Kelsey Chase, co-founder of Aumni, a new solution that analyzes private capital investment data, discusses trends in venture capital

Kelsey Chase of Aumni - Podcast Transcript

Scott:	Hey, it’s Scott Orn at Kruze Consulting. Thanks for joining us on Founders and Friends for another awesome podcast. Let’s give a quick shout-out to the Kruze Consulting accounting team. We’re very fortunate. We have a ton of people at Kruze who work on the monthly books for our clients and get them all set up, due diligence ready, rocking every month, answering all the clients’ questions, making all those adjustments. There’s no better moment for a founder, and for us really, when a founder says, “Hey, I think I’m going to get a term sheet. Are my books ready for diligence?” and we get to say, “Yes, they are. Fire away. Send them over, give them access.” That is a great feeling. It’s the feeling that lets us know we’ve done a job very well done, and nothing is better than watching that cash at the bank account. If you are a venture-backed startup, you’re going out to fundraise, maybe check us out. Check us out at kruzeconsulting.com. We love what we do. At taping here, I think we have 575 clients. Clients raised over a billion dollars this year, so we know what we’re doing and hopefully we can help you be successful in your fundraise. All right, let’s get to the podcast. Thanks.
Singer:	(singing) It’s Kruze Consulting, Founders and Friends with your host, Scotty Orn.
Scott:	Welcome to Founders and Friends Podcast with Scott Orn at Kruze Consulting. Today, my very special guest is Kelsey Chase of Aumni. Welcome, Kelsey.
Kelsey:	Hey, Scott. Thanks for having me again. This is great.
Scott:	Is this number two or three?
Kelsey:	I think it might be three.
Scott:	I think it might be three. I think we had a panic COVID, I think, like March or April of 2021-
Kelsey:	Yeah.
Scott:	… We did one. For those that don’t know, I’ve been long-time friends with Kelsey. Also, I’m a tiny, tiny investor in Aumni, so just letting everyone know that. I invested because it’s a really exciting company. Do you want to tell everyone what you folks are doing and how you had the idea, and maybe give a little update on the progress these days?
Kelsey:	Yeah, sure. Kelsey, one of the co-founders. I always like to share an opening about the company, that my background’s pretty unique in that I started my professional life as a lawyer. Began my career as a corporate attorney with Wilson Sonsini and then also spent some time at other large law firms like DLA Piper, so spent a number of years in the corporate legal world representing companies, and investors, and all sorts of other stakeholders that were doing deals in private markets, and that was really how I got exposed and cut my teeth into this world. I was just living and breathing in private venture financings and other types of private offerings and transactions for years being the deal attorney. It was really through that experience, touching hundreds and hundreds of deals as an attorney, seeing all of the nooks and crannies of these transactions, understanding the different factors and considerations from different stakeholders and parties in the round or the transaction that we got really inspired to just do things differently. It was, honestly, a lot of frustrations too, as any attorneys listening in can probably relate. I linked up with one of my colleagues that I had met at Wilson, Tony Lewis, he’s my co-founder and also a lawyer. We jumped out and started Aumni about four years ago. What we have set out to build is a data analytics and infrastructure platform for private market transactions. What makes us, I think, just really unique and won’t surprise anyone, is that we focus all of our data and analytics on underlying legal records. We’re going into the deal documents and extracting, structuring, analyzing all of the data that was inside of those agreements, all of the different pieces of a transaction that come together and are negotiated among all of the various parties, and we do a lot with that data. Then we built a nice product that I really like to describe as a reporting interface into that structured data. What that looks like today, what Aumni is doing today is we’re working with many, many venture firms across various segments, and really all different shapes and sizes from the Sand Hill Road names that everyone will know and recognize, down to solo GPs that are starting their first firm, as well as corporate venture funds, and family offices, and some other unique parts of the market that have investments into venture-backed private companies. That’s what we do, yeah.
Scott:	We hit it off because, I still remember like our first meeting, I had been, before I joined Kruze, I was the chief compliance officer of Lighthouse, a venture debt fund. Had raised six funds and managed over a billion dollars. I remember telling you all that data that you were unlocking, at Lighthouse, it was all in spreadsheets, total spreadsheet. There were times where we almost missed warrant expirations or exercising, or our annual reporting was just a total mess and was a giant deep dive every single year. Our investors in the fund didn’t know, really, real time stuff. It was a tool that I wish existed when I was at Lighthouse, and so that’s why I love what you guys are doing. I think probably one of the coolest things, since we’ve done the podcast last time, is the product has made so much progress. I subscribe to your newsletter and I can see what’s going on, and the new reports you’re coming out with. It’s got to be a really exciting time at the company because you now have the resources, you have the people, you have the money, and you’re building something. It gets better every month. It’s really neat.
Kelsey:	Yeah, no, thanks, Scott. Yeah, we did just close in August a 52 and a half million-dollar round, our Series B that was led by J.P. Morgan. We also brought in Pelion Ventures out of Utah, which is where Aumni’s headquartered in Salt Lake. Pelion, I think is the premier fintech investor. They’re on their seventh fund, and they’re just a real force in the region and have some amazing companies in their portfolio, including ones that made headlines this year like Divvy and MX. Really happy just to feel like we’ve got some great investors behind us in Utah, but also, partnering up with J.P. Morgan has been incredible. Yeah, to your point, I think now that I’m doing some angel investing myself, I do hear pitches and I’m like, “That was totally me when we were starting out.” Like, “I can’t make sense of what you’re telling me. What are we doing?” Then to go from that disjointed idea of what the business was going to be to today, where there’s more clarity, the product has matured, it’s driving specific value for individualized roles at firms and addressing hundreds of use cases. It’s definitely been an evolution and there’s been a lot of progress over the years, so it’s cool to see that get to the point to that we’ve hit today.
Scott:	Yeah, I love it. Well, we’re going to spend a few more minutes on Aumni, and then we’re going to play a fun game because you do sit on top of the most amazing dataset, maybe in all venture capital. We’re going to play, essentially, a game of over-unders on nerdy VC things like valuations and things like that. Spend a few minutes, because before we get to that, and by the way, we will come back next year and revisit our predictions, so maybe we’ll do it like halfway through the year or something like that, and see how smart or how wrong we were, which I think will be pretty fun. It’s kind of like NBA season win totals, over and unders, that’s what we’re trying to do here. Spend a second just talking about the new stuff you’ve come out with this year, because we were talking before I turned the camera on or the mic on that there’s a friend of mine who runs a VC firm and I told him about Aumni a couple different times over the last two or three years. At first, he didn’t quite understand or it wasn’t compelling enough to him. Then in your latest newsletter, I saw that you signed them as a client and I was super excited. I had nothing to do with that, the latest version of them signing. It was just like cumulatively and the value prop of Aumni got him over the hump. What’s been cooking underneath the hood?
Kelsey:	I think, especially with the … I tell our team and I tell lots of people I meet with, Aumni is a set of sharp tools. It’s like pretty sophisticated tools that you want to leverage and have inside your firm. I think early days, we just went through this evolution of view, and I think it’s probably not too atypical for startups, but we had the early adopters that really believed in what we were doing. We were really, if I’m being honest, backing, Tony and I, and saying, “We’ll sign up because we believe you guys are going to figure this out and we’re the right team to do it.” Then since then, as you win more and more customers, have more and more users, it’s this beehive of feedback that … We’re a very product-led company and so we get a lot of our roadmap and a lot of our ideas for product directly from our customers. I would say your friend, two years later, has the benefit of hundreds and hundreds of customer interviews and feedback, trying to address sophisticated use cases at some of the biggest firms out there. That’s the whole thing about the product now is it’s really a platform that can be plugged into any firm, and it’s going to have the benefit of lots of feedback and a lot of thoughtful analysis around how this can be most valuable to an institution. How can they get the most out of this dataset?
Scott:	Yeah. Well, also, how many companies are you up to in the dataset? It’s a huge amount, right?
Kelsey:	Yeah. I think we’ll safely clear 10,000 companies that we’re looking at, and I think-
Scott:	Wow.
Kelsey:	… Our pace of growth is really fast, so it’s a really exciting set of data and it’s very granular too. We are sourcing from the legal reads, literally tracking hundreds and hundreds of data points out of the dense closing agreements. One of the cool things we get to do with the product now and give back to our customers is, I think it’s the industry’s first real access to market benchmarks and analytics for venture financings. You know how it typically looks. This is the Series B, going back to our Series B. When a company’s raising venture capital, me, you the investor, our lawyers sit around the table and say, “What should the option pool size be? What’s right? What’s the market out there right now?”
Scott:	How much should we raise?
Kelsey:	How much should we raise?
Scott:	Yeah.
Kelsey:	“What’s the valuation?” You know how all those conversations have historically gone, and that was just going back to my fundamental pain points as a lawyer. After doing hundreds of these deals, I just remember having this feeling like, there’s got to be some global view on all the work I’ve done, let alone my firm or even the market. Just what it looks like, my own portfolio of information as counsel to all these companies, like, “What do I typically do in this situation?” I think it’s fair to say, for the first time ever in a venture capital financing, we actually use live benchmarking data to drive our own financing negotiations and discussions.
Scott:	Wow.
Kelsey:	When that question comes up of, “What is a typical option pool size for a fintech company raising this amount of capital that has historically raised X amount of capital?” we could actually look to our database to see. I don’t think, I don’t want to suggest that the market data determined what the round was going to be, but I can’t think of a better piece of context to have in those negotiations to just know what the boundaries are or what’s normal, breaking it down by quartiles. It was just really powerful, so we did bring that in for some of the most important economic and legal components to the financing. I think the net result was that it just drove a much more productive and efficient negotiation with us and all the investors. That’s what I’m most excited to turn back to our customers in the product is they could actually access those same benchmarks.
Scott:	I love it. It reminds me of like the Netflix algorithm, recommendation algorithm, but also how they buy TV concepts or shows, or what they green light. You guys have this incredible dataset that no one’s ever really probably had ever in the history of venture capital. I know, again, at Lighthouse, we didn’t have that and everyone was kind of … Sometimes, you would depend on, this is where your legal background comes in. Sometimes, you depend on the lawyers to say, ballpark, what market is, but even that, you’re getting a snapshot of like one law firm that probably doesn’t have very clean data either across … There’re probably 10 or 15 law firms that matter in the startup world that are big enough to affect average transaction sizes and things like that. It’s really cool, man, and I think it’s exciting. I was telling you before we turned the mics on that you have such a pure network effect business where the data just keeps getting stronger. I’m sure, do you see it when a fund joins Aumni, they must be so excited probably because for those that don’t know, funds invest with many different co-investors and so the odds are that some of the transactions that a given fund has invested in, they’re already in the Aumni database through one of the co-investor partnerships, so some of their stuff’s already there and they can probably see that, test it, and validate it, right?
Kelsey:	Yeah, that’s exactly right. I mean, super powerful. What I would just tease out, what we’re learning and really excited about, just in where we take our analytics and our platform is that’s true across just private capital markets, generally. Really powerful, network-driven market, and that extends much beyond venture, the venture asset class. I think, for us, we definitely take advantage of that for our venture product, and you’re exactly right. Co-investors co-invest together a lot, and then because there are successive rounds of financings, you’re always bringing in new parties and new capital onto the cap table and so the network just, over time, compounds and becomes even more powerful. It’s just not uncommon, like an M&A context, when it’s time to pay out all the stock holders, that list can be 3, 4, 500 long and if you think about that, that’s the network that we’re building.
Scott:	It’s amazing. Okay, so very excited about Aumni. It’s really cool to see. I get a feel for your financial results, but the business is compounding very, very nicely so it’s very exciting. Your sales team’s doing a good job. I don’t know if you lead that or you have a VP of sales now. Let’s talk some metrics here. There’s two ways we can do this. Do you want to lead with making me guess metrics, or do you want me to… What should we do? How should we do this?
Kelsey:	Yeah. Well, one, we do have an awesome VP of sales, Ben Tobin, shout-out to Ben. He’s doing a great job. I still attend a lot of … I love meeting, I love being out there in the market talking to firms, so odds are, if you’re interested in Aumni, probably, I’ll be on one of those calls to talk with you. Yeah, one thing Scott, before we jump to the hot takes, I think what was interesting about using our data for the Series B was completely useful and powerful when you’re actually trying to get the deal done. Okay, we closed the deal, wires are settled, everyone’s cheersing, it’s a great moment. The next day, how are you supposed to behave? That’s even, I think, where some of the data’s even more powerful, for at least the founders. We looked through our database and just said, “Well, rather than pull the venture 101 playbook for what we should be doing next, let’s just ask our database, how should we be thinking about this company when we’ve just raised this amount of money at this inflection point? What did the trendline look for companies on that trajectory?” I would say that dictated and informed a lot of how we were thinking about our Series B growth plan, was just looking and seeing, how do top-performing Series B companies behave and spend capital?
Scott:	Yeah, so you’re talking about like how many people to hire, what departments to hire for, or total burn rates, or how much cash, how many months of cash the company should have. That kind of stuff?
Kelsey:	Yeah, we looked at a couple different dimensions. I think probably the one that I know founders would care about the most is like, “Okay. I just did my B. What is the distance to the C and what does the C look like?”
Scott:	Yeah.
Kelsey:	That was the-
Scott:	“What milestone do I need for Series C?” basically.
Kelsey:	Yeah. It turns out, one of the groups we’ll focus on for the hot takes is the fintech sector. It turns out, for fintech companies that have successfully raised a B, and we define success with our own metrics, but let’s just say successful fintech companies that did their B, it turns out in 12 to 16 months, if you want to command and optimize and get a really strong valuation from B to C are companies that are getting the best valuation raise again in 12 to 16 months.
Scott:	Wow, interesting.
Kelsey:	That’s evolved even over the past couple of years, it’s sped up. When you know that as a founder and you’re saying, “Okay. Our window of time, if we want to be on that trendline, at least the database is telling us 12 to 16 months you’re out in the market raising again.” That can look entirely different than if you’re operating from a 30-month plan with the end of it shows you being profitable, which no one ever does from B to C, and so you challenge, I think, a lot of those venture assumptions and just really think holistically about the business and the larger opportunity that you’re really going after.
Scott:	Yeah. Now is that something where, is that going to be a subscription product that you can offer or something like some type of … You were able to use it for yourself, but will this be able to inform the world or inform venture funds like, “Hey, I just invested in a Series B company that’s fintech. What should I be expecting from them?” Because right now, we all depend on these heuristics, and experience, and things like that but will they get that feedback loop from Aumni?
Kelsey:	Yeah, so we’re focused on driving, and I would put that in the category of insights. That’s where, one, the data becomes most interesting, most valuable, highest willingness to pay, whatever you want to call it. It’s like when it drives action and can actually change behavior, that’s where it gets pretty interesting. I’d say we’re absolutely focused on insights, delivering back to our core customers today, which are venture investors. We see a much larger picture where founders and other types of stakeholders that have an interest in these deals want to tap into those same insights. I think definitely long-term, we’re thinking about how this data’s just more useful, and valuable, and demanding of the broader market, but definitely starting with our core customers.
Scott:	I love it, I love it. Hey, it’s Scott Orn, and we’re going to take a quick break from the podcast to give a shout-out to the Kruze tax team. Gosh, it’s so nice to have an in-house tax team, I can’t even tell you. We have some really amazing professionals on the team. It’s over, I think it’s 13 people now, and we do everything from your federal and state income tax return, state franchise tax filings. R&D tax credits, those are pretty popular these days. Guess what? They’re there for you when you go through diligence. A lot of people really don’t know this, but you actually go through tax diligence. Not just operational kind of financial diligence, but you do go through tax diligence, so it’s nice to have Vanessa Kruze on the phone with your VCs and with the accounting firm they hired to diligence all your stuff, and the law firm they hired to diligence all your stuff. Vanessa knows what she’s doing. She’s done this a million times. It’s not just Vanessa. We have a really great team of tax professionals that will do those calls too. It’s sometimes the difference between getting a round closed or having to take another two weeks because something was disorganized and the tax compliance wasn’t done correctly. We hear those horror stories from clients that come to us, so hey, if you want Kruze’s tax team on your side, we’re here for you. Check us out at kruzeconsulting.com. Thanks. Do you want to share some of those observations, or do you want to do over-unders, or what do you want to do?
Kelsey:	Yeah, why don’t we pick a couple and then we’ll do the over-under. I wish we could do it blindly so that we could see if we agreed or not, but okay.
Scott:	Well, you probably came into it with some of your … Maybe next time, before you do the analysis, write down your takes. Okay, so seed, Series A, those are the core focuses?
Kelsey:	Yeah. I think we’ll end with seed, but starting with Series A, what we saw in the data was valuations across the market were up 40%, which is pretty powerful. Sorry. We’re looking at 2021 data as compared to 2020, so just a year-over-year, we’re really talking the COVID era, what was going on. Valuations are up by just north of 40% across the board at Series A.
Scott:	Wow.
Kelsey:	What we saw is some sectors just exploded. Some sectors and, again, this is year-over-year growth. It’s not a lot of time between, 12 months is-
Scott:	COVID hit in March of 2020, so even that, anecdotally, we saw a super dip for like two months and then we saw the top-tier VC firms coming back in late April 2020, in May and leading rounds. It was like silence, and then that happened. Then 2020 picked up a lot of steam. Then you’re right. 2021 was just absolutely bonkers. Even 2020 might be, that baseline is still pretty aggressive-
Kelsey:	I know.
Scott:	… Probably.
Kelsey:	I agree, yeah.
Scott:	Series A, you saw 40% growth, 2020, in dollar amounts, or valuation, or what was the metric?
Kelsey:	Well, everything’s up. The 40% was in relation to valuation, so the sector, I chose our sector because I think that’s interesting, but valuations from 2021 over 2020 from the fintech for Series A were up over 100%.
Scott:	Wow, crazy.
Kelsey:	Pretty incredible growth, and I think that’s speaks to a lot of things, just the opportunity, the excitement for that sector, but even in a 12-month period, things are really up and to the right quite a bit.
Scott:	Oh my god. Typically, that’s the valuation. Most investors will buy a set percentage of a company, so typically, an investor will buy 20, 25%. Is this accurate? Is it safe to assume that the average dollar amount going into the company also doubled or went up 100%? That metric, hold tight there?
Kelsey:	Yeah, it’s definitely a safe assumption, and that’s what we see. The interesting part of that is while you saw valuations in fintech go up by over 100%, the amount of capital, so corresponding, the amount of capital that actually came into the company went up by 70%.
Scott:	Oh, interesting.
Kelsey:	I think what that means is, at the end of the day, founders are keeping more of their company. That’s what that actually means. I think it will continue to mean that the best companies are going to get funded at great terms, and I think that’s going to withstand any market headwinds that we experience over the next year or two as great companies will continue to-
Scott:	Yeah, that’s my exact takeaway too. There’s only so much money you can deploy in a two-year period, probably, and so probably a lot of founders are saying like, “Look, I’m already maxing out at like 35, 40, 50 million,” whatever it is. “I can’t really hire and deploy anymore, so I’ll just keep more of my company and maybe sell 17% of the company instead of 20%,” on average, something like that. That makes a lot of sense to me.
Kelsey:	Yeah.
Scott:	Wow, that’s fascinating. That’s really cool.
Kelsey:	Yeah. I think it’s a really healthy indicator, actually. Especially for good companies. I think these things will compound into whatever headwinds come in the next couple of years. I think good companies will continue to be funded at great terms.
Scott:	Yep.
Kelsey:	I think that what’s really interesting is these early stage metrics, what’s happening at Series A, but I think the area … I mean, we could do an over-under there, like 2022, you think fintech … We’ll do valuations and capital. You think it’s going up from 105% growth?
Scott:	I say up 25%, off of 2021. The reason why I say, I’m just picking a number, but there’s definitely a little bit more ambiguity in the global economic picture right now with China, inflation, COVID coming back around. The time, we’re recording this, in late December 2021. Also, the Fed’s lowering the bond buying and things like that, so they’re pulling liquidity out of the system. I think part of what drove, all financial assets did really well because there’s just so much more liquidity. I still think things are going to go up, and I still think there’s so much room to run, especially in fintech, which is what you’re talking about. Because the interconnectivity of our economies is just getting stronger and stronger, and you see, even in our world, you see the credit cards, and bill pay companies, and everything’s getting more and more efficient. People are learning that these markets are bigger than anyone ever imagined, so I think it’s still going to go up. I just don’t think it’ll be like 100%. I think what we saw from 2020 to 2021 was like almost a once in a 10-year cycle kind of thing, but I do think it’ll be up. I think it’ll be up like 25%. Something a little more manageable. What do you think?
Kelsey:	Yeah, so let’s, so that we can actually come back in a year and see, the fintech valuations for Series A grew too close to, call it $100 million, is where the market moved. You’re saying 25%, you could see that moving up to 125.
Scott:	125, 125. It’s rich. It’s a lot. It’s a big number.
Kelsey:	Oh, I’m going over.
Scott:	You’re going over. Oh, I love it, I love it.
Kelsey:	Yeah.
Scott:	What do you say?
Kelsey:	What I’ve learned as a founder and especially with the data that we’re studying is this market is much, much larger and more complicated than just me as a founder and my VC investors. The VC investors have an entire group of investors and stakeholders who probably have their own group of stakeholders and investors that they’re accountable to.
Scott:	Totally.
Kelsey:	What I love seeing is just the excitement of private capital markets. The headline is funds are becoming larger. More funds are raising funds. It’s the easiest time to raise a fund right now, and so I look at all those indicators and just see the amount of capital that’s coming in upstream and how much of that capital, ultimately, will continue to have to be deployed into the best companies, so I think I’m going over.
Scott:	You’re saying there’s so much more capital coming in at the top end of the … Even, there’s a pretty big trend of access for retail investors, access for family offices that hasn’t really existed. You’re saying that’s going to power that over as well, basically.
Kelsey:	Yeah, I think so. We’re seeing-
Scott:	I believe it.
Kelsey:	Yeah, with more data, and these markets will take, all private markets will take more time to evolve. I was just talking with a good friend of mine that’s a real estate investor. That’s his business. He doesn’t know startups, but he would love to put some capital in private markets and invest earlier into growth opportunities. The challenge is, how do you give access to someone like that to the venture world if they don’t have connections and network? You could just imagine a future state where there’s products, there are people, there are platforms that that individual could turn easily and say, “Hey, I’m in real estate. I actually want to get behind property tech, and I want to invest in a … I won’t even toggle the risk factor. Give me high-risk with lots of upside and I want to put some money into work into that type of asset.”
Scott:	Yep.
Kelsey:	You can even imagine further, I want to split it between investments into funds that are focused in that space and direct investments into companies. You can imagine, that’s ultimately where the demand, I think, is coming from. To your point, there’s this whole part of really the world that wants access to startup and venture, and there’s lots of companies that are trying to create those products and platforms.
Scott:	I see. Samir from Allocate is a Kruze client who’s doing exactly this. Then one of my friends works for one of your investors who’s doing this at First Trust. Those are just two of 100 companies trying to do something, but I think it’s going to be a giant tidal wave, myself, too. What’s funny is, I’ve actually seen some VCs talking in blog posts and they have that same, like, “Hey, maybe we were systematically underpricing seed and Series A all these years,” which is pretty interesting to think about. Because I think it’s also, even companies like Aumni that show the trendlines and show what companies are capable of doing, and bring those datasets to the forefront so everyone’s not operating without any … People can see what’s actually happening. It helps pay a little bit more early stage because you know the outcomes are getting bigger and bigger over time. I don’t know. You guys are part of that. You guys are part of making it accessible but also giving people data to make smart decisions. It’s not just about pouring money in. It’s about making smart decisions and doing it in a systematic way. I think Aumni is doing that, which is really cool. Okay. I got to be respectful of your time, by the way. We’re going over right now, so you want to hammer out a couple more over-unders, and then I’ll let you go?
Kelsey:	Yeah, so what I think, one that we could probably focus on that’s pretty specific is, I brought data from Series A. The place where I think we can just take a total shot in the dark is, I would say, seed deals. These are equity rounds of seed capital, like a Series Seed Security. Those valuations, it wasn’t that interesting in 2021 over 2020. For me, the amount of seed capital I see being raised and deployed, and the case at which that’s happening, I think we should look at like, “What’s your growth rate for seed deals in 2022? How do you think valuations will look if you’re going to take a snapshot today and 12 months from now?”
Scott:	Yeah. I think those are going up too. I think those are going to go up faster than Series As. I would say, this is a ballpark, but I see two kinds of seeds. I see, one, the $2 million just getting going, usually first-time entrepreneur. Then I see a seed of like five million, something like that, usually with a more established entrepreneur. The five million ones are like a $20 million valuation. They’re high. We talked before I turned the mics on. That was actually what a Series A used to be. I think those are going to go up a little, but I’d say, the interesting thing is, the growth rate increase, even if it goes from five to six, that’s still a pretty healthy … I could see it being like a $6 million average invested and a $24 million average valuation, which is a 20% increase. The reason why I see that is I think what we just talked about, where more people are getting in, more people are doing seeds, and people understand now that if a seed company … Maybe the hardest round a seed company will ever get it is a Series A, and if it gets that Series A, it’s on its way, and there’s lots of institutional investors who want to fund that. The chasma of death used to be Series A to Series B. I think now more so, it’s seed to Series A. Are you guys seeing that?
Kelsey:	I think that’s a great way to look at it. Since I’m pegging you to picking the growth rate, I’m going to pull you up to 50% and you can get the benefit of the under and I’ll take the over. I think seed valuations are going to just, I think they’re going to skyrocket next year. That’s my hot take and I’m definitely the bull in the room, I guess. I’m going over on A and over on seed.
Scott:	Well, you see the data. You know better than I do.
Kelsey:	Yeah.
Scott:	I love it, I love it. What’s your rationale? Just the same thing, capital wanting to get in these companies?
Kelsey:	Yeah. I think there will be from seed to A, I think the good companies that will get to the A, to your point, will have really good prospects and I think there will be lots of … At the end of the day, startup and venture is competing for a finite resource, like space on the cap table.
Scott:	Yep.
Kelsey:	I think when we see the seed companies that can evolve and grow to an A company, I think they’re going to get funded and I think it’s going to be really competitive too.
Scott:	Yeah. I guess, just to explain my point a little bit more, I think we’re saying the same thing. Say the average is like $25 million. What I’m saying is, basically, it’s going to go up to like $25 million. Well, if the Series A is at 100 to 125, that’s basically a 5X, 4 or 5X on paper return, not realized return. What I’m trying to say is that inflection point of actually getting that Series A is such a strong inflection point. If you think about it, if you’re a seed investor, that means one out of every four or five can work and you’re going to do really well still. They still have tons of growth in valuation after Series A at each step. What I’m trying to say is people will do more seed and be more aggressive at seed because that valuation inflection point has shifted to A, and it’s so strong. Does that make sense?
Kelsey:	Yeah. You’re saying, and we can come back a year from now, seed valuations, we’re using a fake number, but let’s say it’s 20. You’re saying you could see it going up to 24, and I’m saying 50%. I think seed valuations will go up to 30, so I’m saying a 50% growth rate in the seed valuations. Yeah, that’s exactly right.
Scott:	Yeah, yeah. It’s just the biggest bang for your buck right now. Part of what drives that is the later stage funds that do As, Bs, and Cs, they’re raising huge rounds, and they think of themselves more as like asset managers than like the craftsman, venture capitalist that I grew up working with in my career, and so they pay up. They’ll pay up because they also have done … There’s a bunch of people that even say things like, “If we just would have done every …” No one would do this, but like, “If we would have just done every investment that came through, we would have actually outperformed,” because things have been so strong. We’re in such a strong growth channel right now.
Kelsey:	Oh, yeah. There’s-
Scott:	Yeah, the seed, man, it’s exciting. It’s an exciting time to be starting a company because it used to be you had to make tons of trade-offs, and maybe not make optimal decisions because capital is so tight, but with capital being out there, you can actually grow your company responsibly, but dot all the i’s and cross all the t’s and do things the right way. It’s a cool time.
Kelsey:	Yeah. I know a very old school VC that’s been around the game for like 30-plus years and there was a point in time where, “I’m coming in as an investor. We’re going to shake hands, and it’s going to be a 50-50 deal.”
Scott:	Oh, yeah.
Kelsey:	We’ve come a long way from there.
Scott:	Well, I also think, and this would be something … Again, I have to be respectful of your time, but what I always tell the Kruze team is … Because I started working at Lighthouse in 2002, so that’s 20 years ago, basically. There was a certain kind of person that got funded, Ivy League, Stanford, Berkeley kind of person. Oftentimes, who had done it before. Venture capitalists were more risk-averse, and what I see in the Kruze client mix is way more women, way more people of color, people who are 23 years old getting funded. It’s such a more balanced, healthy group of people getting funded to start their company and chase their dreams that it doesn’t surprise me that the outcomes are actually opening up and getting bigger and more great companies are getting funded. Because I feel like before, again, coming back to Aumni, you guys … People were using the wrong heuristics before because they just didn’t know it. They didn’t know anything. They didn’t have any data, and now with being able to see how the last 20 years have played out or even the last 10 years, and folks like you who are aggregating this and making it more useful and letting people drill down, that I bet you lots of different kinds of profile founders are getting funded, and that’s exciting. That’s really exciting to me.
Kelsey:	No, I agree. I’m glad you mentioned that. We’re partnered up with Act One Ventures. Shout-out to Alejandro over there, one of the founders. I don’t know if you’ve kept up or know what they’re doing around the Diversity Rider, but they are looking at bringing diversity into venture, but they’re attacking it from the cap table. They’re saying, if you take a check, they want to say to a founder, like, “We want to help you bring in a diverse group of investors and anyone coming into this round, if you take checks, there has to be a diverse investor coming in.” It’s a pretty powerful movement that has, last I checked, I think it was over 70 firms, and these are the who’s who of venture, lots of interested parties that are supporting this. I think what we’re also, without … Until there was data, until there was more transparency, I think what’s interesting to look at is, do diverse investments, how do they perform? I think you’re seeing a lot of evidence that there is really capitalistic-driven interest in investing in diverse teams.
Scott:	Totally, totally.
Kelsey:	Not just founding teams. I’m seeing it on the fund side too. There are diverse funds being spun up and created that want to go out and tackle this problem as investors. It’s a great point. I agree with it. I’m really excited to just see some of the market traction around this topic in particular.
Scott:	I agree. Okay. I got to let you go because I know you’re running late. You’re being very generous to the Founders and Friends audience, so thank you so much. Tell everyone where they can reach you, or how to reach out to Aumni and get a demo, or check out the product. Again, super cool. Congratulations on all the progress and thank everyone there for doing such an awesome job.
Kelsey:	Yeah. Thanks Scott. I think we’re pretty easy to find on the internet and if you want to connect on LinkedIn, it’s a great place to find me personally. Thanks a lot, Scott. This was awesome.
Scott:	All right, buddy. Take care. Say hi everyone for me.
Kelsey:	Okay, bye.
Singer:	(singing) It’s Kruze Consulting. Founders and Friends with your host, Scotty Orn.

Kelsey Chase, co-founder of Aumni, a new solution that analyzes private capital investment data, discusses trends in venture capital

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