Alishahal Macknojia
University of Houston
Houston (29.7° N, 95.3° W)

featuring Moody Heard, Senior Investment Analyst, Mercury Fund, Houston (29.7° N, 95.3° W)

Moody Heard is a senior investment analyst at Mercury Fund in Houston. He graduated from Washington and Lee University with a degree in business administration and geology. I had the privilege of interviewing Moody to discuss how his history of working for a startup and his innate curiosity prepared him to pursue venture capital as a career.

Unlike many of the traditional students who focus strictly on finance as an entryway into the venture capital industry, Moody did not have some of the professional guidance that others may have had. He simply expected to give his best efforts in the classroom and athletics. He noticed a lot of people around him were working in or working toward the oil and gas industry and decided to double major in geology and finance to make himself a good candidate. When Moody spoke with a friend’s father who was a CEO for a well-known oil and gas firm, however, he realized that the industry would change by the time he entered it. He then became interested in technology startups after talking with some of his older friends.

After college, Moody chose to join Venture for America as a fellow and worked for a consulting firm in Charlotte, North Carolina. At Queen City Fintech, he was able to work with others to solve the problems of competing in an innovation economy; this provided him with the toolbox of skills and knowledge of how to make early-stage investments and the general operations of startups. While he was in Charlotte, he homed in on the missing piece of Charlotte’s innovation economy, venture capital investments in startups. He helped launch a seed fund for the purpose of investing in the entrepreneurs and talent in the city.

As he learned more about venture capital, he decided to make the move to Houston and work for Mercury Fund. As a senior investment analyst, he spends much of his time sourcing (meeting and evaluating startups) and travels frequently to the 10 cities where Mercury Fund makes investments. He provides support to the four partners at Mercury Fund whenever they need help in keeping these business relationships active. If Mercury Fund decides to move forward with a startup, he spends up to three months getting to know the company and analyzing their product, competition, and market to evaluate if it’s a good investment to make. Some of his other duties include being a board observer at board meetings and giving his input to entrepreneurs on their potential projects and expansions. The projects Moody spends most of his time on are the due diligence process to create a research-driven deal memo on a monthly or quarterly basis, as well as providing the answers to any questions to confirm if it’s a good investment to make.

During our conversation, I appreciated Moody’s insight into what makes someone successful in venture capital, and I found him to be a very interesting person to interview. I think Moody’s curious personality is a unique asset for his exploratory work. His interdisciplinary background from a liberal arts school meant he took a variety of classes and practiced reading and writing research, which, combined with the competitiveness he had from playing football as a student athlete, prepared him for the exploration and evaluation of industries and companies that he does in his current position. I think a key takeaway was Moody’s line toward the end of our discussion, “If it fails, I’ve got a good story. If it succeeds, I’ve got a better story.” This attitude is something that students can take almost as a mantra on how they should approach the meaningful work they do.

Highlights from the interview:

Everyone’s family, community, and life circumstances create an initial role for them in society. What was expected of you? Did you adhere to it, or did you stray from it?

I grew up without a ton of expectations about my career; the only expectation that I had was that I would excel in whatever that career was. In fact, I would go as far as to say I didn’t have a ton of professional guidance growing up. I’ve just had an expectation that I would put my all into whatever it was that I chose to do, in high school and in college.

I went to college at Washington and Lee University and went to high school at different points in Houston.  I was at a private school. I was really focused on excelling in the classroom and then in sports, specifically in football. I played football through high school and through college. I was involved in student government as a president of a student governing body on campus, and then was double majoring, and at that point, I figured—again, without a ton of professional guidance—that everybody I saw as successful in Houston was involved in oil and gas. I decided to study geology and finance, [thinking] that if I had a geology technical skill set, combined with some business job, that I could go make a name for myself in oil and gas in Houston.

And then really the first piece of professional guidance that I got from anybody who had been successful in the field was from the father of a friend. He had been the CEO at one of the large oil and gas companies in Houston, and essentially his advice was like, “Hey, this game is going to change in the long term, and by the time that you’re coming of age as a professional, you know, getting the stride of your career, you’re going to be basically working in a different oil and gas industry than the one that we, the current, incumbent business leaders in the oil and gas sector, grew up in and made a lot of money in.” It was at that point that I started talking to some friends who are couple years above me, got really excited in startups…I figured if I can build a technology company, that’s where people are making money today, building successful careers, and that I can even do that in Houston. And so fast forward only about three and a half years out of school… have a job that I consider my dream job and already starting to plan out what the rest of the career looks like.

Did you think your fellowship with Andrew Yang’s Venture for America had any influence on your road map to working for Mercury Fund and building a network with other early-stage entrepreneurs?

Yeah, it one hundred percent did. When I joined Venture for America, it was because I had some really, really close friends who were older than me and got excited about the program and joined it. I basically just joined with the fundamental thesis, which was all I really know is that I want to start a company one day, and this program is promising to give me the toolbox to be able to go out and start a company when the time is right. 

I moved to Charlotte, North Carolina through that program right out of school. I got picked up by a consulting firm who was working with the big banks that are headquartered in Charlotte…And Charlotte, just like every other city, like Houston, was trying to figure out where can they compete on a national scale, and their answer to that was financial technology. They wanted to bring in financial technology entrepreneurs from around the world to spend time in Charlotte and work with the banks. And so I was in the interesting situation which was, “Hey, let’s pull together all these corporations, pull together people involved in the city, and then pull together people in the entrepreneurial scene and try to wire together that entire ecosystem and direct their efforts towards financial technology innovation.”

When I decided I wanted to go back to Houston, Mercury Fund stood out. They have a very similar thesis, which is they only staffed in the middle of the country, so traditionally overlooked innovation ecosystems. My two years of experience right out of school dovetailed nicely with Mercury Fund’s thesis, and that was definitely a function of my involvement with Venture for America.

When did you first envision yourself as an investment analyst?  

I didn’t know a ton about venture capital when I moved to Charlotte through VFA, but it didn’t take very long to figure it out. The thing that Charlotte was missing at the time was an early-stage venture capital fund; there was nobody investing in startups really in the city besides an angel fund. So I started heavily researching venture capital because I saw it as a missing component of Charlotte’s innovation economy, which I was focused on for the time I was there. I was like, “Somebody’s got to invest in startups in Charlotte,” and so I actually helped launch a fund, a seed fund in Charlotte, that was investing in entrepreneurs that we were bringing into the city. Through that experience, I learned a ton about the nuts and bolts of venture capital investing. When I decided that I really wanted to be in Houston, I started talking to the few venture capital investors in the city of Houston.

Can you tell me a little bit more about what your position entails?

At Mercury Fund there are about 10 different cities that we see as systemically important to our fund making new investments. Our constraint is that we have four partners, they’re sitting on boards of five portfolio companies each, this takes up a lot of time, and so they need help finding and making sure that they’re keeping relationships in all these cities up to date. And so frequently—I’d say on a weekly basis—I’m in any one of these cities in the middle of the country, meeting with entrepreneurs. I’ve spent a lot of time sourcing, just taking pitches from entrepreneurs and trying to evaluate whether or not it makes sense to have another conversation with them. And then once we decide it makes sense to have a follow-up conversation, and we really want to dig into one of them, then we’ll spend up to three months really getting to know an entrepreneur and his or her company. And that’s a very analytical, research-driven process where we try to get a firm grasp on the market they’re trying to get into, we try to get a firm grasp on their product, on their competition, and ultimately try to evaluate whether or not it’s a strong investment opportunity.

So that’s what I spend most of my time on. When we do make an investment I’m a board observer, so I join their board meetings. And those entrepreneurs would frequently come to me with projects they might ask me to help them out with.

What skills do you find yourself most utilizing in your current position?

I would say really strong interpersonal skills. I think probably the best thing to know when you want to communicate with entrepreneurs is understanding the right questions to ask.  That’s probably the most important skill in the early diligence for the sourcing path. If I’m trying to get a cursory understanding of whether or not this would be a good fit for our fund, that means having a really firm grasp on what makes a good investment, and specifically, what makes a good investment for Mercury Fund. And you can’t really ask the right questions until you understand that.

Beyond that, I’d say the standard skills like financial—for instance, in the diligence process, we need to get an understanding of if we put X amount of money into this company, how much do we own after the deal happens? It’s not quite as simple as some people might think. That’s what we call evaluating the capitalization table or the cap table. That process has its own unique form of math. I would say so much of it is just purely analytical. It’s like, can I balance a bunch of seemingly disparate ideas in my head to pull together a comprehensive story of whether or not this is a strong investment opportunity.

I’d say…being creative as well. Everyone that we’re looking at is working on something fundamentally new or different. It’s trying to understand what it’ll take for an entrepreneur’s vision to become a reality. There’s just so many variables in that equation, and so being analytical, being creative, having a strong intuition, strong interpersonal skills, and then add into that some, financial and Excel modeling jobs, that’s maybe 80 percent of the way there on the skills.

How did your college years prepare you?

There’s a venture capitalist named Peter Fenton, who is a general partner of a firm called Benchmark; they’re famous for a lot of investments, Uber being one of them…I think it was Peter Fenton. I once heard him say that the two most important characteristics of a venture capital investor are one, being hyper-curious, and two, being hyper-competitive. That really resonated with me.

I would say on the hyper-curious side, I’ve always been that way. I’ve almost always gotten in trouble for asking too many questions. If you’re not incredibly curious about learning new things, you’re not going to enjoy the job, because everything is—every single deal you’re looking at is fundamentaly new and different, at least it should be if it’s a good deal. I’d say going to a liberal arts school, where it’s super interdisciplinary, you’re forced to take a lot of different classes, and then just being around a lot of people who are asking tons of questions about things that we always did, that most people assume are just universal truths, that was such a great environment to then enter this world where you should be continuously questioning everything. And so, in that sense, a liberal arts education, being surrounded by a pretty diverse group of people and a group of pretty inquisitive people, was super helpful. 

The other piece is being hyper-competitive. I think I’ve always—I love football because…I loved competing. That behavioral drive is the thing that fuels me to go out and just have hundreds and hundreds of conversations a year, and work towards making a name, and ultimately helping to make great investments, in the sense of competition and being the absolutely best at this game.

Can you give me an example of the kind of projects you work on?

The projects that I work probably the most on are when we engage in the diligence process. Ultimately, what we are working towards is a deal memo…anywhere from a 10- to 20-page document. It’s super, super research driven. I actually really enjoy putting those together. I always liked writing papers in college, and in high school, and this is just an incredibly research-driven, analysis-driven document. By the time you finish reading it, it should make decisions for why we’re deciding to make this investment. 

Can you describe the dynamics of a team in terms of structure, organization, and other important characteristics?

We have four partners, and we have two analysts—of which I’m one. It’s typically one of the partners who gets really excited about a deal, and they come to me and they say…“Hey Moody, I’m interested in this deal. I’m going to run point on it, and you’re going to do a bunch of research to back me up on it.” So I’m basically helping to fill in all the gaps and questions they have as they are getting to know the entrepreneur and trying to figure out if it’s an investment they want to make. And so, the dynamic is really just partner runs point on the deal, analyst does a lot of the leg work and documentation and digging into the numbers, and then helps define it with a partner so that we can call up the entrepreneur and continue to ask more, better questions during the next conversation.

What do you think is the biggest issue facing your industry?

One, without a doubt, is diversity and inclusion. It is an issue for venture capital as a whole. It’s something that a lot of firms, including Mercury Fund, are starting to become really thoughtful about, and I think Mercury has been a really strong leader in that field. We just hosted a huge women-in-tech event in our office earlier this week…and if you just looked at our team, it’s a pretty diverse group of people, which is awesome, but the industry as a whole has been dominated by a pretty homogenous subset of the population. I think that’s one issue.

Another issue,—it’s just pretty slow to change, and I think there are a lot of opportunities to get creative with, not necessarily technology, but the financial instruments that are used to finance a company. And by that I mean, depending on the business model of the startup you’re investing in, it doesn’t always make sense to just say, “Hey I’ve got two million dollars, and I want 20 percent of your company.” There are other creative ways to invest in startups that are less dilutive to the entrepreneur and are less risky to the investor that are also helping to finance their business. You’re starting to see some really creative ways of financing startups, and I think we’ll start to see some more of that.

A good example of this is in Houston, there are so many exciting hardware and material sciences and robotics companies. Most VCs are really just interested in investing in software, because you write a line of code once and then you can sell it a million times. There’s no variable cost to producing another unit of software. In the hardware business, VC’s don’t want to put money towards supply chain stuff, like financing working capital, and so there are a lot of great businesses that don’t get VC funding. Houston should really be competing right now in renewable energy and clean technology. If there were investors who can figure out a way to get excited about investing in material companies or hardware companies or robotics companies…but that just hasn’t quite happened yet. I think anyone in Houston who figures out how to do that will, (a) be able to make a lot of money, and (b) be able to solve a pretty big problem that helps a lot of entrepreneurs.

 What advice would you give to students interested in your field?

I would say my biggest regret was not taking computer science courses during undergrad. I really wish that I had; it would have been so valuable. I’ve tried to go back and teach myself some of that just so I can speak more intelligibly with entrepreneurs and understand their businesses better.

The issue with breaking into the world of venture capital is there just aren’t that many jobs. For instance, a lot of firms don’t even have analysts. I mentioned that firm Benchmark—they don’t even have analysts; it’s just partners…they run the entire process themselves…And so, most of the people who broke into venure capital…it’s some function of both being hardworking, smart, and having the right resume—but then, on top of that, just being in the right place at the right time. I definitely say I was. It’s completely driven by personal relationships, and you just have to play the long game. If you’re really interested and passionate about it as a career, start by reaching out to somebody like me and getting to know them in a few different ways. One way to do it is when I was in Charlotte, I just volunteered as an analyst for the local angel fund, and I was writing diligence reports for them completely for free, just so I could get experience doing it and say that I’ve worked on deals before…That was one way that I did it, and I think through a truly demonstrated interest in the startup process—whether it’s working for a startup, working for an accelerator, an incubator, working for an angel fund, like I mentioned…those are all good ways to just prove that I’m actually interested in this.

 What was your most memorable experience in your career that helped you develop as a person?

I have this one memorable experience where I was really frustrated with this position I had taken in Charlotte, just because there wasn’t a really clear road map for where we were going, and we were struggling to scrounge enough money together to make investments. I went for a long run to clear my mind. And on that run, I had two thoughts that struck me. One was, “Okay, there’s…not a clear-cut path, but I just need to fully commit to this, and give it my absolute all, because it either fails and I’ve got a story, or it’s successful and I’ve got an even better story…” And then the second was…I just almost had an epiphany and thought of a way that we could restructure the way we’re working with startups and also the way that we are positioning ourselves. I went back and talked to my boss, and we reimagined the way we were approaching this business…That was a memorable experience. I just had this moment of full recommitment and that brought a lot of clarity to what the next steps were.

 Is there anything else that you want to mention?

I would say one thing that’s really, really important—beyond just the allure of the type of company that you’re working for or whatever you think is interesting or exciting about an opportunity that’s sitting in front of you—I would say there’s really nothing that’s more important than the people that you’re going to be working for, working with…I think working for somebody who (a) you trust, and (b) has an incredible reputation, and (c) is just really, really good at their trade or their craft—that’s really, super important. I think it’s way more important than however much money you’re going to make or anything else, the name of the company. That’s been super important to me. For instance, the individuals I work for at Mercury Fund right now have a phenomenal reputation. I love getting to show up to work with them every day and I feel like they have my best interest in mind. That would be my one piece of advice…I think just doing what you’re passionate about and doing it with really good people.

Interview excerpts have been lightly edited for clarity and readability and approved by the interviewee.