The 107th episode of Datacast is my conversation with Grace Isford, a Partner based in Lux Capital's New York City office. She invests in companies innovating at the nexus of the computational sciences – data, AI and ML infrastructure, network and compute infrastructure and cutting edge technological applications especially in healthcare and financial services. She focuses on data and machine-learning startups that are hyper-personalizing user experiences and transforming legacy industries, as well as fintech and blockchain infrastructure companies building the next-gen developer stack and payment rails.
Our wide-ranging conversation touches on her upbringing in New York; her education at Stanford; her early career in venture capital at Canvas; her current journey as a Partner at Lux; tactical discussions on hiring decisions, navigating go-to-market strategy, and growing product offerings; her theses on the API-first economy, data stack, and Web3 infrastructure; her community-building work to promote women's voice in tech; and much more.
Please enjoy my conversation with Grace!
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Key Takeaways
Here are the highlights from my conversation with Grace:
On Her Upbringing
I grew up outside New York City in Connecticut and was heavily influenced by financial services, investment banks, and hedge funds - typical things in the Westchester and Fairfield County area. That interested me from a young age in the business side of things. I was intrigued by not only how to build and grow scalable businesses but also how to invest in transformative companies - more at a macro, public, or investment bank level than early-stage startups.
I had the experience of living in Tokyo for a period of my childhood. That opened up my aperture to the broader world and broadened my perspective globally. I learned a lot from the different perspectives of many different people at my elementary school. I then returned to Connecticut, where I graduated high school and had different friends from different perspectives. Thanks to the financial influence and the international experience, learning and growing from those with diverse perspectives were two formative aspects of my upbringing.
On Studying at Stanford
I actually wanted to stay on the East Coast for college because Stanford was the only school I applied to in California. I am glad I went there because it was very formative for me. Why did I decide to go to Stanford? When I visited during high school, I was struck by the intellectual curiosity of the campus. It felt very collaborative, was sunny, and had a beautiful environment. It encouraged collaboration, curiosity, and interconnectivity to build, grow, and work on different projects - whether they were problem sets in a class or much larger kinds of macro, startup-level problems.
In terms of my experience, that mapped closely. From day one, as the more financially-minded girl from the East Coast moving to Stanford, I was struck by the spirit of innovation and entrepreneurialism. So many friends were starting their own companies and pulling different ideas. There were many nations across campus, both in classes and outside of class. For me, not going down a specific rigid path in financial services or investment banking and, instead, thinking more about entrepreneurship was important.
I initially expected to go to college so I would return to the New York area and follow the traditional path of many East Coast residents. Stanford flipped that assumption on its head for me. Why would I do that when I could work at an early-stage startup with a more meaningful impact and better work-life balance? Then I also learned about venture capital; why wouldn't I work in that industry and help entrepreneurs' dreams become realities? These zany, insane, often contrarian ideas were bringing something new to the table - versus continuing to support older, stodgier industries to a certain extent.
The Management Science and Engineering major is a techie-business major. It is in the Engineering school at Stanford and has an Engineering core, so I took many CS classes and the classic Stanford Engineering core. But it is also where the Stanford Entrepreneurship department is housed, which hosts many awesome programs and fellowships, such as the Stanford Tech Ventures program and the Mayfield fellowship. There are also many classes in the MS & E department on the spirit of innovation and company-building/ideation. I described it as an interdisciplinary major since I took everything from economics and computer science to psychology and entrepreneurship. It is a perfect way to scratch my own itch and have a more well-rounded degree instead of focusing on one specific core competency area.
I really liked a Master's class called "Entrepreneurship Through The Lens of Venture Capital." It was co-taught by Ann Miura-Ko and Mike Maples and focused on evaluating and investing in "thunder-lizards" early-stage startups. "Thunder lizards" are how they describe what they were searching for as early-stage, pre-seed investors. I could have the perfect confluence of practitioners in the real world and think about it through an interdisciplinary lens.
On Being a Mayfield Fellow
The Mayfield Fellowship program was incredible. It is a work-study 9-month program, which is far longer than typical classes at Stanford of just one quarter. So it is three times the average class length, combined with a cohort of students. I was one of the 12 students in this cohort. How it is structured is that you learn once, do once, and teach once.
In the spring quarter, you focus on learning what it means to be an effective member of a high-growth startup. You get the good fortune of meeting a lot of influential players in the startup and venture ecosystem and learning more about what startups are about - more specifically, what are the tools and the real goal of entrepreneurship, which is to grow and solve intractable problems and leverage new problems as new opportunities.
In the summer, you work at a high-growth startup as an intern. You also have this interdisciplinary relationship where you get to know other fellows and their startup experience by reflecting on your journal.
In the fall, you teach a class to other peers, where you synthesize your insights from working at that startup in a specific area.
More importantly, the best part of the fellowship was the people. At the time, it was taught by Tom Byers and Tina Seelig. Ann-Miura Ko got involved as well. This cohort of extraordinary people was very intellectually curious. Given the focus on the startup and entrepreneurship realm, the program could be super valuable for someone who wants to learn or think about what their career could be like working as a member of a high-growth startup or venture capital firm.
On Being Involved with Stanford Women in Business
I joined Stanford Women in Business (SWB) as a freshman at Stanford. It is the largest pre-professional organization for women at Stanford, so I am proud to have been a part of it. I also grew up through the organization and met the Canvas Ventures team there. Later, I served as the president of SWB during my final year at Stanford.
What I really enjoyed about it was, again, the like-minded peer group where you can support and learn from one another. Even though MS&E was a techie-business major, I did not feel like Stanford prepared me that well on the business side of things - general professional etiquette such as emails, resumes, interviewing skills, etc. Those things are very indicative of a business degree. I got a lot of that out of SWB.
The cool thing about SWB is that we were broad and horizontal across business sectors. For example, I would go into everything from investment bank and consulting offices to startup and VC offices. We really tried to show a holistic view to even non-profit and impact-focused organizations and illustrate by talking to practitioners in each of those industries as to what a job might be like in that space. For me, it was majorly helpful to understand why I might be more excited about people working in a venture job.
On Her Wide-Ranging Internships
Often when I advise folks about their careers, I encourage them to try very different internships so they can taste, test, and learn what they like and do not like. Internships are valuable from that perspective, which was certainly true for me.
I worked at the Stanford Management Company (which is Stanford endowment), managing tens of billions of dollars. It is probably far larger now than when I worked there. It was a great opportunity to understand what it is like on the Limited Partners (LPs) side. As many people know, LPs invest in venture firms, which then invest in startups. Ultimately, the goal of venture firms is to further assets and returns for LPs to support institutions like Stanford or other endowments to support posterity. I learned a lot about the macro perspective of how VC firms fit into private equity within a much larger pool of asset classes - from public equities to natural resources to real estate. What I did not like about the job was that it felt very much at arm's length. Even though I would invest in VC managers who invest in companies, I did not have that startup experience or a relationship with the entrepreneurs.
Thus, I took the opposite direction afterward and worked at Handshake, an ed-tech startup. I often call it LinkedIn for college students. When I worked there, the company was $700M in valuation and had 60-70 employees. Now, they are $3.5B in valuation and have 500 employees. It was an incredible opportunity to work with them. Big credit to Handshake's founding team for what they have built and how they have been able to grow the business. I worked in product there. What I enjoyed about the experience was the hands-on relationship with the product and the company. I resonated with their mission: talent is universal, but access to opportunity is not. Ultimately, I learned how to build a great product, ask the why questions, architect each product sprint, and align these products to a north-star goal for the company's growth and development.
Ultimately, I wanted the more in-between view: not as high-level and macro as the LP side and not as in-the-weeds as the product side of a startup. That led me to Stripes Group, which is a growth equity opportunity. It is a great way to get a sense of how to evaluate companies in a growth stage while still maintaining some relationship with the entrepreneur.
All three internships were at slightly different locations and team sizes, so I learned a lot about myself and what kinds of working environments energized me.
On Joining Canvas Ventures
I worked part-time as a liaison for Canvas to help them get to know awesome deals and operators on the Stanford campus. The cool thing about that was that I could learn quickly from a young age what venture capital was. Historically and even today, it is still difficult to get a job in venture, and there are no clear job postings. I wanted to work with Canvas because I wanted a job in venture, to be frank. I was excited to scratch my own itch and pursue a passion opportunity, given my interest in Stanford Women in Business and the Mayfield Fellowship. I got introduced through another SWB peer and also heard Rebecca Lynn (one of the female co-founders of Canvas) speak on a panel at an event during my time at Stanford. I was inspired by her, as well as many women who have founded their own firms in the venture industry. That was another reason I was excited to join Canvas to pursue and learn from another female leader in the space.
It was lucky because I got the taste test of working with them, and they got the taste test of working with me. For anyone who would be interested in pursuing venture, I would encourage them to try working part-time or doing something in a scouting capacity while they are still in an undergraduate or Master's program. That is a low-risk way for both of you to know if you actually like each other, and then it can be a natural transition to a full-time opportunity.
Canvas is an early-stage generalist venture fund based in the Bay Area. The firm manages just under $1 Billion today. They have three main focus areas: enterprise, fintech, and healthcare. I focused primarily on B2B investments in the enterprise data/ML infrastructure stack and made roughly 12 investments while I was there.
On Proving Value as a New Associate
The venture capital job is learning through doing, and there are many ways to do the job well. You can read a lot and try to become an expert in different thesis areas. You can talk to experts and try to refine your thesis in order to grow in certain areas. You can be a major networker and get to know every entrepreneurship club or early-stage entrepreneur. For me, it was a combination of the three:
First is leveraging my network - which fortunately was already very strong from the Mayfield fellowship and Stanford networks- in addition to my past internship experiences.
Second is trying to cultivate circles of competence. I am a big believer in the theory of finding my true circle of knowledge where I have asymmetric information compared to others. I cultivated that by creating a data network, where I featured a lot of awesome Heads of data and ML across major Silicon Valley and New York-based startups. That provided an excellent perspective on areas of opportunity and investment options.
Third is working hard. Venture is an area that rewards people who hustle and work hard. I just worked really hard in my early days at Canvas. I still do today at Lux to prove my value because I know I have less experience than a lot of other folks in my position.
Every day in venture is different, but one common thing is that there will be a lot of meetings. A lot of my days entail meeting with new entrepreneurs, doing due diligence calls with experts to validate a hypothesis for a prospective investment opportunity, or working with portfolio companies (that we have already invested in) to help them on everything from go-to-market and hiring to customer introductions and subsequent fundraising rounds. Every day can vary in the actual schedule, but those are things I am typically doing in terms of meetings. Otherwise, it takes a lot of time to think and synthesize the learnings from those different meetings regarding my investment thesis for a given sector or a new investment area of opportunity.
On Giving Advice To Her Portfolio Companies
On Hiring: If it is not a hell yes, it is a no. Keep a high bar for hiring. It is obviously hard to hire a lot of great people. It is also hard to keep the bar high. I encourage companies to hire people who are better than them in many ways or who add differentiated skills that are different from the team's existing skill set.
On Go-To-Market: Focus, focus, focus. From the market perspective, companies often want to do a lot and often have horizontal technology platforms that can do a lot. But it is much better to focus and find stability in one area or sub-segment of the customer and then sequence it and do other hills over time.
On Growth: Think about how you will grow your wedge over time. I encourage all companies I work with to think about how to become a true platform company and grow not just the ACV (average contract size) but also the product suite. That means thinking strategically about how each new product launch can build towards the north star goal.
On Trends in the API-First Economy
In the future, API-first companies will offer something critical but non-core, like payments for e-commerce companies. Tools like Stripe that abstract away the complexity will maintain their dominance across different sectors. There are two trends I see more companies developing in the API-first space going forward:
There will be more international API-first companies. All the companies featured in my doc are happening internationally in fin-tech, healthcare, data, e-commerce, etc.
There will be more API-first companies in the crypto/blockchain space. They will abstract away the complexity of working with blockchain data and making critical but non-core components to work with crypto fin-tech payments.
On "The Mindset of a Data Leader"
This article was a culmination of my interviews with data experts in my network. It aimed to help a prospective data entrepreneur to get product-market fit and think about go-to-market. It is focused on the specific value that the product is providing, the pain points it is addressing, and the approach to selling the product with that value proposition to a person with the budget to pay for it.
The article mentions a series of questions structured around a 3-step framework:
Focus on creating a product that's actually solving a problem: You would be surprised how often I saw companies that had developed products without addressing the pain point. Customers are way more willing to adopt the product and pay for it if you solve a problem for them. So always go where there is the greatest pain for your end user and where you can truly provide value.
Sell the product: Are you going through a lengthy sales process where you are talking with people who do not have the purse string? Think carefully about whom you are targeting, how your price points, and how your pricing strategy aligns with their budget.
Optimize for a fast time-to-value: How can you make your product usable and accessible without too much of a life on the other team's side?
Those are three tips I would give to any company across any sector, whether data-first, API-first, or crypto-first. Specifically, in the data case, those were born out of interviews with many folks in the data and ML space.
On The Rise of Web3 Infrastructure
I think crypto and Web3 infrastructure companies will have a massive impact in the future. Vice versa, many Web3 applications and metaverse layers are over-hyped. We see many folks talking about the next consumer app or gaming company atop Web3, which is awesome. But people are not thinking enough about the infrastructure that needs to exist for those companies to happen.
It is similar to the early days of the ML stack. A few years ago, I really wanted to invest in ML because I thought it was awesome, cool, and sexy relative to the infrastructure side of things. In many ways, investing in Web3 and metaverse applications are sexier too. Investing in things that leverage decentralized infrastructure and work on the top sounds more exciting.
However, I think we will see a point (that we have not quite seen) of Web3 adoption where we need a better crypto developer stack, a crypto data stack, a crypto privacy scaling infrastructure, a reliability stack, and a crypto financial infrastructure stack, among other things. Those are certain examples to enable any of those applications to function and scale to 100M+ users.
It reminds me exactly of the data stack in the early days: where everyone wanted to invest in ML companies, but we needed to build the infrastructure and data systems in place to clean, pipe, and transform millions of data points to be leveraged for ML applications at the top. I would double-click on that for anyone building anything in the crypto and Web3 infrastructure space.
On Joining Lux Capital
Lux manages $4 billion in AUM (Assets Under Management). Our 7th fund is $1.5 billion. We are based between New York and the Bay Area. I currently live in New York. We invest from pre-seed to growth.
What attracted me to join Lux was their willingness to do things differently. I think a lot of venture firms these days coincide more with the status quo, while Lux truly invests at the intersection of tech and science. The common characteristics across our investments are true technology companies and technology platforms - whether data-first, AI/ML-first, tech-first, biotech-first, or physical hardware-first.
I think about three main areas:
Computational sciences: blockchain, AI/ML, data, API, fin-tech, etc.
Life sciences: a relatively new area.
Defense-based hardware: a recent example was Hadrian in the space sector.
Lux's strategy is to invest in contrarians inventing the future and moonshot-like companies with a tech-first underpinning. We have an exciting brand and opportunity to create a portfolio of companies with the greatest impact. What is most energizing for me is investing in the most impactful entrepreneurs.
Venture capital is the business of taking big risks and big bets. I worry that a lot of the venture industry today focuses more on safe bets - things that are not truly changing the future or being contrarian. If you think of the most amazing massive companies, a lot of them started as things most people thought were crazy, weird, or different. It has been cool to see the confluence of massive companies being built that are doing things that may seem crazy, risky, or different from the status quo. I encourage all VCs to think more from that perspective because we are trying to invest in true technology innovation (versus incremental innovation that may not change the status quo).
On Her Framework For Making Investment Decisions
Ambitious founders with a strong perspective: The founders have a conviction in their belief for why the world should be the way it should be with their company in it. They often have relevant expertise, research, or a welcome-here thesis around why that will be the case. They should also have an ambitious team with a clear vision for the future.
True technology: The tech should have an IP/patent or take a different approach to solve the problem. Having a solid technological core is essential to any investment I make.
Customer love: The company should have early signs of attraction regarding qualitative or quantitative data points around why their offerings make the customer happy. These are signs of early product- and go-to-market fit.
On Community Building
I am super happy to encourage, invest, operate, and work with more women. I view my role as the connectivity node or the routing source to connect awesome investors, angels, and operators to each other. I am constantly working on improving this so that my own network is diverse and includes folks from all different backgrounds. I think that it is the investor's role to help companies recruit not only diverse capital but also diverse employees.
If you are a woman listening to this and interested in angel investing, I am starting different angel-matching syndicates for folks and would be happy to help. If there are any companies in the Lux portfolio where you are interested in working, contact me or someone on the Lux team, and we would love to have you.
On Adding Value To Others
I always try to find a way to be helpful and ask someone what I can help them with or think proactively about ways to help based on their area. The practice of doing that and thinking about ways to help people first before expecting anything in return will pay dividends over time.
I have been limiting interactions so they can all be of high value. For example, if you email me and ask for time, I have been trying to guardrail and say no to more meetings. If I take too many meetings, I will not be as helpful or energized in any of them. I would be happy to help asynchronously, but I tend to focus only on investments within my circle of competence - where I can be the most helpful, have a network, or have a point of view.
Show Notes
(02:02) Grace shared formative experiences of her upbringing - being heavily influenced by the financial sector from growing up near New York and getting an appreciation for diverse perspectives from studying abroad in Tokyo.
(03:47) Grace described her college experience at Stanford studying Management Science and Engineering.
(08:04) Grace talked about her participation in the Mayfield Fellowship and her service as a Co-President of Stanford Women in Business.
(12:34) Grace walked through her internship experiences as an investor at the Stanford Management Company, in product at ed-tech startup Handshake, and in growth equity at Stripes Group.
(16:20) Grace reflected on her time at Canvas Ventures - where she joined as a campus scout while still a student.
(19:11) Grace shared three approaches to prove her value upfront in potential deals and to form her investment thesis as a new VC associate.
(23:07) Grace dissected her Series A investment in Vendia, a blockchain-powered, real-time data-sharing platform that solves the growing inter-organization data collaboration problem.
(25:17) Grace examined her Series A investment in Robocorp, which offers the first cloud-native, open-source automation stack and orchestration platform to power any automation process.
(26:43) Grace shared three pieces of advice in hiring decisions, navigating go-to-market strategy, and growing product offerings that she had given her portfolio companies.
(29:49) Grace shared trends in the API-first economy that she is most excited about in the upcoming years.
(31:56) Grace unpacked key takeaways from her article "The Mindset of a Data Leader."
(34:02) Grace discussed under-hyped and over-hyped trends in Web3 - taken from her incredibly detailed deck on the Web3 World.
(36:31) Grace dissected the major categories of the Web3 infrastructure, including Decentralized Finance, Decentralized Apps, DAOs, NFTs, and Guild Education/Reskilling.
(41:43) Grace walked through her decision to join Lux Capital, a firm that invests in emerging science and technology ventures at the outermost edges of what is possible, as a principal investor in early 2022.
(45:12) Grace shared her mental checklist to evaluate entrepreneurs and make investment decisions at the nexus of web3, data infrastructure, and applications of AI/ML.
(47:10) Grace talked about her community-building work to promote women's voices in tech.
(48:59) Grace reflected on her consistency in adding value to every conversation with people in her community.
(51:26) Closing segment.
Grace's Contact Info
Lux Capital
Securities (Podcast & Newsletter)
Mentioned Resources
Articles
"The Third-Party API Economy: Part I" (Sep 2020)
"The Third-Party API Economy: Part II" (Feb 2021)
"The Mindset of a Data Leader" (Nov 2020)
"The Web3 World" (Jan 2022)
"Welcoming our newest investor Grace Isford to Lux Capital" (Feb 2022)
People
Fred Wilson (Union Square Ventures)
Matt Huang and Fred Ehrsam (Paradigm Ventures)
Katie Haun (Haun Ventures)
Book
"Wanting" (by Luke Burgis)
Notes
My conversation with Grace was recorded back in April 2022. Since then, many things have happened - given the decline of interest in crypto/Web3 and the burgeoning interest in Generative AI. I'd recommend:
Listening to her chats with Tina Seelig and Christian Catalini on the Securities podcast
Reading her thoughts on building the next AI/ML infrastructure stack
Check out her reflections on the intersection of AI and creativity
Additionally, Grace invested in RunwayML's Series C, a pioneer in the Generative AI space. If you are in NYC, be sure to stop by the upcoming first annual AI film festival powered by Runway!
About the show
Datacast features long-form, in-depth conversations with practitioners and researchers in the data community to walk through their professional journeys and unpack the lessons learned along the way. I invite guests coming from a wide range of career paths — from scientists and analysts to founders and investors — to analyze the case for using data in the real world and extract their mental models (“the WHY and the HOW”) behind their pursuits. Hopefully, these conversations can serve as valuable tools for early-stage data professionals as they navigate their own careers in the exciting data universe.
Datacast is produced and edited by James Le. For inquiries about sponsoring the podcast, email khanhle.1013@gmail.com.
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