Recently, Founder Institute EIR Mike Suprovici hosted a webinar discussion with Lucas Rocha of Unshackled Ventures. Unshackled Ventures is pre-seed fund that specifically invests in immigrant-founded companies. At its pre-seed stage of investment, Unshackled’s goal is to come into the business early, and then at all stages of the company’s growth, to remain a ‘High Conviction’ investor.
For Unshackled Ventures, a ‘High Conviction’ mentality means not just that the Founder always comes first in their due diligence process, but also that the entrepreneur’s personal story ties closely into the problem their startup is working to solve. Unshackled Ventures also readily demonstrates High Conviction back to their portfolio companies: the Unshackled fund only leads in its investment rounds - and that too takes High Conviction.
As a prerequisite to funding, Unshackled Ventures specifically only invest in teams that have at least one immigrant Founder, as well as teams that, for the most part, have at least one Founder already located in the United States, and that sell to North American companies or consumers. As a pre-seed stage fund, Unshackled Ventures closely aligns with the Founder Institute, in that they also put their focus on the Founder themselves above all other investment considerations. Unshackled specifically focuses in on what they call Founder Superpowers.
Founder Superpowers here means an entrepreneur who has the personal awareness to focus on the things they’re already really good at, instead of spending a lot of their energy trying to change themselves or correct things that they might lack. Unshackled seeks Founders who already know what they do well, and want to do that thing even better or for many more customers.
Checkout the video below to watch the full interview with Lucas Rocha of Unshackled Ventures - or, listen to the interview in full via the Founder Insights podcast embedded below.
Click on the timestamps to jump to key points in the video:
- (1:15) Unshackled Ventures value proposition
- (2:55) Find your Superpower
- (4:55) Who is VC for?
- (13:46) Innovation vs. Profitability
- (26:07) 2 Due DIligence Examples - Plantable Foods & Lily AI
- (38:38) 3-Point Framework to Qualify Founders
The Unshackled Litmus Test for VC-Fundable Ventures:
One of the most insightful things Rocha spoke about early on was dispelling the all-too-commonly-held notion that VC is something every Founder should be seeking. According to Rocha,
I think Venture Capital is not a product for all businesses. There's a fallacy in the market that VC is a great source of financing for most businesses, and I don't think that's true. It's actually a very small percent of businesses who would benefit from the type of capital that VCs provide. And these are technology companies that have economics driven by the need for scale. The key defining aspect of technologies that are VC ready (or that will be VC ready at some point) is the ability to either reach a very large amount of people using technology, or to unlock technology in a way to enable their customers to pay a lot of money for what they’re providing.
And in more quantitative terms, Rocha elaborated on the Unshackled Litmus test with some figures that make it clearer about the scale of business growth VCs seek for realistically expecting a return on their investment.
You see a growth in the market that’s so outrageously obvious, and you see the team coming together to leverage an opportunity that’s so large, that it’s possible for you to get to $100M in revenue by year 7 or 8.
In speaking about avoiding some of the tribulations that can occur when Founders unexpectedly find themselves needing to raise several smaller funding rounds, and where Founder equity dilution sometimes takes place as result, Rocha encourages entrepreneurs think hard about the fundraising milestones from the start.
Be very mindful of how rigid Series A investors have become, and definitely think about your pre-series A funding as, ‘What is the minimal amount of money that I need to raise to hit the milestones I need to hit, to get to that $1M ARR by Year X.’
To date, Unshackled Ventures has invested in two Founder Institute alumni-founded companies:
Lily AI
The industry leader in creating emotional intelligent experiences for fashion e-commerce, helping women to discover the clothes that make them look and feel their best.
Rocha spoke about FI portfolio company Lily AI as a case study in Founder 'Superpowers,' explaining that Founder Purva Gupta possessed a large and compelling body of research into women’s psychology, had recruited a brilliant and complementary co-founder, as well as had a series of strong early ideas about how this research could be applied to B2B SaaS. Unshackled invested in the early days in the case of Lily AI, simply because they were so impressed with the Founders.
Gridraster
A platform that powers immersive VR/AR experiences on mobile devices, leveraging cloud computing to render high-performance graphics at ultra low latency.
Founder Institute Portfolio Companies Ask the Questions
One of the many perks of being a Founder Institute portfolio company or program Alumni is the ability to attend all these investor video webinars live, and pose questions for the guests to answer directly during the interview.
One FI alumni attending the webinar named Carolyn asked a great question at ~19 minutes that lead to an interesting line of discussion from Lucas regarding how Founders can position themselves so that they elicit radically honest feedback from investors. Put another way, Carolyn wanted to know how to make sure VCs don’t sugarcoat their feedback, so that she can always be sure to make the most of every investor meeting, even if discussion doesn’t move forward after.
Asked about how Unshackled weighs Founder ambition at its very entrepreneur-centric pre-seed investment stage, Rocha says,
Ambition needs to be tethered to market conditions at the end of the day. There are markets that will support venture-backed businesses, and there are markets that will not.
Lucas Rocha also answered another question that helped dispel a concern voiced among many Founders who fear losing control of their venture through the process of raising capital. According to Rocha,
Great investors partner up with great CEOs. I don’t think any great investor will back a business with the expectation that they will replace the CEO shortly, especially if the CEO is a Co-Founder. Later on, there are other effects that come into play, when you raise your Series C or Series D and there are other investors that come though. But at the pre-seed and seed stage, it is really all about alignment.
Rocha wraps up Unshackled Ventures’ Investment Thesis in defining the key criteria for investment away from “innovation” and towards the action-oriented qualities of a strong entrepreneur, saying,
Innovation for the sake of innovation doesn’t create businesses - it creates interesting tech. We’re not investing in interesting tech, we’re investing in great Founders building great businesses.
Lucas Rocha - Associate, Unshackled Ventures
Lucas Rocha was named to Business Insider’s Under 30 Rising Stars. Prior to joining Unshackled, Lucas invested in early-stage technology companies at JetBlue Technology Ventures and Underscore VC. While attending Northeastern University, Lucas was a partner at First Round Capital's Dorm Room Fund and the IDEA accelerator. Lucas immigrated from Brazil and has deferred admission to HBS.
Graduates of the Founder Institute are creating some of the world's fastest growing startups, having raised over $1.85BN in funding, and building products people love across over 200 cities worldwide.
See the most recent news from our Grads at FI.co/news, or learn more about their stories at FI.co/journey.
