Oct 22, 2024, 11:24 AM ETInterview, Fireside Chat, Podcast

Battery Ventures’ Chelsea Stoner on the power of being ‘stage agnostic’ in tech investing

Battery Ventures has operated continuously since 1983, navigating three and a half generational transitions through a collaborative governance model featuring an executive committee of four partners rather than a single managing partner.
The firm maintains a stage-agnostic strategy within a single fund, allowing capital deployment across the entire software spectrum from early-stage growth to later-stage buyouts.
Chelsea Stoner, a General Partner since 2006, leads Battery's private equity practice, which was one of the first venture firms to execute software "take-privates," beginning with a 2003 ERP acquisition.
Approximately 85% of Battery's investments focus on software infrastructure and applications, enabling deep thematic analysis across specific end markets.
The firm's deal-making process empowers the ground-level deal team to lead investment decisions, often resulting in non-consensus outcomes where the Investment Committee votes are closer to the "no" side.

Battery actively sources investments globally, including regions outside the traditional Silicon Valley corridor, such as Burlington, Vermont; Bainbridge Island, Washington; and Sydney, Australia, based on the conviction that innovation is ubiquitous.
The firm views the post-COVID shift of talent to mid-sized cities as a key driver allowing tech companies and investors to connect anywhere, reducing the necessity for physical travel.
Increased global competition has made off-the-beaten-path investing more difficult, yet Battery continues to pursue these opportunities to find superior risk-reward profiles.

With a vast pipeline of approximately 1,000 private unicorns and a constrained IPO environment, Battery anticipates a 5–6 year runway for companies to eventually access public markets.
The firm attributes the resilience of its portfolio companies to a "maniacal" focus on cash flow and runway management, which mitigated the immediate need for follow-on raises despite growth decelerations.
Future unlock potential lies in M&A consolidation, requiring capital structures that accommodate diverse investor incentives to facilitate exits for companies stuck between unicorn status and acquisition.
Investment opportunities are currently polarized, with Battery targeting early-stage deals post-product-market fit on one end and buyout activity, particularly in Europe and Canada, on the other.
Growth-stage valuations remain stretched relative to reduced growth rates (below 50%); Battery leverages its stage-agnostic flexibility to bypass these middle-market gaps while waiting for capital to absorb.

Battery's AI thesis centers on the application layer where proprietary data creates competitive moats, rather than horizontal infrastructure models like NVIDIA or general LLMs.
Vertical software companies, such as Curve in the dental space, are leveraging unique datasets to train models that offer preventative clinical insights, such as cavity detection before human visibility.
In healthcare, AI is expected to act as a forcing function for integrating disparate Electronic Medical Records (EMRs) within single institutions to improve outcomes and reduce costs, bypassing regulatory bottlenecks.
The firm believes customers will not surrender proprietary data to horizontal giants but will instead adopt solutions that allow them to utilize their own data internally.

Battery has shifted hiring practices to recruit analysts directly from college rather than from investment banks, a move that has resulted in analyst classes that are at least 50% diverse in recent years.
The firm emphasizes early mentorship and long-term pipeline cultivation, arguing that diversity efforts must begin before candidates enter the professional workforce to be effective.
The investment culture is built on humility, requiring partners to continuously validate their thesis through deep product market analysis rather than relying solely on financial modeling.

Stoner identifies her greatest investment strengths as data analytics, the ability to avoid FOMO through focused execution, and humility that forces deeper due diligence.
She cites "time is your most scarce resource" as her most critical advice, necessitating strict prioritization of meetings and events for long-term career longevity.
Stoner expresses admiration for Ray Dalio's data-driven approach and identifies Neeraj Agarwal as her primary mentor for teaching the critical importance of product-market fit over financial metrics.
Regarding future opportunities, Stoner highlights excitement in biotech and dementia research, specifically citing advancements in the protein "cloto" at UCSF, despite Battery not currently investing directly in this sector.