B Capital’s Howard Morgan On The Key To Early Stage Investing

Decerry Donato

Decerry Donato is a reporter at dot.LA. Prior to that, she was an editorial fellow at the company. Decerry received her bachelor's degree in literary journalism from the University of California, Irvine. She continues to write stories to inform the community about issues or events that take place in the L.A. area. On the weekends, she can be found hiking in the Angeles National forest or sifting through racks at your local thrift store.

B Capital’s Howard Morgan On The Key To Early Stage Investing
Provided by LAV

On this episode of the LA Venture podcast, B Capital Group General Partner and Chair Howard Morgan discusses his thoughts on early stage investing and the importance of company ownership.



B Capital Group is a multi-billion dollar venture capital firm with an L.A. office based in Manhattan Beach. The firm has multiple focus areas including digital health, supply chain, deep tech and ad tech companies.

Precision Neuroscience is one of Morgan's investments, a company that leverages neural technology to develop a minimally invasive delivery of brain-computer implants, enabling patients with a better approach to treating neurological illnesses.

Throughout his years investing, Morgan has seen companies from all different sectors make their mark. Lately, he’s noticed that there is a lot of interest in quantum software companies from other investors in the industry.

“There are problems that can be solved with quantum computing,” he said. “They're in pharmaceutical and drug discovery, obviously in codebreaking. What quantum computing can do is search those simultaneously. It's not just in parallel, but it's literally in an instant.”

Morgan said there are two things for quantum computing to succeed, 1) quantum bits and 2) people who understand how to build quantum algorithms.

So far, “IBM has a machine with 439 today, and we need several thousand at least. We need to get to millions eventually.”

Morgan, a pioneer in the venture landscape, also co-founded Philadelphia-based First Round Capital, a seed stage fund. He recalled that by 2010, there were several hundred seed stage funds. With decades of investing experience, Morgan learned that the key to becoming a successful investor is ownership.

“You may only have one or two of your companies that really win and if you own 10% or 20% of them at the beginning and you get diluted down to maybe eight or 9% at exit that's still a fund maker,” Morgan said. “But if you own 1% of a lot of companies, it's not a fund maker.”

During First Round’s third fund, when they invested in Santa Monica-based smart security device company Ring.com, Morgan realized the importance of having ownership over each company he invested in.

“We ended up with only 1% or 2% and so it got sold for a billion dollars, which if you had a small fund might have been great,” he said. “But for us, it was a $20 million dollar exit and 100 million dollar fund, so it didn't move the needle. So you really do have to focus on ownership with big funds.”

Since then, Morgan has transferred everything he learned at First Round and applied it to B Capital.

“In our Ascent fund, we want to have at least 7% at the seed stage and 10% at the A stage and we'd like to buy up,” Morgan said. “We'd like more, but that's kind of our minimum and we pretty much won't do a deal for less than that because it takes your time, takes your effort and it's not going to return the fund.”

According to Morgan, the key to venture success is sourcing.

“It's not a sin to pass on a great deal,” Morgan said. “But it's a sin to have not seen the deal and be able to pass on it. So you really have to say how do I get into the flow where I see all the great deals, and if you're focused and you become a quote expert in that area, you'll see all the great deals and those entrepreneurs will want to talk to you.”

Morgan said that as venture capitalists, they are constantly receiving pitches, but the key is to make sure the founder’s vision is big enough because if it’s too narrow, that becomes a problem. Given his 15 years serving as a professor, Morgan is skilled at evaluating people, which has led to picking great partners and selecting which entrepreneurs to invest in.

“I look for integrity in somebody,” he said. “I look for the fact that they'll tell me the bad news first and not always try to tell me the good news. And I really look for them having passion and persistence because not everything goes right and you have to be able to stick it out when things go wrong.”

dot.LA Reporter Decerry Donato contributed to this post.

Click the link above to hear the full episode, and subscribe to LA Venture on Apple Podcasts, Stitcher, Spotify or wherever you get your podcasts.

This podcast is produced by L.A. Venture. The views and opinions expressed in the show are those of the speakers and do not necessarily reflect those of dot.LA or its newsroom.

Subscribe to our newsletter to catch every headline.

LA Tech Week Day 5: Social Highlights
Evan Xie

L.A. Tech Week has brought venture capitalists, founders and entrepreneurs from around the world to the California coast. With so many tech nerds in one place, it's easy to laugh, joke and reminisce about the future of tech in SoCal.

Here's what people are saying about the fifth day of L.A. Tech Week on social:

Read moreShow less

LA Tech Week: Six LA-Based Greentech Startups to Know

Samson Amore

Samson Amore is a reporter for dot.LA. He holds a degree in journalism from Emerson College. Send tips or pitches to samsonamore@dot.la and find him on Twitter @Samsonamore.

LA Tech Week: Six LA-Based Greentech Startups to Know
Samson Amore

At Lowercarbon Capital’s LA Tech Week event Thursday, the synergy between the region’s aerospace industry and greentech startups was clear.

The event sponsored by Lowercarbon, Climate Draft (and the defunct Silicon Valley Bank’s Climate Technology & Sustainability team) brought together a handful of local startups in Hawthorne not far from LAX, and many of the companies shared DNA with arguably the region’s most famous tech resident: SpaceX.

Read moreShow less
https://twitter.com/samsonamore
samsonamore@dot.la

LA Tech ‘Moves’: LeaseLock, Visgenx, PlayVS and Pressed Juicery Gains New CEOs

Decerry Donato

Decerry Donato is a reporter at dot.LA. Prior to that, she was an editorial fellow at the company. Decerry received her bachelor's degree in literary journalism from the University of California, Irvine. She continues to write stories to inform the community about issues or events that take place in the L.A. area. On the weekends, she can be found hiking in the Angeles National forest or sifting through racks at your local thrift store.

LA Tech ‘Moves’: LeaseLock, Visgenx, PlayVS and Pressed Juicery Gains New CEOs
LA Tech ‘Moves’:

“Moves,” our roundup of job changes in L.A. tech, is presented by Interchange.LA, dot.LA's recruiting and career platform connecting Southern California's most exciting companies with top tech talent. Create a free Interchange.LA profile here—and if you're looking for ways to supercharge your recruiting efforts, find out more about Interchange.LA's white-glove recruiting service by emailing Sharmineh O’Farrill Lewis (sharmineh@dot.la). Please send job changes and personnel moves to moves@dot.la.

***

LeaseLock, a lease insurance and financial technology provider for the rental housing industry named Janine Steiner Jovanovic as chief executive officer. Prior to this role, Steiner Jovanovic served as the former EVP of Asset Optimization at RealPage.

Esports platform PlayVS hired EverFi co-founder and seasoned business leader Jon Chapman as the company’s chief executive officer.

Biotechnology company Visgenx appointed William Pedranti, J.D. as chief executive officer. Before joining, Mr. Pedranti was a partner with PENG Life Science Ventures.

Pressed Juicery, the leading cold-pressed juice and functional wellness brand welcomed Justin Nedelman as chief executive officer. His prior roles include chief real estate officer of FAT Brands Inc. and co-founder of Eureka! Restaurant Group.

Michael G. Vicari joined liquid biopsy company Nucleix as chief commercial officer. Vicari served as senior vice president of Sales at GRAIL, Inc.

Full-service performance marketing agency Allied Global Marketing promoted Erin Corbett to executive vice president of global partnership and marketing. Prior to joining Allied, Corbett's experience included senior marketing roles at Disney, Warner Bros. Studios, Harrah's Entertainment and Imagi Animation Studios.

Nuvve, a vehicle-to-grid technology company tapped student transportation and automotive sales and marketing executive David Bercik to lead the K-12 student transportation division.

RELATEDEDITOR'S PICKS
LA TECH JOBS
interchangeLA
Trending