Investing at Dorm Room Fund with Christina Liang

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Background

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Christina Liang is a senior at Duke University, double majoring in Statistics and French. She joined Dorm Room Fund (DRF) as a student Investment Partner and works with the Philly & Southeast team. I talked with Christina about what DRF looks for when investing in student founders, the investment process, and how to stand out if you’re applying to be a student Investment Partner.

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Highlights

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• DRF heavily indexes on strong and aligned founding teams with a track record of hustle. It helps to have a good understanding of your customer, market, go-to-market strategy, product differentiation, and how you will make money.

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• Founders are invited to pitch to regional DRF investment teams and need a majority vote before receiving funding. The deal is then passed to Molly Fowler, the GP of DRF, to finalize the terms and complete the investment.

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• DRF’s standard check size is $40,000 for 1.3% ownership.

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• Students applying to be a student Investment Partner at DRF should leverage their experiences to support their underlying framework of how they think about startups and investing.

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• DRF’s value add to student founders are the network & introductions, fundraising help, and peer-to-peer advice from students of a similar age and experience.

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Interview Transcription

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KR: Thanks, Christina, for joining me today. Can you introduce yourself?

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CL: My name is Chris. I’m currently a senior at Duke. I’m double majoring in Statistics and French. I’m mostly involved in a lot of venture-related things on campus. I’m a Partner at Dorm Room Fund, a student-run VC. I got involved through a few other things on campus related to entrepreneurship. Duke is a nascent entrepreneurship hub, but we have a blooming ecosystem. 

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KR: You’ve been at Dorm Room Fund for a year. Is that correct?

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CL: Yeah, I joined Junior (year during the) Fall.

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KR: I saw you posted on your LinkedIn that applications are open for (DRF student Investment Partners). Can you talk more about the application process?

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CL: Dorm Room Fund is doing a national recruitment search for our new Investment Partners. We do this once a year. It’s for the continuity of our teams. All of our teams are composed of student Partners at either the undergraduate or graduate level, doesn’t matter what school you attend, on the four regional teams. Because we’re recruiting for new Partners, we’re in the midst of the search until September 29th to find the best talent interested in VC or building stuff. You first submit an application that says who’s in your network, who you know would be an excellent founder, what industries you are interested in, industry trends, a company you find interesting, and more short-form questions. Afterward, the investment team reviews those applications and decides whether to do a first-round interview. We ask them about everything in their application, specifically industry trends, theses around student founders, and companies they are interested in. We have a second round interview and then eventually have a superday. Superday is where multiple people from the regional Dorm Room Fund teams and our General Partner, Molly Fowler, will interview you. That process takes about two weeks, and then someone becomes an Investment Partner.

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KR: I would love to hear more about what happens when you get into Dorm Room Fund. Is there some sort of onboarding process where they train you on what they are looking for in student founders, or what happens when you get in?

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CL: There’s onboarding. It’s a little bit like training but not so formalized. Essentially, people are shadowing people who are current Partners and learning the ropes of how to talk to founders and how to go about our investment process. Once you do all that training, shadow someone, and get the general VC basics, you become a full-fledged Investment Partner. You’re in charge of your deal flow, and you source the companies you’re interested in.

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KR: What does Dorm Room Fund look for in student founders? How do you evaluate them? What are you indexing on?

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CL: Because many student founders don’t necessarily have previous experience, it’s just a general track record of hustle, and we’re often looking for founder market fit. Generally, the number one thing we look for is strong founding teams, alignment between them, and a good understanding of who they are building for and being obsessed with that part of the market.

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KR: Is everyone looking for the same things? Or do student Investment Partners have the autonomy to make their thesis of what they look for in founders?

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CL: We work as a unified team, so there are many markers of good companies that we all look for, and these are all things we talk about within our investment committee. In terms of companies we individually source and find, everyone is free to have their investment theses. Some people are well-versed in e-commerce and have a view on it, so they try to find companies that fit that thesis. Generally speaking, everyone aligned on wanting strong founding teams with good hustle.

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KR: It seems like there is a decent amount of collaboration between (student) Investment Partners. Can you talk about how you work with the internal, full-time investment team (Molly Fowler, Caroline Toch, Mariell Abalos)?

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CL: We work, for the most part, within our regional investment teams. We have four – Philly & Southeast is the one I’m on. It covers Penn, down to Duke and Florida – that whole region. Within this team, everyone is autonomous and has the same vote regarding investment committee decisions. Molly Fowler is our GP. She is the one who runs the fund and represents it. Once we make investment decisions, we tell Molly that this (deal) passed, moving on to the negotiation and term sheet stage. Or it didn’t pass, and we’re looking at the next (deal) in our funnel. In terms of working with people on our team, there is a lot of camaraderie. So you (may text them something like), “Hey, I think this company is cool. Can you look at it, too?” And because they are also your friends. In terms of interfacing with Molly, outside of a professional context, she’s a great go-to for a lot of different things like advice – but she also helps us with diligence calls, organizing everything, and streamlining all the different criteria and mandates for our investment process.

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KR: It sounds like each student Investment Partner has the autonomy to make investment decisions. Do you also do the term negotiation and logistics side of the deal? How does an investment get done at Dorm Room Fund?

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CL: The eventual term sheet negotiation is with our GP, Molly. We do have standard terms. Going into an investment pitch, most founders know our standard terms – $40K for 1.3% ownership. We make that very clear from the get-go. There will be some companies raising at like a $20 million valuation cap that won’t be a great fit for us, or we’re not a great fit for them. The eventual negotiation is with Molly and the founders. The investment process in terms of the pitch itself is everyone on the regional investment team voting on it. It just needs a majority of the votes to be a yes for the investment to pass. After the founder pitched, we deliberated it and considered if it was a fit for us and them.

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KR: Is there a cap on how many investments you can make at a particular school or region? 

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CL: We don’t have a quota on anything. It’s moreso based on quality. Sometimes, we won’t invest in a company for a month or two months at a time because we don’t feel like it’s the right one for us. There is no hard quota, but (each regional team) does have a set amount of checks per year.

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KR: Have you made several investments on Duke’s campus? Can you talk about one or two startups you invested in?

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CL: Recently, we haven’t made any investments in Duke startups, at least the time I’ve been here. I’ve brought in a few companies from Duke to pitch to us that I had a lot of conviction in and I really liked the founding teams, but we didn’t end up investing. In terms of recent companies that we invested in, one is called Peach. It’s a financial planning startup that wants to recalculate the APR on your loan automatically.

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KR: Can you talk about one of the startups that you brought into pitch that didn’t receive investment? Where was the pushback on that deal?

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CL: I can talk about general frameworks on why some companies didn’t pass. Often, we’re usually focused on market and product differentiation. Not necessarily the product itself but the road towards differentiation. I think, in general, we place a big bet on the founder; we hope that they are dedicated, and we want to bet on the founder, but by the time they get to pitch, we’ve already vetted the founder and think they are super impressive. So, a lot of the questions come down to (go-to-market strategy, barriers to entry, conviction in the ability to generate paid users and contracts, product differentiation, competition, and moat).

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KR: I was looking through LinkedIn profiles – some said Managing Partner and others Investment Partner. Are there any differences between the titles? Can you move up in Dorm Room Fund?

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CL: Hierarchically, there’s not too much of a structure. Everyone’s votes are worth the same. No one has more influence during investment committee meetings. We have 2 Managing Partners per regional team per year. Those act as liaisons between the Investment Team and our GP (Molly). So, they have weekly or bi-weekly meetings that sync across all the Managing Partners across all the regional teams to get on the same page – what are the respective teams doing, how is the deal flow, is there anything they can help each other with, the direction of DRF, and interfacing all of these updates with Molly. They also help set the tone for the general structure of things – running the meetings, logistics stuff, and managing the day-to-day of internal stuff. But they are also just like us. They are normal Investment Partners that are responsible for their own deal flow. In terms of investment decisions, (there is) not much of a difference, but they take the upper hand in terms of managerial and leadership.

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KR: Earlier in the conversation, when you were talking about what you guys look for (in student Investment Partners), it sounded like you need some VC exposure or to be interested in building startups. I saw you interned at a VC firm before joining Dorm Room Fund. Do you need a basic understanding of VC before applying to be a student Partner at Dorm Room Fund?

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CL: I wouldn’t say it’s a prerequisite, but traditionally, most people that join Dorm Room Fund are interested in VC or startup building and want to have a career in something related to entrepreneurship. It’s beneficial to have some sort of background in it. With experience comes an understanding of an industry and how you build your theses. So, it always helps to have already built something or done an internship in VC. People are accepted from all different kinds of backgrounds. So, it’s never you have to have done this before, but it informs how you think about stuff and your decision-making process.

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KR: What advice would you give to a founder applying for investment from Dorm Room Fund?

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CL: My biggest piece of advice, not necessarily for applying to DRF but for founding in general, is to ask yourself why you’re building this and who you’re building it for. Sometimes, founders have a product, but it’s not for anyone specific or a specific market. It can be hard to be product first and market second. When you really think about who you’re building for, why you’re building (this), and what niche you would try to enter the market through – it helps the way you convey your story and the way you present yourself during a pitch, which translates on the investor side, our conviction in the market and their vision. I think it really helps to understand your customer segment.

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KR: What advice would you give to a student applying to be an Investment Partner at DRF? How do they stand out?

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CL: It helps to leverage your experiences no matter what you’ve done (in the past) – ecosystem building, starting a big organization, non-profits, building a startup, VC, etc. Leverage your experiences and spin how you think about investing and building in general through lived experiences. Having concrete examples always really helps your case. Sometimes it’s a bit harder to say, I’ve researched a little bit, so I think this. Knowing your stuff through experiences makes it easier to back up your frameworks.

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KR: Is there anything that I didn’t ask about that you think is important to know for students applying to be Investment Partners at DRF or as a founder looking for investment?

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CL: I think people need to realize student investing when you’re a 20-year-old is a two-way street. So, you can’t go into VC being like, I just want to be good at it and get good returns. That doesn’t happen unless you put time into your portfolio and support the founders you’ve interacted with, even if they don’t end up joining DRF or another VC’s portfolio. Whether that be checking in on them, providing them with resources, or connecting them to the right people. Everything in this world is a two-way street. So, if you’re only in it for a specific personal goal, it doesn’t really work out. You have to think about the larger picture of where you fit in and where you can help people as well.

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KR: Can you talk more about how DRF works with founders after investment? What is their value add?

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CL: Part of it is the network and how we introduce our portfolio founders to others within our portfolio. (For example,) if you’re building in the mental health tech space, we have X, Y, and Z companies in our portfolio doing this and (can connect them). Or we have this person in our network who is doing this and can help you. I think the big part of any VC and why people generally go for VC is having an automatically larger community. Another big thing is we help with fundraising. Since we have our LPs now and many DRF alumni partners become VCs in their own right and are now Partners at these massive firms, we help with fundraising and closing rounds. The last thing is peer-to-peer advice. Because the Partners are students of a similar experience level and age range, we can help with founder mental health, talking to you about very nitpicky random things that you wouldn’t maybe ask your lead investor about. (For example,) do I get an attorney for this, and who should I talk to? These are questions that (founders) may not think about asking a VC for, but we always try to help with.