Kelly is founding partner of Moonshots Capital where he invests $500k – $1.5M with conviction into extraordinary leadership with a heavy emphasis on leaders with a military background.
We’re here with Kelly Purdew. He is a partner and founder Moonshots capital, a seed fund here in L.A. and Austin. Kelly and his partner Craig have both served in the U.S. military and have a strong thesis around investing in extraordinary leaders which in many cases is synonymous with investing in military veterans. Before Moonshots was a fund Kelly was doing similar work running a syndicate and pulling together SPV’s I believe to invest in great entrepreneurs. He’s also an entrepreneur himself, an angel investor and winner of season two of The Apprentice. Kelly thanks for being here.
Thank you for having me. So I am dying to ask you about The Apprentice but it is so it’s so fun. But make sure that we get the basics of moonshots up front.
Absolutely. So we are a seed fund. We like to invest with conviction. We like to lead check sizes or half a million to one point five million and we are looking for extraordinary leadership as a thesis. And the thought process that got us there is over our years of investing and looking back at what was successful and what wasn’t. From an investment standpoint and trying to identify factors that you could control for at the time of investment will 20 20. Looking at it the only thing we could come up with that showed a positive correlation was quality leadership.
And the only place in the world where we know that millions of dollars are spent training in leadership per say is the military. So we lean in heavily and look closer at deals that have military veterans as part of the founding team and that can be not just US veterans but is really or wherever.
Hi Kelly. I also want to hear about The Apprentice. But before we get there can you tell us about how many how long have you been doing shots and how many investments have you made.
Yes we’ve made so much shots. We also use the name for our syndicate. We kind of describe our investment career in kind of three chapters so far chapter one was as an entrepreneur without much money. We would make individual angel investments kind of old school you know a twenty five thousand dollar check in the round up eight to 10 more of those four bodies and invest that and then help the entrepreneur whoever we could. We formalized that to invest via a syndicate with our angels when basically Novell got a no action letter from the S.E.C. enabling syndicates to kind of be broker dealers without a broker dealer license.
So we you know we have you know probably 20 or 30 each so 40 or 50 or 60 people that would frequently invest with us when we like something and then formalizing that initially through Angel List and using the angel as tools to attract more angels. But you don’t have a set of documents and paperwork that’s kind of S.E.C. no action letter meaning you’re allowed to do this because you basically collect you know money from people to invest in something that you’ve researched you’re putting your own money into it. So that’s kind of a stamp of approval and then you can get paid for it right.
You get a percentage security from those angels that are relying on your work your due diligence and you being involved in helping and that’s basically broker dealer activity.
So how many people did you end up having when you were running the syndicate.
So we still do syndicates that are not appropriate to follow on syndicates so the deals we previously invested in. So it doesn’t conflict with the committed fund but we’ve done 30 to as PD that we’ve invested in. And there are probably four hundred and ninety ish angels that have followed us and the deals that were over the time.
Well that sounds like a lot of help. How do you manage that.
We’ve got some pretty interesting things Retail sells spreadsheets going for for the syndicates for the fund we use Carlos the back end but so just so when you’re running moon shots the syndicate you’re you’re taking carry on a deal by deal basis correct but not taking management fees correct. There’s a minimal amount of you know two to six thousand dollars depending on the complexity of the deal of some of our legal and our. And we set aside three or four thousand dollars for K1 payments over time you know over a 10 year period.
So we set some money aside for doing all that and if we’re a little wrong on it it cost us somewhere for a little ride there’s a little extra money to distribute when we do distribution but it’s not a bundle. So the economics for an industrial or you know more interesting when an exit happens you actually get distribution rights and you can have a bad one that doesn’t perform and it doesn’t drag down the rest of the performance. So it has a lot of positive components to it.
Yeah. I just feel like I have a lot of friends who want to pull together and SPV on a sort of more one off basis and are considering doing that on Angel List to advice on using Angel as well.
So I think that anybody who’s doing this as I don’t know is saying on a lark but you know as a kind of a one off here and there because they happen to see really interesting opportunities. I think that paying for the tools like angels provides is a good idea if you’re going to do this as a business. A lot. Jason Calacanis or something somebody else then you should probably. It makes sense from a scale standpoint and efficiency to own it yourself and do it yourself in terms of all the legal docs and running the process and doing the tracking and everything.
And do you think it’s a good way for people to maybe get into angel investing to join syndicates.
So you do understand a little bit more about the process as being part of a syndicate and you can also for you know my my mentor in investing was a gentleman named Luis Villa Lobos.
He was the founder of the tech Coast angels. He also was one of the co-founders board members of the Angel Capital Association has helped up New York Angels the Washington D.C. Angels is really kind of a mensch unfortunately passed away a few years ago.
But you know his thought process and the way he described it to me as a typical Angel usually writes two or three checks you know twenty five fifty thousand dollars. They happen to be you know doing a really good job and what they’re doing and making extra money and they see all these phenomenal results and returns from everything that’s you know on countries every other day and they want to get involved. One of their friends goes to a dinner five entrepreneurs pitch they like one of those five the best they put a twenty five thousand dollar check in there in the game right.
You get excited they maybe do two more. And one of the three that they’ve invested in fails and so there’s a a zero where there was a twenty five thousand dollars before and you start to either they or a spouse starts to do the math around OK that’s starting to be a good chunk of a year of college education. What are you doing stop doing that. And they stop. So they haven’t gotten to a statistically relevant number of investments to take advantage of that asset class which as we know it has the best returns of any asset class.
And you know my recommendation is always that you should participate in this asset class but you should understand your total portfolio and you should do your unit bet size if you want to call it a bet. Should be you should get to 20 to 25 investments so you should think about it. If if in this very risky asset class but also high return asset class I want to put 5 percent of my holdings or 10 percent of my total portfolio figure out what that number is it could be 100 hundred grand it could be a million whatever it is and then make 20 to 25 bets and have the stomach to do the bets and you try to diversify over location and places and times sector whatever it is to really take advantage of it and understand how to do it.
And the answer is yes and Angel List allows for that because there’s such a one you can now go down to like a thousand dollars I think because a minimum or five thousand so you can make you get it back can be small so that you can ensure you get to 20 to 25 bets and you can learn it through through that mechanism very well lots of information lots of connectivity. You can meet other angels talk to them through the system and you can learn a lot.
I have joined your could. Could anyone join your syndicate.
So anybody who is a part of our syndicate has to be a qualified investor similar to angels. And that is part of our process for onboarding but most of people ask to be in the deal flow where we don’t like saying no I’m not letting you so just to get it on record we can’t join your syndicate.
Yes absolutely. All right.
Gray Davis is past me now. Let’s head here. Let’s talk about the Apprentice a little bit. Can I ask you about apprentice you are on season. You were the winner of season two. Yes. Which is a huge deal. It was watched by everyone we’re just chatting with Eric Packer. You said he watched every episode you were on right. Everyone he missed and it was like the rerun was Friday night. And so I’m dying to hear about it like you were given task tell me about the actual process of it.
So the dynamics in the show are take 18 people probably four or five of which would be reasonable people would say yeah those people could be the apprentice and be the winner and the rest was an amalgam a compilation of you know geo psycho.
I said psycho the right way demographic component. So that is an interesting show to watch.
It’s entertaining and you get a task and it’s a you know it’s like written on kind of the royal letterhead with the gilded gold and it says you know you are going to come up with an ice cream flavor you’re going to go to the factory make this ice cream then you’re going to go out into the streets in New York and the team that sells the most of your new ice cream wins the task and they hand that out. And it’s a free for all on the two teams going after it. You run through the task running truthfully in procedures and setting up an after action movie basically a whole bunch of military stuff that I ingested into put into our teamwork to perform and much like the joke in the forest where you don’t have to outrun the bear you just have to outrun your buddy because the bear will eat them.
So it was the same. My my focus was on if we’re just efficient we don’t have to get an A plus we just have to beat the team. It’s not efficient executing and the task ends and there’s mayhem and craziness throughout that’s filmed. There’s no there’s no narrator of the show while you’re in the middle of the task they’ll pull you out and say Hey what did you think about Sally doing this or build doing that. And you give your feedback and that’s what they edited it to try to tell the story along the along the flow of the story.
And then there’s the results where you go to the board room and they say who won and who didn’t win. And then the losing team goes to the board room and the board rooms can last anywhere that’s like six minutes on TV during the show in one of my board rooms I was in there for three and a half hours where he was grilling and going out there.
That was the final for the board room and the boardroom has Trump and these Trump making the decision how much is he. I mean our current president how much is he involved in deciding who wins 100 percent OK.
He takes people’s input.
Yeah but just like now Yeah that’s his decision.
So sort of you were Trump’s favorite person on that season.
So Yahoo. Used to run these polls like generally speaking and I was like a 9 to 1 9 9 2 1 favorite going into the finale and then they also ran a live finale where Regis Philbin like asked audience members randomly who they thought as as the as the live piece was going and it was like 10 people said Kelly and nobody said my opponent.
So that would’ve been a really weird spot to not pick me at that point. So do you think the story as they put it together accurately reflected what happened the story because there is no narrator The only the only elements that I thought sometimes were on the spot were like during a boardroom session Trump would say something and they flashed to one of the contestants faces that may or may not have been the exact case they were making the writing that occurred but it added to that. But it was like ninety five plus percent accurate.
There’s no way to mess with it because what happened happened. But some of what you’re about to do if you’re the winner you’re then spending a year promoting Trump and his enterprises. And so I was one I like is he choosing you because he likes you. I mean also you’re the favorite but also you’re gonna be a good face of his brand to some degree.
I think that that was definitely a consideration the different winners of the Apprentice apprentice.
They had various levels of interactivity.
Some people didn’t move back to New York to work for him. Some people kept doing what they were doing and just spent the time on The Apprentice time kind of promoting the next season of The Apprentice. A couple of people did work but I was like How many times you get to hang out with a billionaire in his offices for a year in New York too.
Were you in Trump Tower. Yes I was in Trump Tower. That’s so cool. I know you’ve been somewhat reluctant to talk about him publicly but can you tell us any secret secrets.
The kind of things that stood out the most for me with for what he did and what he was doing was really media management and media manipulation if you will. You know the the you know kind of you know blow ups that happened with Martha Stewart. And or I can remember the woman from the view the timing on those different things occurring were like literally two to four weeks before the next Apprentice started. And it was you know it was what it was and it ended up keeping the ratings. I think of the Apprentice significantly higher than they might have been but very very shrewd and how he managed all of the real estate items that you know all the businesses and all the meetings that I was in and the questions I asked him because I published a book on leadership principles and leadership characteristics asking him what he considered to be the most important leadership trait of all of his people that worked for him 100 percent loyalty loyalty loyalty was the most critical.
And I’m like What about work ethic. What about IQ. What about like and he said yeah. Always you can find. But loyalty is the most important and.
And c words in Trump Tower and were so avuncular and Don Junior about my age if I not mistaken. So they were finishing college they were in college were they around also. No.
They were they were in the offices first.
Oh were they had they just finished college or they sort of young they were ensconced when I was there in 2005 and truly phenomenal like really remarkable. I mean some people say you get a measure of someone by how their kids turn out. And you know his hit at least Don Junior and vodka were fantastic hardworking smart. I had only the best things to say about them.
So I so related to this theme but I mean to move off the apprentice. But I want to move into advice for our founders but but sticking with like the Trump stuff you’re talking about.
Do you coach your founders or do you think about things like media strategy and how to build a personal brand and some of the lessons you took from Trump to maybe your portfolio company.
How the companies use the media to their advantage is a significant part of our discussions. From what. From the immediately upon getting involved in how and how they portray themselves and what the story arc is how they even announced fundings how they announce product releases that that entire strategy is incredibly important. And if you aren’t managing the story about your brand you’re basically creating an opening for somebody else to do that for you. And that’s not something that we want our portfolio companies doing. We want them in charge of their brands.
I had that same but it a new question.
Well so one of the things I’ve seen maybe more of my friends in my portfolio companies but is people who get a little too caught up with their media strategy. I’ve a little. I have some friends who it’s a big win when they’re written in tech crunch and it can be a distraction I think.
Yeah I I don’t I don’t think that you should overweight effort and time to only working on your brand versus delivering the product and managing the product the right way. But I think having a coherent strategy around how you’re doing branding for both of your primary company elements as well as products and product releases is very important not just for how other people think about the company but also how your internal team thinks about the company and having the same storyline.
It also helps with attracting talent.
I watched this week and I watched you from like 10 years ago it’s fun like you’re at the archives you’ve got a lot out there. Do you coat your founders some on how to do how to actually be in front of a camera. Better how to do PR so they’ve got their messages. How do they deliver them.
Yeah we do practice frequently around no matter what questions are asked especially in kind of news by element there. You got to go into anything that you’re going into with. Here are the three points that I’m gonna get across and you can pretty much answer any question with those three points.
It doesn’t matter what we talk about in this podcast I’m going to get the same answer.
What are some common mistakes that first timers make over promising and under delivering is pretty significant. The items that are going to go into media are things that are easily findable and are probably the first things that pop up when somebody is looking at what you’re doing. So I know that’s the same message for when you’re going out to raise money. It’s a long arduous process for 90 plus percent of fund raisings and the deck that you send tracking it. Understanding who had who has it who you sent it to and who you went through it with.
Because when you come back to them in six months to show them traction it better not be half the size it was before.
Is there any real difference between how you learned it pretty social media and how it is now. In terms of the communication with the external parties the channels have changed a lot right.
Significant changes the tempo and the depth of required material I think are significantly different now. So the kind of a content distribution and content management strategy a lot smaller bites much more frequently to stay top of mind. Ah ah ah kind of more the case today. You don’t just have a section on your website or press releases that’s got six for the last year and that’s what people can go to to see what’s going on.
I think over the long term too it seems like you can actually get to know the reporters who cover your beat or whatever and building those relationships seems like a thing worth doing.
Absolutely. I think that for many startups and I think about marketing kind of you know with two hats on one is kind of the brand strategic right brain activity and the other is the left brained performance marketing traction. What did you do this month. Did you hit your numbers in terms of acquisition and a lot of early stage startups. And I think we investors have a lot to do with this focus on the left brain performance marketing metrics piece a lot in early on so there’s a lot of activity around that and there’s a lot less attention paid to brand positioning.
So tell us and bring us back though to what you’re your bread and butter what you’re looking for when you’re doing investing. How do you evaluate leadership. I know it’s one of your core theses.
Sure. And we get a significant amount of questions around what sectors are you guys in. And I can talk some sector around around what we do and I’ll come back to talking about the leadership element. So sector wise so my partner Craig Cummins in Austin he helped stand up cyber command while he was still in it for the Army and the army. And when he sold his last company that he founded to Mercedes Daimler in headquartered in Austin which is why he moved to Austin he moved on to their emanate team for about two years.
So he looked at transportation automotive and mobility around the U.S. for either investment or acquisition. My background from building direct to consumer companies to working with my wife my much better three quarters who’s built and sold for media agencies three to Interpublic Group one to NBC and it’s built up Griffith fifth business all around direct to consumer all around measured media have some chops in that space from helping her build up this this fifth company and then I sat on and helped build a few SAS based companies.
So it’s a it’s a mixture. Tell us more about your veteran thesis so there’s some really interesting things that happen with our focus on military veterans on teams. If you look at a lot of the early stage technology platforms investment investor platforms like TechStars or Y Combinator 500 Startups and you look at a cohort I bet three of us on any call would pick TechStars New York if there’s 16 companies in this cohort the three of us would be like ninety five percent accurate identifying what they are to fintech to H.R. 1.
I want a R and then whatever you know one or two of whatever the latest hottest new tech thing is. And the state of DC right now is that there are at least 100 venture capital firms focused on each one of those.
Well they can be at lunch with the FinTech team.
One of the FinTech company teams and one of the founders is a former special operator say a Navy SEAL talking about Afghanistan. Invariably they go Oh man I know you’re in FinTech and I can’t remember that before after the first five that I’ve talked to recently fintech investors but you should talk to Kelly credit Moonshot because they’re military veterans who like military veterans. So that starts a little ripple effect that Navy SEAL founder through his military channel or her military channel back back checks. Craig Kelly and guys who are these guys do I want to work with them and Craig and I if it comes across the transom do the same thing.
And the answer on that reference call is basically no run away Don’t run away Don’t walk away from that person there in either direction right if it’s bad and it’s 100 percent you know gloves off completely honest or it’s like yeah you want to in your foxhole they’ll die for you. They’re fantastic. Then starts our heavy lift process where I can call whoever in my network maybe military maybe not but I’m a military veteran asking on behalf of another military veteran whoever CIO at Sprint do you can you can you I’m a. Here’s my portfolio company. Here’s what they do. Can they talk to your the right person on your team.
And we get a really high response rate from having that occur.
We’ve also talked about leadership. Absolutely. And the training that goes into leaders in the military. Absolutely.
The 10 leader principles that I wrote about you pick a few of them from you know planning people say planning but and obviously you need a plan in business but understanding why you need planning.
How do you plan your mystically based on you know here’s my objective here my intermediate goals here the milestones that hit each goal thinking that way you may or may not have been to business school may or may not have alerted business school but it’s fundamental to how people who’ve been in the military operate over a written plan like something that you can gauge against whether you’re off course or on course not. You might have not made the plan correctly but you know that because you’re now measuring against something.
So I don’t know what all of the 10 the 10 principles of leaders had more planning but my impression of what you might learn at West Point would be around planning reliability accountability and things that sometimes are a little at odds with the pants on fire style of entrepreneurship which is it’s great to have a plan.
But sometimes I just look at these people who’ve written out detailed five year plans and I think I’m going to throw that out the window because this is entrepreneurs.
Really don’t know what you’re doing. Yeah can’t be a five year plan now but one thing we know is that plan won’t be right that’s right.
I think that one of the dis services that kind of Hollywood has done to military service is describing this kind of automaton robotic. Yes ma’am. No sir mentality. And the ability to creatively problem solve for people who’ve been in the military is phenomenal and pants on fire and a startup has a different connotation and seriousness.
The two pants on fire in combat right. Right.
The amount of the amount of planning and stress and seriousness of execution associated with some form of military operation kind of makes it kind of pale in comparison a little bit. So I’m trying to get my product back.
I’m gonna push back a tiny bit because I’ve heard some of your founding story. When you’ve taken money from friends and family. Yeah it can. I realize it’s not a life and death thing.
Exactly except the level of stress that we’re seeing with founders and with our society it can actually be fairly life and death. Going through that process. Yes.
And and I’ll then I’ll I understand what you’re saying and I don’t disagree but I’ll couch it in terms of you can always walk away from it. Right. Right. I’m not saying that founders should walk away when it gets hard. That’s not at all what I’m saying. I’m just saying that the the testing and the mettle and the resolve required to go through the military training components and I’m not even talking about with combat experience I’m just talking about just the training element. Right. The reason that you’re doing it the higher the higher calling associated with it and the literally focusing on training them to deal with those situations is something that’s directly applicable to the pants on fire.
Stonehenge was like hey relax you know everybody at West Point takes boxing play here and it’s not so that you can become a great boxer it’s so that you can get punched in the nose and still operate and back to the creativity and problem solving. So in the U.S. military commander is told go take that bridge. There isn’t a manual that says how do you go take that bridge. The same way it’s like did that product launch.So I would take creative problem solving like picking my team you know for pickup basketball for pickup entrepreneurship will pick the person who’s got military background.
So after you invest are there do you think there’s some advice that you give that people without your experience particular military experience don’t give.
So I think that a an interesting part of our process for investing especially out of the fund is we even though there’s super young and we know the plan’s not going to be right really tearing apart the financials and forcing them to sign up for a budget for the next 18 months. And that is I know that other people don’t do it that much. Not everybody but like a lot of a lot of other investors don’t require that because they feel oh you know it’s gonna change anyway. This is close enough and you burns about here that’s about twelve months but we’re we we want the founder or founders to think about the operating plan with.
They have to hit it and or understand why they’re not. So that we can adjust fire basically. And that comes through during the. Before we put the money in process so they start to get a feel for what that is.
And do you think that where you’re willing to take a risk or not take a risk has changed over the course of your investing like what you’re willing to invest in.
So yes absolutely.
And that’s why we switched to a committed fund. One of the reasons is with the syndicate you know I can meet a hot new startup and want to be involved and say Hey love you love what you’re doing. We can get you four hundred to seven hundred thousand dollars sometime in the next 90 days. And they’re like you know if it’s a driven founder who’s trying to close they’re like that sounds great. Call me when you have something. And so unless Craig and I want to fund it out completely or Delta ourselves before we run the process is a little bit risky to to sign up for that.
So now with the committed fund that enables us to invest with conviction and leaders that we like we we’re able to get to the due diligence level in the lead position where we write a term sheet gets us the attention and the timing to be able to go to the go to that level of due diligence.
So if there are no veterans on my team should I come to Moonshot and how should I get to you. Yeah.
So two questions there is an exclusively military veterans answer is No. So the one we’re at about 60 percent a few in total. So that from starting as an angel of Chapter 1 through the syndicate’s Chapter 2 and in the fun word about 60 percent a U.N. into teams that have military veterans on it. We still value those leadership characteristics. They didn’t mention all 10 of them but a few of them. Passion perseverance the planning element integrity is critical. Right. So if anything comes up as a red flag on the integrity side we’re typically out.
I don’t believe that those leadership principles by themselves are exclusive to the military people with military backgrounds. I love failed founders. I mean going through the Startup Grind gives you battle wounds for leadership elements. And then how to get to me. I mean that’s a that’s a that’s the same for I think all of us.
Right. The warm intro where there’s a you know a double vouching for like if you get one of our entrepreneurs to introduce you to me that entrepreneur knows how we operate. And that’s about it to you that he likes operating with us or she likes operating with us. And for you you know that entrepreneur unless they don’t like you wouldn’t introduce me. They think that I would be. You know that I’m a good investor.
So we’re running out of time and let’s see. Kelly anything else about you personally. You were top of your class at West Point. Does that. Am I wrong I’m thinking you have a sort of intense personality. How do you how do your friends describe you.
How do your friends describe you.
That sounds like I didn’t how you’re anyone. I wonder if one of the front end questions trying to get into The Apprentice. Yeah. Saturday from Kim.
So you know Craig and I are day spouses. Yeah. My partner and I. And he he said I’m two hours ahead because he’s in Austin. So he kind of dreads waking up in the morning because I don’t sleep much. I sleep like whatever four and a half to five hours a night so I’m on the list guy.
So he wakes up to do a live look at the list that he’s thankful for in some ways dreading every single day.
But isn’t he two hours ahead of you. They shouldn’t. Are you waking up that much more if you’re in California.
He’s in Austin and you see you’re out but he wakes up to my son he goes to sleep tonight. It’s here to do this.
We communicate a lot. So that’s great. That’s great.
Mo and I would say and I would love for all the founders that we’ve worked with them to tell me who’s more responsive time and time frame wise. Right. So in terms of you know their co-founder or me like I’m some texting back while the text is happening so I I’ve I’ve been on the receiving end of unfriendly and or unhelpful investors and I don’t ever want to be that for our founders.
That’s great. I think a lot of founders appreciate that. Well thanks so much. Thank you Kelly.
Absolutely. Yeah. This is great. Looking forward to doing deals the other day. Likewise.