Profiles In Venture: Stripes' Fred Kauber

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Fred Kauber is an investor at Stripes, a growth equity firm based in New York focusing on software and branded consumer products. While he spends most of his time on the software side, he is found walking to work in his On Running sneakers while listening to a podcast from Gimlet Media. Before joining Stripes in 2018, Kauber worked in software for an alternative investment startup that grew to transact over $6 billion during his tenure. Before that, he worked in product management for Morningstar to drive engagement and conversions for the company's retail investor product. Outside of Stripes, Kauber can be found following the Premier League and searching for the perfect slice of pizza, a quest for which he has traveled 5,000+ miles. He is always open to suggestions.

Frederick Daso: Why did you choose to start your career in venture focused on growth-stage investing versus early-stage?

Fred Kauber: I get energy from helping entrepreneurs accomplish what they're most passionate about creating. I had the best opportunity to do that authentically while investing at the growth stage. In early-stage investing, you can have 9/10 portfolio companies fail, but if the other one succeeds wildly, you can still have a successful fund. At the growth stage, you typically are writing larger-sized checks and have a smaller portfolio. For me, I like the pressure I feel at the growth stage to make sure that every company is a success.

Daso: What are the main differences between late- and early-stage investing?

Kauber: I touched on a few of them above, but there is more nuance worth exploring. At earlier stages (think Angel, Seed, and Series A), it's rare that a company will have a solid product-market fit or a fully dialed-in go-to-market strategy. As a result, investors at those rounds need to place a great deal of confidence in the founding team. Specifically, that faith relies on both for their vision and their ability to execute on it. Later on, it's much more important to see strong product-market fit and a solid go-to-market approach that can scale over time. The obvious point is that valuations are (almost!) always higher during later stage rounds. So there should be a much more structured case for growth in the business over time.

Daso: You previously spent time as a Software Engineer and Product Manager as various firms before your tenure at Stripes. How did those experiences influence your investing style and strategy?

Kauber: Great question! First, it established product as the north star in guiding my investment approach. We live in an age where the best product will almost always win (which was not the case 20 years ago). Coming from a more product-heavy background has enabled me to support founders building best-in-class products more effectively. I know that my colleagues at Stripes share that sentiment, and so I feel fortunate to be working here.

Second, it allowed me to understand different market segments more deeply. For example, let's say I'm speaking to a developer tools company. They may reference how their product helps companies implement a test-driven development approach or a hexagonal architecture pattern. Given my operating experience, I know what those terms mean. That obviously creates an edge for me in evaluating those tools because I've often had firsthand experience with them.

Daso: What were some of the critical skills you honed as a member of Cornell Venture Capital, and how do those skills serve you in your current role today?

Kauber: For those who aren't familiar, Cornell Venture Capital (CVC) provides services to VC firms and their portfolio companies. We advise on things like developing sector theses or understanding a new product opportunity. To that end, CVC was very formative for me in giving me a model of how to evaluate startups and how to execute on it. One of the most common questions I get is "how do you think about a company in X space," and CVC helped me answer that question.

Daso: Some tend to say that late-stage investing is closer to or even synonymous with private equity? Do you believe that to be the case?

Kauber: I can't entirely agree with that, at least for the stage that I typically invest in. For one thing, many folks we traditionally think of as "private equity" care a lot about profitability in each of their investments. While capital-efficient growth is essential in my job, seeing strong growth is much more important than seeing profitability.

Daso: What would you advise someone still in school who wants to invest in late-stage growth companies as their first job?

Kauber: Try to get your reps in as early as you can. A lot of the information that I use to evaluate exciting startups initially is public information. So anyone still in school can do the research and find a few companies that they think would make intelligent investment targets. If you seriously want to work in the space, consider sending that list with your rationale to a few VCs and get their thoughts. Everyone in the industry is always looking for new and exciting companies to invest in. So it can be a tremendous value add if done well.

The other bit is to start to think about your unique value add. Figuring out which companies to invest in is fun. More importantly, it can be even more fun sometimes to think about how to make it worthwhile for a startup to take your money over someone else's. In a lot of ways, that's the more difficult question. The quicker you can find an answer to it, the more successful you'll be in this business (or any other)!

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