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(Jeff Morris Jr., Founder & Managing Partner at Chapter One)
Prior to founding Chapter One, Jeff was the VP of Product, Revenue at Tinder. In the role, he led the revenue team to the #1 top-grossing app in the App Store and directed one of the top-grossing products in mobile history.
At Chapter One, Jeff has invested in companies like Lyft, Lambda School, Superhuman, Roman, Mercury and Branch Metrics. Chapter One is backed by Sequoia, Kleiner Perkins, Bain Capital, and 70+ other Limited Partners.
As a product leader, Jeff is passionate about building high performing teams and creating profitable products. He is known for being one of the most passionate product minds in the subscription space.
This interview took place via a phone call between Jeff and Gaby Goldberg (Contributor at The Takeoff) in early May.
You can find Jeff on Twitter @jmj.
We hope you enjoy today’s Edition.
Gaby: To start off, what exactly is Chapter One? What is the fund's mission, and what kinds of companies does the fund invest in?
Jeff: Chapter One is an early-stage product-driven fund. We tend to invest in entrepreneurs who have a strong opinion about how product design should work, everything from the way the UX and UI should feel to distribution. We tend to invest in folks who are former product managers and heads of design at large companies. We also often invest in technical teams that have a strong intuition about how a product should behave. We tend to invest in businesses with recurring revenue: this tends to be software businesses that have either a B2C subscription component or a B2B subscription, which, for most B2B businesses, is how they monetize. Some areas I love to invest in are developer tools and productivity. Developer tools are anything that help make developers the athletes of the workplace, because they’re the superstars. Developers are often the highest paid people in the office, and they’re also really hard to retain. If you can build software that makes developers more efficient, more productive, and happier, I think a lot of companies are willing to pay for that. Productivity is a vertical that’s reimagining old, antiquated software products and making them more streamlined. An example of that would be Superhuman. I'm really interested in the “Superhuman for X” category. I think that analogy is just meant to say, highly performant, beautifully designed software that often serves a specific use case within someone's workflow. In the case of email, people spend hours a day doing emails but never think of the fact that Gmail is a terribly designed piece of software. So I’m really interested in productivity.I’m also generally interested in any kind of subscription businesses. I think the subscription business model as a whole is the purest form of a customer-company relationship where the company has to continuously deliver value. I love businesses with a membership component because you can build community and create brand loyalty. In the best cases, you have customers for 10+ years or 20+ years. A lot of people have been using Microsoft products for their entire lives. I try to look for software with recurring revenue and has the potential to be a piece of software that people use for their entire lives. Those are some of the things I look for. There’s also a mix of companies where you become really fascinated by a space and just dive in for a couple of months. In the past, mental health and health/wellness have been categories that I dove into — just things that make people feel better and live healthier lives.
Gaby: I love what you said, especially about the membership component building community. For me, I always saw memberships very broadly — it’s obviously beneficial from a financial standpoint, but the idea of having a community rally around your product, especially recently with things like the Roam cult and other examples like that online, is really interesting.
Jeff: Roam is a great example. A lot of the communities that perform the best are API-driven companies with products that developers want to build on in their free time, or API's that companies want to build on top of. If someone is willing to build on top of your software for free in their spare time, that, to me, is the ultimate signal that you’ve built something special. Right now, I’m spending a lot of time in open-source communities, looking at trending repositories on GitHub and reaching out to those people. On GitHub, as I am sure you’ve seen, you can look at trending developers each week. I’ve been reaching out to a lot of the open-source leaders and trying to figure out where these new cults might emerge.
Gaby: So, switching gears a bit, your background is fascinating; you studied English and Film, and then you went on to lead revenue products at Tinder, and now you manage your own fund. Can you tell me a bit about that pathway and how some of those experiences along the way made you especially well-positioned to execute your mission now?
Jeff: My background was not at all logical; there was no career path that really makes sense given my background. I studied English because I loved writing, and, out of high school, it’s what I felt I was best at. I didn't think about the career path quite honestly. After graduating from UCLA, I applied to USC Film School, thinking I would be a producer for television or film. I did that for two years — and that was in 2009 when the last financial crisis was happening. It was just a terrible environment to try and get a job in entertainment. I grew up in the Bay Area, so it made sense for me to switch career paths. That's when I moved to the Bay Area and started working at startups. I was building a lot of products in my free time, and I had released, I think, three number-one products on Product Hunt. I was building my reputation in the product community, and Tinder reached out to have me join their product team. I was kind of just in the right place at the right time. Our Head of Revenue was promoted to be the CTO, and we sat next to each other at work and he got to know me really well. He asked me if I wanted to basically inherit his role, which I happily said yes to. So much of what happens in our careers is just luck and being in the right place at the right time. That was a good break for me.
Gaby: That's an awesome story! As a first-time fund manager, how do you prove your value up front and show the value that you provide in deals, particularly the deals with co-investors and with people you really want to collaborate with in the future?
Jeff: I had been doing a lot of investing prior to the fund. I was a scout for Index Ventures for a while and had a syndicate on AngelList. I’ve done over 60 deals already, so I feel like I have kind of figured out how I actually add value. When I first started investing, I actually, frankly, didn't know, but over time it became clear to me that people want me on their cap table because of my product background. I positioned the entire fund, and myself as an investor, to serve that purpose. So, part of it has just been establishing that as my value. The other part of that is actually delivering on that value; making sure when I work with an entrepreneur, I’m scheduling recurring meetings with them to talk through different product ideas, helping them with the roadmap, and helping them with the product recruiting. Eventually, you get referrals from people you've invested in, and investors tend to figure out who adds value on each cap table. The metric I try to optimize for is CEO referrals. So, within the portfolio, how many of our CEOs are actually sending me deals? If they’re not sending me deals, it’s probably a sign I’m not doing a very good job.I think the biggest part is just defining what you want to do on a cap table. I think investors who say they offer a wide range of services — unless they are a multi-stage firm like Andreessen Horowitz or Sequoia who have dozens of employees to help add value — need to focus their value and their offering, especially first-time GPs. That’s what I tried to do.
Gaby: My next two questions are advice-related, but for two different audiences. First, your advice for startups. Everyone’s thinking about what’s going on in the world today, and companies across all industries are in uncharted waters. What advice have you been giving your portfolio companies to help them best navigate today's markets and create strong businesses moving forward?
Jeff: That's a great question. The truth is, there’s no one-size-fits-all answer for every company right now. It very much depends on the stage and the state of your business. Early-stage companies who have recently done fundraising rounds and have cash in the bank should be in company preservation mode, where they’re trying to limit their expenses, probably being really careful about hiring. If you’re an early-stage company that just raised, it is kind of business as usual unless you happen to be building within a category that has gotten killed by COVID. If you are building anything in offline travel, offline retail, or entertainment, you probably have to adjust your business for a period of time. That might mean pivoting the business in the worst case, but most of the time, it just means trying to be mindful of your operating expenses.Then, there are later-stage companies that may have raised at a really high valuation and hired too many people. For those folks, who are further along, I think there are much bigger questions about possibly reducing headcount. They are really trying to survive right now.At Chapter One, we have two companies who are series A at this point, one that just graduated to Series B, and another seed that’s going to be Series A soon. Most of the companies in Fund I are early-stage companies with a couple of founders and pretty limited expenses, so we have been lucky from that point of view. As an investor, reallocating your time to supporting your portfolio is probably the best thing you can do right now. I've definitely been doing that with each company. I know some investors who are literally reviewing P&L statements line by line and trying to figure out everything from what software, what SaaS applications, and what contracts can they potentially renegotiate, to what products they can stop paying for. I've also seen companies who are planning to go fully remote after COVID.
Gaby: Definitely an interesting thing to think about. My next advice-related question is for The Takeoff's subscribers, the majority of whom are current college students, especially undergrads, like me. What advice would you give to a student who is interested in breaking into VC? Are there certain classes, skills, or experiences that you think are important to pick up along the way in order to become an investor?
Jeff: One great thing is obviously having some operating experience. I saw a stat the other day that ~70% of people on The Midas List have been operators at a company before. I think there’s a lot of clarity that comes from operating, in terms of being able to identify different challenges in the workplace but also being able to empathize with entrepreneurs and gain their trust. I’m not trying to discourage people from going into venture right after school, but I think there are some benefits to gaining operating experience. If you do want to go directly into venture, I think trying to do exactly what you are doing, which is getting your foot in the door so you can be part of the investment process at different firms, would create a lot of trust. If you have the means, even investing is useful. It doesn't have to be private markets, you could literally open a Robinhood account and set aside $500 and just try to grow that over a year so you have stories you can tell about managing money. I've seen people create fantasy startup portfolios, where they give themselves a certain budget to spend on startups and stack rank companies and allocate those assets accordingly. I think trying to simulate or get real-life experience in investing is really important because it's a skill and something that requires a lot of time and mistakes, quite frankly. I also think having a really technical background, or some technical skill helps. In your case, you have a technical background and have studied things like AI and can speak to them with a certain level of technical proficiency that you can't get if you didn't spend a lot of time on those subjects. Being able to go deep in a few different areas is helpful so you can come in and say, I'm going to be the person who covers artificial intelligence better than anybody else. Having some specialty is always attractive.I would also say doing things like building your personal brand are always helpful. It sounds kind of cliche, but sharing your thoughts online is helpful so people can start to understand how you think. It can also create a strong connection with entrepreneurs. Whether through blogging or Tweeting or whatever it might be, I think it’s all really helpful.
Gaby: That's all really good advice. I haven't heard about the fantasy startup portfolio before, but it’s a cool idea. I'm definitely going to look into that.
Jeff: There is a public market fantasy stocktaking-thing that I just signed up for a couple of days ago. It's a fun thought process. This guy Turner Novak (GP at Gelt Venture Capital) did it for startups. He would publish his thoughts every year. Turner is now a GP at a fund, and he lives in the middle of Michigan, I think; he’s not who you would expect to be in the information flow in Silicon Valley, but he’s just done a great job of that.
Gaby: Do you have any favorite books, movies, or podcasts that have been influential in your life or, specifically, in your career?
Jeff: The book I always recommend is The Catcher in the Rye because that’s where I kind of learned how to write. I feel like Holden Caulfield in The Catcher in the Rye said whatever he wanted to say, and it really felt like stream-of-consciousness writing. I’ve always tried to share whatever’s on my mind and write how I hear things in my head. I think that’s been good for me because it creates a certain level of honesty that people appreciate.Podcasts are not quite as deep, but there’s one called Invest Like the Best with Patrick O'Shaughnessy that I really like. He interviews people from different financial backgrounds; some are VCs, some work at hedge funds, and it's a really great investing podcast. I also like Venture Stories by Village Global. Erik Torenberg is the host, and it’s just deep one-hour intellectual conversations from different cultures and ideas within tech. I also like The Twenty Minute VC with Harry Stebbings, who is a friend of mine.
Gaby: The Twenty Minute VC is definitely my favorite podcast.
Jeff: Yeah, it's just kind of snappy and fun and Harry does a really good job. There are so many podcasts you can listen to, it's kind of overwhelming, but I do really love it and I listen to a lot more podcasts than I read, unfortunately. I also read a lot of newsletters. I do Ben Thompson's newsletter, Stratechery, and there are so many good newsletters on Substack that I read, too.
Gaby: Okay, great. I’ll need to check those out. Thank you so much for getting on the phone with me! I’m excited to get this out.
Jeff: I'm excited, too. Good luck with school the next couple of weeks!
- * Please note that our interviews may be edited for length, content, and clarity **
I’m on Twitter @gaby_goldberg 👋