Episode summary
Carmen Palafox discusses her path to venture capital, early-stage companies and leadership.
Key takeaways
- The conversation explores what makes a strong founder.
- Diverse teams bring different perspectives to investment and leadership.
- Resilience matters when building a career in finance.
About this episode
In this episode of Rocking Finance, CEO Ashley Leftwich sits down with venture capitalist Carmen Palafox to explore the fast-paced world of venture capital, innovation, and leadership. Carmen shares her journey from studying economics at USC and building her career at Dimensional Fund Advisors to becoming a founding partner at 2045 Ventures, where she backs groundbreaking startups at the earliest stages. Together, they discuss what makes a great founder, why diverse teams drive stronger outcomes, how resilience shapes success, and the young professionals can apply as they pursue careers in finance.
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Transcript
Transcript supplied by Riverside; it may contain transcription errors.
Rock The Street, Wall Street: Welcome to Rocking Finance, the Rock the Street Wall Street podcast. Real stories, real access, real path into finance. Join us for candid high-impact conversations with industry leaders sharing the insights, experiences, career pivots, and journeys that can help young women advance through the financial industry with great confidence. Rock the Street Wall Street equips high school and university students, especially young women, by bringing the image To life through financial and investment fundamentals. We provide direct industry access and guidance supporting students and young professionals on their journeys from classrooms to careers while expanding participation in the capital markets. Through cohort-based learning, mentorship, and individual career connection, we help students build confidence, capabilities, and network. That opens doors. Our goal is clear: expand participation in the capital markets and strengthen the future of finance one cohort at a time. Today I'm your host, Ashley Leftwich, CEO of Rockmistry Wall Street, that loves rock finance. Welcome to Rocking Finance, the podcast where we explore careers, leadership, and the people helping build the future of finance and investing. I'm Ashley Leftwich, CEO of Rock the Street Wall Street. Today I'm happy to be joined by Carmen Palafox, a seasoned venture capitalist and a star in the VC space. Carmen is a founding partner of 2045 Ventures, a venture partner at How Women Invest, and a partner at Mila Capital. She's been recognized with the Rising Star Award Los Angeles Latino Chamber of Commerce, spotlighted by the National Venture Capital Association as a Rising Star MVC, and featured by Los Angeles Magazine as one of LA's most powerful women. After graduating from the University of Southern California with a degree in economics, Carmen began her career at Dimensional Fund Advisors, where she helped scale operations across Latin America. Canada and Europe during a period of tremendous growth. Today, she focuses on identifying and supporting innovative founders at some of the earliest stages of company building. Carmen, welcome to Rocking Finance. Thank you, Ashley. I'm excited to talk to the students of Rock the Street Wall Street. Carmen, you studied economics at USC and earned an MBA from Berkeley Haas. What first sparked your interest in economics and investing? And what advice would you offer students who may be exploring careers that are different from their parents? Yeah, as an undergrad at USD, it was a time of exploration. So I took advantage of testing out different majors of f everything from geology to international relations, but I would say with the economics, I I started to really get interested. when we were diving into econometrics and statistics and looking at data on the difference between micro and macroeconomics. ⁓ So that was the foundation for me and in learning about the capital markets and the economy. I would say what sparked my interest in investing though was my time at Berkeley Haas and being at the Epicenter of tech and innovation in the Bay Area. I had incredible professors, Maura O'Neal and Toby Stewart, who are both practitioners. They're they both founded companies that were venture backed. And so through their lens and experience, I I really started to understand the impact of venture capital. And when you think about VC, I know we'll talk about this. later it really touches most of the products and services that we use. So when you think about Zoom, which we're we're using now, that was a venture-backed company. Alphabet and Google, which many of us use, is venture-backed, Netflix, which we all watch, venture-backed Moderna, and so on and so forth, even Starbucks and and Home Depot. So Venture plays a a critical role in in innovation and our economy. I love that you mentioned the data piece. That is something that we are very in tune with here at Rocklist Street, Wall Street, and also the relevancy of venture capital backing so many companies that we know and and many of us love. You actually began your career though at Dimensional Fund Advisors during a period of significant growth. the firm had expanded from approximately 75 billion to 300 billion in AUM assets under management. Looking back at those early years, what lessons did you learn about building expertise and earning opportunities and positioning yourself for future leadership roles? Yeah, just reflecting back at my time at Dimensional, I was so fortunate coming out of USC to land. my first job in my early twenties at a firm like Dimensional. Like you said, a period of really high growth. Back then we only had the Santa Monica office in the US and London and Australia internationally. So for me it was that's where I I learned everything. Our growth was really driven by Customer discovery. So really understanding what the customer needed and wanted and and satisfying that. It was very dependent on on data and theory. So most of the board at dimensional were Nobel prize winners in economic theory. So think Fom in French, right? And so incredibly exciting and inspiring to be in rooms with with those leaders. Also disciplined. Dimensional is very disciplined on their investing and approach and block trading. So learned a lot through that. But was very fortunate to just be led by an awesome leader, Rick Eustace, who really was himself very disciplined and informed and developed fact pattern, never jumped to to any conclusions. And so that was awesome to to be led by him, to learn to be a leader under him. And and then David Booth, he ended every company meeting with telling us to have fun in our jobs. And we did. Love that you mentioned that listening to customers is a key piece, that discipline aspect and then having fun at work. Those are all wonderful takeaways. Now we started talking about venture capital naturally, and it sounds so exciting and makes such an impact. Could you summarize venture capital for our listeners and what roles you often see venture capitalists play in helping innovative companies grow? Yeah. So just kind of tying my experience together at Dimensional, we're investing in public companies. The expectation is when you go public, you're profitable. I would say that's in question now nowadays, but Back then you were you were profitable. So going back to school and learning that VC invests in companies that don't have revenue yet in many cases was was very eye-opening to me. So venture capital is risk capital. It's that first money in when you may not have a product, you may not have revenue, you may not have customers, right? A bank is not going to issue you a loan because you don't have a history of revenue, you don't have collateral things like that. And VCs are underwriting different forms of risk. So we are underwriting a team risk, we are underwriting market risk, we are underwriting whether or not a company can scale and be repeatable across jurisdictions, across states, internationally, so on and so forth. So that is in basic terms what VC does, what VC provides to company is expertise and network. Right. And so this is very nuanced because I'm generalizing a lot. VCs come in different flavors and Our funds are different sizes, but at the early stage where I focus, I'm typically providing companies with expertise on their operating budget, right? If if I'm investing capital into a company, I want to know how they're gonna use that money and how what they're gonna use it on. Then we're talking about, well, what does this whole journey look like? What are your financial needs? Going on through year one, three, five, seven, helping them with their go to market, who their customers are, what their revenue model is, and making intros. So extending our network of limited partners. So as a fund, we have investors in the fund who are successful, who have networks of their own. So bringing all those resources to the table to help these companies get to the next level. Your venture career included Mila Capital, which focused on that frontier technologies and companies building physical products where hardware and software innovations are. And my parents are technologists, so I'm particularly attuned to this part of VC. Tell us about making those investments in fields where innovation is actually changing the landscape. Yeah, so I was fortunate coming out of Berkeley Haas to start my career in Southern California venture and land at a firm that was focused on what we call Tech You Can Touch, right? So this is anything that required manufacturing and LA has a deep history in manufacturing. We have two ports for us, it was being focused on helping founders really understand the complexity of getting from a design to actual manufacturing and being surrounded in this ecosystem by operators who have that expertise was was very valuable. And in terms of companies that we invested in through that first fund, Orbit Fab, they're building refueling stations in space. Which when you think about what has happened historically, satellites used to have to take all of their fuel up into space. So once they r ran out of fuel, that was it. ⁓ but now if you have a refueling station on on space, you can operate longer, so less waste, more efficiency. We invested in a wearable called feel that attracts emotions and and so that ⁓ it was useful for drug discovery, understanding how patients react to medication. And then another company we invested in called Pathspot, which identifies pathogens in restaurants and hospitality. So if you walk into a Marriott, they are Pathspot customers, so you can be assured that they they are serious about health and have that as their operating system. And they're in also several different restaurants chains at this point too. Wow, that's very interesting. Such interesting companies. 2045 ventures, you often are in the pre-seed stage. So you talked a little bit about how you're looking at what budget is, what their operational budget is, what they're going to spend money on. And What are some of those other things that you're looking for whenever you meet founders who have a little more than an idea or a prototype or a vision? But what what qualities make you think this is someone I want to back? Yeah, I think this is very hard to encapsulate. It is definitely more art than science, right? So we've talked about data, but at the very early stage f with a a founding team. Especially in the areas that I invest in in in deep tech, I'm looking for both hard skills and soft skills. Hard skills obviously do have the technical chops to do what you want to do and bring your big vision to life. I'm often backing more folks with scientific backgrounds and so understanding do they have prior patent history? What does that look like? What have they brought product market, what publications do they have, ⁓ what can they point to in in in terms of their technical expertise? And then on the soft skill side, which is often overlooked or or not taken into as much consideration, is do they have an ability to to lead, right? Are they gonna be able to grow the company to a successful stage? What does that look like? And especially at the early stage, it's very chaotic. There's a lot of uncertainty. It's a roller coaster ride. So major peaks and valleys. Are you able to accept that and not walk away? Right. And so just looking for for a lot. And as a VC you have to be able to identify that in a short period of time. So it's it's not typically at pre seed, you don't have years and years to be able to underwrite a team. You have to do as best you can with with what you have. I have a mathematics background, so I love data. And of course we measure outcomes and impact. But I like that you point out the fact that not all of it is historical data. There's other pieces that you're picking up relationally about the people that you potentially are working with and those that you're going to invest in. One of the things that stands out about 2045 ventures is that the firm is grounded in data showing that diverse founding teams can deliver strong outcomes. You've shared that companies with women on founding teams are more likely to generate stronger returns and ethnically diverse teams can also outperform. What should our students understand about the value of bringing different perspectives to providing solutions? Yeah, our history of 2045 is definitely rooted in that data. So understanding the fact that women are capital efficient, right? They they definitely, in my experience, are incredibly scrappy and gritty and have been proven to to outperform sixty percent of the companies we invested in in our first fund are led by women. So we're excited to to track the progress there and to see what comes next. Many of our students are also scrappy and gritty. What advice would you give the young people building resilience when they inevitably will encounter setbacks along the way? Yeah, if you are looking to build company, there will be many setbacks and there will be a lot of uncertainty, a lot of chaos as always talk to founders. It's never over until there is some sort of exit. And so endurance is important. Having support a solid support network in your family and friends, having different outlets is incredibly important. So I think those are those are all things that I highly recommend. I'm pretty active in in my community here in Santa Monica in so many different ways. Well, you mentioned endurance and you also run marathons. You've built a career in an industry that's urgent and yet also rewards patience and discipline and long-term thinking. So what lessons from those endurance sports have influenced your approach to venture capital and leadership? I ran my first marathon in London. So London Marathon was an incredible experience. I qualified for the Boston Marathon in that first marathon and I credit that to my coach, Jackie Hansen. She was the first woman to break 240 in a marathon. Jackie's also responsible for getting the marathon included in the nineteen eighty four LA Olympics. So she was a very strong advocate for distance running and for women in sports. So what I've learned from sports in my career is A few things it's it's putting in the hard work, doing the reps. Like in venture at this point, I've made over forty five investments and I've learned from each and every one. You have to reflect back on what works, what doesn't. And that's the same in training for a marathon. Every time you increase your distance, you're learning something about your body. And in addition to the reps, there's also discipline. So Jackie gave me a plan and I followed it. I did everything she said I needed to do and that was really important. And as a result of that, was able to qualify for the Boston Marathon in that first run. So discipline is incredibly important in venture. You just at the early stage, you just don't know what companies are gonna break out until they break out. So you have to be very disciplined at pre seed. How inspiring and congratulations. That's that's incredible. We often asked our guests if they were to go back and give your student self one piece of advice about careers, confidence, or life, what would it be? Yeah, the one piece of advice that I always come back to, it was given to me by one of my colleagues actually at Dimensional and he said, play the cards or dealt. And it's something that resonates with me because No two people are the same. If you're sitting next to someone at the poker table or if you're playing dominoes, or you're each gonna have a different set of cards ⁓ to play. And that situation is unique to your own self. So for me that means my network is is unique. It means that my relationships are important and I need to think strategically about the decisions I make. Carmen, thank you for sharing your experiences and insights with us today. I love playing the cards that you're dealt. Your journey reinforces the innovation benefits from many perspectives that sometimes the most meaningful opportunities begin with courage to take the first step into similar or something unfamiliar. To our students and listeners, remember you don't need to have your entire future mapped out today. Stay curious, continue learning. Build relationships and don't be afraid to pursue opportunities that stretch you beyond your comfort zone. Thank you for joining us for another episode of Rocking Finance. Until next time, keep learning, keep asking questions, and keep investing in yourself. Visit Rock the StreetWall Street.com to learn more. Make sure to follow and join us for the next episode. Until next time, let's keep rocking finally.
