Nick Grouf — Alpha Edison

Posted on Wednesday, May 26, 2021
Nick believes VC has become a very reactive business. He explains how he and Nate Redmond set out to build Alpha Edison as a proactive, knowledge-driven fund.
 

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Nick Grouf is a founder and managing partner at Alpha Edison. Alpha Edison is a knowledge driven venture firm that invests in early stage companies out of their fairly new fund II.

Nick has been a founder at least three times and before Alpha Edison, he was running a very successful LA based incubator. Nick, nice to see you.

Great to see you, thank you for having me. 

Great. Did I get the introduction, correct? Good enough, at least three times you’ve been a founder.

At least three times for sure. 

Great. 

Makes me a glutton for punishment or somebody who just loves to build stuff. 

Yeah, I see the glutton for punishment. I did it once Nick and that was enough for me. Tell me more about being what I called a knowledge driven venture firm.

Sure. We are big believers that venture capital has become a very reactive business. That there’s been an order of magnitude increase in deal flow. And it’s very easy for people like us to sit back and let the deals roll in. and a lot of people will tell you that their job is to quote unquote shift signals from noise.

But while there’s been an increase of deal flow, it means that there’s more noise in the system than ever before. and it’s very easy with that volume to get distracted. As you know, for competitive deals, it used to be, you had 90 days to make a decision and now you probably have less than nine days.

And so what we came to recognize was that in order to successfully identify opportunities and act with conviction in a way that was both respectful of the entrepreneur’s process, uh, and facilitated a sufficient amount of time for diligence on our part. It meant that we needed to do what entrepreneurs do, which is to study sector vulnerabilities.

To identify what we believe are material opportunities to unlock latent demand, uh, and then to proactively go out and look for businesses that were well positioned to take advantage of the core thesis that we’ve decided to invest against and candidly to also filter our inbound deal flow on that basis as well.

So that we’re looking at the companies that we believe are well positioned to capitalize. On the opportunities that we think are relevant and therefore our businesses that we want to own. 

does deal flow, come in. And it’s a great looking deal and there’s lots of things to love, but it doesn’t fit one of your theses 

Yeah. I mean, we, we are, we are not dogmatic about this. So if something comes in, that’s very compelling and we understand it, um, then you know, we’re happy to, to, you know, go after it, but, As, you know, a lot of times what happens is an entrepreneur walks into the office and they say, I’m working on a, you know, a big problem.

and the first thing that, you know, the venture capitalist says, well, is it a problem? And if it is a problem, is it big? And if it is big, is this a solution? And if it is a solution, is it the best solution? And even if it’s all those things, is this the best team to go after it? Uh, and it takes time to figure that out if you haven’t already developed a point of view.

And So we like to have a point of view in advance. Uh, and what we find is it allows us to focus on what the entrepreneur is actually seeing and often talking the same language. Uh, you know, that the entrepreneur is speaking to us and, and, and sometimes help the entrepreneur further massage the business opportunity and strategy.

So I had Ryan Hoover on just recently from the weekend fund. And he said he likes to be surprised by their insights. Um, do you. Still have that, or is it kind of the opposite? Like you want to already be on the same page as the entrepreneurs insights?

I mean, we love, we love we love learning, right? We’re we’re all very, very curious and, and we’ve set up our organization in a very different way. There are a lot of PhDs that are walking around alpha Edison with pretty remarkable backgrounds. Um, so we, we love. Learning and seeing things differently and the type of paradigm shifts that are possible in those meetings, but we like to be prepared.

Uh, and we like to come in with some point of view. Uh, even if it’s a point of view that ultimately has changed. 

Tell me more about these PhDs and, uh, the points of view that you, that you have right now, I guess.

So my co-founder Nate and I, when we started the firm, one of the things that we committed to, um, based on advice that, that I had gotten from her Ballin, actually, which. Was, if you’re going to start a firm, go find somebody with a radically different background. And Nate’s background is been, you know, he’s been an investor his entire career from even when he was at BCG, he was working with Ken Griffin at Citadel when they were less than a billion dollars AUM and through sort of.

Working very closely with clay Christensen launching his fund and then building rustic Canyon, which became one of the two largest venture funds, uh, in Southern California. And, what’s great is that he compliments my background as an entrepreneur, right. I’ve spent the overwhelming majority of my career building companies and sitting on the other side of venture capitalists.

So at least the other side of the table, um, And, and then what we we chose to do was continue to build out that, diversity. So 

so a very disparate group of people. And you know, if you look at us, we look different. Um, I think even more importantly, we’ve all had very different life experiences.

Some people have grown up, uh, with more privilege and opportunity and some people have grown up, uh, Pretty poor. Um, and did not have as much opportunity at least initially, uh, some people, you know, chose to focus on business. Some people chose to focus on science. Um, Steve got his degree in the arts, um, and you know, we all have different work experiences and we think that those different experiences.

Compliment each other and allow us to come at a problem from very different angles. And it’s a bit of a traumatic experience for us. We like this idea of taking an idea, tearing it apart. and then when we’re done, we sort of come back together and we take a different position and we start tearing at it again.

And, ultimately we, we feel that we get to better decisions. and then what we do is we, we have the benefit of having on a stage on the team who actually studies the decisions that we make. and not just the things that we do, right. But far more importantly to us, the things that we do wrong, because you know, what, what we believe is that you, you do a lot of learning in life, but sometimes you learn the most from, from the challenges, um, 

I want to come back to the, um, your decision making process and what you’ve learned there and what you’ve learned not to do there, I guess. Um, but just staying on, on how, um, what am I want to say? Like, Staying on kind of how you develop your own theses, right? Because sort of the decision making process is one part, but, um, stay on sort of the thesis that you’ve developed and your investment focus areas.

how often do those change? How dynamic are they? How many do you have right now?

Yeah. So at any given time we’re probably investing against, or looking at somewhere between four and six, core thesis. But beyond that, there are a number of other theses that are in different stages of development, uh, or that have been developed. And, they’re just less active, or less. I wouldn’t say less relevant necessarily, but there Are fewer opportunities, uh, that we are finding that are aligned with those, um,

Are there any, I mean, do you want to go through all of them or are there any that are 

Well, and it might be instructive to go through one and talk about it and how we sort of arrived at it. One of the things that we are not is sector focused, or necessarily focused on stage. Uh, although we tend to invest predominantly in early stage opportunities. Um, and, and the reason is because we believe that 15 years ago, technology, which for all of our careers, It been its own discreet vertical sector.

The way that real estate or healthcare financial services are, uh, 15 years ago, it tipped over and went from being that vertical sort of sector to a horizontal foundational platform upon which all of the other sectors are now built. And that has dramatically changed the pace of change. And innovation.

Um, and it, it started to blur the traditional boundaries between sectors where some of the most interesting businesses are actually emerging at those intersections. But one of the things that it also did was it freed business models to move horizontally across the economic East ecosystem and, in tearing through it.

Really forced a tremendous amount of change. And we were talking to some friends of ours who run a $25 billion platform, uh, in New York. And they said, you know, when it comes to energy where some of the smartest people around, we know where it is in the ground, what it cost to extract it, to process it, to store it.

And for all of our careers, we’ve built a leg up on the market by. Uh, you know, really having a better sector expertise, uh, and that expertise always gave us competitive advantage. They said, but something very interesting started happening about five years ago. Uh, they said we started to realize that we were so siloed and myopic in our focus that we did not see innovations that were happening outside our sector.

but these things were happening that were outside the sector. They were coming in effectively sideways and we were blindsided. Uh, and it wasn’t just disruptive.

It was incredibly expensive for us. And so we came to recognize that. Chose to focus instead on business model innovation and use these theses or themes as a way to change the prism so that we could look at opportunities differently 

So, so just to clarify, when you say business models move horizontally, that’s like they’re copied from one sector to another sector.

That’s right. So, you know, one of the ideas that we talk about are elastic marketplaces, right? This idea of unlocking latent supply to unlock. A blatant demand. Right. And just the very simple example of that is Airbnb was able to do this very successfully, in the context of hospitality, Uber and Lyft had done it very successfully in the context of transportation and 

So you see these ideas, that are being replicated and at a fairly rapid pace across multiple sectors. 

Uh, and so would it be helpful to go.

through an example of that? 

Yeah. And also, can I just ask her, like, is unlocking a latent supply? Is that one of your themes that you’re looking at across different verticals or is that

So we we’ve looked for category creators, And in the context of category creators for us, one of the determinants is, Is this a company that is unlocking latent demand because in our world, as you know, you know, the big winners are not companies that are stealing share from an incumbent here and there they’re companies that are identifying large pockets of latent demand, unlocking that latency.

and effectively creating a new category or a new market, and often putting them in a position where the winner takes a lot more than you would see in a traditional segmentation of sector. Uh, and so, you know, latent demand is very important to us. And one of the ways of unlocking that is through latent supply. 

Um, just say that about so latent demand is very supportive. Can you say that again? Cause the internet froze.

Oh, I’m sorry about that. I said, uh, yeah, latent demand, uh, is one of the way, one of the things that we focus on and one of the ways to unlock that latent demand is by unlocking latent supply. 

Great. did you want to go through one example of that?

Yeah, I’d be happy to. So we were recognizing, that fairly consistently on earnings calls, CEOs were talking about trust and how trust was their most valuable asset. and you know, you’d listened to Fred Smith, talk about FedEx and he tell you that, and you know, you’d listen to Jamie diamond and he’d tell you that and you heard it over and over and over.

And we started to ask ourselves, if you want it to value trust, uh, as a component of total enterprise value, how would you go about doing that? Uh, and we spent months tearing at this problem and ultimately in our opinion, we’re not successful. Um, and then we had the idea of what if we inverted the model.

And instead of looking at trust in the positive as value, what if we looked at the destruction of value as a consequence of the destruction of trust? And so our behavioral data science teams, took. A spectrum of examples of what we call trust violations. So these might be circumstances like, uh, Facebook violating trust around data privacy issues or Wells Fargo, opening customer accounts without their customer’s knowledge or sexual assault in the newsroom at a place like news Corp.

Uh, and we correlated when that information became public and what the immediate impact was on the underlying stock or security. And then how that stock traded over time. What did the recovery curve look like if there was a recovery curve? And it was very interesting, right. In the case of Wells Fargo, that.

Destruction was fairly permanent, uh, in circumstances like, you know, Facebook, there was a recovery, but it came over a long period of time. And in the case of NewsCorp, sadly or not. So sadly if you’re a news Corp shareholder, uh, the recovery was. Was fairly quick. and we use that as an exercise to identify sectors that were vulnerable around this issue of trust.

because if the sector is vulnerable, there’s probably an entrepreneur that has identified that vulnerability and is beginning to study it. Uh, and it’s an opportunity of course, for that? entrepreneur, to build a business and as opportunity for us to start thinking about how to size W what we call the Nam or new addressable market that will be unlocked, right? Because as you know, entrepreneurs come in and they’ll quote, you know, a number from a big consulting firm or accounting firm and say, well, this sector is, you know, this big and it’s growing at 2.1%. And so by 2030, it’s going to be this much larger. but all of that information is information through the rear view mirror, and we feel that, it’s much more valuable. to be thinking about what the implications are. If the company is successful in changing the size of the market. And one of the frameworks that we use for this is an idea that we call silent suffering. And the idea of silent suffering is that there’s a solution in the market. We all know what it is, we’re all familiar with it. And we all think it sucks. Right. But for any number of reasons, from, you know, the regulatory environment on one end of the spectrum to just. Basic human inertia. On the other end, we resign ourselves to the fact that it’s never going to change.

We don’t even bitch about it. Right? So you land at JFK and it’s pissing rain, and you wait on a long line for a crappy car with lousy navigation and a driver who is incented to take you the long way. And, and what we find is that as you think about silent suffering, it changes the prison through which you look at opportunity, and allows you to see some of the latency.

Uh that’s there. Um, and, and all of that is. in service of an exercise of trying to quantify or wrap your arms around what the new addressable market is.  If this business model takes hold, uh, and the type of change that the entrepreneur envisions is able to be successfully, uh, accomplished. 

That’s interesting. I have never heard of someone trying to, evaluate the new addressable market. Nick you’re very cerebral. 

Well, if you go back to what you said, we like to think of ourselves as knowledge driven. We, we like to do this research, as the core of the work that we do. And then we develop a set of investible insights and on the basis of those investible insights, we can proactively go out and look for deals and filter the inbound deals differently.

And. Uh, you know, it’s our strategy. we think it’s a strategy that’s been working well, if you look at our fund one performance, it’s incredibly strong. And, uh, you know, we are seeing that growth compound now and, and we’re very proud of the work that our team has done and, you know, excited about, you know, the incredible group of, of entrepreneurs that we have the privilege. 

No. That’s great. I had meant cerebral only in a positive, in a positive way. I think cerebral is good. Actually. but let, okay. Let’s, let’s get practical on some of this decision-making stuff. So, uh, you said one thing, which is, you said deals get done in nine days. Maybe you said less than nine 

Decisions get 

done. Yeah. 

get done.

Yeah. I mean, how, tell me more about your process. I’m interested. You said you’ve been studying it. Tell me what works, what doesn’t work, what are you 

Well, we, we think it’s very hard to make good decisions in nine days. so, uh, what we think is important is if you can develop a point of view, You can go out and start building relationships with the entrepreneurs, who are well-positioned to capitalize on that and get to know them over time. 

and you said that you’ve analyzed some how decisions get made? I think, 

Well, what, what happened was Nate and I, before we started the firm, we spent a year, locked in a room and, uh, a big part of what we did was we studied the mistakes that we had made as investors and the investors that we admired most. and we broke them into two categories of mistakes. What we call type one errors and type two errors.

And as it is, type one, errors are common and type two errors are, you know, more than twice as common. Uh, and you know, ultimately it led us to ask ourselves this fundamental question, why does the, you know, why do the very best investors, not just the best firms, but the top 10 individual investors miss the overwhelming majority of their best opportunities.

Um, how many people past on Airbnb, how many people passed on, you know, so many great companies. Um, and, and it’s because it’s, it’s very hard to identify the opportunity early on. Uh, there’s not a lot there. and you know, sometimes the entrepreneur doesn’t necessarily fully have their finger on, on what the business is going to become.

Right. I remember when Google was selling servers, right. They’d lived on a server rack. uh,

and that was the core business. Right. Um, 

They were 

so That’s cool. That’s very cool. I always forget that you were there from those early, early earliest days. 

I think I met you in the early, 

We did. Yeah, we definitely met. Um, so, so yeah, so it’s, you know, because of that, it’s easy to miss.

and, and we believe that the way to reduce your error rate, is to be much more, sort of invested in spending the time studying and analyzing the opportunities. Right. Um, and building the relationships and developing a clear point of view. Uh, and, and, and so that is this idea of being knowledge driven, and you know, the, the other part of our mission that’s probably missing, but it’s just important to us is we have made a decision as a firm to commit ourselves to, earn the right.

And we think it’s a right that you have to earn to be the first call that an entrepreneur makes, not when things are going well, because if you get good news late, that’s no problem. But when things are really tough, Um, and, and we want to do that because it’s, when things are difficult, that you have the opportunity to lock arms and focus on the problem and address the friction.

Uh, and it’s also when people are most open to new ideas and change. Uh, and if you care about business model, that is when the flaws of the business model are most clearly exposed. Um, and, and ultimately the other reason we do it is because, you know, we talked about how you learn from challenges in life, but you know, when things are tough, you also learn who your friends are and your friends are not, uh, and.

We intend to stick through it through the good and the bad. Um, and some would argue that that is not a good use of our time. Um, but we believe that that’s when relationships are built and that’s when you get to learn a lot, um, both as founders and managers, as well as investors, uh, and you know, maybe the company doesn’t succeed, but the entrepreneurs.

Have a lot of learning that they just, you know, were able to accrue and you get to build your relationship with them with the senior management team. Sometimes it’s the most junior person in that organization who goes on to build the next great company. Um, and they’re more likely to call on us if we did the right thing when things were difficult. 

Okay, so this was something I wanted to ask you about in your HBS, that talk discussion. You did, you said something like a founder growth is a step function,   

I don’t think I’m talking about founder growth. As much as I was talking about personal growth, people tend to grow in a step function. We have these sort of moments of insight, right? Uh, paradigm shifts, uh, Learning experiences. And we take a big step forward in our growth and maturity, and then we digest that change.

 Um, companies tend to grow more on a curve. and so I’ve always believed that.

one of the reasons founders. Have the privilege of, building companies and running them for so long is because they have that vision. And the vision is such a crucial engine, to growth that, you know, if you control the vision and, uh, It’s a good vision, right? You are going to be able to, you know, ride that wave for as long as you probably want to ride it.

Uh, as long as you know, you’re a reasonable person, um, or, or maybe not reasonable, it’s the wrong criteria, but as long as you are an ethical person, Um, and I, the, you know, but for, for others in companies, particularly people who are, best positioned to be early stage employees, right. Companies can grow at a very.

extraordinary rate, and not everybody is able to grow with the company, as quickly, you know, as they would like. and I believe that when that happens, that’s not a sign of failure, or personal challenge. I believe that that’s a sign of success that you’ve built a company that can scale at such a pace, uh, that it’s starting to outpace the people who built it.

and you know, I think that that is something to be sort of. Understood and, and, you know, accepted, uh, as, as founders, as entrepreneurs and as people inside early stage, fast growing companies, uh, and you know, not everyone gets to continue to report to the CEO forever. Um, and sometimes even the CEO can’t scale at that pace.

And, you know, you need to bring in, you know, more talent, uh, to help them grow. Right. I mean, again, you live through that at Google. 

I lived through it, a shift too, in some ways. Um, you know, I think the challenge I had, I had a lot of very senior people that I had hired. Is to help them feel like they were, um, you wrote this blog post. You have, sorry, I’m jumping off. You wrote this blog post. Do you have a thousand hats? You have to give them away.

The challenge I saw at Google and at shift and other places is having it not feel like the hats are being taken away from people.

Yeah. If you’re giving them away, you get to control that process. And if you are resistant to giving them away, at some point, what was already obvious to you becomes obvious to everybody else. which is that you can’t do everything. You can’t scale. David and I, w we often talk about this phenomenon that happens where if you have somebody who’s incredibly capable, sometimes you have the opposite problem as well, which is that they’re so good at things that they tend to fix all the problems themselves, rather than.

Teaching people how to fix the problems and delegating that sort of problem, solving to others. And those people scale for awhile. But at some point they hit a wall and they burn out. Um, and, and that’s the other sort of risk, uh, associated with high growth, which is that if you’re not hiring strong people.

around you, uh, and delegating to them, uh, you run into a different wall, right?

It’s a wall about, you know, whether you have the, the energy and capacity to keep growing, even if you have the capability to operate at that level. 

So, let me try on one question I have for you, which 

Does that make sense? By the way? 

yeah, but I have so many questions. I have up questions on all of it, Nick. okay. Just my first question is on growth and it being a step function, are there ways to. Accelerate that to experience that and not kind of get stuck in your rut.

Yeah, I think, one of the things that I think is, is so valuable is the ability to be introspective, and to know what you’re good at and what you’re not as good at, and to hire. People who compliment the areas that feel more challenging for you, or just are not as interesting to you.

Um, and, and the great CEOs, um, know what they don’t know, right. Or know where they’re not as strong and they don’t pretend otherwise. Um, and, and that turns out to be, uh, a great way of having your arms around what your capabilities are and not, and allowing you to focus on the areas that you know, are most important to the business and where you can be the greatest contributor and, and not spending energy on things that perhaps are more chill, challenging, right?

Or more difficult for you. And it could be done by others. 

yeah, let’s stay in, like, you’ve been a founder so many times I said at least three, because you also had an incubator. Let’s stay on just advice for founders. Um, and hiring is one, so. I’m very good at hiring for things that I’m very good at, because I understand it’s easy to hire down in a sense like you can judge.

I’m good at judging female soccer players because I’m very good females. I can’t judge a figure skater. Right.  how do you help people hire above themselves if you will?

When you say above themselves, do you mean hire people who are going to report to you, but are better than you 

I mean, 

Judging up is hard. Like I know Larry Page is smarter than I am, but I just can’t judge how much? Cause it’s like the figure skaters either they fall over or they don’t like, I can’t really judge the gradations, 

yeah, I’m, I’m pausing because, and this is really embarrassing. I, I spent most of my career, um, being the CEO and not reporting it to people. In fact, my wife torments me about this all the time. So. 

How so,

Well just, I, I never, you know, I had a board of directors, but if you’re able to, the best board of directors, relationships are relationships where you’re working with the board and delegating some of the work to them and looking at them to compliment the areas where you’re not as strong as well. right.

I think for a founder, you’re constantly building networks of people, um, that can contribute to the opportunity that are incented, uh, to contribute to the opportunity and, you know, are, are treated well, uh, and appreciated, uh, when they do so. 

But that means your board is sort of similar to what you’re saying is knowing where your weaknesses and then getting the people on the board to compliment that

doesn’t that make a lot of sense. 

it does.

Yeah. So I think that’s true. and so I, I go to this point of introspection as being so critical. we spend a lot of time, focusing on, you know, the things, as I said, that we have done, right. And that done wrong. We track every investment decision that we make.

particularly the ones where we choose not to invest. I think I just lost you again. 

Yeah, it’s a little choppy. Come back, come 

Sorry, should we go? Where, where did, where did you lose me? 

Uh, you track everything. I got most of it, I think. 

Okay. But again, w we track every investment that we make, every investment decision that we make, not just when we choose to invest, but just as importantly, where we choose not to invest and why did we not invest? And then every quarter we sit down and we look at how those companies are performing. and what we’re looking for is where we had an opportunity and we passed, and it was a mistake because those are not, you know, mistakes of losing your money.

Those are 10, 20, 30 X mistakes, In missing, out on returns. and we spent a lot of time talking about. What was going on, right. If we, you know, knowing what we knew then is there a way that we might have arrived at a different answer or not. And sometimes we arrive at the same answer. Um, and it’s not necessarily the right decision, you know, overall, but it’s the right decision for us as a team, as investors.

Um, and sometimes we recognize that, you know, we under. estimated something or overestimated particularly over,  say the risk of competitive, dynamics, you know, disturbing the businesses opportunity. So there’s a lot of different reasons that we make the mistakes, but we capture them, uh, and we try to get our arms around them and we try to learn from that.

So the next time we’re faced with a similar situation, it’s part of our lexicon and we can refer to it. And we all know, you know, what it is that we’re talking about and what it is that we’re, You know, raising as, as a point of argument, uh, and can participate, you know, in an informed way, in a very constructive conversation.

You should be learning from you that you’d care to share about how you do that and how your decision making process has changed.

 I think what we do, at a 20,000 foot view is we study our blind spots. we study our cognitive biases, and we study those biases, not just for. Each of us as individuals, but how they interact, as we operate as teams. 

What did let’s talk about you, Nick, what are your, um, where are your biases? Where are you? what have you learned about yourself?

well, I mean, it’s, an ongoing process, you know, we start with where we have insecurities, um, 

Oh, go on. Tell me about your insecurities, Nick.

Yeah. Sure. So, um, you know, my, my greatest insecurity and you can ask your partner, David who’s my best friend is, I worry that I’m not lovable. 

Um, And, and when you, when you speak to people and you ask somebody what their greatest insecurity is, what you’ll probably find is that it boils down to one or two answers and that’s one of them.

So it it’s pretty common. but not everybody is comfortable. Talking about it, but we think it’s good to talk about. You know, we, we spend a lot of time looking at risk profile and risk tolerance. Um, we think that that is incredibly important in decision-making and people’s risk profile and risk tolerance is not a determinant of where they are in life or their wealth or their education.

It’s a very personal combination of lots of different factors. Um, but it is a determinant. Uh, and I, you know, I remember interviewing CFOs, uh, when we were taking our second company public and, you know, we had people come in and say, I’ve got $50 million in the bank. if this doesn’t work out, it’s not going to change my life at all.

And so I’m really excited and we had other people walk in and say, I have $50 million in the bank. And if this doesn’t work out, like everybody’s going to sink. You know, w why did you do that wrong? And is it going to compromise my lifestyle going forward? And, it was a funny thing. You’ll also find people who have just graduated from college and you’ll say, how do you feel joining a startup?

Because the odds are much higher, that it will fail than it will succeed. and. One person will tell you, like, what do I care? 

Right.

I’m going to be learning no matter what, uh, this Is a great adventure for me. And if it doesn’t work out, then I’ll go onto the next thing with a whole foundation of knowledge.

That’s going to be very valuable to me, you know, in a business career. And you’ll have other people who will say, gosh, if I have something that fails, go on my resume. And that’s the only thing on my resume. Everybody’s going to think I’m a failure. I’m never going to get traction. And there you go.

Right.

Is having good is having high risk tolerance. A good thing. That’s where my mind went was that, being risky is good in our business 

Well, I think me, what we talk about is you need to know the risk that you want to own. If you’re investing and, you know, in other aspects of your life, you need to know the risk that you want to take and the risk that you feel like you can stomach because not all risk is easy to stomach. and Are you familiar with what the consequences will be of the decisions that you’re faced with and based on those consequences, can you live with the outcomes, 

I feel like our society sort of  says that risk taking people who have high risk tolerance is a good thing. And people like you and I, who went to business school are like, ah, they’re the conservative non-risk taking folks. 

well, I think it’s good in some aspects and not good. And again, it’s, it’s how much risk and how much tolerance for it. Right? I mean, Elon Musk took a level of risk that most of us could not stomach. it put him in an extraordinary position. it could have worked out otherwise. In fact, there are, lots of people throughout history who found themselves on the other side of that decision.

And some of them were okay with it, and came back and did more Interesting. things. And some of them never recovered from it. 

Interesting. I tend to think people do recover, but I get it. It’s hard. It’s hard. Um, what about you, before alpha Edison, you had an incubator, uh, you incubated loot, crate, Pluto, TV, Why stop incubating or what did you learn there? 

well, I think there were, two reasons. One was I was doing a lot of it with my own capital and that, you know, I knew that the business cycle was not always going to be positive and I wouldn’t necessarily be able to support all these companies on my own.

If money tightened up.  but I think the real reason was that, I felt there was this opportunity to re-imagine venture capital and to approach it as an entrepreneur. I had the, uh, Privilege of knowing Nate Redmond for a long time. And he and I started talking about how we felt there?

was a different way to tackle, the venture industry and really investing, right.

I mean, for, for us, these investible insights that we come up with. They’re very valuable to us for early stage investment decisions, but we share them with our LPs and some of our LPs use them to inform decisions that they make, you know, in the public markets and other asset classes, et cetera. So, you know, w and that’s always been a very important part of our vision that, that they are applicable, uh, to other types of investment decisions in other stages, or.

Or sectors. And so for, for us, that felt like a, a great adventure and a great challenge. And that’s why we decided to go out and build off Edison. 

Hmm, that’s great. anything else on just building early stage companies and you know, when you were building your incubator or doing incubation. Did you find there were certain things that were really helpful to entrepreneurs that you were able to provide? Sometimes I think about moving 10, one 10, just moving earlier and earlier,

Yeah, you just broke up. Can you just say that last part again? 

I’m curious, worked in terms of providing value at the earliest stages in sort of an incubator type model.

Yeah, I, I think that, it’s hard, it’s hard to answer this without the risk of being presumptuous, but I think that one of the most valuable things. To me as an entrepreneur and to many entrepreneurs is finding somebody who sees what you see and gives you permission, right. To go after it. 

what do you like, Nick? What do you like? Uh, as a board member,

I, I like problem solving, you know, I, I always ask the CEO’s that I, that I get to work with to think about the board as another tier of workers. and that a good board meeting shouldn’t end without some delegation of additional, you know, work, or support being requested from the board. 

 I can see you liking the strategic work.

I love the strategic work.

It’s true. I like the sort of, I like the difficult challenges and then trying to find familiar analogs to help you think about the problem in a different way, to reframe it. I always find that to be a very satisfying conversation. And I, I like knowing that I’m helping a founder, uh, and a management team see their vision through.

Uh, you know, one of the things that we have the opportunity to do is choose where we invest. Um, which means that we choose, we have the privilege of choosing the problems that we get to participate in solving. Um, and for us that means, Uh, trying to make the world a better place, uh, and working with people.

With a deep commitment and passion to do so. And helping them accomplish that is, you know, is a very special, special thing. And, and, you know, uh, something that I’m very grateful for.

Uh, I have a question on the first thing you said the hair. Uh, Oh yeah. How do you build that skill? I’d like to be better at doing what you do, which is, you said find a familiar analog. How do you build that muscle? How do you get better at that? 

I have no idea. 

I think you just try to do it, right? Like it’s just, I eat whenever, whenever. I find myself working on a problem that feels, immovable. I like to step away from it and try to find something familiar that similar. and oftentimes there’s a pattern match that occurs, and suddenly you’re thinking about the problem in a different way. I think this is why David. Uh, it feels so strongly about you know, investing in teams with more than one founder. because you run into these problems. It happened to me all the time. I’d, run into a wall and then I talked to David about it and he’d say, well, why don’t you look at it this way?

Or why don’t you think about it this way? And so I guess in a way, what I’m describing is, is trying to channel the conversations that I had with David and learn to do more of that myself. but it’s. It’s so much easier when you have partners, right? Uh, and other people on the team. And, and in our case, people with really different life experiences and professional experiences and educational backgrounds, they see things differently and it makes you enlightened.

and is it usually like taking a business problem and thinking of some other business that had a similar, you know, growth, stalled out sort of 

Yeah, it could be. And you know, sometimes it’s like, Hey, I saw my, my five-year-old daughter do this and it’s kind of the same thing.

Uh, and you know, I think we’re, we’re surrounded by, you know, we have, We have very fluid minds. and if we don’t lock ourselves or constrained ourselves too much around the sort of societal structures and norms, uh, we can start to see things differently.

And I think that that allows us to be more creative in our problem solving. 

Ooh. I really liked that. I really like trying to get out of it. The societal, Oh, this is what. It’s expected. That’s good. Um, okay. Now another question for you, you are a very convincing talker.

Yes. I’ve heard that. I not, I’m not necessarily thrilled about that, but yes, 

Really? I meant it as a compliment.

I, I, you know, I I’ve had this said to me many times, I think that, for me, I worry that, it could be perceived as, as manipulative. And, and the good thing for me is I’m, I’m only convincing when I really believe something, but just because I really believe it doesn’t mean that it’s correct. Um, so I’m also somebody who, while I can be very strident and passionate about what I’m saying and convincing, if I’m convinced, otherwise I will move on a dime.

but, but embracing the fact that you come across. As believable and convinced. I mean, convincing me, I’m glad to hear that you have strong opinions, loosely held or whatever that thing is or that you can be convinced, but I want to learn to come across as a convincing, knowledgeable, thoughtful person.

Like you come across. 

Oh, well, that’s good. So sweet of you. I, you know, I. You know, I, I would just kind of, I was born this way. you know, I think, I think maybe it was growing up in New York or where I went to school. Like you had to sort of fight to be heard. And, you know, and I, I take the time to develop my point of view.

Um, I don’t like to have. You know, perspectives that are not thought through. Um, but I also tend to, um, pay attention to my gut and that can be very informative as well. And I guess probably the last thing I’d say is that I only, I would have really been working hard to try to do what I care about and what I’m passionate about, because for me, when I’m not passionate about it, I’m not very good. 

Well, let’s move to one more passion of yours, which I believe is photography.

Yeah. I, I like, I do like photography. It’s true. I like collecting photography more than 

taking photos. 

What is it about photography that you like?

You know, I think it’s a couple of things. I think one that we are part of a generation that communicates in images, in a way that the generations prior to us communicated primarily in text and the generations that are younger than us tend to communicate increasingly in moving images. and so, we are exposed.

I, I forget the statistic, but it’s a staggering statistic of the number of images we’re exposed to in a single day. And the percentage of them that are actually advertisements, which are basically propaganda for products, um, trying to get us to need something that we don’t even know if we want. Um, and as a consequence we’ve become, I think, as a.

Culture, very facile in communicating and images and reading images. and I think that it’s, you know, it’s an impressive thing. When an artist can capture an image that communicates an idea, um, and yet all it is is an exposure, you know, on a negative of light or, you know, paint on a canvas or, you know, some material being shaped into something else. 

Hmm. Are there certain things, are there certain things being communicated that really draw you towards them? Like feelings of nature are different than feelings of.

I like, I like when they speak to. core human emotions. You know, there’s, there’s a lot of work that a man named Henri Cartier-Bresson song did, uh, that he describes as the decisive moment, which was basically street photography. And you see that extended from his work. There’s an incredible photograph of a child sort of just running.

His hand, maybe a four or five-year-old against a wall in war torn Spain, uh, in the thirties. That’s pretty remarkable. There’s a photograph by, Dan Arbus of a child with a toy hand grenade in central park in I think 1964. Uh, that is just a very. intense image and you can find on the internet that there’s actually, the contact sheet where all the other photographs that were taken, at the same time, sit side by side, and there’s one image that is extraordinary in communicating and the rest of them feel relatively flat.

Um, are there, you know, it’s for, for these photographers, it’s, it’s not just the ability to make a decision about what’s inside the frame and what’s up inside the frame, which is an editorial decision. but it’s then the ongoing curation of sort of.

identifying the images that really communicate that emotion and, and finding, you know, that they resonate with other people.

And, you know, I think it’s an extraordinary talent and skill and something that I really appreciate and enjoy. 

That’s great. Uh, Nick we’re out of time. I could keep talking to you for a long time. 

Me too many. And I wish we did that more. 

yeah, it’s really nice. So hopefully, um, we can go back and come, come squat in your office. Some more. I miss that. I miss those times

We’d love that. 

Thank you, Nick.