With Sabrina Li: “Question the Status Quo” — A Gen Z Investor's Playbook
18VC Podcast · Episode 4 · May 29, 2026
Guests: Sabrina Li
Source: https://www.18-vc.com/podcast/sabrina-li

Good morning, good afternoon, and good evening to our audiences, and a huge welcome to our guest, Sabrina Li, an investor at Sunstone Management, a diversified private capital firm located in Southern California that invests in early-stage technology companies. Thank you so much for joining us on the fourth episode of the 18VC podcast. For those of you who may be new to our channel, we are a student-run podcast featuring student founders, operators, investors, betting on the youngest and smartest minds for the next generation. The host today will be me and Philip.

Hi, everybody. I actually knew about Sabrina for the first time back when I started my graduate study at USC in 2024. A common friend told me that she knew someone graduated from USC who's currently working in the VC industry, and we quickly found each other at a venture event hosted back to USC on campus, and have been friends since then. So to start with this, I found an interesting thing, actually an interesting personal summary at your LinkedIn profile as well as your WeChat profile.

It's just a simple four words combination, "Question the status quo." I'm just wondering, where did you get that instinct? And is this a statement to encourage sort of yourself, or are you saying that to others around you? Yeah. Great. First of all, thank you Lucas and Philip for organizing this. It's such an honor to join the very beginning of the episodes.

So happy to share anything anew. And for the first question you asked, so this "Question the status quo" is actually, I got it from the experience when I was doing the program at Berkeley Haas back in undergrad study. So they just put it everywhere, and- Oh ... initially I didn't know what does that even mean. I feel like it's just a slogan or something.

But- Mm-hmm ... after a year I spent there, I just feel like this is something they really believe, and they have the... They're just working on achieving this. So I feel like the core under this sentence is trying to challenge whatever is being set up, and I think that's kind of echoed back to what is the real VC spirit underneath. Mm-hmm. So I feel like that's pretty interesting because to me, I'm always the one who wants to challenge the authority or maybe even something like the old rules or whatever.

So question the status quo and embracing the new stuff. That's the thing I really believe in. I see. And since that's your principle, is there any status quo you found in the VC space or just general business space that you personally want to challenge? I feel like it's just everywhere. Like every time the whole human society gets better and better when somebody challenge the status quo.

Like just break the old rules, whatever, like the- Yeah ... it is technology or other society side. So- Mm-hmm ... it just makes people getting better and better. I see. I see. And looking back at your previous background, you've moved through product consulting, finance, securities, and investing roles. Which experience has changed the way you think most dramatically?

Honestly, I feel like every of them are changing me a little bit. So when I was doing undergrad, I'm totally not sure what I want to do or who I want to be in the future. Mm-hmm. So just like other college students, I start to do internship, apply to different positions. I don't even know what that is, but until I got into those positions, I start to know what the daily life is like, and I start to know if I like it or no.

So after trying a lot of different areas like consulting- Mm-hmm ... tech company or maybe data or market research. So I feel like none of them are the thing I want to do in the future. So I feel like I'm just trying to iterate myself continuously- Mm-hmm ... so which makes me get closer to the right one. Mm-hmm. One step closer after each experience.

Interesting. And just to follow up on that, what is the right one? Or is there even a right one? Yeah, that is a good question. I don't think there's a right one because people have been changing all the time in their life. Yeah, right. Unless you find something that you really believe in or like at this moment you have the confidence that you want to do.

Absolutely. Thank you for that. Mm-hmm. And another follow-on on that is actually people enter VCs from very different backgrounds or perspectives. Some people enter VCs after they do IBs for several years or consulting for several years. Others who are startup founders themselves, and later after maybe a successful exit or a failure, they go into the VC world.

So we would actually want to ask, what kind of make you into the VC world? Is it... And then how, why specifically did you end up in Sunstone Management? Yeah. So I feel the same because the people I met in the VC world, they are either 10 years experienced in Johnson & Johnson or maybe from the top consulting company and maybe a successful founder, they start their own firm later on.

And I feel like it is really rare to see new grad student join VC at the first job. But for me, my occasion is I was doing a lot of VC internship back in China during the pandemic. Mm-hmm. And it was inspired by one of my friend from my program at USC Marshall, and she was doing the VC internship and we've been good friends. She's sharing everything interesting with me.And that moment was when I was still not sure what I want to do, and I just feel like what she did in the VC internship is super interesting, and that makes me super excited to it.

So I tried a little bit. I applied for a couple positions, I got in, and I feel like it's totally different from the traditional financial world. It's different like you're just facing the financial models- Yeah ... doing everything with the numbers, with Excels. So that makes me excited, and I just kind of want to do this. And after I graduate, I just randomly applied on LinkedIn, and luckily I got into Sunstone.

Wow. So that was a moment that they just officially start to deploy more money or get bigger or have more influence. So I was kind of the first new grad hire of them- Wow ... at that moment. So which means it's kind of not as traditional VC- Right ... everything is set up. So when I get into the company, everything is just building from zero. So there's a lot of things to do.

That's kind of also interesting, kind of like a VC startup. Yeah, definitely. You're kind of... Sorry. The founding members of the VC, right then. Founding employee. Yeah. It's definitely super challenging, but at the same time, a interesting experience, I suppose. Yeah. Then do you have any people who you look up as a role model, specifically in the VC world, and can you share a little bit more about the story behind that?

Yeah. Honestly, when I saw the list, I was thinking about it for a long while, but I'm going to be honest, there's no single person, and I think that's intentional. So I feel like every investor I've either looked their stories or I met, no matter how legendary they are, has made some mistakes or have made some calls that aged badly. Yeah. But if I put someone on as a role model, I'm just borrowing their framework instead of building my own.

And I feel like VC is kind of an industry you need to build your own philosophy instead of borrowing from others. Maybe you can use a little bit mindset from somebody, but- Makes sense ... the reason they success is a combination of their ability, their effort, and the most important one is the time is the correct one, I think. So I don't think that applies to me at this moment, so maybe I need to build my own.

Yeah. I see it. That makes total sense. Let's start talking a little bit about Sunstone. Sabrina, why don't you give us a little bit of intro of what Sunstone does? Yeah, sure. So Sunstone officially started from 2015. We are a early-stage venture capital firm based in Orange County in Irvine, and we do investment into pre-seed round and seed round companies.

Average check size is about 200K, and so far we have around 100 portfolios. Most of them are still super young, so not a lot of exit. And we look at the companies in the whole United States, so- Okay ... it's a good combination. But industry-wise, I think we were pretty much a generalist for the early stage. Okay. Yeah, but the most of them are kind of related to B2B SaaS, or AI, or a little bit consumer fintech maybe.

I see. Are those areas that you just mentioned, fintech, B2B SaaS, also the kind of markets that you're most passionate learning about? Not really. Honestly, my interest was more on the consumer side. So- Consumer side. Yeah. Tell us a little more about it. Yeah. So kind of related to my first experience in VC, so I was doing a internship in China. Mm-hmm.

And as a fresh intern, my job was just going to each of the local store, like the grocery stores, to find which beverage is most popular, like people love it the most. So I just went to the grocery store every day. I just don't feel it's tedious compared to the Excel work. I feel like it's super interesting because I'm the consumer. I can feel what I want.

I can feel what others people want. Mm-hmm. So it might be also because related to my background, because I don't have a coding or bio background. My background's purely finance. Mm-hmm. So consumer is the thing that I can enter easily, and I have the empathy that I can feel the user's mindset. Yep. Makes a lot of sense. Yeah. Yeah, definitely. I remember you mentioned that VC is kind of a different type of work comparing to the pure finance work, like auditing or consulting or investment banking.

And can you just tell us a little bit more, how was working in VC really like, and how's your typical day? What's your major responsibilities? Yeah. Yeah. So that's the interesting part. Initially, I saw VC is super cool. You've been talking with founders, with investors. It's totally not you're sitting in front of the desk all day. Mm-hmm. But after several years working on VC, I feel like it's another-It's another hard path.

So- Mm ... it doesn't require a lot of modeling skills for our early-stage investors. But on the other side, you need to engage with founders, with different- Yeah ... fund managers, and that is a skill that I feel like is not trained by most of the schools, and like- Mm ... and it's hard to evaluate, actually. I feel like for me, the recent daily life is more like deal sourcing.

I talk to founders, a lot of founders we've met from different sources, and also due diligence. We ask for some data, but that's the part kind of like consulting job, but more deep. We will dive into the cap table- Mm ... market research, industry research- Mm ... investment thesis analysis, et cetera. And also, I'm covering a lot of on the portfolio support.

So you're not just giving the money to the startups. You have to check in with them at least quarterly to ask, "Everything goes good? Do you need any help?" Where like if they're raising money, they may reach out to you again. So the real world feels a little bit different than I thought initially, actually. But it's interesting overall. Yeah. Is it different in a bad way or a good way?

It's just the imagination versus the reality. Oh, okay. Sure. It's different- Because when you imagine it, you can only think of the good part. You do not know- Mm-hmm ... the dirty work, which part is- Yeah ... like the thing you cannot... Yeah. Okay. But if you could choose how and where to allocate all your time, would you choose to allocate 100% of your work time to just the front role, the front desk work of just talking with founders and sourcing deals and writing memos?

No. I would say this is important, talking with people, not only founders, but also different industry people. You can get- Mm ... knowledge or information from different perspective. Mm-hmm. So that makes you be a more natural position- Mm ... instead of biased by somebody. So I think the important part is to make everything make sense on your end, at least.

So you have to think about it after each conversation- Mm ... what's right, what's wrong- Mm-hmm ... and why he thinks about this, why- Yeah ... the other person thinks differently. So- Mm ... everything makes sense. So if you are on a natural position, you can understand the whole picture instead of just a few. And speaking of being able to tell what is right and what is wrong and learning from different points of view and perspectives, that actually touches on my next question about people are just talking about avoiding a consensus and being contrarian investors in the space, right?

It's a common belief in early-stage VC, and what does this concept of being a contrarian mean to you? I feel like you doesn't have to invest differently, just you want to pick differently. So there is a saying that I saw really common on the social media now, it's like you cannot earn the money you do not have the knowledge of. Yes. I feel like it just compares who you compare with.

If you compare to the general public, the most of VC already have their opinion enough. But if you compare to the rest of VCs, you may be the same of them. The VC is also huge. Most of people won't get a large return, maybe three times as the average. I think a lot of them just get lower than three of them. So 3%. Mm-hmm. Sorry, three times. Mm-hmm.

Yeah. So, I think the underneath strategy is just to keep to reiterating yourself and make your logical fully serve for what you're investing in, instead of, "Oh, I want to do something different than others." Just believing in doing different equals make money. That's not the same. Yeah. Hmm. So trying to be different for the sake of being different- Mm-hmm ...

it might not actually end up doing any good. Right. Right? And it might- Right ... actually become consensus since everyone else is trying to become different- Yep ... so to speak. That's interesting. Mm-hmm. And speaking back a little bit about when you first got to Sunstone, because we're just calling you probably one of the earliest founding employee of Sunstone when they were trying to establish their presence in venture capital investment.

When you got there initially, how did you first build up your deal pipeline from scratch, from zero? Yeah. So I still remember when I joined the company, there's totally no database of the pipeline. Yeah. So everything is in email. My boss has forwarded them to me. And it took me a while. I tried different tools and- Mm-hmm ... it's a painstaking process, I would say, because initially, I tried to use Excel a little bit, but- Okay ...

it's not that good, especially when you are trying to make sure everybody in the company on the same page. Sometimes they- Right ... just got a different version. So-Yeah, I tried the other platform called Airtable and- Okay ... that was already, I think, one year or two years later. Mm-hmm. And I think tools is especially important. That was the time back when we don't use AI that much.

That was like- Yeah ... AI just started. You can only ask it to write emails for you. Right. It'll be better now. It will be better if- Yeah. You were talking about Excel and Airtable, and I think those are mainly for storing and manage your information in a smarter ways. But how do you, in terms of just sourcing, getting the information, collecting- I see ...

inbound, outbound. What did you do? What are some actions that you took to get that done? Yeah. Got it. So I feel like initially Sunstone has a lot of connection already with the local- Nice ... universities- Oh, wow ... or some accelerators locally. Mm-hmm. Okay. Yeah, they will refer a lot of deals to us, but sometimes student founder is not that mature or ready to be invested in.

Right. So we met a lot of founders at the event. Mm-hmm. So event is important one, but the quality of event is also important. Ah. But I think the top one resource is from referral from other partners, like other VCs, either it's their portfolio company where they just purely don't look at this industry, so they refer it to you. So I feel like it's the same as hiring in a VC world.

So- Hmm ... reputation is super important. Right. So if you find the right person to refer you, you got higher chance. Right. That's interesting. And in terms of outbound, have you tried just the very manual, laborious work of maybe trying to send out a bunch of cold emails, cold LinkedIn, things like that? Honestly, no. But the reverse. I've received a lot of cold emails and cold- Wow ...

reach out on LinkedIn, but honestly- Okay ... I barely reply them because I- Oh, no. Cold truth ... yeah, I heard the same from the other investor in Bay Area. He said, "I don't even know who you are." There's totally no context, so it's got lower chance. But I believe some people might have replied every everything, but I'm not. Yeah. So just actually just a quick follow-up.

So you rarely apply to those cold outreach emails, but among those cold outreach, the ones that you click to actually see what the other people wrote, what made them different from the other one that you just didn't consider looking at it? I feel like your question is why do I still reply to those referred by the partners, right? No, actually, my question is what makes some of the outreach messages- Mm-hmm ... different from the others?

So you actually click into those outreach messages and see and sometimes even reply. Yeah. That's an interesting question. Let me think about it. So some of them, they just stated super clearly- Mm ... and we building just only a few sentences, maybe two lines, three lines- Okay ... so that makes me easier to read, so- Mm-hmm ... the first time we met, I don't want to read a long paragraph saying what you're building, what's the problem, or whatever everything is.

So attract the intention is important if you're doing the cold reach out, and it would be better if you see you know somebody that I know also, that increase the probability I reply as well. I see. Interesting. Yeah, definitely there is a callback actually from our previous episode. During our previous episode when we were talking to the managing partner of Impact Venture Capital, who is also a professor in USC.

And she also mentioned that he really recommend founders to get a referral because it's really increase your chance of getting a response, and they just got so many reach outs or emails in their mailbox, so then yours may just get lost. But if you get somebody who know the partners or know somebody in their firm, it's just much higher chance they will just have a look at it. Yep. Yeah, definitely.

Yep, that's true. Yeah, of course. And then, we can also move on to talk about how do you actually evaluate a startup or a founder. So, I think VCs are looking for tractions even in the earliest stage. For example, if you have some customers or if you have at least some demos of a product, or have you got some letters of intent from your customers, there are some good proofs of you're solving a real problem, or if you are...

Yeah, there's customers there who are willing to pay for your product. How do you look at this traction perspective when you are evaluating a startup? Mm-hmm. Yeah. So as for traction, people always talk about the revenue or the potential customer in the future. So, how many LOIs they sign, but I honestly don't really like the LOI, how many they sign.

That means nothing, I feel like. Hmm. So I want to see the real data, like real revenue or how many paying customers you have, or how many contract you have been signed already. So that's actually tough for early stage because a lot of company, they just don't have it, where some healthcare company or biosciences still in the FDA. Right. So there's nothing they can provide.

But I mean, for example, there are several YC companies, they just started two weeks ago, three weeks ago, before the demo day. Mm-hmm. But I still remembered a lot of them got a lot of tractions, like real paying users-... within those two or three weeks already. So I'm believing that if your product is really good, so since day one, there should be somebody using it.

Otherwise, the demand is fake, or either you do not have the ability to push your product to the target customer. And talking about this, I want to mention that I have a belief that the demand has different levels. So there are three levels, I think. The first one is must-have. It's like water or whatever food, people need it every day in case they will live or die.

And the second is good-to-have. It's like if you're buying beautiful sunglasses, it's like, okay, it's better, but you're fine without it. Mm-hmm. And there's another layer, it's called you're just trying to get it to prove you are the level of some person, or prove you are the same group of the other person. Oh. So a good example is organic food. So not sure if you guys go to the grocery store and buy the organic food or just like the, without the organic tag.

Yeah, I go to Whole Foods to buy organic food. So do you feel like-- What's the internal side of buying organic food? Do you really think that's going to make a huge difference on your health by eating that organic food? I think it's probably most of it is because of peer pressure. I think a lot of my friends at USC just started this wave of getting into the organic food, and they were just trying to persuade me into this wave, too.

Yeah, kind of the same. So I feel like people sometimes go to maybe Whole Foods to buy organic food just to- Mm ... prove they are in the maybe upper level, where they live a better life- Mm-hmm ... instead of the reality of the quality of the food. So- Hmm ... yeah, I feel like that's a super interesting side. So go back to the founders, they need to make sure they are, like who they are targeting.

I'm not saying like the three types of demand is which is good, which is not bad. It's just saying you need to make sure you need to know who you want to target and who you want to sell it to, and make sure your product is matching the same level. So I've seen a lot of founders, they're just creating a demand. Like totally, they're just purely creating from the air.

It's nothing. And that's why you don't get traction. So if you find the right demand, right person, and you do it rightly, there should be traction. Yeah. Interesting. Actually, I want to push forward on this question. It reminds me of a conversation with a guy called Anthony. I assume you also know him. Yep. He attends several of Sunstone events. And during one of our conversations, he mentions the top tier, top of the top tier founders, they create demand.

For example, the example he make is Elon, for example. He's creating a demand saying that we cannot live in the Earth, and we need to live a multi-planetary life. I think it's kind of a demand from nowhere. I'm not sure if-- Do you have any response on that? Yeah, that's a good point. Actually, I also agree with Anthony on that because I feel like the demand I just said, if you are building the same thing that is already existing in the market.

But if you're building something that totally doesn't exist, you are just trying your best to educate the customer. And after keeping educating them, they'll buy it. So let's see example, maybe for the cosmetics, there is a whole bunch of different products. But I feel some of them, they just have the same function. Hmm. So they just create a new type of product to educate a customer, you need this, you need this, after everybody bought it, and you really feel you need it.

Hmm. So there are actually ways to make those demands that, and are initially good or nice to have, and turn it into must-have for some kind of niche populations. Yeah, it depends on who you are targeting and how you want it to be ultimately. Sure. Can I just push forward on that a little bit more? So for example, on your mentioning about real revenues, for example.

In the case of your investments in Sunstone, for example, a 200K or something investment, how much revenue are you actually targeting? How much is enough? Because we have friends who maybe just have only a small fraction of revenue, but that may be a good indicator of they're already having some early market fit. Yeah. Mm-hmm. I would say there's no number on that.

At least I see, let's say if you start a company one year already, and you have one million revenue, so the combination of the how long you've been working on this, how long the product has been released, and if everything makes sense, that will convince the investor, okay, this could make money instead of just asking your friends and families to buy it. Yeah, definitely. We want to move on to the market size or scalability side of when you are looking at the startups. So is there a specific market size those ideal startups you are going to invest have targeted on?

Or is there some of the startups that you think they are targeting just a too small market that it's not a investable company? Mm-hmm. Yeah. I think for VCs, they would like to see the market at least at billion level. Mm-hmm. But to me, my observation is founders always just put the random number on that and make it as big as possible. So unless you just go to the due diligence and you check it by yourself and you figure out that's different.

But they've all validated from their own methodology saying that the market is this big. So it's kind of like I'm not really buying into this market idea. So market changes every time also. Definitely. You also mentioned unless you do your own due diligence to check that. So I'm actually curious, how do you validate? How do you double-check if the market size is as mentioned as by the founders, right?

How do you validate- Yeah ... that independently? Yeah. Yeah. I did a lot of check from different resources, so like a third-party research paper where like from the consulting part, consulting companies report, or sometimes that market doesn't even exist. So, it's all about how you evaluate it. Maybe like the per customer, you got how many, and you do the calculation.

I would say it depends highly on where you got the data and how you want to calculate that. Yeah, sure. So do you actually also, for example, talk to, I don't know, let's assume there's already some existing customers of the firm. Does talking to their current customers would help this process of estimating their probably market size or something like that?

Yeah, but generally we don't do that because it's hard to find a customer unless like they are the... Maybe for 2C company it's hard to find it. Like why the customer want to- Yeah ... want to answer the questionnaire from the investor. True. Right. But for 2B, I think it's even harder because- Mm ... it doesn't make sense for them to answer your question as they are the buyer, and they have to answer your question from the investor.

Oh. Yeah, that totally makes sense. And I would like to have one more question on this. For example, we have a bunch of friends who are doing their own startups, and they may be just curious about what type of companies are actually VC backable, and what type of companies that are not actually backable. For example, if they want to start up a boba shop next to, I don't know, next to USC, is that a really VC backable business?

I think it depends. If it's like high tea, let's just say- Yeah. Yeah ... if that's a random family-owned boba shop, that's not. So the background logic is VCs want to back something that has the high potential of high return. So VC is one of the most riskiest investments now. So high risk, you need to have the high return. Yeah, definitely. Mm-hmm.

And we want to move on to talking about the moat. So, in your opinion, what is a defensible moat? For example, is the IP a defensible moat, or is the speed the only moat nowadays, especially with AI? Yeah. Yeah. I think now with AI, the moat is becoming not as it is before. So, before we may think like you have the data, you have the IP, that's a important part, but for now, I don't really see IP as the super important item there.

Because except for some medical or deep tech industries that really needs the license or approval, the other industries, people can find tons of ways to solve the same problem, not you. So IP doesn't means a lot for some industries, I think. The real moat is the team, or maybe resources, or like the ability to move fast. So I think you have to find the right person in the right time to move quickly and build it up, and you have to make sure this is not going to be replaced by OpenAI someday.

Yeah, that's definitely true. And some people argue that instead of these general, for example, AI applications, they want to focus on vertical areas, maybe, for example, in, I don't know, finance or law or maybe medical, where some of the data is more kind of proprietary, or maybe just these clients, they don't want to release their data to other guys because it's sensitive or it's private data. And in these areas, they think probably there is a moat from the data side. Do you agree on that opinion?

Yeah, kind of, because on the regulation side, maybe some data cannot be released to those big language models. So maybe some company with their own huge data pool, they can train by themselves. But meanwhile, which means the market is also smaller than the broad one. Yeah, definitely. And as you just mentioned, a good team is definitely an important moat if they got the best talent in their area.

Then from your perspective, what's a high-performing founding team look like? What kind of qualities or kind of skills are you looking for in the founding members? Mm-hmm. Yeah, that's a good question. So initially, in the beginning several years when I was doing this, I feel like top schools or a lot of big names on the resume is definitely means a good founder.

But I figure out that's not the thing, because there's one portfolio company we invested, and the founder graduated from the top school in the United States- Mm-hmm ... with a PhD degree, a lot of awards, looks super good background and super solid. And she just paused the company after investing to them two years later. So she started to do another thing.

So that makes me feel a little bit disappointed because initially I feel like, oh, she's so great. She can do everything. But- Mm ... turns out she's pivoting herself to the other part. So that makes me feel the background, maybe school educate where industry background is not the most important thing, but still it can help you to filter out the sharpest, the most...

The founder has the best ability or most resources with them. But meanwhile, you have to make sure that the founder themself truly believe into what they want to do and have the so desperate to do it instead of, oh, I'm just want to build this company because I want to build a company. Because I feel it's maybe they just feel like, oh, I feel it's cool because I'm a PhD and I want to build a company. I can make a lot of money and raising money instead of, oh, I really want to solve this problem.

So it's tough to identify. I mean- Mm ... you have to talk with the founder multiple times- Right ... to know them personally- Right ... to how they think of this. Hmm. Yeah, that's definitely interesting. And the next question I'm going to ask might be a little bit abstract, but I still want to ask it anyway. What does taste mean to you in investing?

And if you were to describe your taste, what would it be? Taste. Okay. I think that's something being keep changing, either by the people surrounding you or- Absolutely ... the whole environment. And for me, I feel like I don't like the storytellers. So I want to see the real number, the reality, the action you did and the... Yeah, instead of just telling a really, really big story and trying to solve all the problems, all of the imagination.

So I'm the kind of person more focused on the reality and if this can be done by the team or something. Yeah. So you like doers more, in a sense? Yeah, doers instead of storyteller. Okay. But actually building on top of that, do you think the importance of telling a good story, the importance of the ability of storytelling is rising nowadays? Yeah, it is definitely.

I feel like some of the founders, they have really good technology. Maybe they just from the school, their professor- Hmm ... spend so much time in a lab, and they- Yeah ... just do not have the ability or don't know how to communicate with the founder or with the investors. Sorry. Yeah. So I think the best approach is just to hire somebody outside to become the face of the company and help you communicate with those investors, because not every investor truly understand how good is your technology.

So it would be better if you have a good storyteller to help. I see. So I just asked a rather abstract question. Now this question going to be a little bit more technical. So how do you usually come up with the valuation, and is what you do actually in work the same or different or similar to what was taught in classroom, like DCF or comp analysis, that kind of thing?

Yeah, I think for me, because I'm in the early stage investing- Yeah ... so it's totally different from the school.Because most of the companies, they don't even have a revenue, so you have nothing to see. Right. Yeah. It just purely depends on how the market is. Maybe some years the market is really hot and everybody's chasing the high valuation. The founder may also market high.

It also depends on the industry. Maybe some industry just have a lower valuation- Mm-hmm ... as nature. And I think it's pretty negotiable in the early stage- Okay ... as long as if you are a super famous, let's say if you are A16Z- Mm-hmm ... you have the right to say, "Oh, I'm just investing $20 million." And I think the founder will say yes. That's true.

Yeah. Because by bringing them in, they're actually bringing something else, which is probably unique, right? Yes. It's just a negotiation. Credibility. That totally makes sense. Yeah. Mm-hmm. Actually, I got one follow-on from previous, the investment taste side. So there we met several people, or we see from different kind of articles there. For example, I think we have a friend whose name was Tigrant.

He was also a student in USC also. He's interested in VC space, and I think he has his own taste in the sense that he kind of once was a founder before, so he have a vision of what kind of work he want to build. And his taste is that he will invest in the companies that aligns with his personal vision, like in a way, how he... For example, the work he want to build.

If that company's aligned in that track, probably I think he's more likely to invest in. I'm not sure if I'm making the correct reference here. Another one I heard was also from another VCs which is in China. Their name was called Creekstone. They're a rising VCs, a quite new fund, and their kind of standard, their special taste is that they want to invest in people who kind of reborn from a trauma or something like that, just who has experienced- Okay ...

a huge failure or whatever kind of thing, and kind of recover from that. I think that's their kind of unique taste. I'm not sure if you have any more comments on this side. Yeah. Yeah. That's interesting. First time heard of this. Yeah, I feel like, because VC is such a small team and it highly depends on the GP's taste, like those persons' taste, who do they want to work with, who do they like.

And, yeah, I feel like different people have different taste. It's not a good or bad, it's just the luck if you can make it or no. Yeah, definitely. I think it's closely related to the probably GP's personal experience or personal preference that- Mm-hmm ... make you realize or discover that he just likes some kind of people that may resonates with him.

Because I think investing is also a two side conversation, right? There must be- Right ... something like chemical reaction- Yeah ... between the investor and the founders. Yeah. Yeah. The chemical's important. I've met some, a lot of top school graduate founders. They just being super, super, let's say not that applied to some of the investors. But, yeah, that's just their way.

Yeah. Maybe they have high ego or- Yes. That's high ego ... to a time that they're a little bit arrogant. Yeah. Anyway. Right. Yeah. And then we want to move on to a little bit more practical tips or advice you can give to, for example, founders or student founders specifically, pitching to the VCs. So, what is the mistakes that you typically see for founders when they are pitching for VCs for funding?

And any advice for student founders who are looking to raise a fund that probably they can prepare in advance before they reach out to you? Mm-hmm. Yeah. I think, first thing is sometimes a lot of student founders, they're not even well prepared to go through the whole deck, so they'll be stuck somewhere in the middle, and that's not a good sign for the investor sometimes.

And, I think investors also knows you are young, like you're just not even graduated sometimes. They can understand the product might be not that perfect. It's not going to be as good as the outsider investor, outside founders, but at least you can show your passion or your vision in the industry. So I feel like investors would like to see the new things compared to the traditional ones.

So, don't work on those things that is already established. For example, I've seen some company doing the phone case. It's totally not a startup, you're just building some of your own business. So, just to make sure you have the space of imagination created for the investor, let them to buy you by buying you as a person instead of your company, because the company is still super young also.

And yeah, sorry, what's the second question? Any kind of mistakes that founders do when they are pitching for funding Yeah, pitching, just make enough imagination space. And the second was any tips for them, right? Yeah. Yeah. I think just be brave to ask questions. So the more you ask, the more impression you got, I think. You don't need to be afraid of ask the sharp questions.

So, it's not like presenting, it's just equally communicating, and maybe get to know who you are presenting early before the meeting will help better. And yeah, I think that's the part haven't been mentioned a lot publicly. Yeah. We also have another kind of similar question to our previous guest, and he also mentioned that he would encourage that to be like a two-way conversation during the pitching instead of you are presenting in a one-way presentation.

If you're not responding to the investors' questions or if they want to ask more deeply, you should kind of do an immediate response rather than just keep talking about your slides, right? Mm-hmm. I think that's a similar suggestion there. Right. Yeah, and then for the last question, and this part is about saying no to founders, actually. Because in our podcast, we also kind of sometimes give a grant to the founder guest that we bring on to our podcast from our own pocket.

It is not a huge amount, but we try to kind of train our own investment decision, in a way, by doing that. And I think for me personally, it's been tough to say no or to just turn down or reject the founder. How do you actually say no to the founders in a respectful or maybe helpful and constructive way? Mm-hmm. Especially sometimes these founders, maybe they are great founders, but they just need some pivots.

Maybe just the product or the area they're working right now is not good. But after several more pivots, maybe they turn out to be a great company and a great founder, and at that time, you want to have a good relationship with them, at least. So how do you handle that? Yeah. Yeah. I feel you because I'm the type of person, it is hard to say no to others.

And I was having a hard time rejecting the founders. I feel guilty. But later on, I just feel like it's okay. It's like, as you said, it's a two-way communication. So let me say it this way. It's better if you tell them no instead of just ghosting them. The polite way is to, I would say now, like first, "Thank you for your time, or we truly appreciate your time, and we really admire your effort in working on something," blah, blah, blah.

"And there's several items that doesn't fit into our investment strategy." So list what is that, and maybe they don't have enough traction. Just tell them, "We would like to connect again after you have enough traction." And I think most of founders, they will appreciate that if you tell them the reason you reject, because it just gives some feedback to them to improve or at least they have feedback. And I've seen the best response to a founder from the other person is like... I think it's from A16Z, where some top, top founder, top, top managers.

So they said, "We're not investing, but happy to see you prove we are wrong in the future." So I was super shocked. So that's really, really good. We hoping you to get better and prove we are wrong. So it doesn't matter if you do not invest, you can still maybe personally or professionally keep feeling touch with the founders. Sabrina, you have been in the VC space in Sunstone since 2022.

Mm-hmm. How have those industries or companies that you looked at at that time changed or evolved over time, especially now given the emergence of AI, and the disruption brought by AI and robotics? Mm-hmm. Yep. So I remember when I started to join the company, we deployed the money super, super fast. Mm-hmm. Like 30, 40 deals per year. That's a lot.

And that was during the time, like right after the pandemic. So the government helicopter the money and lower interest rate, and a lot of big companies, they just lay off bunch of people. Right. And so both on the demand and the supply side, the just fundraising market just thrived up. Yeah. And I remember the valuation back in those years was a little bit higher than now.

And a lot of startup company, I would say they shouldn't have raised money back then, but because there's extra money, they just find a reason. But for recent years, after the pandemic, after the interest rate goes down, and all the VCs are facing the fundraising difficulties somehow. Mm-hmm. Yeah. And I've seen a lot of companies just shut down before they start to raise Series A.

So I think it's a market selection. It's a correction from previous outliers. And I think-With recent years, AI is growing faster and faster. We've been invest some companies that is doing super cool stuff. Like- Mm-hmm ... we call it web coding right now. Yeah. But back then, there's no this word. They're just doing something, you tell the app what you want to build, and they will write a code that build a website for you.

So I thought that was super cool back then. But recent two years, the company just, I feel like they cannot compete with the big language models. Big tech. Yeah. So that's tough. I think it's kind of like new era, totally make everything different. It's infrastructure, like the electricity- Mm-hmm ... in early 19- Right ... century. Yep. And everybody's building on top of it.

But meanwhile, some companies is just using the API. It's just plugging in a lamp instead of building the whole factory. So that's what I observe. So, still a lot of noises in the market, but trying best to find a good company with the AI offer. So in a sense, would you cautiously recommend that investors should focus more maybe on the infra layer of the AI rather than the application layer?

Not really, because- Hmm ... there's still some verticals that the big models won't get in, were hard to get in. Mm-hmm. So it can give some time for the startups to become the leader of that niche market and maybe be acquired by them in the future. Makes sense. Yeah. Makes sense. And have you see, in terms of the VC people, investors, how AI has changed their work from day to day?

For example, we also talked to also a new emerging VC fund, which is named XiaoXiao Fund. And the founder was a lady who is doing a solo GP or solo VC. The whole VC is herself, like one-person VC, and her kind of outsource some of the work. For example, her argument is that, for example, if doing market research or kind of some of these desktop research, you can rely a little bit on these AI tools to help you do that.

And some of the others, like law or compliance, he outsource it to some other teams, right? And have you seen some shifts in the VC industry because of the rise of AI and how you do your work from day to day? Yeah, I feel it's pretty common. I also see a lot of solo GPs coming up recently, but especially for the emerging VCs, as you said. They just raise a fund, and with the tools of AI's help, it's not necessary to hire entry-level people to do the dirty work.

So it happens. But for some of the existing VCs or some more traditional ones, I feel like it's not replaced yet. But I want to echo back to, there's an article Lucas shared earlier this week. I look at that. So it's talking about Gen Z's influence in the investing area. I feel like that's super interesting. I really like that opinion, because we are human beings, we're engaging with human beings, so- Yep ...

a lot of things like the culture, proximity, is not something AI can replace. At all. AI can do the data, can do the communication even, but the interaction where real thoughts from young people, that's totally different. And we see as a type of, in the sector, which really, really need a new blood and new mindset to get in. So it keep evolving. If you're not, you're just a solo person with old mindset and just AI.

AI will tell whatever you ask it to do instead of have Gen Z people having new inspirations inside. That's important. Yeah, I think that also resonates back to the taste question because I also read the article you mentioned there, I think. There was some Gen Z investor who are interested in, what is it called? Scuba diving or some kind of diving. Mm-hmm.

And there was a diving glasses that's kind of integrated some VR or AR technology there. It's a super niche market, and the article says it's a sport or diving is not that popular among the older generations. And this young investor can observe or identify such an opportunity because he's in this generation, and he know there is a bunch of his fellows who are really interested in this kind of sports and have a real demand for that. I think that's what I reply to that one.

And also, we are now kind of walking to the end of this episode, and- Mm-hmm ... we want to ask one question is, would you consider starting your own startup or your own fund someday in the future? Yeah. I still remember when I was finding a job, I tell everybody I want to build my own startup in the future, but the longer I stayed in the VC space, the less confidence I have, honestly.

Because I feel like VC, it is a long-term game naturally. I don't see any instant result, either good or bad. I reasoned, maybe within three to five years. The shortest is almost 8 to 10 years. So I'm not sure if my understanding or my perspective really can be the right one, or say can make the money. So I'm not quite sure now the answer is, but start my own fund sounds easier than building a startup.

That's actually very interesting. So I think you're suggesting that it's because you're understanding more about VC and after seeing so many successes and also failures of startups, that increase of understanding actually makes you less confident in founding your own startup. And vice versa is also true. Maybe one of the reasons that a lot of founders could start founding some of the great companies because they started out not knowing how difficult this entire journey would become, would unfold- Right ...

and move forward, right? Right. It's just because- That's such an interesting observation. Yeah, it's just because I've seen the whole path a lot, which makes me maybe consider too much about the difficulties. Mm-hmm. And I feel like I'm not brave enough to face all the challenges building a startup. But, hey, that looks like if you ever show up in another...

Become a CFO or CEO in another startup, I think that would be a huge conviction or signal to other investors out there, right? Because you were an investor yourself, but then you willingly trade your investor journey and your role to join a startup. I think that would be a huge conviction in the eyes of other investors. Right. This morning, I just talked to a funder, and he told me he just hired a person from one of their angel investor fund.

Oh. I was pretty shocked. I'm still not sure what's the background story and why he choose that. So I'm not sure. That's interesting. That sounds like a deal that's worth of digging in. Yeah. Right. I'll tell you later once I figure out. Before we wrap up the entire session, just one last question. So actually, there are a lot of people out there who discourage fresh grads from getting to the VC industry.

And one of the most common reasons is that the fresh grads are not experienced enough to either make informed investment decision, or resonate with the founders. What's your take as a fresh grad turned VC? Yeah. I feel like it depends on what you want to do or who you want to be in the long-term goal. Mm-hmm. So if you want to build a startup company, I won't say VC is a bad choice.

Otherwise, it's the best approach, or at least the top two, the other one is just join the industry. Mm-hmm. Because you have a tremendous connection to different people from... Most of them are senior level people, C-level people. You have totally different understanding and different resources compared to those guys who's working from the entry-level position in a specific big company.

So I think that's the good part. But as a lot of people said, the best thing is you just get into... You know every industry, but you don't dive that deeply, which means you don't have enough expertise, knowledge to build the thing you want to do. And the common sense is VC or buy-side is the ultimate goal for financial people. Right. So not sure the next path, next step, if you're not doing VC and still you're not sure what are people doing next.

Mm-hmm. It is rare to see people get into other industries from VC- Mm ... but it's common to see the vice versa. So I wouldn't discourage people doing this, because I feel like it's totally your own decision. You can just chase what you want at this moment, and don't be afraid of in the future, like you just said, on the building startups thing. So just don't be afraid of that, and there will be a best solution if you're trying the best.

Mm-hmm. That's so well said. Thank you so much, Sabrina. Once again, appreciate your time and commitment and willingness to be as one of our guests on our episodes. And that wrap us our recording for today. Fellows, don't forget to subscribe our channel at 18VC and visit us at 18-vc.com. I will see you next time. Bye. See you. Bye. Bye. Thank you.