Driving Alpha: The Art of Low-Velocity, High-Conviction Investing With Rebecca Kaden of Union Square Ventures

Rebecca Kaden is a Managing Partner at Union Square Ventures, a New York-based venture capital firm. She began her career as a journalist, and prior to USV, was a General Partner at Maveron, a consumer-focused early-stage fund. Rebecca was born in New York City. She studied English and American Literature at Harvard and received her MBA from Stanford.

Here’s a glimpse of what you’ll learn:

[2:46] Rebecca Kaden highlights the role of early mentorship in a successful VC career
[6:27] How Rebecca’s liberal arts background influences her VC perspectives
[8:29] Union Square Ventures’ thesis-driven approach to investing
[15:00] USV’s investment strategy in the healthcare sector
[17:04] How USV collaborates with other VCs and values syndicate participation
[22:04] Why should investors prioritize businesses with unconventional models?
[26:42] The philosophy behind the concept of “high conviction, low velocity” investing
[33:42] USV’s unwavering commitment to decentralization and the future of blockchain investments
[39:42] Rebecca’s advice for junior VCs

In this episode…

Can high-conviction investments yield the results venture capitalists strive for? What does it take to pursue an unusual and non-competitive market? With a deep understanding of the industry, a journalist turned VC specialist brings a unique perspective to the untapped potential in sectors like healthcare and the revolutionary applications of AI and blockchain technology.

In this episode of Driving Alpha, Steve Brotman chats with Rebecca Kaden, Managing Partner at Union Square Ventures, about the strategies that drive USV’s investment philosophy. Rebecca dives into the value of thesis-driven investments, USV’s unwavering commitment to decentralization, and the future of blockchain investments. She also explores the importance of mentorship, collaborating with other VCs, and a deep understanding of markets.

Mentored by Bill Campbell, Rebecca Kaden leverages her journalism background and business acumen to drive investment in companies reshaping entire industries. Her insights into Union Square Ventures’ thesis-driven investment approach reveal how low investment velocity along with high conviction can make all the difference. From innovative healthcare companies like Thirty Madison to unconventional investments in platforms like Team Shares, USV’s philosophy centers on finding and nurturing non-traditional opportunities. With a significant portion of the firm’s portfolio dedicated to decentralization and cryptocurrency, Rebecca highlights how investors can cultivate a portfolio characterized by strong conviction and innovative solutions by staying informed on emerging technologies.

Resources mentioned in this episode

Quotable Moments:

“Low-velocity, high-conviction investing is our model — it’s about what we do, and not what we don’t do.”
“I think venture can be a really, really great apprenticeship business.”
“Being open to things that are a bit odd and come at it in a different way unleashes a lot of opportunity.”
“The most interesting ways to transform markets are not going to be to go through the middle and the traditional paths.”
“The best applications of crypto are where it’s used as a superpower to unlock a core user behavior.”

Venture Tips from Rebecca Kaden:

Establish a mentorship relationship within the VC community: Mentorship provides nuanced understanding and strategic insights that can significantly accelerate a new VC’s learning curve.
Embrace a low-velocity, high-conviction investment approach: Slowing down allows investors to identify truly transformative opportunities rather than fleeting trends, leading to more sustainable success.
Explore investments that tackle transitions in large, foundational markets from an edge perspective: By investing in companies that reinvent market edges, investors can significantly improve efficiency and accessibility.
Practice candid communication with empathy when engaging with entrepreneurs: Transparent feedback combined with a supportive approach helps founders navigate challenges and aligns the investor with the company’s growth.
Stay informed on emerging technologies like blockchain and AI: Understanding cutting-edge tech can unlock opportunities to fund companies that offer innovative solutions with the potential to lead markets.

Episode Host: Alpha Partners

This episode is brought to you by Alpha Partners, an NYC-based growth equity firm managing $300 million.

Alpha co-invests in top-tier growth equity companies led by the world’s best investors. We focus on scaling and late-stage tech investment opportunities primarily in the essential technology sector, including e-commerce, enterprise software, fintech, edtech, and health IT.

To learn how we can help you with your funding goals, visit www.alphapartners.com, or email us at vc@alphapartners.com.

Sponsor Host: Affinity

Affinity is a relationship intelligence platform that empowers dealmakers in relationship-driven industries to find, manage, and close more deals. With the most automated relationship intelligence insights and technology, Affinity enables leaders to drive deals and ensure their teams can take action with confidence, knowing the context and history of every relationship.

The Affinity platform, including Affinity CRM, is used by over 3,000 relationship-driven organizations worldwide. Founded in 2014, Affinity is headquartered in San Francisco and backed by leading investors, including Menlo Ventures, Advance Venture Partners, 8VC, and MassMutual Ventures.

Learn more at affinity.co/drivingalpha.

Episode Transcript

Intro 0:06

Welcome to Driving Alpha, where we feature our friends, the outperforming investors, who demonstrate their past to Driving Alpha or outsized investment returns. We’re Alpha Partners, where we partner with 1000 early-stage venture firms as their opportunity capital to invest in their best companies. Driving Alpha is supported by Affinity, a provider of CRM for the private capital relationship economy. Affinity knows who has the best relationship with the right startup. Affinity knows. Learn more at affinity.co/drivingalpha.

Steve Brotman 0:40

Hi, I’m Steve Brotman, your host for today’s podcast on Driving Alpha. Driving Alpha was a podcast inspired by our venture funds efforts to connect with VCs, and one of those things was driving exotic cars a few years back, every year we’d host 12 VCs on the back roads of New Jersey. And, you know, we’ve got to drive Lambos and Porsches and all sorts of crazy stuff. But you know, certainly some of the partners could afford their own. But the highlight of those trips, though, is really just the conversations. Because what would happen is we would switch drivers every 30 minutes or so, one person driving a car, another person sitting in the passenger seat. And what I really took away was not just the cars and the beautiful weather, but our connections with other people in the industry, and we wanted to kind of recreate that a little bit with Driving Alpha. So today we have Rebecca Kaden. She’s a managing partner at USV. She began her career as a journalist. Prior to USV, was a general partner at Maveron, a consumer-focused, early-stage fund. She was born in New York City, studied English and American Lit at Harvard, and received her MBA at Stanford. But she’s done many, many other things since and now at USV for what, six years now, seven years, yep, seven years now. So welcome to the pod. Rebecca, thanks so much for joining.

Rebecca Kaden 2:13

Thanks for having me.

Steve Brotman 2:15

This is awesome. Our team is super excited to have you on. We’ve heard so much from other VCs in the community about your dynamism and perspective. So super excited to hear more. Why don’t you share a little bit, I mean, I gave a very dry bio there. Why don’t you share a little bit more about, you know, how, how you got, how you came to be at USV, you know, in your own words. And that would be a great place to start. Tell us a little bit about your backstory.

Rebecca Kaden 2:46

As you mentioned, I grew up here in New York City, but made my way to the Bay Area after I had graduated from college and I was a journalist. I was an editor at the time, and thought that’s really what I wanted to do, and really enjoyed it, but made my way to business school kind of humbled and curious about the publishing industry and what was going on with editorial but quickly got kind of sucked in to everything that was going on in that era in Silicon Valley, and became very close to a mentor of mine at business school at Stanford named Bill Campbell, who you may have known, but was known in the valley as the coach. He passed away a number of years ago, but he had actually started his career as the football coach of Columbia, and in this kind of winding, amazing path, became the chairman of Intuit. He had run Adobe. He had this kind of storied tech career, but largely as an advisor. He was kind of most known as being a really good coach and kind of wisdom giver to big names, mostly Eric Schmidt and Steve Jobs, and kind of as big as you can get. And then all the way on the other end of the spectrum, was involved at GSB, and very good about getting to know students there. And I had gotten to know him well, and had gone to him to talk through some ideas I had about what I would do after going to business school, having come from this kind of unusual path. And he was the first one to say to me, I think you should explore being a VC, that your kind of curiosities and interest in people and ideas might be a good fit. Maybe it’ll work out. At the very least, you’ll learn a lot about different early stage companies and get your feet wet, and, you know, jump into a business.

Steve Brotman 4:34

And when was this in your career, and when you were?

Rebecca Kaden 4:39

It’s 2010, and he introduced me to Maveron, where he was an advisor, and Dan Levitan took a big bet on me there. Hired me as originally an intern. I worked up the ranks of Maveron. So I did that whole kind of run up there as associate and principal and partner and a general partner, and learned a ton. Maveron is a very customer-focused firm, and then joined the partnership at USV in 2017 which, among other great things, brought me back to New York City.

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