Q&A with White Star Capital's Karolina Mrozkova

Karolina Mrozkova is an Associate at White Star Capital, based in New York City. Prior to joining White Star full-time, she was a model with Elite Model Management and Supreme Management in New York, and a student at NYU Stern.

What drew you to venture capital and working with startups?

This goes back to my childhood in Prague. My dad was an entrepreneur in the retail space. He is one of my greatest sources of inspiration; I thought I’d follow in his footsteps. With that in mind, I finished the IB program at an international school and started applying to universities in New York and London. I intended to get a business degree and start my own company. That was the dream of a 19-year-old me.

I didn’t know anything about VC back then. In Prague, startups are traditional self-funded businesses or funded by bank loans. Rarely is anything VC-backed. Regardless, my life took a turn when I was scouted by a modeling agency shortly before graduation high school. That was a whole new world. All of a sudden, I had a chance to do something incredibly unique. I signed with an agency and deferred my enrollment to NYU. After a year, I was doing well in modeling and landing great gigs for some of the most iconic brands in the industry like Chanel, Lanvin, and MiuMiu. I did move to NYC, but I deferred for another four years so I could travel on the road and focus fully on modeling. Once I got to Stern, I continued to model while studying finance and marketing to pursue that goal of becoming an entrepreneur. I eventually discovered VC as the career that combined entrepreneurship and finance – both of my passions.

Why White Star Capital?

For most people who get into VC after college, it happens partly by perseverance and partly by chance. Yes, the recruitment process is slightly more standardized for bigger funds like Insight, NEA or Softbank; they tend to hire analysts and associates in (small) groups like a bank would. But with other VC firms, the hiring process is more network based. When I was trying to get into VC at the end of my junior year, I went all out for it. I started cold emailing and cold calling. If I knew someone at a VC firm, I’d kindly ask them for introductions to other investors. That’s how I slowly got to White Star Capital - one intro led to another. I met with Elie Denfert-Rochereau, one of the principals in New York, who took the meeting even though they weren’t looking specifically for interns. He liked my excitement for VC , and introduced me to the rest of the team who thought my background was relevant to their thesis and a good fit for the summer. I continued my internship through my senior year at NYU, and, 8 months later, joined the team full-time in New York.

White Star has a very international DNA. We have offices in New York, Montreal, Paris, London, and Tokyo. Everyone in the team has global experience from living or being raised abroad. Collectively we speak 8 languages and hold passports from 10 countries. We put a lot of value in that because it helps us reach different founders and offer great opportunities to our portfolio companies. I knew I wanted to be at an early-stage VC firm. I realize how lucky I was when everything I wished for aligned at White Star from the vertical focuses to size and number of investments per year.

Given the global nature of White Star Capital, can you walk me through the investment process?

We very much work as one firm, not separate offices. Whether we’re evaluating an investment in North America or Europe, we care about it as a firm. We pull the best people and resources from each office for each deal. If it's an investment opportunity in the e-commerce space, we might have people from New York, Montreal, and London working on the deal.

Many of the companies we look at would benefit from our global network; they’re companies fighting to go international. We often help companies make the leap from Europe to North America or to Asia, and vice versa. It’s a big value-add but it’s definitely not a set-in stone criterion. If a company is not expanding internationally in the next year, that doesn’t matter if it’s a good investment opportunity – take Freshly, for example, or KeyMe. Both companies focus primarily on the US market (at least for now) and they are doing incredibly well.

There’s a great dynamic to working with almost 20 people across 5 offices. We’re all very close even if we don’t see each other every day. We do weekly calls to catch up and talk about deal flow or trends. Those are super helpful to know what’s happening in Europe or Asia as market trends aren’t always aligned across different countries. Very often we’re exchanging knowledge about a space that’s more sophisticated in one region and figuring out ways for the others to get ahead of other investors.

What kind of investment areas are you looking at?

White Star looks at three core areas that are pretty macro but essentially converge on entrepreneurs who are the forefront of their industries: collecting, collating and bringing data to life.

  • Disruption of Commerce. Especially digital commerce, which is growing faster than physical stores. We’re looking at companies here that are both B2B and B2C. One of our most recent investments in this sector is London-based Butternut Box, which aims to change how pet food is distributed.

  • Digitalization of Finance. That covers a lot of sub-sectors like payments, insurance, infrastructure, consumer finance, and blockchain. A good example is Clark, which is an insurance platform based in Frankfurt. We co-led their Series B last summer.

  • Sensors and Algorithms. These are companies that leverage data, data analytics, AI, and IoT. One example of a White Star investment is Unacast, which aggregates location and direction data. They’re mapping how people move in the real world, the same way we can see how they “move” online.

I personally like the commerce sector because it goes well with my background in fashion and long-term passion for consumer and retail. It’s even better that I’m in New York which is the epicenter of all-things-commerce. Because of the city, we see companies on the cutting edge in commerce, fintech, enterprise, real estate, and healthcare.

Speaking of healthcare, I recently read one of White Star’s Medium posts that mapped opportunities in mental health and wellness.

We’ve been looking at mental health since the beginning of this year. We’re very passionate about this space, and it’s being driven by Ed Gaussen who is an associate at our London office. We find it relevant for many reasons, especially as something that has been overlooked for so long because it's hard to measure/quantify. Mental health is important for general human wellness and company productivity.

Deep dives are a big part of what we do. We talk to a lot of companies and map the sector publicly as a great way to educate internally and inform the tech community that we’re seeking opportunities in that area. We know it’s working because other investors and companies reach out to us to have a conversation when they come across those blog posts.

Why did you gravitate towards the early or pre-growth stage?

I was not sure what stage at first. I think they all have their pros and cons. In general, I was more interested in finding myself in VC than any other consideration. But I can tell you what I like about it now that I’m here!

Early or pre-growth stage funds tend to be smaller. You end up having more impact and exposure to the portfolio and investment processes. As a junior person in funds that are bigger in size or in the growth/late stage - from what I’ve observed - you are more focused on one part of the process like sourcing. Unfortunately, not always do you get to see how the process goes from there till the finish line. I definitely like having the smaller team and immediate contribution and impact.

This is more of a personal preference, but I think it’s more interesting to look at companies when they’re in the early stages. Other firms and investors might be more interested in the strategic components of investing at the later stage. But seed and Series A companies are still figuring out product-market fit. We have to evaluate whether this is the team that can take this small company from anywhere around $3M to $100M+ in annual revenue. I like that very personal, human aspect.

You’re also very involved. These startups tend to be under-resourced. They don’t have the full team that they’d like to have. Often, we help with hiring because of our network. We are an open book – entrepreneurs can tap into our network to look for mentors, clients, advisors, partners, vendors and so on. We help with new fundraising rounds (if we did the Series A round, we help structure their Series B pitches and make relevant introductions). And because we’re only on Fund II, we’re trying to be actively involved with our companies. We don't have 200 investments that we’re overwhelmed with and only “focus on the top 10%." For White Star Capital, every investment is very personal and equally important.

What changes have you seen in White Star from Fund I to Fund II?

We’re like a startup ourselves. We started as an institutional fund in 2014 and have done around 25+ investments (8-10 a year) which is quite standard for a Series A fund scenario. Our first fund was about 1/3 of our current $180m Fund II. With this fund came lots of structural changes. Fund I was more weighted towards seed and Series A since we wrote smaller checks; more capital now allows us to play at the late Series A and early B stage. That’s a big evolution in terms of sourcing, positioning, and how we think of our reserves.

We also had to increase team size and with that has to come more structure into our processes. We considered things that were not prioritized before like having a CFO - now we have Julie Plouffe in Canada. We've also been joined by Matthieu Lattes, who is our new partner in France and promoted several people internally. When I started a year ago, as an intern, we were in the process of raising Fund II. Timing and the firm’s momentum is very important when you’re looking to join a fund. Part of the reason I came on full-time is because White Star just raised capital and needed to strengthen the team.

There are some other things that we’ve learned as a firm like the healthcare space. We’ve recently made investments in telemedicine through Dialogue in Canada and Echo in London (a mobile-first delivery platform for prescription medicine and chronic condition management). The trend that we’ve been seeing in healthcare is not only digitizing but also dismantling everything that was under one umbrella of a big hospital, insurance company or large pharma. Similar to what’s been happening in the financial industry for a while or even in commerce. Now startups are focusing on becoming the premier resource in one specific service. For example, you used to go to one place that handled all debt services. Now you have startups that focus solely on mortgages (Blend) or consumer credit (Affirm). This means that startups can often optimize (both in terms of service and price) and personalize their product to sell people exactly what they need. When done well, it can be cheaper and more efficient. As a VC firm, we’re shifting our attention to startups that make the status-quo experience more than just marginally better – I think that KeyMe, Echo or Drop are great examples of that!

What challenges have you faced as a new investor in VC?

Going into VC has definitely been a very steep learning curve for me. The three things that I am still soaking up and trying to get better at are time management and efficiency, pattern recognition, and communication skills. One of the hardest things is to find the most effective way to cover as many deals that fit our scope as possible. This becomes quite challenging in smaller teams you wear more hats than just the deal sourcing analyst. When you are also involved in LP reporting, portfolio management and support, sector deep dives, and due diligence. I think I now know and tried all the possible tools and productivity apps out there.

When it comes to company evaluation, I think that needs time and repetition. Once you speak to 100s of companies you start recognizing patterns that make some companies good and some companies great. I'm speaking to as many companies as possible and slowly start seeing what the key differences are but it’s a work in progress!

Last but not least, we are in a business of helping someone build their dreams. But, unfortunately, we also have to say a lot of nos. It is a natural part of the process and entrepreneurs should not and do not hold it against you as long as you are conscious of how you treat the founding team. Respect their time in the process and how you communicate the decision. If we looked at a company seriously, took a few meetings, and ended up passing, we always make a lot of effort to give constructive feedback.

What advice would you give in brief for someone looking to break into venture?

Just over a year ago I was still in the shoes of someone trying to get into VC. Now that I’m here - and was recently involved in helping hire our most recent intern - I finally understand the importance of asking the right questions. The process is often so unstructured and there’s no playbook for communication with VCs. There are ways to differentiate yourself.

  1. Make it personal. It shows that you have done some homework on not only which firm you are speaking to but also who you’re talking to. Has the person gone to the same school or studied the same major as you? Has she/he written any article that you liked? Have they worked at a cool company that you like and want to learn more about?

  2. Know the fund. This is very important. Typically, most VC companies say what their focus, stage and thesis is on their website so make sure you know it. You should also know what some of their investments are and have an answer to “Which company in our portfolio would you invest in and why?” and perhaps even the opposite to that, so which company you did not like and why. All VCs have made some “bad” investments so there is nothing wrong about asking what the rationale was at the time of investment.

  3. Be curious and different. Ask questions and don’t be shy. When evaluating a startup, I always liked when candidates said; this is what I liked, this is what I did not like, and these would be my follow up questions given that I have not seen the company’s deck or talked to the founders. Also, there is no beaten path to VC so being different and having non-traditional experience is not bad – so sell it!

And last – just be you! In the end, sometimes you are a great candidate but just not a good fit for the current position. Your great skills might be replicating/overlapping with skills of someone that is already on the team, you might be over/under-experienced, you might have interest or expertise in an area that is not relevant to the current fund thesis. There can be many reasons but try to find a role that fits you instead of trying to fit yourself into a role.