“I'm looking for leaders that I think can lead a company of hundreds of people in the future. And sometimes, you just don't get that feel, there's no way to quantify it. It's like a gut feeling that you have, but we're only looking to invest in companies that will have massive outcomes.”
— Sheel Mohnot

Today’s guest is Sheel Mohnot, Co-founder and GP at Better Tomorrow Ventures (BTV). BTV is an early-stage venture fund focused on building the future of fintech by leading seed and pre-seed rounds of fintech companies.

Before becoming an institutional investor, Sheel founded the podcast “The Pitch” and a tech-enabled food company, Thistle, serving 10’s of thousands of customers every week. He also invested in numerous tech companies as an angel investor, successfully achieving two meaningful exits in fintech companies.

In this interview, Sheel talks about the journey from operator to angel, and now, institutional investor. If you are serious about getting into venture capital for life— you’ll enjoy Sheel’s sharing!

“So I would say, the main thing I look for, is a founder
who can clearly articulate their vision.”
— Sheel Mohnot

Highlights

Successful fundraising = clarity in communication!
The single point of failure on unsuccessful early-stage venture deals.
Enjoying being a VC, unapologetically.

Transcript

Arjun Dev Arora 0:00

Hello everybody, my name is Arjun Dev Arora and I am the Founder and Managing Partner of Format One. We support funds and founders and help accelerate their efforts via people capital and strategy. And now off to Jon.

Jon Low 0:14

Hello Jon Low here and I am the co-founder of Format ONe and I'm the lead on executive coaching and all sorts of good things with Arjun Arora. But today, enough about us, we have a wonderful guest, his name is Sheel Mohnot, and he is very seasoned both as an operator and an institutional investor. And obviously a lot of other things in his life other than his work. Why don't you introduce yourself to the audience and tell us a bit about what you're up to these days?

Sheel Mohnot 0:47

Yeah, absolutely. So um, Sheel, I am a San Francisco-based venture capitalist, I invest in fintech companies, typically as a lead investor at the earliest stages of seed. And before I started doing this, I was an operator a couple of times. But both in FinTech. And I have a partner that I work with on this, his name is Jake, and our fund is called Better Tomorrow Ventures.

Jon Low 1:14

Wow, thank you, thanks for sharing. And so Sheel, you know, having been an operator more than once, how did you get into venture? Why did you get into venture?

Sheel Mohnot 1:30

Yeah, it's a good question. I think, so I got into venture because when I was an operator, and I was raising from VCs, I thought, you know, I like what's going on on the other side of the table, it's like, those people seem like really smart. They seem like they're the ones giving me money, like I'm, like going after bouncing at their feet, I want to be on that side.

Now, of course, like now that I am a venture capitalist, I know that actually, like, it's not that the VCs are smarter, or anything like that. But I've wanted to do it for a long time. And then, you know, after the first exit, I had a little bit of cash. So, I started doing some angel investing. And I found that I really enjoyed that. And the part that I enjoyed was actually helping companies at the earliest stages.

I had moved from Chicago to San Francisco, when the company got acquired, and for me, angel investing was about, I think, three different things. It was one like, moving here, like getting to know people, like, I can hang up a shingle, and then people will like, meet me, it was a different time back then. 2012.

But two, it was like, maybe I'll be inspired by these people. And I'll want to start something or join them. And then three, it was like, you know, okay, I might make money. And then four was like, this is a foray into an entree into becoming a real venture capitalist. And so those are, those are my reasons for doing it. And then, you know, a few years later, I ended up becoming a VC with Arjun and really enjoyed it.

Jon Low 3:08

Oh, thanks. And then today, with the fundraising, same reason you still in the game?

Sheel Mohnot 3:15

Yeah, the same reasons, which, and the reason I invest at the seed stage is I love having impact and like really helping companies. I love thinking through complex problems, particularly around strategy, distribution, hiring, that sort of stuff. And then of course, like helping companies raise the next round.

So, I'd say like, those are the things that I really enjoy doing. I've done it several times in the past, and I can see myself doing it for the foreseeable future. Like I don't see myself doing anything else. I really enjoy it.

Jon Low 3:49

Nice, well, what a wonderful gift to find the career that you take to the grave.

Sheel Mohnot 3:55

Yeah, exactly. I feel really lucky. And fortunate to be able to do it, youknow, the being an early stage, very early seed stage, and sometimes even seed, right and pre-seed seed Angel.

Jon Low 4:10

How, what have you learned in terms of what to look for in those early stage founders? And more importantly, how, how have you developed your thinking around being supportive on how they build out their strategy or supportive of building that company, especially when what they're building doesn't really have a precedent where they can't say, I am the Uber for, but they trying to actually communicate something that they see that's very unique to them, that arguably, most people have to actually catch up to or get educated on in order to actually see the founders thinking they can draw on biases of the past.

Sheel Mohnot 4:55

Yeah, it is interesting, and I think a lot of, it's interesting because in FinTech nowadays I invest in FinTech. And it feels like there aren't a lot of new thoughts, there's a lot of derivative thinking. But for the truly new opportunities, or what I'd say, like, when I started in this five years ago, it felt like there were a lot more new thoughts. And you have to just like, make people believe you have to paint a picture about what a future looks like, and how your product helps them get there. And so that's, you know, we love helping our founders do that, at the early stages.

Arjun Dev Arora 5:34

And what do you do when you're looking at those early stage founders, whether they're, you know, kind of producing things that are more derivative or, or tangential to what already exists? Or looking at something truly visionary? What are the things that you're looking for in those founders? Maybe, you know, with your FinTech lens, but you've also done investing outside of FinTech. So maybe more broadly, as well.

Sheel Mohnot 5:53

Yeah, for sure. So I would say, the main thing I look for, is a founder who can clearly articulate their vision. And it's weird, because you might say, like, well, what does clearly articulating your vision have to do with building a big company?

And I'll say, well, if you can't clearly articulate your vision to me, you're not gonna be able to sell your customers, you're not gonna be able to sell future employees, you have to we'll sell future investors. So like, a clearly articulated plan for what you want to do, and how you're going to execute on it is really important to me. You know, because I invest in a specialized sector, FinTech, I do, like, I do, like the people that I work with know the space really well.

And oftentimes, they, I want them to teach me something a lot of times, and then I'm looking for leaders that I think can lead a company of hundreds of people in the future. And sometimes you just don't get that feel, there's no way to quantify it. It's like a gut feeling that you have, but we're only looking to invest in companies that will have massive outcomes. And so I want to believe that this leader is going to get them there.

Jon Low 7:07

Nicely said it's, um, it's simple, but effective. Yeah, and, you know, it reminds me of something it's like, if you can also simply communicate it or communicate something effectively— one could argue that you've really understood the essence of the problem you're solving to a level of detail that allows you to get it across simply. Whereas if you have to go into talking about code, yeah, probably not. Probably not the right direction.

Sheel Mohnot 7:40

You know, it's I I've never thought about this until you just said that. But it's like, if you think about how, like, Steve Jobs described a new product versus how like, the PC industry described a new product, it was like Steve described like, a vision. And that vision is, like what you were buying into, versus the PC industry brought into like, a bunch of numbers and jargon.

Jon Low 8:10

Yeah. Well, they said, and, you know, you know, having been an ambassador for some time now, and also having been an upgrade yourself and working so closely with founders. What do you wish that crowd would know more of, before they got involved in raising their first round? If any, that you know, and it can be? It's totally an open ended question. It could be like, wish they knew more about VC or wish they, you know, drew more resources available to pitch or it could be anything? Yeah.

Sheel Mohnot 8:55

Yeah, I would say, you know, I wish they thought more about who they pitch and who they want to have involved. And I think, for me, it's pretty clear at the seed stage, what you want, typically, is you want to work with people that are going to help you most at the end give you the most support at the seed stage.

So, people that have founder empathy, operational know-how, industry experience and a good signal for future investors. And I think people don't think about it as much as they should. Obviously, I'm talking about my own book here. But I think that's really critical, I think and I think like it is seriously what matters.

What can be more helpful is actually a strong brand. And a strong brand can be helpful for recruiting and other things and then Series B and beyond. I think you can just go for the best terms you get but I I think that's one thing that people miss a lot. I think people also, you know, they don't know how to run a process. And I try to help people run a process as much as possible. You want to talk to as many folks as you can around the same time. And that's what I've found to be the most effective.

Try to think of other things I wish I knew, hmmm.... there's so much. Like, when I was getting started, I didn't know anything. We're really figuring it out as we went. And I would say, you know, it's important to understand the industry that you're in and understand, you know, how this process works, or talk to talk to your friends who've done it before and get guidance from them around building an effective pitch and delivering it.

Jon Low 10:58

Thanks for sharing that. And we can as you said, you could probably share a number of other things that you wish you knew beforehand. Yeah. You know, like, really like the way you mentioned, that you wish founders knew to be more thoughtful about who they selected.

Sheel Mohnot 11:18

Yeah, early stage. Like, I mean, thinking in their shoes. I mean, it's obviously understandable why expediency is key. So it's such a temptation, right? Where you need money, either vision, and and you know, for sure that to execute upon it, it's not. It's not brains, you are eating its resources, right?

Jon Low 11:41

Yeah. Like, yeah, so why is it important? Is that? Yeah, actually, like, what's your muscle that needs to be trained? If any? Or what do they think they need to hear to be able to take a step back and actually breathe and go, Okay, if I don't raise in the next month, maybe it's not the end of the world.

Sheel Mohnot 12:11

Yeah, so. So I think the way to think about it is like, you're with whoever is investing in your company, you're gonna be with them for probably 10 years. And that's a long time to get into business with somebody, if you don't feel great about them. And so, I like to think of it as a wedding. And, you know, would you, would you marry somebody that you just met? Probably not. So I think about it that way. And I think, you know, it really is important to set yourself up for the future to take the time and find the right fit for you.

Jon Low 12:52

Thanks, thanks for providing that perspective. But we'll shift gears a bit more. So you said you've had quite a career in VC that spans well over a decade, right?

Sheel Mohnot 13:06

It's actually, I guess, now, four and a half years. But I but you're not wrong. Like I had been angel investing since 2012. Yeah, I think, you know, it's always fun to see your companies have success. And so every sort of up round, you know, you're celebrating a little bit, I'd say moments where I learned a lot are helping co-founders separate.

You know, it's, it's happened multiple times in my portfolio. And I feel like I've learned so much every time about how to do it. And that's one thing that I'm sure is gonna happen again in the future. And I'm much better prepared for, you know, I think going into this, there's a lot I didn't know. And so every time I learn something that I know I can share to future entrepreneurs, I get really excited.

Jon Low 14:18

Oh, that's very cool. And, you know, you talk about learnings you've had along the way that you can share with entrepreneurs are, you know, specifically even around co-founder divorces, throughout your career as an angel investor and venture capitalists? What did you learn about yourself? You know, going through the ups and downs of the industry?

Sheel Mohnot 14:43

Yeah, well, okay. So one thing I learned is, I like this more than being an operator. Because I can be there to be helpful. Give me advice, but then don't have to execute on it. And you know, that's a criticism oftentimes, but that's what I like about it also. I was a management consultant in a previous life. And that's also their criticism there. They tell us what to do, but then they don't actually execute on that. And that's what I do now.

So, yeah, that's, I learned that I enjoy that. And I feel like that's been, that's helpful to me in terms of what I like to do as a career.

Jon Low 15:32

Nice. And, you know, I probably want to give you an opportunity to also clarify, because I think there's a misperception that it can be argued that as an institutional venture capitalist, that your actions have no consequence that you're not accountable to someone else. Right.

And whereas, I'd like to give an opportunity to share some of the moments where, you know, you are a steward of and responsible for big pools of capital that aren't entirely your own, right, because when you invest you're writing straight out of your bank account. Yeah. And then you go institutional, and you're like, oh, there is a consequence.

Yeah, absolutely. Yeah. I think he kind of, like, get into that and communicates that to the audience a bit more, because I think people understand it intellectually. But it'd be great for you to provide some perspective of any sleepless nights or where or Yeah, gone either way on a deal. And it wasn't an easy call, you know?

Sheel Mohnot 16:36

Yeah, you're right, that it is very different being a steward of other people's capital. And, you know, when I was an angel investor, I was writing typically 25 k checks, versus now I'm writing a million dollar plus checks. And it's not for the most part, not my capital. So there's a lot that I have to think about. And, and it does impact certain things like, I don't move as quickly, I, you have a lot of legal work to do, I, I can't just invest in all my friends anymore. And I have to win the deal.

So, those are all things that are different. And the other thing that I, this is not quite an answer to your question, but one of the things I realized and getting institutional is, we can't write small checks anymore. Like we especially because we only invest in FinTech, we're only gonna invest in one company in that category. So we need to get the ownership that we need. So that's, that was a learning that I thought, like, I thought, I always thought like, why wouldn't a fund write a small check to be supportive? And now I know that's not the way it works. And our LPs care about ownership.

And I always thought, like, why do they care about ownership, but now I understand it, it's a function of time that I have, and also a function of influence on the company, like, because of the position that I'm in as a lead investor, I have certain rights in the company. I'm a board member, oftentimes. And that's important to my LPs in a way that I didn't think about or was not important to me as an angel investor.

Arjun Dev Arora 18:13

That's super helpful. Thank you for sharing that.

Jon Low 18:15

Yeah, that's super helpful. And so you know, when you go from writing smaller checks to bigger checks that require a lot more diligence. Let us know some of the consequences, whether positive or negative, that your brain likes to run through before you get to conviction? On a yes or no.

Sheel Mohnot 18:36

Yeah, there are a lot. One thing is, first of all, like, I have to do a lot more due diligence now than I did before. And I didn't always like, as an angel investor, like I never wrote a deal memo. I was always just kind of going with the flow going with my gut feel. Now I write a very detailed deal memo, and it actually helps clarify my own thoughts.

And then in terms of diligence, you know, if you're writing a 25K check, you meet a founder, you can write a check. Now, if you're writing a million dollar plus check, it's probably like, you know, three to four hours with an entrepreneur, and then probably another five to 10 hours of work on the phone, like diligence in the team.

So, like talking to people that they've worked with in the past, and then diligence in the opportunity. And, you know, that's at my stage, which is at the earliest stages of the company. So what I focus more on is the team because the idea in the market can change the team typically does not. So that's where I spend my time and what I have to be doing now as an institutional seed investor.

Jon Low 9:58

And it’s obviously worked well for you?

Sheel Mohnot 20:03

Yeah, it's, it's, it's very early, but I've certainly enjoyed it. And we've had some early success. But you know, that's the other thing in this business is like, you don't really know how good you are for a really long time, it takes a long time to get to exits. And so you don't have immediate feedback the way that a public market investor does. So, it's a different game, but I enjoy it.

Jon Low 20:31

Thank you. And so, and obviously, respecting confidentiality, you know, when you look back at some, have you ever looked back on a deal that ended up not playing out so well, and then looking at the memo and going, What went wrong? Was it fully an unforeseen risk? Was it something I flagged as a more minor risk than it turned on?

Sheel Mohnot 21:02

It's very clear, it's just, it's always people. And the times when things went wrong, I didn't diligence the people enough, and I didn't. And so now, that's why I do a lot more, I might go overboard on it. It was, you know, it's not to say that actually, you know, I've invested in people that had a mixed bag of feedback, but I wanted to get all that feedback and know what I'm getting into first, and that helps me address it.

But yeah, I mean, there have been several times where I screwed up by not investing in the right people, you know, various things. Once, you know, I didn't like some of the judgments that they made in hindsight, you know, I know, now, if I talk to the people that they worked with, before, I could have gotten to that earlier. Or, you know, people aren't as scrappy as I want. So, that is another people judgment that I probably could have figured out earlier on.

Jon Low 22:09

Oh, yeah. And, and some of those things that are easy to overlook, right?

Sheel Mohnot 22:14

For sure, for sure. But it's where it's where like, just the time and practice in venture helps you get over it. Like, the way to get better is to, you know, have practice and make mistakes the first time around. And fortunately, in our first fund, we got lucky a bunch of times that made those mistakes and learnings like, much easier to be much more palatable. And so now hopefully this next time, we'll make fewer of those mistakes, I'll make a different type of mistakes this time.

Jon Low 22:48

Thanks for sharing, I mean, even more than helpful and really giving us a bit bit of insight into being a seed stage investor. The other thing I want to give an opportunity, because we're hitting home and on time, is, you know, as you grow your fund with Jake, obviously, but because Jake's not here, I'm going to focus on you.

Yeah, you know, VC investors, there's a certain persona, a perception that most founders have about venture capitalists. But if there are a few things that you would really want founders to know about you, you as an investor, what would you hope they really understood?

Sheel Mohnot 23:36

So, a couple of things that are like really cliche in venture, I'll say, which is, I think, you know, we're in this because we want to invest in a better future. I feel like it's really cliched, but it's actually true for me and Jake, like we genuinely think that our companies can make the world better and in financial services is a great entry point into improving people's lives. So we truly care about that.

Again, sounds hokey, but it's something that is true for us. And then, you know, there's this also this notion of VCs not actually being helpful, and there's this, like, ‘how can I be helpful’ trope, I'd say like, we get real joy out of helping our founders think through issues and being there for founders, we tend to forget with most of our founders, we're talking to them like on a daily or every couple of days basis.

So we truly want to be there for the founder, all the time. And it does motivate us. Like having impact on the company is really motivational for us. So we don't want to just be you know, obviously we're cheerleaders on the sidelines as well, but we also want to be that trusted partner that they come to.