Sam Evans: Thanks for being with us Anthony. What led you to venture capital?
Anthony Santaro: First, thank you so much for inviting me to share my thoughts. I started my career off in finance, specifically, working at Wells Fargo’s investment bank in New York City. It was a great experience because I was in a unique group called Corporate Finance & Strategic Transaction Advisory. This group coupled corporate finance issues (e.g., what is a company’s optimal capital structure or whether a company should initiate a dividend) with complex M&A deals, so I got to work with the C-suite of companies in a diverse set of decision making. From Wells Fargo, I went to work for a special situations private equity firm that was also based in Midtown Manhattan. The firm did everything from traditional buyouts to real estate transactions, but the one area that I was most drawn to was early-stage venture capital investing. While it was a dynamic environment working on different transaction types, I was the only associate at the firm and was constantly being pulled in different directions. After some time, I took a step back and thought about what I found most interesting and enjoyable as that is what I wanted to spend my time doing. I determined that it really was that VC, earlier style of investing. At that point I started to survey this investment scene. I’m originally from Syracuse, New York and was also looking for an opportunity that would allow me to make the move back home without sacrificing my career ambitions. Armory Square Ventures was a natural fit, and I was beyond fortunate to join them first as a Venture Fellow (in June 2021) and now as a Senior Associate.
Sam Evans: Could you elaborate a bit more on Armory Square’s investment thesis?
Anthony Santaro: Armory Square Ventures has a unique investment thesis, which was another reason I was drawn to the Firm. Perhaps most important is the geographic focus of Armory Square. The Firm focuses on secondary markets (with the exception of New York City), historically overlooked by venture capital. ASV I was launched in 2014 and was primarily focused on New York State with an emphasis on Upstate New York. ASV II has continued that emphasis, but now also looks opportunistically at companies in other secondary markets across the Midwest (e.g., Columbus, Indianapolis, and Pittsburgh) as these areas share similar features with the startups that made ASV I so successful. Another important feature of Armory Square’s investment thesis is that the Firm looks to step up and lead Seed and Series A rounds. As a result of that, Armory Square styles itself as a high-conviction investor, typically making ~10 investments per fund – compared to some other earlier stage managers that more often do 20 to 30, or I’ve seen sometimes even more than 100, which is kind of crazy. At Armory Square we really like to “roll up our sleeves” and do the extra diligence and portfolio company work that corresponds to having a very concentrated portfolio. Given the relatively small number of investments, Armory Square looks to truly work with each PortCo as they scale throughout the life of the company. Outside of this, Armory really focuses on B2B SaaS and Marketplace companies where we have realized successful exits. But apart from that, we remain fairly industry agnostic. Our thesis gives us the chance to see different types of industry sectors all within our target geography and business model focus.
Sam Evans: Describe what your day to day as a VC Senior Associate looks like.
Anthony Santaro: Of course. So not to give a non-answer, but it’s always hard to describe the day-to-day. We’re a small team, very lean, and I personally really enjoy that aspect. It’s very different from being, for example, at an investment bank where there’s 30 or 40 other associates. And so, what my day-to-day looks like is always changing. All that being said, some common themes throughout all of it are a heavy emphasis on helping to lead the sourcing efforts of the Firm and the corresponding investment analysis. Sourcing takes a range of forms from doing cold outreach, connecting with other VC investors that have a similar thesis to us, or meeting with different accelerators. Another area that is important to us is doing business development day trips to the geographic areas I previously mentioned (e.g., Upstate NY, New York City, the Midwest) to really build a rapport with local startups. Taking sourcing a step further, once we find a company that we’re really interested in pursuing, the team and I conduct detailed analysis on the company. This looks at a whole range of different factors, including looking at the capital efficiency of the company (how much capital have they raised, how much money has been burned, etc.) what is the net new ARR over different time periods, and what are Armory Square’s potential returns under a variety of different scenarios. In addition to sourcing and investment work, I also help out our portfolio companies whenever needed with different projects, and I serve as a board observer to one of our companies. This really is just a high-level overview of what I could be working on. The one constant is that I am always busy and working on something intriguing.
Sam Evans: What are the X factors that you look in when you’re looking at founders?
Anthony Santaro: I think that’s always the hardest question to assess because it’s subjective. If you gel with a founder, it doesn’t mean that somebody else on the team will. It’s hard to get a deep understanding of that person after 1-2 Zoom calls. What really helps, and this relates back to our investment style of taking high conviction bets, is that Armory Square will typically meet with a founder on many separate occasions. We assess founding teams beyond standard Zooms, such as part of in-person group meetings to learn more about each company. In the past, this has included having them visit us in Central New York and also going to where they operate. During these meetings we assess each team holistically to better understand the opportunity and how everyone works together. One important area Armory Square looks for is the talent that the founder has been able to recruit around them. More obvious, but looking at the founding team’s domain experience has been helpful in the past. It has guided us to understand how the team’s background fits with the problem they are addressing. A founder’s ability to attract world-class talent and previous domain expertise are two of the X factors that come to mind.
Sam Evans: Any advice for current investors on how to navigate the ambiguous economy and venture ecosystem?
Anthony Santaro: To give a little bit of background, I joined in the middle of June 2021, and that was really almost at the height of a frenetic fundraising environment. So that was my normal for the first six months as it was all I had known. Halfway through 2023 and with the benefit of hindsight, that period was anything but normal. There has been a huge shift. We invested slowly throughout much of 2021, which took some resolve given the flurry of activity at that time. In 2023 the market has been far more receptive to the traditional, slower, more deliberate investing that the Armory Square team favors. In retrospect, pulling back was a wise move. Although I have been in venture for two years, determining and sticking to your “gut” does benefit an investor in the long run. No one definitively knows what tomorrow will bring, so sticking to a set of core principles is beneficial.