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It’s been a tough time for the startup world, particularly tech. According to Crunchbase, “More than 191,000 workers at U.S.-based tech companies were laid off in mass job cuts in 2023, according to our tally, and the cuts continue into 2024.”
VCs have also struggled in these challenging times. Cambridge Associates wrote: ”…we expect the VC market will be a mixed bag in 2024. Among existing investments, we believe there will be an increase in “down rounds,” meaning valuations will decrease across financings. At the same time, we expect AI will continue to serve as a major market catalyst, supporting new investments and fund commitments.”
For Parkway VC, it’s a sweet call. As founders and general partners Jesse Coors-Blankenship and Gregg Hill describe Parkway as a highly focused investor, “AI, simulation, quantum technology, ubiquitous data and complex engineering are the general technical categories we track.” Parkway is one of the most active VCs in the space, with investments in high growth series A stage companies like Figure.AI and Oxos Medical.
A recent HBR article put the VC challenge this way: “For VCs, having a clear message about what you will and will not do, how you provide real venture assistance, and how you approach bold visions is key to winning these types of opportunities. And they matter tremendously for fund returns.”
In this interview Coors-Blankenship and Hill describe how they make investments, and the strengths and experiences that have made the firm a major success.
Welcome Gregg and Jesse. What’s the origin story of Parkway? What brought the team together?
Gregg: Parkway came together in 2018. “Jesse and I have been friends and partners for twenty years. Both USC graduates. When Jesse founded his first tech company, Frustum, I was an investor and board member, and we grew Frustum to a successful exit in late 2018. That was the impetus for Parkway. What keeps us together is a shared vision, our shared entrepreneurial experience, and Jesse’s pioneering work in AI.”
What’s the vision guiding Parkway’s focus and investments?
Jesse: “We see a future where AI is embedded in every product and/or process. We’re interested in expanding markets with innovative products that open up new market territory. We’re looking for significant innovations that change lives for the better and, as a consequence, disrupts and expands markets.”
Some VCs lead investments and others participate and spread the risk. For people who don’t know Parkway well, where do you fit and why?
Gregg: “We are highly selective, very active, investors. We don’t play averages. The best outcomes require active and energetic participation. Frustum taught us that successful early-stage companies navigate many critical decisions early on. A key challenge – and a source of our success – is our ability to help founders “de-risk” their business. Our insights as successful entrepreneurs are more valuable to our founders than the capital we bring.”
What’s exciting in the portfolio now, and where are you looking to add?
Jesse: “We’re investing in some amazing technologies. AI, simulation, quantum technology, ubiquitous data and complex engineering are the general technical categories we track. Robotics company Figure.ai is a great example of a portfolio company on the bleeding edge of innovation. We led their Series A last Spring and are amazed by their progress in humanoid robotics: their robotics platform learns new physical tasks by taking in live data and training itself without any added programming. Figure will have extraordinary economic exponential as it unlocks new automation capabilities.”
Can you describe the timeline of a typical portfolio company from entry to exit?
Gregg: “Most of our investments are Series A stage, where we like to lead the round, start making an impact, and build the relationship. A Series A VC has different economic concerns then seed or angel investors. A few of our portfolio companies are later stages where we’ve been with a company for a while or it’s a new deal that will have an impactful exit in a short timeframe that will help us return capital commitments. Overall, we’re typically with a company around five years on average.”
What are the elements that make a company attractive to Parkway?
Jesse: “We’re looking for companies with a strong, capable, founding team. We want to see a “collaborative mindset” with board members. Without a drive to learn and collaborate, we won’t be effective helping them navigate through their challenges – and they all face challenges. Key founding team strengths we look for: leadership skills, technical expertise, the ability to operate and execute, are all important. Finally, we’re looking for evidence of long- term success, so early adopter customers and clear product-market fit are good signs.”
What’s the Parkway “secret sauce” that has generated nearly a 100% success rate? That’s pretty impressive.
Gregg: “We strive to add value in a number of ways. Our entrepreneurial backgrounds help founders to deeply understand their market and customer. Our relationships provide essential resources in many areas. Ultimately, we build trust through the assistance we offer. TestFit is a good example. We led their Seed and Series A rounds. The company now has 50 employees, a true enterprise product and significant revenue and corporate partnerships. We knew TestFit would need to expand their offering carefully and in a targeted way to attract corporate partners. After helping them to identify a new market segment, we now have Prologis as one of our largest customers and financial partners who joined us in the Series B financing.”
What is it about the VC role and goals that founders often misunderstand?
Jesse: “Founders often misunderstand the economic expectations of venture capitalists and how funds work in general. There are many potentially great companies out there, but only a few really should take on venture capital. The economic goals of venture capital are very strict: a path to a large exit multiple within a reasonable period of time. The kind of companies that fit our model not only have the operating characteristics we mentioned, but they must have the growth and profitability prospects that make it an attractive VC investment.”
What advice would you give founders looking to work with Parkway or another VC?
Gregg: “Experience matters. Many Founders succeed on their second or third companies. Timing is a key area. For example, founders might feel pressure to oversell their product readiness. A false start can be hard to recover from if expectations don’t match up with promises. Storytelling is very important: Many founders show too much technical information and not enough insight about their market. Ultimately VCs are looking for a business to back, not a hammer looking for a nail. Lastly, many founders think VCs have a limitless supply of money. That’s just not the case so it’s important to keep your corporate development active to ensure you have access to investment.”
Finally, what skills, culture, etc make a great VC firm like Parkway? What makes the firm work as well as it has?
Jesse: “Gregg mentioned sustained velocity as key. Anything that inhibits the velocity of the firm has to be addressed quickly. But more generally, we think of VC skills as a combination of basics and unique attributes. The basics are well established: thoughtful about your firm’s thesis, disciplined in making investments, actively supportive of your founders, and conscientious in meeting the expectations of investors. But the unique attributes derive from having been successful founders and successful sponsors and investors of great young companies. That path offers lessons and insights that can’t be taught at B-school. Everything required to run a VC fund otherwise is fairly commoditized in the industry but having the tools doesn’t insure success.”
Viva la revolution!
