that are not, you know, close to an imminent exit. It's more based on the OPM model.



As the CFO, you're also sitting on the investment committee, if I understand things correctly.



Correct. So as far as partners, we all join the investment committee meetings and you know, I vote and everyone who joins the investment committee and we do have, you know, more than just the investment team that sits in on those. If you attend, then you need to vote. As Howard Morgan was also very helpful in setting up our our voting system in the early days. And it was his input that that led to us and implementing a blind voting system.



So everyone log of their votes and independently while we're going through the IC and I can log any questions or comments. And then those votes are flashed up on the screen and we can discuss any of the comments. And what that does is it allows everyone to really put down their real questions and thoughts about the company without being biased by, you know what, Raj or Eduardo are voting. And it's led to some really, you know, really thoughtful and and, you know, intellectually honest conversations around our deals.



And so I think it's been, you know, another differentiator that's really gone a long way to make us and, you know, to guide our investment decisions and my vote doesn't count. So it doesn't go to the total of that, you know, the IC quorum. But it's it's nice to be part of that process and to feel, you know, engage.



At the very beginning of that, I see a very beginning of the investment process before it becomes a portfolio company that it is that that vote usually happens at the end of year of a whole diligence process that you guys go through. We do a preliminary IC and then a final IC. Interesting, interesting. Yeah, because I was going to ask that question, which is, don't you know if you're posting your questions, then questions must come out of that.



And then you you do further diligence and then. And where does the company does the company always come and sort of present to the partnership and does the vote? I'm interested in the process where we're thinking about her. Yes.



Absolutely. So we do a preliminary IC.  Thats where we're initially pitching the company. And from that, you'll have the follow up questions. And from that vote, a lot of. I mean, every time that the vote and the questions are discussed, you know, at the end of the IC to it's not like they're just washed up and you don't have discussion around them. So it's very clear the deal team knows what the next steps are in terms of the diligence process.



And typically, depending depending on on the timeline of the deal, because some deals are very accelerated, as we know right now. But typically, sometime between the prelim and final, I see we'll have a management presentation where the management team actually presents two to the partners and that the investment committee. And then from there, it's finalized. Okay.



And and so tell me also about the companies that you guys are looking at in terms of the sectors that are most of interests and yet sort of, you know, are they inbound or outbound?



I know you guys do some fintech, insurTech. What are you guys looking at? Yeah, I mean, what we're seeing is really the last two decades were about the rise of the consumer Internet. And we feel like the next two decades are going to be more about the digital transformation of traditional industries like healthcare, banking, insurance and industrials. And so that's what we're really looking at, is what's transforming these traditional industries and how can we partner with those those companies entrepreneurs.



Got it. OK.



That makes a lot of sense because I know you've got industrial transportation fintech and those are all what I would call.



Yeah, the the the big legacy industries. Do a lot of those companies still come inbound to you? Are you, you know, mining upstream investors for deals to give a sense of how the deal flow comes?



I would say we're we're we're really focused on our deals in being hunters. So I think, you know, it's it's definitely on us externally sourcing. You know, we of course, we love it when they come to us. That's that's amazing. And but I think we've we really have at work to create an investment team that is outsourcing and finding great entrepreneurs.



Great. And most of them have done a series A before, like their own sort of more traditional venture path as like a PE typically.



Correct?



Right. And so actually, maybe that's an interesting maybe you can compare a little bit to the to the PE world, since that was your world beforehand, where I imagine a lot of the companies you were looking at there had not grown up through a venture financing.



They were more organic. Correct.



I mean, the space that I was in was it was more carveout, you know, complete buyout and leveraged buyout M&A, 100 percent ownership and corporate divestitures. So, you know, legacy industries that were looking to carve out a section of of a business and we would come in and purchase it, make a standalone and definitely not typically one that we saw that had come up in the venture type funding. These were companies that were more turnaround. And so, you know, there was always an element of growth that we were looking to start the company achieve.



But really, it was more about operational improvements, you know, margin improvements as well as just anything that we can do to drive a better one.



Okay. And so and to your then, did you see having a controlling interest or buying or owning the whole company? The first that I was at that we did 100 percent control for, I would say 90 percent of our 95 percent of our investments.



I was thinking that I was like, it's kind of like you were taking a controlling interest or just owning the company in businesses usually probably with strong fundamentals.



And now you're taking a minority interest in companies with weaker fundamentals. So maybe that's a yes.



It's different. It's a little bit different. I'm telling you, when I see these models, you know, and I'm so ingrained. But like, EDITDA, cash is king. And so I see this venture model of mine just like I don't get it right. But that's you know, that's that's why I'm not on the investment team. And that's why I'm on the internal team. But it's yeah, it's it's a different face. And, you know, I think that luckily the investment team that we have, you know, knows what they're doing.



And they see that they see that at the end of the road. And we're we're going to go with them.



So why did you say. I thought it was engine. The culture between private equity and venture capital really is quite different. And yet they have some similarities as an asset class.



It is right. Or both asset managers, but it's just that I see kind of venture as the more like rosy and, you know, kind of friendly. It's the friendly environment. Right. Whereas you even just if I look at getting information from portfolio companies and it's when I was in private equity, the general theme that I felt was more of a management by fear style because, you know, not that we were mean people. I consider myself a pretty nice person for, you know, for the most part, I think I worked with nice people.



But, you know, you own the company. So if you're asking for something, there is that element of I need to give it to you because you own the entire company and you're in control. Whereas in venture, you know, you own of course, you have the proper governance. You're on boards. But you you are ultimately a minority investor. And so in order to to you know, you have to prove yourself a little bit more.



You have to proof of value that you can provide the portfolio companies and entrepreneurs and so that they really want to give you this information and so that they want to partner with you and see how you can help them. Right.



I think venture has changed, though, to become nicer or something because it's become more competitive and some of these can't have a bad reputation.



Well, I mean, exactly, it came back to what we were saying before, that, you know, capitalism is somewhat of a commodity. And so it's there. And you need to have you need to have something different in order for it for companies to want to work with you as well.



Yeah, I also think the private equity it used to be I think that when you you'd go into ibanking. But then you'd go into ibanking for a few years with the goal of going into private equity.



I agree. But I think also now you go into ibanking with potentially the goal going to venture capital, we're seeing a lot of us, you know, especially analyst roles, trying to switch into the venture.



Right. That would make sense, I think, at the at this sort of earlier stages as and maybe going from banking to a later stage fund.



Look, I don't the companies I invest in don't have enough financials, unfortunately, to really dig in and model it in sophisticated, it's often simple, fair.



And so, yeah, I'd love to hear. Yeah. A little bit about we're a lot of people in private equity.



Did they have banking backgrounds.



They the people you were working with. They did. I think it was banking for the most part. Or, you know, other asset managers in a similar space.



But you came from a different path. Tell me more about you. I did, yes. And my path. I mean, I started my career in public accounting. So, you know, traditional went straight from school into into the audit world and actually got selected for a program my first year where I was doing half transaction support and half audit. So I got a taste of the, you know, the buyout. I was actually working with several private equity clients on and on just quality of earnings reports for their targets.



It's it was two thousand eight. So there were a lot of starts and stops. And I think my I was lucky enough to be mentored by people who would just say, oh, put them first year. Those deals going to die anyway. And so I got to see a ton. And I was working pretty hard at that, decided, you know, that I didn't want to go to consulting me anymore. And I wanted to be in-house at the asset managers and really, you know, doing the deals and deciding what to do with the companies after they were purchased.



So I was lucky enough to meet up with the Open Gate founders and got brought on board there in the very early stages. They were they were prefund. I didn't know somebody. I didn't know that they were prefund at the time. I was just like, I'm private equity, great. And I got there and I didn't realize it.



But, you know, we we made it work and it ended up being, you know, super, super fun and rewarding to build the open gate portfolio. And they did end up, you know, raising institutional funds and then that I was very close to that fundraising process.



Yeah. Has anything surprised you about Venture? I mean, everything. So if they learn something new every day, it's high. It's an exciting place to be. I really enjoyed, you know, my my three plus years here now. And it's what surprises me the most, they think, is that difference between them. You know, I've been I've spent by my fear versus management by love style. And just, you know, it also just that the communal approach that, you know, like I mentioned with other groups, how willing to willing and open the other firms are to want to partner together.



We're going to co-investors in deals. Right. That's you have to really partner with good firms. It's not like, of course, it's competitive and where know we're all vying for for the same deals, but there's room for for everyone versus private equity where, you know, there's room for one right now.



That's interesting, I think, because more of my career has been as a founder. Now that I'm a VC, I'm amazed by how much the VCR, like, put the founders on a pedestal.



Like there's a little light sometimes. And I only I was like tiptoeing around this like, I don't know. And how much I think venture capital is like a services business.



Right. You're serving your your your founders is interesting. OK. So going back even more in, you went to USC. Yes. Were you a good start? Were you? Yeah. Fight on. Say, I forget my whole family are all Trojans. I was not.



Were you serious student? How did you you know, it sounds like you've had a great career. Do you study hard? I think I'll just be honest. I hope this doesn't come out, you know, sounding pompous, a school  came fairly easy to me. You know, from from an early start, like high school, you know, I did well. I got a scholarship and academic scholarship to USC. It did come, you know, relatively smoothly and easy.



And I had a good time at the same time I was in a sorority. I really you know, I was there during the Lyonheart days. So it was it was a great time to be a see, we kept winning all these national championships. And so it was you know, it was a very it was a traditional college experience. I would say I had a good time. I studied, you know, and I did well. I found myself, you know, really excelling in the accounting classes.



And that's where it's you know, I was like, everyone hates these classes and I love them and I don't know why. So I should probably keep going with this because the the other classes, you know, that were were more challenging for me that, you know, people were more the major or the I talked to say a lot of my friends were going more into the investment banking route and that to me it was a harder to get into.



I didn't have the connections like my parents were going to make certain things to get me in.



And so I it was just it was a natural path to go to accounting. And I'm so glad I did because it worked out well.



There definitely still is a bit of that. Like parents connection type. Yeah, I didn't know the difference between. I mean, I still barely know what hedge funds do. But but that whole world was very opaque.



Do you think there was any advice?



Is one of my favorite questions, which is the sort of advice that you've been given that has resonated with you, has changed your path at all?



Yeah, there's there's one thing that kind of keeps me going. But the someone told only right when I started at B capital and this is a good friend and mentor. He actually was a lender at the open gate portfolio companies. And I got to know him very well over my time next week. Thanks a lot of our deals. And he came out to visit and I was in the very early stages at B Capital, was somewhat overwhelmed. You know, what have I done?



I was in a good place. And now here I am. I have so much work to do. It's so much responsibility. And he said. You know, you wake up each morning and you get your shit done and you can't lose sleep over it because tomorrow's going to come and you can do it or you can die. And, you know, he told me he's like, you're Virginia, you're going to do it. So that's that's all you need to know.



And so I kind of just say to myself over again, like, just get this shit done and tomorrow's going to come. There's nothing there's nothing we can do about that. So there's no point in stressing anymore. And just to do what you have to do. I love that. I love that.



Minds chop wood, carry water. Same concept. I like it. Awesome. Virginia, it's so good to get to know you better. And it was great to learn more about B Capital and congratulations. And I hope we get to cross paths more. Well, thank you so much for having me. This was fun.

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