How Susannah got into investing

I was born and raised in Salt Lake City, and I majored in environmental science at BYU with a lofty plan to save the world. It didn’t take long to realize that I needed a background in business to make a real impact. So I switched to business, worked at Goldman Sachs after I graduated, then went back to school to get my MBA. That's when I was introduced to venture capital. While doing consulting projects for early-stage companies, I fell in love with the startup world. I met Pelion in 2018 when they brought me in for an internship, and it was a natural and good fit, so I stayed on full-time. I've been here more than six years now. I may not be saving the world the way I thought I’d be, but I’m doing some important things with some great startups that are trying to make the world better.

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Key opinions

* Raising too much capital can camouflage the problems in a business. One thing we're seeing is that companies that were started after 2021 are being built in very sustainable and efficient ways. I see a lot of Seed and Series A companies that either haven't raised capital or have raised very little, and they've been able to find product-market fit fast. Now they're ready to grow and because they had those financial constraints, they were forced to be more in-tune with their customers. Sometimes raising too much obscures the problems in a business, and the company grows headcount before it really finds product-market fit, gets out-of-tune with its customers, and the churn starts. 

“I see a lot of Seed and Series A companies that either haven't raised capital or have raised very little, and they found product-market fit fast. Because of those financial constraints, they were forced to be more in-tune with their customers.”

* I think bridges are overspent: We’ve been seeing a lot of companies that received bridges in recent years coming back to market, and I think we’ll see a lot of less-quality companies finally coming to market after being bridged one or two times over the past couple of years. 

*AI is underhyped. I hold a steadfast belief that AI stands as the most profoundly transformative technology of our era, and perhaps, of our lifetimes. Its potential to reshape industries, revolutionize economies, and redefine human capabilities is unparalleled. While AI's impact is already evident across various sectors, from healthcare to finance to transportation, its true potential remains largely untapped. Yet, I also acknowledge the prevalence of wasted capital in the AI space, along with occasional overhype in specific investments. However, I firmly maintain that AI, as a technology, is underhyped.

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Key outlooks and predictions

* Fund sizes will get smaller in the coming years, and startups will raise less capital. I think that in the next few years, we’ll see a lot of venture firms struggle from their returns from the 2021 era.

* Bigger firms haven’t had the best returns in recent years, and may have to face the reality of what their next fundraise brings. But I suspect a lot of those people will go start firms. So one outlook that seems likely is the number of firms will increase.

* Time between rounds will keep increasing. Companies are spending more cautiously right now, with a focus on efficiency, so they're burning less. Gen AI also allows companies to build more with significantly less when used effectively. That means there will be more and more time between funding rounds.

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On networking and location

While we invest broadly in B2B, Pelion’s thesis is very influenced by geo. We invest across the U.S., but 50% of our last fund was invested in Utah. We happen to be located here, and we believe that Utah will keep growing, further establishing itself as a significant tech hub. Already it’s one of the leaders outside of the Silicon Valley-New York-LA ecosystem. So we’ll keep focusing here, trying to build and support the ecosystem around us. 

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This is why I spend part of my time focusing on strengthening my presence and relationships in Utah. Pelion is all about the idea of stocking our own pond. We focus on creating and building an ecosystem that encourages more people to join or start software companies, and helping those companies find product market fit. We recently built a new office space that not only can hold events for startups, but also a large incubation space where we can have multiple companies working with us.  Part of building my network is focused on founders and operators, and part is building strong relationships with other VCs. Utah has a friendly VC ecosystem where we are all pretty close friends and enjoy working together.  A lot of network-building is putting on events for founders or future founders—this looks like anything from curated dinners with CROs or other execs to larger founder audiences with a panel.  

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The potential (and the limitations) of AI 

Every company is doing something with AI these days, so naturally that’s a set of technologies we’re focusing on at Pelion. We look at a lot of vertical applications using AI. One portfolio company that I’m very excited about is a company called Trace. We led an investment there in 2021, and it’s a real-world AI company that trained its data on soccer teams to ultimately trace a single player in and out of a frame. Trace calls itself a game film platform that can edit personalized moments for every player on a team. But since our investment they’ve had some remarkable breakthroughs in their computer vision work, and have become a leader in computer vision. Now their technology is also being used for any video, not just soccer. For example, Trace has the ability to track vehicles and people in security cameras to ensure the safety of a parking lot. Trace is quickly expanding its technology to enterprise use cases. It’s a company with a really exciting journey. 

While there’s investing in AI, there’s also using AI internally in our workflows, and right now I’m less compelled by what AI is capable of in this space. We do use AI to help us write emails, for example—whether that’s reach-out or turn-down—but typically our use of AI isn’t satisfactory enough to make the outreach sound truly personalized. Our aim is quality over quantity at Pelion. So we’ll use AI to craft an initial draft, but then we’ll go in and do some deep personalization based on our research, our conversations and our real knowledge of what the company is working on. Good founders that are raising from great firms simply won’t respond to someone unless there’s a real connection there. And AI isn’t (yet) capable of creating those kinds of connections.

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The advice I’d give to a new investor

VC is very ambiguous. I entered the industry with that understanding, so I don’t know that I struggled as much as other people do when they’re first getting their feet wet, but I know it’s a common challenge. It’s difficult to know what you’re supposed to be doing in a given day, and how you’ll be measured at the end of it. In part, I think this is because there’s such a long-term feedback loop—you don’t even necessarily know whether you’re “good at” venture until you’re six or seven years in. So there’s a great deal of uncertainty: Are you taking the right actions in a given day? What are your KPIs? Likely, no one in your firm will hold you to any KPIs, so you need to hold yourself to them. If you create a strong network and source great companies consistently then it will pay off in the long-term. Results will come, be patient.     

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In light of that, the advice I’d give is the only thing that ultimately matters is your track record. If you're uncertain what you should be delivering on, track record is your north star. Like a lot of firms, we do value projects and firm work at Pelion, and that's the expectation if you enter in a junior role. But at the end of the day, what LPs and your GPs care about is  your track record. So add value and crush it with projects and firm work—but don’t forget to prioritize sourcing and finding great deals, and building your network. That’s what will matter for you and your firm long-term.