Rocket Science: Tracy Killoren Chadwell
Named as one of Entrepreneur Magazine’s “100 Powerful Women” and Forbes “8 Women VC’s to know,” Tracy Killoren Chadwell is an experienced venture capital investor and attorney. She is the Founding Partner of 1843 Capital, an early stage venture capital fund.
What’s your favorite wall decoration in your home?
My personal holding company is called Coyote Capital, and I have a John Nieto painting of a coyote. It’s up in the bedroom and it’s really beautiful.
People often have a negative connotation associated with coyotes, but I’ve always been drawn to them. Coyote is the Sioux word for “god’s dog” and they are great hunters and great mothers. In their native habitats, they are just spectacular.
What’s your favorite French and/or Japanese word?
“Pardon.” It seems like I’m always saying, “Excuse me” when I’m in France, I’m always making mistakes. I have to say, “Pardon moi,” all the time.
I worked in Japan for a year and I have a couple of good ones. I love “kichigai.” It’s a little bit rude … it literally means insane. Another interesting word is “wabi-sabi,” which is something beloved that is well-worn. You love it because it’s worn and it’s a cherished object.
What’s a trend in venture capital that you wish would go away?
The fear of missing out. There’s a tremendous amount of capital that goes toward a small set of ideas, and it just sucks all the air out of the room for other things that might be equally as interesting in maybe slightly smaller markets. Everybody runs towards the same exact company and it’s frustrating.
Here’s an example. I find it astonishing that so many funds won’t invest in companies that aren’t 100% software-based. I understand the thesis: the margins are higher, you don’t need a lot of people to run it, you just have your hosting fees, and they’re easier to scale. You get the initial customers, but then what?
A lot of companies that go public have a real services component. You can’t just throw the software up and expect people to engage with it, like it, and not have problems with it. So many companies are changing their model to be more services-based, they need that one-on-one relationship.
When you have a services component to your software businesses, you increase your engagement and reduce churn. It’s a lot easier to upgrade an existing happy customer than it is to get a new one.
What’s a common trap you see young startups fall into?
“If I just had more money, I could spend more on marketing and gain more customers.” That’s just flat out not true, from so many perspectives.
A lot of startups want to raise money to spend it on marketing, and to be a standout company, you have to have a unique customer acquisition strategy. There’s no more just buying Facebook ads and hoping for the best.
What should a pitch deck absolutely not have in it?
That’s such a great question because I always get the other one, “What does a perfect deck look like?” I like to make the joke that in a perfect deck, the page that speaks loudest has no words … it’s the one with all the financials.
But what should it not have in it? This is tough because most people are so polished these days. I would say don’t use too many stock photographs. Trying to tell the story visually and having all these beautiful photographs is nice, but it’s just not the meat of the matter and it’s not what’s important.
And, I think a lot of people want to tell their story upfront so quickly that they forget to say who they are. Time and time again, you ask any venture capitalist, “What’s the most important thing?” and it’s always the team first. But then the team is at the back of the deck.
Start with you. Why do you want to do this? Who are you, and why are you the best person to do it? That sets the stage for opportunities.
How do you handle getting pitched all the time?
We get pitched so much. I get pitched everywhere, it’s like being the dermatologist at a cocktail party and everybody comes up asking, “Can you look at this spot?”
I can decide whether or not I’m really listening in about 30 seconds. One way for sure to get me to listen is if your background matches what you’re doing.
I look at 700 deals a year, and I have phone calls with probably about 300 people a year to listen to their pitches or updates. So, you get used to it. Something I see a lot of is … I don’t know if “entitlement” is the right word … but it’s an attitude along the lines of, “Well, I’m out here pitching my idea and I’m good, so why am I not getting dollars?” You’re not entitled to dollars!
People get very, very frustrated. They 100% underestimate the trust factor involved, because there’s so much fraud in this business. “Hey, I’ve got a great opportunity. I’ve got a great story. I’m passionate and I’m educated. Wire me five million dollars.” Really?
It’s so hard to invest in someone that you’ve just met over a Zoom call who doesn’t have a relationship to someone you already know. Introductions from other founders are so valuable because that’s a trust check. Unfortunately, that leads to the same type of funder being funded over and over again, which is problematic.
But trust has to be there, because once you wire that money, it’s gone. It’s impossible to get it back. You have to trust that the person is going to do what they said they’d do with your capital.
You spend a big part of the year in Montana. What’s been your closest call with wildlife?
We have daily encounters with wildlife, but way up there is the mama bear who threw our gas grill across the deck and then sat with her whole body against our plate glass window with her baby bear. That was definitely the closest.
I just looked and marveled at this beautiful fur coat right through the glass. I was a little surprised. At first, I thought it was snow falling off the roof. But no, it was mama bear. Baby bear had been there the day before and smelled, I think, the cheese on the grill and so he brought mom back for a taste. We definitely stayed inside.
What’s been your COVID deep dive over the last year?
Oh gosh, being able to read both fiction and nonfiction has been terrific, and being able to read so many different biographies. I read a lot for work — blog posts and articles that are always very current and timely. It’s nice to sit back and read people’s life thoughts for a span of 75 years, versus 75 minutes.
I read Steve Schwarzman’s book What It Takes, and I read Sam Zell’s book Am I Being Too Subtle, those were very good. I actually worked for Sam, which was interesting because I could fact-check it.