Jennifer Richard’s journey to investing in nascent companies began with her career before venture capital, when she worked at a slew of nimble, early-stage companies that evolved, raised more funding, and, in some cases, were acquired. She began working at Brentwood-based Bonfire Ventures in 2020.
Why have you chosen to set your sights on seed-stage and early-stage companies?
The entirety of my tech career has been focused on early-stage companies. My entry-point into tech was heading up the customer support team at L.A.-based YC (Y-Combinator) company, Prizeo. That company was acquired early, shortly after its seed round, and before the founding team went on to start Represent. I was part of Represent from its inception and scaled the company from zero-to-one (meaning to create something brand new to the market) before it was acquired by Custom Ink out of D.C. (It then went on to be acquired a second time by Cameo.)
After that acquisition I left with one of the founders of both companies, Leo Seigal, to start celebrity direct-to-consumer brand Pop & Suki. As the head of e-commerce, I began the journey of getting the company from zero-to-one once again – seeing the company through its seed round – and departing shortly after to embark upon business school at UC Berkeley and eventually, VC. Early-stage VC was always the obvious path for me – I’d just spent six years operating at that exact stage. I’d seen the pitfalls, obstacles and successes. And I knew that was the stage at which I could offer the most value – both to my firm and to founders.
Can you explain how factors like location, risk appetite and sector preference played into your decision?
In terms of location, we only invest in U.S.-based companies so that sets some clear guardrails. We have invested in a few Canadian companies but really prefer to be within a reasonable geographical radius of our founders so we can speak regularly and spend time in person. That means, we of course have a bias towards founders based in L.A. because of proximity. But overall, we’re agnostic to U.S.-based teams.
Risk appetite…I’m going to answer this through the lens of portfolio construction. There are certain types of opportunities that are right down the middle for us – some examples would be vertical SaaS (software-as-a-service), commerce enablement and digital health at $500,000 ARR (annual recurring revenue). However, every once in a while, we’re presented with a phenomenal team that’s outside of our strike zone in one way or another. That typically manifests as a business that’s outside of the sectors we focus on or is too early. The riskiest opportunities we have to take a bet on have both of those characteristics. We internally call these “flyers;” i.e. they’re not the kind of investment we’d typically make, but we have so much conviction in the team that we’re going to move forward. And we expect those to either be huge or go to zero. I’d say we do three-to-four of those out of the 30-35 investments we make per fund.
How do you define pre-seed, seed and early stage? What benchmarks do startups need to meet in order to be classified as each?
We acknowledge that every fund defines these stages differently and try to be very upfront about our definition. We lead seed rounds of companies that have at least $500,000 in annual recurring revenue with a full-time team on-board. We want to see founders that are fully invested, customers using the product, and early signs of product-market fit. Most of the companies we invest in have raised prior institutional capital, but it’s not a requirement. Some of the best founders are scrappy and have bootstrap to get to their Seed round. Pre-seed companies, on the other hand, can range anywhere from ideation to early revenue (anything less than $500,000 ARR). They can have founders that are working on the businesses part-time or full-time. They may or may not have an extended team beyond the founders. Again, this is what makes these definitions so tricky – it’s a wide range. Early stage generally speaks to companies that have not yet found product market fit. This generally refers to companies at series A or earlier. They can be at various stages of revenue, team size and customer count. What generally defines “early-stage” is whether or not the company has built out a sales motion that produces predictable and repeatable growth.
Do you feel like the standard for what is classified as “seed” or “early-stage” has changed over the years in the venture community?
Yes – the standard changes as we go through various cycles. During the ZIRP (zero interest rate period) in 2021-2022, there was an abundance of venture capital so I’d argue that the bar for funding was much lower. Companies were raising “seed” and “series A” rounds at high valuations off of very little traction. Those types of companies either wouldn’t get funded today or their funding would be titled as an earlier round (i.e. series A would be titled seed, etc.).
In 2023-2024 the exit market dried up and the bar to raise became very high. We were leading seed rounds into companies whose revenue was nearly $1 million ARR. Those companies would have been classified as series A a couple of years prior.
Today, we’re in another cycle where AI companies are reaping the benefits of market hype. AI-native companies are able to raise rounds with lesser metrics because investors are willing to take on more risk to bet on the next wave of innovation. My prediction is that this too will change as AI-native becomes the standard in the next one-to-two years. The barrier to entry to build an AI company is becoming lower every day. Once that happens, I’m sure another cycle will take over once the AI buzz is over, and that too will send investors into a frenzy.
Investing in nascent companies that don’t have the reputation or revenue of developed startups is risky. How do you go about determining what investments are the right ones?
Investing at the seed stage is inherently very risky, and we go into it knowing that some of the bets we make will be wrong. There are a few requirements we’ve agreed on as a team in order to remove some of the bias from the diligence process: An exceptional team with a track record of success. This could be a leadership role at a previous company, a prior startup or domain experience that gives him/her an unfair advantage when it comes to building in the space.
We also look for extraordinary storytellers who can leverage the passion for what they’re building to sell their vision to investors, customers, and prospective employees. Lastly, we look for founders we’re excited to be on a long-lasting journey of ups and downs with. Real revenue traction that’s validated by talking to customers as the final stage of diligence. We want to understand what the true customer experience is and whether the product is “a nice to have” or something that solves a critical pain point. Geographical proximity that’s aligned with our hands-on approach. That means founders in the U.S. that are within a reasonable plane ride to spend time in person.
Have you ever made an investment you regretted? Can you explain what happened?
Yes, I’ve definitely made an investment that I’ve regretted. More than one. It usually comes down to falling in love with a product so much that I overlook serious flaws in the founder or founding team. At the end of the day, a company is only as strong as the person running it.
As the startup community in Los Angeles has gotten more developed, and as startups globally blurred geographic lines since the pandemic, how has your brand as a Los Angeles venture firm evolved?
The pandemic democratized access to great companies, and it really expanded our reach as a firm. Before the pandemic, we had a higher concentration of companies in Los Angeles and California broadly. We’re proud of that and still want to have a first look at the best founders building in L.A. But, as Zoom became “a thing” and we were able to schedule meetings more easily and efficiently, it also became easier to run our process regardless of where founders were located. That organically led to more geographical diversification in our portfolio.
With that said, we’ve raised larger and larger funds since the pandemic, which has also expanded our brand and reach. We’re now the largest seed fund in Los Angeles and have the resources to compete with other coastal funds.
Companies like Scopely and AuditBoard have seen major exits, boosting L.A.’s stature as an innovation hub. Our portfolio has grown, which means we have more successes and more portfolio founders talking about us.
