Q&A with Flavia de la Fuente, VC at BuildGroup
This article is part of Rebel One’s “Investor & Founder Series”, a series of recorded interviews with CEOs and investors recently launched by RBL1, a leading venture capital firm and investor network based in New York City. You can view RBL1’s investor training programs and new content here. Written by Brian Ou.
In celebration of National Hispanic Heritage Month, Rebel One is proud to feature Flavia de la Fuente, a venture capitalist currently at BuildGroup. BuildGroup is the first operator-led, permanent capital investment company focused on fast-growing and SaaS-based private companies and small-cap public companies. During the 36-minute interview, de la Fuente shares her journey from studying political science at UCLA, to advocating for conservation at Sierra Club and banking at Merrill Lynch, before switching over to the investment side.
In addition, our host and Founding Partner of Rebel One, Sergio Marrero, asks de la Fuente to share her insights for aspiring fund managers, current trends in VC, and how the VC ecosystem can better support women founders and founders of color.
Here is a short summary of the interview:
Sergio: Can you share a little more about your journey and how you went from studying political science to investing?
A: I went to UCLA where I had a lot of friends who were undocumented, and I was very involved with the undocumented youth movement there. I wanted to do something that would make the world a better place, and I thought studying politics and power was the most important thing to do. I didn’t really pursue any jobs in the immigrant space post college, but I worked at Sierra Club, which is one of the largest and most influential grassroots environmental organizations in the U.S. It was very much like a sales job, but instead of selling vacuum cleaners or whatever, we were selling democracy and clean air. I really liked it, but I felt like I only understood one part of the puzzle. I felt like in order to understand people power and the world, I needed to understand money and capital markets.
I then studied Finance and Investments at McCombs School of Business, and got a really awesome job at a pension fund where I had to travel very often to Asia. I really loved that work until I got called away by BuildGroup.
Sergio: Can you share a little bit about how you think about impact in later-stage investments?
A: We look in the neighborhood of Series B or later. As a fund our size (over $300M in AUM), we need to write larger and larger checks in order to scale. We usually write check sizes between $5M and $20M for companies in the SaaS space.
We aren’t explicitly impact investors, but how I think about it is, power is organized money or organized people. So to change things, we need organized money, which is writing checks, and organized people, which is hiring diverse candidates.
Between just making profit and pure philanthropy, there’s a lot of space for experimentation and different asset allocators should incorporate impact into their investment-making decisions.
Sergio: For the aspiring impact fund managers, what should they keep in mind and where should they look for information?
A: You want to know where your funds are coming from and identify who is making the actual investment decisions. In the case of a pension fund, they may make an investment in a vehicle, but the pension fund ultimately answers to retirees, firefighters, etc.
There are some really big pots of money out there waiting to be invested into companies with good ESG metrics. You can start off small and check out boards of different pension funds within your city or state to see if they have an ESG or impact mandate.
Sergio: What experimentation in venture do you think is interesting right now that’s leaning towards the impact space?
A: This is great, because I’m going to say something that’s a little controversial. One thing that people really don’t like is the dual voting class structure, where founders retain all of the voting power and concede some of the share class to the investors. But when you’re an impact startup, that’s a good thing because it allows you to see out the vision over the long term.
For example, the New York Times is a publicly traded company with a dual-class structure, but most of the voting power is still with the Schlesinger family. This enables them to really make sure that the fundamental purpose of the New York Times continues to be delivering quality investigative journalism above all else. In that way, they’re able to protect the long term mission of the company. On the contrary, Etsy was the first B-corp to go public who ended up having an activist investor get involved and tear apart the whole concept.
Sergio: What innovation trends do you see happening in the structure of funds in venture?
A: BuildGroup’s structure and permanent approach is really unique, and I hope others copy it. A lot of organizations and institutions that claim to be long term investors should explore structures like these. The shorter term investment vehicles frequently prioritize top-line growth at all costs, and that doesn’t necessarily mean you’re building a sustainable business.
Sergio: Given your experience in Austin, what are some of the benefits and drawbacks of being a venture investor in the Austin ecosystem?
A: Life’s good in Austin, but I came from equities, and I spent a lot of time attending conferences with investors from New York and Wall Street. It was interesting, but I definitely appreciate the quiet of being away from the herd. Most of my friends aren’t working in investments, but at regular companies. And in a way, I like that more because when I’m evaluating a new business or sector, I always have somebody to call just by virtue of not being in a financial hotspot. I like to make sure that my thinking is my own and to avoid the chatter. For us, that means finding interesting businesses without sky-high valuations.
Sergio: Before we close, what do you think needs and can be done to elevate women investors and investors of color?
A: Private capital markets is a very referral, and warm-introduction-based business. I don’t love that, but if this industry is defined by organized people managing organized money, then we as under-represented investors have to start organizing too. Hopefully this leads to more meetings, which leads to more checks, which leads to more hires, and that’s just what we have to do.
Sergio: I think that’s great. Thank you for joining us today.
A: Thank you Sergio, this was great!
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If you’re interested in learning more about Flavia’s experiences, you can watch the full interview here. If you are a motivated investor or young professional like me, I would highly recommend checking out RBL1’s Youtube channel for more videos on how entrepreneurs and investors are changing the world.
Thank you for reading and stay safe!
