Listening as an investment strategy

Jocelyn Kinsey looks for the 'Why?'

March 3, 2022

As a partner at DFJ Growth, Jocelyn Kinsey ’08 is involved with researching, analyzing, and then selling investors on why a new company would be a good investment. It takes due diligence, studying the potential market, and actively listening to the founder and his team while they are “sharing their stories” on why they formed the business.

A lot of weight is placed on founders’ stories, she told a group of 52 students attending her virtual question-and-answer session Monday. Kinsey, who was speaking from her office in San Francisco, was the final speaker in The Ron Rubin School for the Entrepreneur series featuring businesswomen in leadership positions. The series was in honor of the 50^th anniversary of Culver Girls Academy.

DFJ Growth is an investment capital firm that becomes involved after a startup has shown its viability in the market. The firm provides the funds and expertise that companies and their founders need after the initial “angel investor” phase. Early DFJ Growth investments included Coinbase, SpaceX, Telsa, Twitter, and Unity.

Kinsey has been with DFJ Growth for eight years and was named a partner 18 months ago. She has been actively involved with investments in Collective Health, Giphy, Helix, Mapbox, Neocis, Patreon, Ring (Amazon), and Splice. She moved to DFJ after spending two years with J.P. Morgan’s Alternative Investment Group in New York.

She graduated from Stanford University in 2012 with a BS in management science and engineering degree, which she described as half-science and half-engineering. Kinsey told the students she “stumbled” into the venture capital field while working on the founding team at StartX, Stanford’s student startup accelerator. She was named to Forbes magazine’s “30 under 30 Venture Capital” list in 2017 and is an active member of All Raise, a non-profit dedicated to increasing diversity across venture capital and venture-backed businesses.

She said while there is a lot of analysis work involved, from looking over financial reports and studying viable markets, a lot of the work involves talking with people. Calling customers for their opinions about the business or product is “the most helpful way to go” to see if the company will still be around in the future.

Her favorite part is listening to the founder’s story behind starting the business. Answering “Why are you building this company?” often reveals the commitment the founder has to the concept. Often there is a “deep personal pain point” that serves as the catalyst for the startup. One founder she is working with has a personal story about his problems surrounding the healthcare industry and insurance. His goal is to make navigating the system easier.

The people a founder has surrounded himself with is also an important component.

“The team is everything,” Kinsey explained. Do they have that “very important skill” of telling their story? Does the founder have the grit, perseverance, ethics, and integrity to keep the business running? The line from starting out to stability and success can be “very bumpy,” she said.

What Kinsey learned at Culver does influence how she views a company and its founder.

“Culver taught me to be a leader. It gave me the leadership skills,” she said. Having integrity and simply being a good person are important traits. “Trust is everything,” she added. “People who don’t hold to their values are really disappointing.”

The Culver values are also what led her to DFJ Growth.

“It may sound cheesy,” she said, but working for a firm with a mission to find those “disruptive technologies” that can have a positive impact on the world is exciting. One of the companies DFJ is invested in is working with developing products for the alternative, plant-based meat and dairy markets. What makes the company unusual is that it is going down to the molecular level of the plants to provide a similar texture and taste. It has recently signed a partnership agreement with Kraft-Heinz.

When considering startups involved with cryptocurrency, blockchains, NFTs (non-fungible tokens) as investment strategies, Kinsey said DFJ is looking at the firms involved in the enabling infrastructure behind them. The financial industry is heavily regulated, she explained, and the question is whether crypto and NFTs will remain solid investments once they mature and/or come under similar regulation.

But the technology behind them will still be viable. As it is in the gaming industry. Video games may be popular for a short time, but the firms designing the infrastructure to create them will continue to grow.

Kinsey added not every investment will work out. Entrepreneurs and those backing them must become “comfortable with failure and learn from it,” she explained. A startup may have a phenomenal founder and team, execute everything just right but the market is bad or not defensible. Good firms will have a “difficulty moat” built around them that protects their share of the market.

When asked if she has worked with any Culver alumni, Kinsey said those relationships “energize me.” She sought advice from Jim Henderson ’52, who helped her make connections. Other Culver alumni have also provided advice and connections through the years. She has been providing suggestions to Pathwater co-founder Shadi Bakour ’09.

Kinsey said the past two years have been "liberating" and she has become more assertive in her role. She admitted to having “imposter syndrome” because she was not an entrepreneur or one of the few women in the room. But she has female mentors "who school me up" and she has gained confidence through relationship building, "leaning into her edge," and realizing that she can complement a team rather than needing know and be everything to it.

Still, when she takes a seat on the board of one of the companies DFJ has invested in, Kinsey often finds she is only woman in the room. That is why she is active in All Raise.