Q&A with Primary Venture Partners' Cat Hernandez

Updated: Dec 5, 2018

Cat Hernandez is currently an Operating Partner at Primary Venture Partners, based in New York City. Her extracurriculars include functioning as the Head of Due Diligence for PeopleTech Partners and Board Member for NYC Blend. Prior to Primary, she spent a decade in various operations and people leadership roles.

What attracted you to venture capital and working with startups?

I have different reasons for why I became interested in startups versus why I became interested in VC.

I have always been the kind of person who thrives in organized chaos. When you’re young, the only mode is “full speed ahead” and it’s perhaps the most invigorating way to learn and make an impact, especially in the early stage startup environment. What’s most prominent is the mentality around ownership. I don’t think that exists as much in corporate America. Places like Morgan Stanley or American Express; they have to work differently because they’re at a different scale. I learned early in my career that impact was often where skill met influence and that was best experienced in small, scrappy companies where less bureaucracy existed.

I view venture capital as an expansion of that. At a startup, you’re helping build one company at a time. In venture, I knew I’d be able to support many founders and startups at once. Having experienced the operational challenges of a growing company, I am grateful to be on the other side of the table and in a position to help our companies work through those challenges. Founders want to work with people they can lean on to help solve some of their most pressing problems; someone who functions as a trusted sounding board. It's harder to get operating breadth if you're working at one startup at a time. You can sometimes get that foundation through education, mentorship, and networking, but in my experience, there's nothing like VC when it comes to getting exposure.

Why Primary Venture Partners, in particular?

I was introduced to General Partners Brad Svrluga and Ben Sun by someone I had previously worked with. We didn’t overlap for long, but she ran finance for Brad’s previous portfolio company and spoke highly of his leadership. The answer why I joined Primary is two-fold:

  1. It felt like a startup. There’s something really unique about building a fund from scratch and establishing a differentiated identity in the market. Primary has always been hyper-focused on establishing an identity around portfolio impact, and it’s been thrilling to build a truly thoughtful and impactful fund around that.

  2. Brad, Ben, and I were all aligned around providing meaningful support to our portfolio companies in a way that will help them build strong foundations and move successfully from seed to Series A. That’s rare. It’s that relentless focus on being the most impactful partner to our founders that carried on from our first conversation to how we think about investing today. We know we’re helping our portfolio move into Series A. So once they’ve achieved initial product-market fit, the next step is strengthening their internal culture and partnerships, creating a repeatable sales cycle, and bringing in solid talent. Those are some of the hurdles we’ve always been committed to helping them overcome.

This past summer, we raised our second fund at $100 million. I’m proud to say that while Primary has achieved some great things to start, we've got a long way to go. In this next phase, we’re conscious of how we scale and support a growing list of investments. That dialogue is exciting because, as a young fund, we’re continuing to shape Primary’s legacy, which is personally important to me in the prime of my career.

Why was HR and talent a good springboard into VC?

What I leverage most consistently at the seed and early stage is that everything is about people. It’s all about understanding their strengths and weaknesses, building self-awareness so they become better decision-makers. If you’re even remotely good as an operator, there’s no world where you can’t translate those skills here.

My core skills are around identifying good talent from a founder perspective. I know the kind of profile that startups need and how to evaluate for fit. I’m not sure I could apply this superpower in a later-stage or growth equity VC. What gets me excited about Primary is not only identifying a rocket ship and generating returns for our investors, but being able to truly shape the future through founders. If I can help build the next five Amazons thoughtfully by building great teams, then I’ve done my job successfully. For the next Uber or next Airbnb, I want to help establish best practices from the beginning. Working with early-stage companies at Primary has been the best way to fulfill that mission.

When you’re tackling talent issues, are you mostly addressing hiring or development?

It’s a mix, because problems that startups face from seed to Series A have ripple effects across product, engineering and go-to-market. So we try to support our companies in hiring senior-level hires across all of those functions. Those foundational team members really have the ability to support founders directly and fast-track the best approaches in their domain areas. They know how to experiment at the highest level.

But that doesn’t mean other hires aren’t as important. We want to bring insight to overlooked areas of the hiring process. When our portfolio companies hire a marketing leader for the first time, we help them think through details they might not have considered, like whether they value a demand generation versus product marketing background. Do they want an expert in brand marketing? And we’re not just bringing that mindset to individual roles; we want to make sure these decisions move the needle from seed to successful Series A.

It’s slightly different when you’re talking about engineering. Every engineer you hire can have a massive impact on product and code shipping, but we never promise that we can help hire their next 10 engineers. Sure, we can make introductions, but ultimately we’re there to help founders think about talent and development as the business evolves. It’s about being honest about where we, as a venture capital firm, can have tangible impact, and helping our portfolio companies build a sustainable talent infrastructure that can grow with them even once we’re out of the picture.

How do you tap the NYC ecosystem to find talent?

Because we’re so hyper-focused on New York City, we have enough boots on the ground to encounter talent all the time. Almost daily, we meet great operators and potential founders. Much of it comes down to the strength of our personal networks and strategic communities, as well as Primary’s Expert Network and engineering pipeline. Beyond that, we find a lot of people at large startups like MongoDB that have individuals who thrive in early-stage environments. But there’s no magic to it. It’s not easy. We take care and diligence to find the right spaces and tools to identify talent. We can only call so many favors within our personal networks. The wonderful thing about New York is that exceptional talent resides in so many industries - fashion, finance, media, etc. We’re open-minded and flexible about where that talent comes from.

I’m sure you’ve talked about this at Primary, but we’re seeing seed funds raise a massive amount of capital from investors. What does that indicate to you about the market?

Anything driving capital into NY is a good sign; it means we have a healthy ecosystem for investing. These seed funds are raising lots of capital because the size of seed rounds have grown. If you go back 10 years, seed rounds were around $200K. Now we’re cutting checks for a round that’s anywhere from $1-$5 million. In order for us to get into increasingly competitive capital stacks, we need to raise more money to achieve the returns that our investors look for. New funds have also emerged, offering subject matter expertise to invest in areas like healthcare and biotech or consumer technology.

I’d say it’s healthy from a macro standpoint because, at the end of the day, the seed stage is the most collaborative and founder-friendly. So seed funds spend more time helping businesses with their fundamentals. That’s significant for founders because seed money isn’t just capital but support in everything from partnerships to talent.

What sectors are you most excited about?

I’d say B2B and enterprise technology, partly because that aligns closest with my background. But I believe that companies influencing the future of work are really powerful because the American workforce is changing, whether we like it or not. We’re going remote, we’re automating, and we’re facing competition from abroad. I’m interested in startups tackling these trends in creative ways. That also means I’m looking at startups in the mental health space from a B2B standpoint.

I also think that people don’t pay as much attention to our aging workforce. My parents fall into that bucket. I think about what will happen when they retire with specialty knowledge - how do we continue to leverage that expertise? It’s going to be 40 years before Gen X passes away, and that’s 40 years of valuable information that needs to be harnessed and institutionalized. The market is ripe for mission-driven companies transforming our approach to work and knowledge transfer.

How do decisions get made at Primary?

We make decisions as a team. Because we’re all in New York, everyone can attend partner meetings and pitches. Not everyone is involved in diligence, but people are looped in as it becomes necessary.

We have a number of considerations before we make any investment. It’s not just what other seed investors think. We evaluate whether a team is the right fit for us. Successful companies can’t be built alone; it’ll take six years or longer to see returns from the average investment, so we need to be able to forge genuine partnership and collaboration along the journey. We also think about if an opportunity is a billion-dollar business? Is this a founder that we want to do business with for a long time? Are they compelling, in terms of sales and hiring? Because we only back 8-10 new startups a year, we use these criteria to guide us and give us strong conviction in our investments.

What challenges have you faced as a woman in VC?

From a very high level, venture is a world of middle-aged white men. And if you add another layer, it’s also dominated by the Ivy League. By virtue of being a woman and Asian American, there are few people in venture who look like me. It’s something I embrace and use to carve out my competitive advantage. There are things that I know I do well. There are areas that I’ve mastered like managing up, having a constructive point of view, and approaching building from a holistic standpoint.

I’m lucky because my partners value me and my opinion. I’m a trusted decision-maker. Very often, people give credit to the investment side and disregard everything else as strategic, or dismiss it as the work that general partners don’t want to do. I’ve found a nice marriage of what I’m good at and what our portfolio needs. I can measure my impact. I’m in this unique position that I don’t take for granted. I coach myself to never be afraid to ask for more, and to always have confidence in delivering.

What advice do you have for young women who want to enter VC - on the investing, operations, or platform side?

That’s a good question. I’d say that you should find people who align with your values. My partners and I are on this journey to build and support Primary; I believe much of our cohesion and success has come from sharing values. It’s not something I could walk away from tomorrow.

Most importantly, don’t shy away from being your own version of aggressive. Getting into venture is always a combination of luck, hard work, and timing. That’s what got me where I am, and I’ve never been afraid to take full control of my career. I make it a point to remind myself of where I am, where I want to be, the impact I want to make, and how I can get there. Even if I didn’t know exactly how to get there, I pushed more than most people. In my early 20’s, I ran large, fast-growing teams. At Primary, I’m trusted counsel to many of our portfolio companies. I aspired to have this three years ago, and I took the steps to make it happen. Of course, you can’t be in control of everything, but you should always be prepared for the moment that luck and happenstance strike.