Q&A with NextGen Venture Partners' Lisa Cuesta

Lisa Cuesta is a Principal at NextGen Venture Partners, a network-driven early stage venture fund. She is also leading NextGen Venture Partners – Align, focused on investing in early stage tech companies that are building scalable solutions that address challenges across economic opportunity, healthcare, and the environment.  Prior to NextGen, she worked in strategy and product at Google.

What attracted you to venture capital and working with startups?

I started working in the startup ecosystem when I was in college. After two investment banking internships, I wanted to see what else was out there. During my senior year, I was on the founding team of a company, which taught me how quickly things can scale online.

I didn’t anticipate that a website we started in our dorm rooms could turn into a company moving millions of dollars in sales. It was eye opening and really empowering. We were in the trenches - living and breathing the startup. I moved to the Bay Area after two years in consulting and worked at Google on the strategy and product operations teams for two different products. I really enjoyed the building process from developing new business lines to thinking through market positioning.

I thought venture could be an interesting next step because it bridged my experiences both building at the early stages (from Google and Penn) and working with diverse industries and clients from consulting. While at HBS, I took venture classes and worked with Thrive Capital, and met the NextGen team towards the end of my second year.

Why NextGen Venture Partners?

The startup ecosystem is very giving. That’s the insight that drove Dan Mindus and Brett Gibson when they founded NextGen. I can best explain it by pointing to our model: a fund that has built a network of 1,000 entrepreneurs and executives who are our Venture Partners. Venture Partners participate throughout the investment process by introducing us to founders, participating in investment committees when they have relevant expertise, and supporting portfolio companies by connecting them to potential customers, hires, and partners.

What’s really powerful is that as our portfolio scales, we have this extensive network that can help at different stages. We’re helpful at the seed stage - testing out the product, connecting with customers, iterating on the value proposition. As a company grows, it needs access and advice from people who’ve gone through the changes that happen at the Series A, Series B stages. Our Venture Partners have diverse industry expertise, experiences, and networks that can help at all stages of building a company. 

We have a proprietary platform that connects our portfolio companies and Venture Partners. Startups can search for Venture Partners with connections to businesses they’d like to partner with. They can find Venture Partners with certain attributes, like extensive partnership experience. The platform also gives Venture Partners access to our deal material (investment memos, decks, recordings of investment committees, etc.).

We want to be helpful to the founders we invest in. So as a startup is being onboarded, we have a list of our Venture Partners that we think will be helpful and we stage out these introductions. Our Venture Partners might also see a company on our platform and come forward to help because they have relevant experience that we didn’t know about. Our platform is a great asset that we use to capture relationships, skills, partnerships, and decision-making over time.

Who has access to the platform?

All of our Venture Partners and founders of our portfolio companies. As our portfolio companies grow, the founders may ask that specific team members or executives join the platform as well.

NextGen is sector agnostic, but are there investment areas that you are most interested in?

Last quarter I started working on NextGen Venture Partners - Align focused on sustainable venture investing. We’re looking at two areas:

  1. Social inclusion. That includes companies that break down barriers to economic opportunity and improve quality of life.

  2. Health and environment. These are companies that promote health and well-being and solve critical environmental challenges.

Consumers are looking for more alternatives like this, businesses are looking to be more conscious of the resources they’re using, and NextGen Align is identifying those innovative companies for investment.

As someone coming from a healthcare background, many things that fall under the social inclusion bucket seem to require capital intensive remedies. What are the investments and companies in this area going to look like?

We’re looking for venture-style businesses. It still has to be a fit for our fund as an investment in a tech company that we can help scale. There’s a lot of low-hanging fruit that can have a huge impact. For example, there’s a company we’re looking at that helps farm workers find opportunities as they migrate between seasonal jobs. That was historically done using brokers or low-tech communications like newspaper listings. Giving this kind of tool to jobseekers is a chance to bring technology to a market that may otherwise be overlooked.

You mentioned working on deals with other investors. What have you learned from co-investing with other VCs?

The industry is collaborative. We work with each other on diligence and research. We trade notes and talk about investment theses, and we work together to support portfolio companies when we’re co-investors.

What gets NextGen over the line can be different. We look at customer validation and how a product delights users. Other firms look at the founder and their ability to successfully fundraise. Another might be fascinated by the addressable market; they’ve deep dived into this area for a while and this particular investment looks more attractive than other alternatives. It’s interesting to learn what drives people.

Working with co-investors also allows us to learn from their processes. We have a unique value prop for the founders, but that doesn’t mean we know everything. We learn from other investors, founders, our Venture Partners, and incorporate the best methods into our process. 

How are you thinking about FOMO?

It’s helpful that I have level-headed partners. They’re very experienced and take an even keel approach. Of course, there are things they get excited about too, but they know based on experience that there will be other opportunities down the line.

If we find that an entrepreneur is taking away things that we normally ask for (like pro rata and information rights), that’s a dealbreaker. We’re very disciplined on that. Even if we really like the company and its product, we want to make sure that we are making decisions and acting as responsible fiduciaries.

What is your favorite book that relates to the startup and venture capital ecosystem?

In business school, my advisor was Bob White (a co-founder of Bain Capital). Just like Bain Capital innovated in private equity, NextGen is doing venture differently. Through Bob, I ended up reading what’s now my favorite book: Done Deals. Published in 1999 by Harvard Business Publishing, it’s full of 10-15 page anecdotes from VCs during the 1970s and 1980s. It's just fascinating how much doesn’t change. I can go back to Done Deals and see that we weren’t the only ones grappling with FOMO.

One of our LPs is in the book and advocates for investing in emerging managers (i.e., NextGen). He likes being part of seeding a fund that’s taking a novel approach and sees the hustle that new managers have in order to survive. By reading Done Deals, I realized we’re all building on the foundation established by those who came before us.

Are there other VC firms taking creative approaches that you admire? 

Definitely. Andreessen Horowitz has an incredible platform team. Yes, they had a huge head start with the GPs involved, but they’ve been very fearless about making investments. They’re conscientious about brand building and community, which are important to LPs and entrepreneurs. They recently announced the Culture Leadership Fund for black entrepreneurs. I’m not surprised they’re the ones to do it. I remember going to their events in the Bay Area; they were always one of the most diverse. It’s part of their culture. I’m hoping there are more funds like that because they’re setting the bar for diversity and inclusion standards. 

Have you faced any challenges as a woman in tech? As an investor?

Well, there was one time a founder didn’t make eye contact with me during our first meeting and only pitched the male associate in the room. We obviously passed - I tend to react to these types of interactions with humor.

People are hyper-aware of dynamics around gender and race. I don’t think we should go to an extreme and be oversensitive – let’s just all work together, be respectful, and empower one another. I’m always pushing boundaries on this conversation. Being a woman and being Latina, I feel comfortable talking openly. I build trust with my team so they know it’s ok to ask questions. 

I’d also add that founders should not underestimate how persuasive analysts and associates can be within their organizations. Partners are open in most firms to listen to a diversity of opinion; it’s part of the reason they hire analysts and associates. Founders are learning over time that if they win over the associate, they’ll have an easier time making it to conversations with the partners. Whether you’re meeting with operations, platform, or the investment team, no one should have a bad impression of you. This is a small community. Everyone has an equal voice, at least on our team, and something consequential would be taken seriously by all of us. 

Have you ever considered becoming a founder?

I feel like I’m a founder right now as I build NextGen Align. When I talk to founders, I can relate because I’m creating something entirely new within my own firm. It’s not exactly the same thing – I have pre-existing infrastructure to build on from our platform, our network, our LPs, and our brand. So, I am an intrapreneur. Hopefully I’m the first of many because I think NextGen has the unique ability to explore different thematic areas. This is a proof of concept for NextGen’s already creative model to keep disrupting itself.

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

One of my HBS professors told me to ask myself why I wanted to be an investor. Was it because saying I’m a VC would sound cool at a cocktail party, or because I actually liked the work? People should challenge themselves to be honest about what is drawing them to a particular role or industry, whether it’s venture or something else. Collect data on your varied experiences and what drives you, and then dive into something that resonates with you. Do what you’re interested in because you’ll thrive when you’re doing what you love.