Andrew Glazier — Defy Ventures

Pre-election must listen.  Andrew Glazier is the CEO of Defy Ventures and runs an incredible entrepreneurship program for incarcerated entrepreneurs. We talk about developing an entrepreneurial mindset and the need for criminal justice reform.

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Andrew Glazier is the CEO of Defy Ventures. Defy Ventures is a non-profit that works with incarcerated and formerly incarcerated entrepreneurs. They have an inspiring entrepreneurship program and also a new fund that helps fund entrepreneurs coming out of prison. Unlike many accelerators or venture funds, Defy goes really deep on the personal coaching and operates on the premise that being a successful entrepreneur is about building the right mindset of belief in oneself and courage. I’ve seen the program in action and I think they’re going to be a ton of lessons we can all learn from Andrew today.

Andrew, thank you so much for coming on the podcast and thank you for the great work that you’re doing. Thanks, thanks for having me. I’m excited to be here. Well, I love Defy ventures, as you know, but maybe you could just start with telling us more. It’s it’s not like a lot of the the VCs that I have on the show. So give me some of the basics of the program you’re running.

Yeah, absolutely. So we are a national nonprofit and we work with currently and formerly incarcerated adults. And we use entrepreneurship to change mindsets, to get people with criminal histories their best shot at a second chance. So, you know, when we start with people who are incarcerated, what we’re doing with them is we are hooking them in with this idea of starting a business to be a successful entrepreneur, you have to believe you have something to give the world, something to sell.

Once people come out, we continue that support for them initially with the reentry and career support. But then eventually, for those who do wish to pursue that business, we provide continued training and then we have an accelerator program where we really look to find some of what we call entrepreneurs in training or EITs, and we select them for the accelerator program. And then with the help of volunteers like you, we’re able to then work with them to launch a small business. Great, so many questions.

So just the program that you’re running inside the prisons, that’s, you know, I’ve forgotten now it’s a nine week course. People are spending 10 hours a week like it’s a pretty intensive program. Yeah.

Yeah, it’s actually about nine months. Oh, so, yeah, seven and nine months. Pretty bad, but. Yes, but is it is it 10 to 15 hours of work per week. It’s a twelve hundred page curriculum, and then at the end of it, we have a business pitch competition in prison and it’s kind of Shark Tank style, but that’s where we have volunteer judges that come in and these EITs pitch their business and we have a competition.

So when you talk about the mindset change, you said, OK, a lot of people in prison have a lot of the qualities. So I would say when I visited the people I met, they had a ton of hustle.

They had a lot of grit, and they were not they had a lot of entrepreneurship. Now, it may have been slightly you know, it was different entrepreneurship than I usually think about entrepreneurship.

But is that what you meant? And, you know, what do you what do you do when you coach the mindset change?

And. Yeah, so, yeah. So, you know, in the past, you talked about the fire as far as, like, transforming hustle. Right, a lot of it is about. Instilling some focus and putting some parameters around what it means to be an entrepreneur, right, to say, look, you’ve you’ve got skills, right?

I mean, most people in prison that are in our program have been. Business owners before it just wasn’t likely legal business, but as I say, in in prison, when I’m talking to folks, look at.

Just because the business you ran may have operated a difficult regulatory environment with questionable HR practices doesn’t mean it wasn’t a business right and those skills can be transferred to legal business and it’s a lot of it is about contextualizing things they may already know how to do and just saying, look, let’s put some different language on that. Let’s put some different frameworks around that. And now let’s talk about something you want to do that is going to make a positive difference in your community.

And that’s where that personal piece comes. It’s like, hey, where did you come from and who do you want to be? Hmm.

And we’ve got people we work in maximum security, the highest security prison in California, all the way down to moderate and a little bit of minimum security, but for the most part, working in modern maximum security facilities with men and women.

And now you were there at sort of the midpoint where they were really just forming their entrepreneurial ideas at that point.

That’s what we’re giving them some coaching on, how to focus some of that stuff.

Yeah, I was there for they were working on personal statements and their personal statements were incredibly impressive, but there’s also some self limiting beliefs.

Absolutely.

Yeah. I mean, the first thing we talk about when we start the class is this idea of self limiting beliefs. Right. What if you’re going to be an entrepreneur? Right. You need to be able to believe in yourself. Right. So let’s explore that. What is the stories that you tell yourself about what you can’t do?

And now let’s blow those things apart.

And so much about what we do in Defy is is about that that narrative change and taking accountability for their past, thinking about who they want to be and what they’re doing to transform and make creating a vision for their future. And and I think that is such a deeply human exercise.

And I think one of the reasons it’s so moving for volunteers when they come in is that they realize. They’ve got they’ve been on their own journey, right? We all have we’ve all made mistakes or we’ve all done things that we may regret and, you know, coming to terms with those things and not letting those things define us, even nobody else knows about them. Right. But how are you defining those things internally? And those self limiting beliefs are things that prevent all of us from achieving the things we want to achieve.

So can we talk a tiny bit about the steps of the line game? Because it is totally a powerful game and you have a question in there that has something to do with, you know, what’s the worst thing you’ve ever done? Right. Tell me about or tell our listeners, because I participated in some of the questions and how that works.

Yeah. So the step to the line exercise is one of the most it was the deepest one of the deepest exercises we do. And the way it works is we have our entrepreneurs in training our EITs line up on on one side, we have all of our volunteers lined up on the other side. And then we ask a series of questions that range from the kind of silly like who’s your who in the room loves Taylor Swift to, you know. Right.

And to, you know, except the line if your parents tucked you in every night until they loved you. Right.

And what we’re looking for, what we’re trying to achieve there is this moment of empathy where we start to see how we are more similar than we are different along the way, and also to recognize where there are important differences.

And certainly, you know, we’re exploring questions of privilege in there. But but I don’t think that’s the most powerful piece of I think the most powerful piece of it is this idea of we’re all humans and we can be empathetic with each other and and find that shared humanity and realize that we are more alike than we’re different. Yeah, yeah, well, some of those were you ask some questions or deep like who has struggled with addiction in their family or some of that stuff where the volunteers who are mostly, you know, the business community stands on the line as well as the EITs.

That’s right.

But then, you know, who got tucked in and felt loved when they went to bed? It was a very disproportionately one shared room.

Yes. Or who was arrested before the age of 15. Oh, right. Which which are are some of the heartbreaking questions in there that I think are so important to the you know, the recognition that we all we come from different realities in life and, you know, and. In many cases, but for where you were born, right, and what you had in the first 10 years of your life, your life path might have been very, very different.

One of the questions you asked that was a very shared humanity question was because you were leading the session when I was there, was who feels nervous to be here today?

Right. Right. Yeah. And, you know, I was in a men’s prison and it was you know, I was nervous, but so was a lot.

So was a lot of the room that was facing me. The you know.

Yeah, absolutely. I tell people. So we ride the bus in. Right. I think you came in on the bus with us, with me. And as we ride the bus in and I always say, like, hey, who’s nervous? And then, you know, people sort of put their hand up and I’m like this. However nervous you are, the folks we’re about to meet are more nervous. Right. And and because. In many cases, the volunteers to come in may be the first people who did not either live or work at that prison that those individuals have met in years, and that is nerve racking.

And they’re going to get in there and like start to share about themselves. And these are all not norms inside of prison. So it’s a it’s a big moment when we’re doing that for the EITs to have that opportunity to sit across from somebody not behind bars. Right. And have that human interaction and to start to be treated like somebody who is smart and as valued and and can be respected. And that’s a big deal.

Yeah. I mean, there are so many stories, but I’m I’m going to stick with your program for a second half of my visit.

Anything else about the entrepreneurship? You know, my audience is more entrepreneurs here. You know, when you’re talking about how to launch a business or some of the basics of entrepreneurship that did apply to all of us that you think have been really good parts of your program.

Yeah. So, you know, I think. A lot of times when I’m speaking with, you know, individuals in the VC community and I’ll talk about entrepreneurship, you know, I talk about all the parameters of the businesses. We support our. Less than twenty thousand dollars to start a capital cash flow positive within three months, you shouldn’t require a physical storefront and should be built on some experience you already have.

Right. And it always amuses me a little bit when I talk to folks in the community who are like, well, you can’t start a business for that.

That’s not possible. Right. And, you know, my feeling is, well, au contraire, you know, because I see it happen all the time. Right. You know, aren’t entrepreneurship in the small business world, the sort of neighborhood world, I think a lot of times can get lost, the basics are the same. Right. How do you come up with the idea that people want? How do you make more money than you’re spending. Right. You know, and then how do you how do you market it and get it out there?

But we’re doing it at the at this level of kind of micro neighborhood businesses. And and we see it happen that when folks come out, you know, not everybody who does the program comes out and necessarily decides to launch a business, which is which is fine.

What we want them to not do is go back to prison. So what we’re really hoping for is initially they get a job that will sustain them. And then for that percentage, you do want to pursue that business. And we see it over and over again, whether it’s the like the commercial cleaning business or the fitness business or the food business.

One of our volunteers is a great guy. Name is Mark Bowles. He’s a he’s a VC San Diego area. And he mentored one of our folks that came home and helped him launch commercial cleaning business.

And, you know, I remember sitting down with him. He’s like, you know what, Timothy? Who was the EIT? He is the hardest working, most talented entrepreneur I have ever met, because this guy will bust through any walls in front of them and work incredibly hard and it feels entitled to nothing. Right. And, you know, he’s like I just like that’s a guy I know is going to be successful. And, you know, Timothy is a guy we were able to to fund through Defy and Forrest with a seven thousand dollar initial investment.

This guy built a commercial cleaning business is Ian.

Do you have a fellow named Ian on your staff? Indeed, yes.

And Ian said something really powerful that stuck with me, which is the people in prison. I forget how long he was in prison, but it was 12 years.

12 years. Yeah.

And he said something like, there are people who come out of prison better and they make that choice and there are people who don’t come out better. But you make a choice. Absolutely, yeah.

I mean, look, agency is something we take for granted in the world, right? You know, you and I have a ton of agency like whether we agree, whether we choose to embrace our agency. Right. Whatever. Right. But I mean, we have a lot of free will. You know, we can decide what we’re going to do every day for the most part. Right. You know, when you’re in prison, you get to make ten decisions a day, right?

Ten. That’s it. Think about the decisions you make in the first hour of your waking moments. Right.

You know, but so we try to do in our program through entrepreneurship is restore a measure of agency to say, look, you’ve got some choices in front of you now. Right. And you know what? Let’s let’s talk about some of the smaller choices programmatically of like, do you want to do this business? Do you want to do that business? Right.

But then that grows into like, who do you want to be? Right. Because you’ve got some choices right now, even if you’re still going to be locked up for a while, even if you’re going to be locked up for the rest of your life.

And we have some of those. Right. You have some agency about what you choose to do with your time. And and that is what a lot of what Ian was talking about is finding agency inside a prison to start to make some choices about who you want to be so powerful.

One of the things you also asked on the steps of one game was who’s been in isolation?

Yeah, for more than a week, a month, a year, five years, 10 years or so.

And in five years, I don’t know, 10 years like people who are stepping to the line. It was really terrifying.

So maybe could we talk about just Defy ventures and what you’re trying to do and what is the overarching what is the state of sentencing and criminal justice, if you use that word? I don’t know. Sure. Yeah. Yes.

I think of our advocacy and a little bit of a subversive way most of the time, which is that when we bring people in, a lot of people think they’re coming in and then they come in with different motivations. Some people think like, oh, I want to go inside and see a prison, see that I’ve done that. You know, other people are coming in because they want to learn more about the justice system. The people are coming in because, you know, they want to, you know, do service.

But everybody walks out of that day, right, realizing that whatever they thought about the criminal justice system was wrong. Right. And who was inside it and that, you know, that the world is not what they thought it was when they walked in that morning. And what I hope to do with that is. Get people to vote, right, to start to think critically about what it means to vote for politicians who just want to lock people up and throw away the key and what and what it means to be an employer and to be in it, to be part of the solution as a member of the business community by employing people or investing in people.

Because employment I mean, I think employment is a huge driver of recidivism. If I.

Oh, number one. If you are unemployed, the number one factor most likely to send you back to prison. Right.

And so entrepreneurship seems more important than ever. Yeah.

Yeah. I mean, for us. Right. We our first hope is that somebody our first goal and people come out of prison is let us help you get settled, make sure you have access services and that’s helped get a job. Right. So one of the things we look for from our volunteer base is people who are willing to employ and have entry level jobs and are willing to say, I will be a Fairchild’s employer. And I always interview people who have finished the Defy program.

Great. The next piece for us is to say, OK, you have your job, you’re stable. Do you want to pursue entrepreneurship?

And to give them that opportunity and importantly, access to capital if they’re willing to work hard and get there. And that segues into this idea of this venture fund that we’re creating. It’s a philanthropic venture fund, but a venture fund nonetheless. And the idea behind that is to say, look, we have built out this selective accelerator program for, you know, we’re hoping we can push, you know, twenty five businesses through per year.

For those 25 people coming through, we want to give them high quality mentors, intensive coaching, a little bit more curriculum. But they don’t need that much more stuff like building a financial model, know how to incorporate their business, stuff like that, and then having enough money to be able to give them up to ten thousand dollars of a seed grant.

They don’t have to pay back.

And then they can employ other people who were formerly incarcerated. And so that’s where that circle starts to take off. So that’s that’s an opinion.

Let me put it another bit of a plug there. But, you know, you’re running a really lean organization, too.

And so people who want to give money to support your entrepreneurs, it’s going straight to those entrepreneurs. Oh, yeah.

For the fund for the venture fund in particular, 90 percent of that is granted directly. Right. So we’re I’m excited to say we just won a major federal grant to support the, you know, most of the operating costs of this program.

And we have this opportunity in front of us right now to invest, frankly, primarily with people of color, because that’s unfortunately who we incarcerate in this country at over indexed to black men six times the rate of white men. Right. And so when we’re talking about funding potential businesses and really focusing on racial justice, economic justice, social justice. This is where it’s at.

Mm hmm.

Well, I appreciate the work you’re doing, Andrew, so maybe changing gears a bit. Should we talk more about this amazing fund.

Let’s just talk about the experience of you show up in your program. And it’s a human tunnel, right? I mean, got for Randall or someone playing music, but it’s, you know.

Yeah. Coming in. Yeah. I mean, look, we try to make the event a really fun day, right. It’s deep, but we also try to make it a fun day that everybody’s going to remember, especially the folks inside who don’t get fund days very often. And so but when people get there. Right, I think for volunteer is the first thing they remember is walking through the big giant iron gates of clang shut behind them, because then, you know, it’s real.

Yeah, right. You’re inside and then you’re greeted by all these men or women, you know, in their prison blues who are super excited to see you. An when you are inside a prison, you have no choice but to be fully present.

It was so intense. I was chatting with someone. Oh, no, it was Emily Proctor who said that she didn’t know the difference being prison in jail. Yeah. Which I mean, it just emphasizes the stratification of our society. Plenty of people have no contact and plenty of people have way too much contact, 100 percent.

But, you know, I didn’t know all the sentencing guidelines, like a life sentence is far worse than twenty years to life or.

Well, so. So I think it’s interesting thing about life sentence is. A basic if somebody just gets life right. What that means is they will be in prison a minimum of seven years before they can go to the parole board to be considered for release. When you hear 20 to life, what you’re hearing is they have to do a minimum time, 20 years before they may be considered for parole and then they may be denied parole forever. Hmm.

Right. But they can go back to that parole board at a minimum every 10 years and be considered.

So but so I think one of the one of the one of the lies that people sort of feed themselves or think is that somebody gets life, are never coming home.

That’s not true. Ninety five percent of people in prison are going to return. Some people get what’s called life without parole or ELAC, which, you know is I’ve been I’ve heard of people call that civil death. Right, because you’re going to die in prison. Right.

But but that’s actually not that many people.

And, you know, I think the sentencing guidelines, you know, you see that the injustice of the sentencing guidelines, I think when you do this work because you meet people who were sentenced to crazy long sentences when they were juveniles. Right. Right. And when you meet somebody who is sentenced. At age 16, 17, 18, even twenty one, right? You know, the thing I wanted to ask in this exercise is who did something really stupid before the age of twenty three?

Right. And that’s nearly everybody in the room, if not everybody. Right. And, you know, that’s where I think I. Find so much tragedy in the system is when you meet these people who. Lived a difficult life as a child, right, and did something admittedly like real bad, right while they were children, and then the state 

That’s, I think, a really important takeaway. People coming in. It’s like, look. Our government is created around this stuff because we, the people, tell them to do this stuff, nobody ever got elected for being soft on crime. Right. And that I think that’s an important. Moment for folks to say, like, OK, what is my part in this? Mm hmm.

Do you have offices that we should all be paying attention to, like elected officials? Because we pay attention only to the top of the ticket sometimes?

Yeah, I would be I would be paying attention to your day races. Right. Right. These days are in his day in Los Angeles right now. That’s an important race. And this is. They step up criminal justice and sentencing and application justice is front and center in this race right now. OK, read up on it. Pay attention to it because it’s important.

OK, where’s where’s the where’s your vote right now?

I am not making an official organizational endorsement. This is my personal opinion. Right. Right. In my personal opinion on this is that I will be voting for Gascon  for a district attorney because he is not funded by police unions and he has a record of approaching justice differently.

Yep, yep. OK, Andrew, you grew up. Do you? You went to Harvard Westlake. You went to UCLA Business School. You’re from around here. You went to Pomona or somewhere on a college.

That’s right. L.A. County lifer. So I spend so much time talking about your program. But how did you go from that to here?

Yeah, but it said, well, my life is has never really moved in a straight line as far as career path, but, you know, went to Harvard Westlake had an amazingly privileged experience in school.

And then I graduated business school in 06. I end up working for his entrepreneurial firm, ostensibly to do finance, but I ended up running a construction site in that work, I met people on my job site and in talking to them, I met people with criminal histories that I was aware of for the first time. And I remember this guy. He was like he was a framer. And he was like, So how did you make this work?

Well, I didn’t wake up one day and think about I want to be a framer, you know? But I was a tweaker and I was high on meth and I stole a gun from a cop. And I was like, I didn’t kill him. And I ended up serving three years in prison. And this is what’s open to me. And I had to feel, given his realization of like, wow, if you have a felony on your background, a violent felony, like your opportunities are incredibly limited.

And that was really my when I first started to think about this idea of reentry cut to working at an education, get with city year, another education, great education nonprofit.

But you see this school to prison pipeline happening. Kids growing up in South L.A., East L.A., wherever it is, right, and they’re surrounded by generational poverty and violence and, you know, there’s a certain path of least resistance that exists in those neighborhoods.

You know, I remember the first time I went to prison was compensation for women. And we went into this room and we did the Stepto line exercise and everybody was lined up there and it just felt like I was in. One of the high school auditoriums that I’d worked at would sit here in the detention room and you look and you see all these faces and you’re like, I think I know some of these stories here.

Right, right. So now what are you are you the CEO?

Thats what they tell me. Yes, you. I didn’t I didn’t start here. Then I started as the executive director for Southern California.

OK, right. And it was a rapid rise to the top.

There was a battlefield promotion. Yes. Yes. Not only the promotion, but I mean, the reason I bring that up is because a lot of the founders that we work with, you know, they they’ve become founders without every qualification.

You know, it’s not like they run thousand person or or whatever they find themselves somehow into.

One thing we always hear is that it’s lonely at the top.It is lonely at the top. You know, I so. Defy story was a little fraught, you know, when I came in, we had a CEO and a who’s our founder. A lot of sort of classic founder’s syndrome stuff happened there and then. She left and then I found myself inheriting, which was essentially at that point a dumpster fire, and as a CEO and I went to my own junior cell phone and beliefs of like, what the hell am I doing here?

You know, I don’t feel like I have agency here. Right. I’m stuck, you know, and and and I’m not I’m not capable of doing this right. I’ve never raised money before in large amounts. And, you know, I have to figure out how to do this, turn around. And I feel like nobody is helping me.

And I want to I mean. Yeah. Who wants a dumpster fire? Well, right, exactly.

You know, somebody a coach said to me, there is a guy his name is Jason Jazz, that he runs a coaching firm called Novas Global. And he was on one of the trips at that time. He’s like, hey, man, I’m going to coach you. It’s like, OK, somebody else. He wants to coach me, right? He’s like, no, no, no, we’re going to do this. And so, know, I got on with him and he’s like, Hey, man, what are you doing here?

Why are you here? And I was like, oh, well, you know, I. You know, somebody’s got to do it and, you know, it’s like, you know, obligated and I don’t let people down, he’s like, Yeah, why are you really like? Well, I also hate losing. Right. He’s like, OK, I buy that, you know. And and and but what he helped me realize relatively quickly was, look, man, no one’s making you do this, so do it or don’t do it.

But stop complaining about it because you have a choice. And he’s like, look, as long as you live in this world of I’m stuck here and I can’t be successful, you are right. And when you’re the leader of the organization, you can’t sort of pull everybody together and be like.

Hey, everyone, I feel really bad right now and let me tell you how bad I’m feeling about this 

And that’s. I think that’s a lot of it, but also learning how to convey vision, right? I mean, ultimately, I never thought of myself as an entrepreneur. I thought of myself as a systems builder. That’s my sweet spot is like taking something that somebody else made and then making it great. 

Maybe being a systems builder was like a limiting belief. You know, maybe. I think you’re right. I think you’re right about that.

No, you’re absolutely right about that is like I put myself in this box and like, well, I’m a systems builder. That’s what I’m good at. I’m not good at, like, vision and and that kind of stuff. But in the end. Right. I mean, you can be. Yeah. I mean, I needed to be and I was and. OK, I have a philosophical question for you. So how here’s the question, how do people learn to forgive themselves?

Yeah, well, so I would add to that, how do people learn to forgive others and themselves? I think they’re both tough, right. I think it is easier to forgive others than it is to forgive oneself. And in some ways are in a lot of ways. I think you learn I think you learn to forgive yourself by practicing it. Hmm. I mean, you have to start by saying I mean, look, the whole operation, right?

I mean, you know, I remember Saturday Night Live and the guy would get me like I’m good enough, I’m smart enough. And gosh darn it, people like me. Right. You know, and we all sort of laugh at that sort of mode of affirmation and it sort of feels weird to do it. But in reality. Right. That self affirmation. It is hugely important because you are practicing. You’re you’re practicing yourself belief at that point, right, and I think forgiveness is the same thing, is that if you say, you know what?

I forgive myself for this, right? I am like, I know I messed up. I feel guilty about messing up, right? I feel bad about doing that, I certainly regret it. I don’t want to do that again. But I’m not going to live in that space and make that define me, and I think that’s a lot about what self forgiveness is, is to say. I am forgiving myself for doing that and recognizing that I that’s not the person that I am anymore.

And we tell it to our EITs all the time is like, look. When you do affirmation and we do those affirmations, you might be faking it till you make it there, right? But you’ve got to say it like you mean it.

And one day you will need it. And that’s how you change that belief about yourself. And I think forgiveness is the same thing. It’s good.

OK, Andrew, we’re going to have to wrap up so we end with some affirmative statements. Andrew, you are awesome.

This podcast was awesome. The work you are doing for the entrepreneurs in your program, each individual is so meaningful to them. And I appreciate what you’re doing. So thank you.

Thank you. And I would like to offer an affirmation to you, too, which is I think you’re awesome and I. I love it. You’re willing to talk about this stuff and and share it with your audience and be part of our program. And if I could just put a plug in for folks who are interested, check us out, www.Deftventures.Org. And if you want to get in touch, somebody wants to get in touch with me directly about supporting the program.

Andrew@Defyventures.org

Jim Andelman — Bonfire Ventures

We talk with Jim Andelman about Bonfire’s new $100M Fund II, the great team additions (Jennifer Richard, Tyler Churchill, Brett Queener), what good traction looks like nowadays and a couple great resources on tech.

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You may be able to hear a little bit of harp music in the background. She’s doing her harp lesson via zoom in the other room. When she was seven, when they were seven, we told them they were going to learn instruments and we said, what instrument do you want to play? And one of them said, drums. And we’re like, cool. And the other one said, harp. And I said, What’s your second choice?

OK, great. So we’re recording. I’m going to go ahead and read an introduction. Oh, my God, we’re recording.

OK, Jim Andelman is a pillar of the Southern California venture ecosystem, along with Mark Mullen. He is one of the founding partners of one of our favorite B2B funds, Bonfire Ventures. Before that, Jim was managing partner at Rincón Ventures. He has guided many startups through their early stages and a few early stage VC firms as well. My sometimes co-host, David, is here as well, and I know he would also express appreciation, Jim, for your pillar-like support of this ecosystem.

Thanks so much for having me.

You know what I would add to your pillar of support for me? I told many earlier that you were my VC whisperer because when I was just starting out, you had already been doing it for over 10 years. It’s great to see it’s great to see you evolve and your funds evolve. And I’m really excited about your new fund. Can you tell us about it?

Sure. Like the latest fund we just recently announced a Bonfire II, our second core fund under that brand. It is a hundred million dollar fund doing the same thing we’ve been always doing, which is leading seed rounds and B2B software startups. We do have an expanded team bonfire started with just Mark and me. As many mentioned, we added a venture partner who is now a full time equal partner named Brett Queener, who has wonderful operating experience. And we now have two additional members of the investment team, Tyler Churchill, who’s been with us over a year, as well as Jennifer Richard, who just joined us last week.

Mazel tov. Thank you very much. It is where we’re Empire Building. I never expected it. 

Do you think you really are empire building? I really like our. Stage and investment style, I like our playbook, I like our resume, whatever, whatever analogy you want to use, and there can be a tendency as you raise larger funds, right. To experience what’s called style drift.

Right. You either need to write larger checks or you need to do a lot more and follow on at later stages, or you need to do a lot more companies. Right. And and all of those things present challenges to to your way of doing it. So so, you know, while 60 to 100 seems like a big jump, we’ve also went from an investment team of two to five in that time frame.

So if you just think of the three partners, a good way to sort of evaluate a a fund and what it needs to deploy is capital per partner per fund, and Bonfire, even though it’s on Fund II it’s really a merger of the two predecessor funds I founded and ran Rincón Venture Partners, Mark founded and ran DoubleM we were two of the very small number of to B2B specialists at seed in Southern California. 

We do lead most of the rounds and which in which when we are entering the company, when we are making our initial investment.

Let me ask about that for a second, because we just had Mark Terbeek on the podcast and he actually used the word indifferent when describing whether they lead or don’t lead. Why?

And I think that Mark Mullen, when he was on our podcast, said that you guys lead 80 percent of the time, our pitch is sort of expertise, attentiveness, responsiveness, right, you can’t be a really high volume investor and have enough time to to deliver on that brand promise. And so relative to the universe of seed firms, we are a lower pace, lower volume, higher conviction, higher involvement investor

I had been told my back of the envelope was something like take the fund size and divide by 50 and that’s what size check the fund wants to write. This is when I was entrepreneur. It wasn’t very sophisticated formula. Does that apply for you guys?

It’s not far off the with think about one hundred million dollar fund. That means if we’re targeting twenty five companies, that means the average is four million per company. And our model for this fund is 40 percent initial check, 60 percent reserved for follow on. So that’s you know, for every dollar we invest initially we reserve a dollar fifty for for follow on. And so that suggests something like a one point seventy five million dollar initial check on average.

So you’re pretty darn close for the reserves, how much of that reserve do you think about is to just pour into your companies that are cranking versus to sort of help companies that need your support in the next round?

It’s a great question and there are different philosophies. it’s never automatic. It’s it’s pretty automatic. If you get a new outside lead, right. Then then we’re then we’re it’s very rare that we don’t do our pro rata, the the challenging parts. And the hardest part about this business, right. Is to is when you make the tough call to not provide more money to an existing portfolio company. And that’s in my opinion, that’s the hardest part of this job, and if no one else shows up with any money and the company needs money, and then it’s sort of life or death is in our hands, that’s a that’s a situation we hate to be in. But it is our job to deploy every dollar to its highest and best use.

Let’s talk about the other side of it, because I’m curious for a company that’s that’s sort of obviously on a good trajectory and the rounds, their rounds are getting quite expensive and your your million dollars is a lot less. And, you know, as a percentage of what you hold or maybe not hanging onto that much, when do you decide that it’s better to take a new shot on goal versus continuing to fund a company that’s doing great?

Yeah, it is a it is a great question. And there are powerful examples that are in direct conflict with one another. One of our greatest successes, Mark, invested in a company called The TradeDesk at Seed and now it is the last I checked. It was an 18 billion dollar public company. The the initial valuation, I think, was around twelve million. In retrospect, if every single dollar in that fund had we just used it for follow ons at TradeDesk, like that would have been a better deployment of every single one of those dollars.

But there’s no way, you know, that at the time. And that’s one of the things that I think that the idea of sort of lean into your winners is. You know, in my opinion, a little bit of revisionist history or false narrative, because every deal when it happens is a market deal.

And you can almost only tell in in retrospect because you’re absolutely right that incremental million dollars can get us an extra quarter of a percent in some company or it can get us another 10 percent in a new company.

Ventures, as we all know, ventures hard to scale because it’s much easier to add portfolio companies than it is to exit them. So you tend to accumulate them. And just because companies are pretty far along doesn’t mean they don’t need your time and attention. Right. And there is a model as well with seed funds to sort of pass the baton. Right. So you’re active until series A and then you drop off the board and then it’s like, call me when you need me.

That does happen with us usually around Series B, right.

Because there’s a logical limit to the number of VC that are helpful on a board and people can debate whether that number is greater than minus one, in this whole retrospect, it’s all twenty, twenty what have been some big surprises or sort of, as David would call them, the wild roller coasters that you’ve had?

Let’s see. Archer is a good example, so Archer started as a campus explorer. It was consumer destination for, you know, discovery around post-secondary education and really capable team business did really well. They I led, I think, a million and a half dollars seed round in 2007, and the company got profitable with that and and then did a series they wanted to continue to invest and then did a Series B, and early on, 90 percent of their business was was was at their owned and operated websites.

And they had a small little sort of powered by business where they would help other publishers monetize and, you know, sort of Google kind of declared jihad on that whole lead gen category, all the comparison shopping engines and businesses like this one. So this business managed to with no new capital.

Last time they raised capital was twenty thirteen, managed to continue to grow, despite the fact that 95 percent of their consumer facing business went away, so they they managed to very successfully transition to an entirely B2B business. And I give the team tremendous credit for foreseeing what was happening and and and putting themselves in the position to to make it happen and sticking with it when it was hard and and when there were you know, when there were a lot of other sort of ways they could have decided to spend the next five or 10 years of their careers.

And now it’s going to be a great outcome for everyone. So that’s one example I feel like we see sometimes in pitches.

And David, I feel like you particularly don’t like this where someone says, well, we’re doing X, but it’s going to let us build up our data moat or it’s going to let us build this other thing, this and and I think we’re always very skeptical when that’s part of the pitch. But I think you see it in the wild a lot more.

To be clear, this was not part of the pitch. But I agree with you there. If we if we all had a dollar for every startup that pitch us what we’re doing, but we’re going to make money on the data. Right. This is going to that’s going to be the main event that we wouldn’t actually have to invest.

We could just harvest those dollars.

One thing you said to me about your portfolio and how you’re sort of thinking of constructing this.

You talked something about like diamonds in the rough versus sort of your fairway investments. How do you how do you think about, you know, what’s in the is it fairway?

I don’t golf. I just made that up. But how do you think about what’s in the fairway versus what are the what are the more diamonds in the rough, whatever the the correct analogy is? You know, there is a.

You know, there’s there’s a typical founder profile in VC, right. There’s a whole universe of other founders, right, that don’t have that kind of background and the challenges that founder may be less good at raising money because they don’t know what the VC wants to hear.

But it doesn’t mean they aren’t building a venture scale business. I’m we are we get very involved in helping our companies raise series A. We have we have kind of productize that that form of value add and for founders who let us who want us to and it is most of them we kind of co project manage the series, a fundraise with them. We deliver to them a Google doc that is tailored to them, that has all of the the the B2B software series a lead investors and with named partners and responsibility from the bonfire team of who’s going to make that introduction.

And and and we use that as sort of the CRM through the process with those factors. Long winded way of saying, like, we’re on that, we’re on the fundraising side more often we’re onto we’re on the sell side of more often than we’re on the buy side, if you will, because our entry point into a company happens once and that company typically goes on to raise multiple follow on rounds. And so one of the things we hear about maybe these sort of less typical founders is, gosh, I’m not sure they’re building a venture scale business, which drives me nuts sometimes because it’s like, well, maybe they are building a venture scale business, but they just don’t talk about it the way that you want them to talk about it.

And some part of that is our job to help train that founder to top VC speak. Right. And avoid the the the negative triggers, if you will.

Can you go back a little bit to talk about this product position of financing? What do you how early does that start like know a lot of honestly goes into. 

Yeah. I mean, and I’ll give a lot of credit to to my partner, Brett Queener on this one. So Brett is a career SAAS operator. Twenty two years as an executive at software companies, more than a decade at Salesforce, reporting directly to Marc Benioff, really still maintains that operator’s lens and and has really helped us and pushed us to operationalize more of what we do. The and so it was a recurring thing where we were developing lists of firms that we wanted to introduce them to.

And it was a recurring thing. We would help a company with their operating plan.

It was a recurring thing that we would help a company with what should be in the data room. And so we just started taking taking ones that we thought were most generalizable and creating templates out of those.

So it’s not cookie cutter to every deck doesn’t look the same by any means. Part of a deck is not just. Checking all the boxes and including everything that A, that an investor wants to hear, but it’s crafting a narrative that highlights the unique strengths of that business and what makes it so compelling and why you should join us with conviction around the odds of this company’s success.

David said that you have strong opinions on sort of the governance side of things, but I’m not sure where that comes from, you know, whether that’s board governance or rights that investors should have when you’re writing term sheets.

There are a bunch of things that go into the broad category of governance and. The sometimes it’s it’s it’s around, you know, how decisions get made, how how certain decisions get made and and sometimes it’s just around oversight and making sure that that the company is getting the best guidance that’s available around the table. So part of that is what’s in financing docs. And part of that is more, more in practice, less, less mandated and more just the manner in which we work together.

What is the what is a board Cadenced? What’s with whom? Who attends board meetings? What’s what’s covered in a board meeting, that type of stuff.

Staying on, being a good v.c, I think you’ve been a VC for 20 years now, Jim.

I think yes, the seven. Yes, that’s what it said. I mean, how is your LinkedIn?

So I started I started I Lietzau for investing for Bay Area VC firm Private Capital Partners in nineteen ninety nine. And I’ve been pretty much since. Right. That’s awesome. So where do you think, you know, you were giving you were talking some about it, but where do you think newer VCs, what do you think people are getting wrong today?

In venture, what advice do you have for people who may be newer in their career and their venture career?

Yeah, it’s a great question, right? We are despite the fact that we’re in a pandemic and the recession might again as as as context, like I do B2B software. I don’t need to be software. I’m not. I’m as every day passes that I get more and more focused on software. I get less and less capable of talking about everything else. So in the world of B2B software, we are seeing all time highs on public market valuations.

Right. And like, oh, there was a five percent correction. Well, that means that these companies are only only trading at 19 times revenue instead of 20 or so most. It seems that most practicing these Ts have only been practicing BK’s in a bull market. And it’s really instructive. I love that Bessemer released some of their investment memos. You can go to BBB Memmo memo, I think it is. And you look at you look at one of them that’s near and dear to my heart is because it’s certainly one of my anti portfolio is a company, a mind body, which is a Southern California company, that they made a vertical software for yoga and Pilates studios Bessemer invested, I think in 2010 and their investment memo you can go and read and I think they invested it about four times ARR. Same thing.

Shopify about four times four and a half times ARR and like that is unheard of today. Right. And so we made an investment in the company just in December and they were doing about three hundred K in ARR and our valuation was 10 million pre money valuation. And which is sort of in the range of where things are these days, I worry, right, that there are that there are so many participants at the seed stage that people that don’t have historical context, that that is good for founders, I guess maybe bad for founders. If they have valuations that then it’s hard for them to support in subsequent rounds. And I’ve seen that happen certainly as well. But I do it is a it is a I think, an ongoing question for those who have been in this business as long as we have like what is a fair price and what is the right price based and based on today’s realities.

I think it’s also been easy for.

Seed round participants who are not lead investors to not have to pay attention and have and there have been no negative consequences to it. And again, when there are market corrections, it’s much harder to to know what’s going on and know what the right decisions to make are when you when you haven’t been paying attention all along the way.

So playing that backwards even more or upstream even more so, you know, everyone’s raising a seed fund, or everyone in every you know, in undergrad wants to be an entrepreneur, you know, what do you think about that? Like, would you coach your daughters to be entrepreneurs?

So two very different things. Should I coach them? Do I coach someone? Should they be a VC or do I coach someone should they enter the startup ecosystem? On the on the latter question? My answer is hell, yeah. I mean, like, I don’t think that the trade off used to be, well, you could go to a more established company, you could be a banker or a consultant or work for a Fortune 500 company, or you can take a lot more risk with your career and get paid less and do a startup.

And like now that’s sort of that trade off doesn’t really exist. Like those those those traditional more traditional careers aren’t necessarily more stable. And those startup careers don’t necessarily pay less. And so why wouldn’t you want to work in a more dynamic environment? Why wouldn’t you want to work in an environment where you have so much more opportunity to learn? Why wouldn’t you want to work in an environment where there’s that equity component but then shouldn’t there be all these new VCs to support those entrepreneurs since this are we just at the start of the flywheel going totally maybe.

Right. So that’s that’s one of that’s that’s the flip side to these increasing valuations.

You look at that, those investment memos for MindBody and Shopify and they had exit scenarios in there. And like the high of the exit value scenario, like the the moon shot over the moon, success, success, case for mind body. It was a four hundred million dollar exit and it exited for one point nine billion. Be over the moon success case for Shopify was one billion and it’s currently worth one hundred and thirteen billion.

So if the exit values are one hundred x, what we thought they were going to be, well, gosh, maybe it’s OK to pay five x what we what we think is a fair price or three X or two X, what we think is a fair price at seed. So what we’re doing today, right from a dollar perspective is simple, is is seed is typically like a three million dollar round.

But from a business progress perspective, not even 10 years ago, the majority of Series A financings were pre revenue. And so that is a that is a fundamental shift, right? There’s a firm called Wing VC that is X, mostly ex-Accel and Sequoia Partners that that published are really some really good data around the the shift in the series, a landscape. And they looked at all companies that had ever received money from one of 22 VC firms that they deemed top top tier.

And that’s not just three. That’s not just, you know, Sequoia, Accel, Benchmark and Andreesen. And they found that, you know. The average series A from firms of companies that have taken money from those types of firms is right now sitting at 15 million raised, not valuation raised, and that’s up from five.

And so the average round size gone up from five to 15. The average amount of capital that has gone into one of those companies before series A has gone up from one point eight to four point six. And I may not be getting these numbers exactly right, but they’re in the ballpark.

So they’ve raised four point six before they do their series, before they do their series.

So there’s a there’s a convertible, there’s another convertible, and there’s a serious side. And then maybe there’s a series seed one, or SIPRI and on average or about four financing events before series. Some of it is nice that in prior era when the venture when the venture community was smaller, you know, you didn’t have the luxury of raising a two million dollar runway and or with a new investor that was just didn’t exist. Right. If you weren’t ready for for Trinity or Mayfield to give you or CRV or any of those firms that are on there, or NEA that are in Roman numeral ten plus, if you weren’t ready for their next check, you were like shit out of luck.

The flip the flip side of the very same coin. Right. That you can do more with less and that and that that that startup formation and launch and growth in the early stages has requires less capital is that there are so many more competitors in every market that’s worth pursuing and more and more enterprise value is being concentrated as smaller and smaller number of winners in each category.

So the implication there, though, is that you’re not looking at it with the lens of is this a good idea?

You’re saying, is this going to be the category winner? I mean, you the VC has to think that.

We the VC speak for us. We, the V.C., have to believe that the business that we are choosing to invest in that seed has a credible shot at category leadership.

OK, Jim.

So you can’t be a VC now and you have to go start a new endeavor. What would you go and start?

And if you can’t tell me exactly like, where would you focus?

So one of the things I really like about VC is there is like the Benchmark style where you don’t have a pyramid, right? You have very you have zero to very few junior members of your investment team and you know, your job. You’re the doer. Like, you know, I like the, you know, running the fingers through the dirt and doing my own analysis. And also, I’m a shitty delegator.

I know that about myself, which is why I this is a good fit for me and maybe an operating role. Building a startup wouldn’t be as good of it for me. And so back to your earlier question, like around advice, I think if you have the capability to be a startup founder or a startup operator, that might be a more rewarding job than being a VC where you are a coach, not a player. Right. You’re not you’re not out on the field.

You’re you’re on the sidelines giving advice and suggesting plays. And I think that, you know, when you’re a startup operator, that the lows are lower, but the highs are higher. You live a life more brightly, perhaps burning more brightly to to extend our bonfire analogy here. And that’s a little muted as a VC. And you two have both lived that, both sides. laugh at that. And VC fund founders who say, oh, I’m a startup founder just like you because you’re not you’re never living paycheck to paycheck as a VC.

We’re also we’re small businesses, right? I may have a few people. Your revenues are measured in small business kind of numbers. Yeah, different things. We’re not VC scale. Right. So I didn’t answer your question.

I think I have been enticed once or twice by a really phenomenal teams that I’ve worked with that I just like look forward to seeing their caller ID or like getting an email from them and and with the folks that I have been in the trenches with, if you will, working through specific issues, mostly around M&A and financing. And I have been enticed to think about switching to an operating role.

Well, I’m not trying to talk you out of doing what you’re doing. You’re doing a great job at Bonfire.

We appreciate having this ecosystem, the and when market, my partner, you know, it was very consciously like, you know, these are these are harder partnerships to disentangle yourself from than a marriage.

Yeah, that’s great.

You’re married to to Mark and Brett Queener. Congratulations. Congratulations on that.

Was totally my business wives. They are indeed. That’s great.

Well, congratulations on that. Congratulations to you all on this new fund. And thanks for coming on the show today.

Thanks so much for having me.

Z Holly — Good Growth Capital

Super interesting guest (and person), Z Holly talks about university innovation, LA manufacturing, gracious professionalism and the LA River (see Rio Reveals).
 

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Z Holly is an investor at Good Growth Capital, but her LinkedIn would tell you that she’s an instigator. Good growth just raised a hundred million dollar Fund III to invest in deep tech and transformative science. Z knows a lot about deep tech and transformative science from her roles at MIT and USC, where she was vice provost for innovation. Z, instigator is such a perfect word.

I was going to call you a builder, but instigator is really good.

You created the first TedX. You built a non-profit to support Los Angeles manufacturing. And I just listen to someone describe your life as a Mountain Dew commercial.

Yeah, I have so many things I want to talk to you about. And you created a podcast. Yes. Love podcasting. Yeah. No, I want to talk to you about podcasting, too, but maybe I will start with Good Growth Capital.

Yeah. Yeah. I’m really excited to have just formally joined the firm. I’ve been working with them for a while now and they’re just amazing, rockstar, venture firm based on the East Coast that folks on the West Coast really haven’t heard of before.

A lot of them. But we’re really well known for our ability to evaluate and support and invest in early stage transformative science and engineering companies. A lot of stuff’s spinning out of universities.

And what I especially love is our ability to kind of tap this amazing network across the country, so across disciplines, across industries, and really support the companies at a very early stage which a lot of these deep tech startups really need that kind of hands on attention.

What’s a typical sort of tech startup for you guys, like typical space areas?

So we do a lot of medtech, we do a lot of materials and sustainability and data science across. You know, that’s the very much a crosscutting theme across them.

But, you know, anything from like plastics that can be programmed to biodegrade on a certain timeframe or fuel stations and space or battery technology, you know, or like new devices for medicine. So that’s the kind of stuff that we do.

Got it. And so you guys will be the seed, series A investors supporting these these technology, transformative tech companies. Yeah, we have to fund families, actually.

So, in general fund does seed, series A. And then we also have this other fund family called the Infinite Corridor Fund. And that’s more of like a feeder sourcing fund precede seed. That is more like one hundred to $300k check size. Sometimes we will even go down to ten, twenty thousand if it’s just for a patent, you know, you know, really, really early stage with with a heavy emphasis on MIT startups.

But anything that’s really transformative science very early.

It’s so perfect for your background. So make sure I got this right. You were the founding executive director at USC Stevens Institute for Innovation and the founding executive director for the MIT Deshpande Center for Innovation.

Yes, yes. And I was recruited by USC from M.I.T. to be the vice provost for innovation back in 2006. And so, among other things, oversaw to transfer and developed a bunch of different programs for student entrepreneurs, faculty, entrepreneurs, innovation across all disciplines. That’s the thing that I was probably most proud of, is to rethink what university innovation looks like, because I think a lot of people think of it as like just commercializing lab technology. And one example of that was working with the TED conference to create the first ever TED event, because it was really a way of like, how do you know, ideas?

You know, how do you were spreading? So how do you take an idea and how to make a broad impact with that idea?

Oh, that’s a fascinating. OK, so let’s stay on that for a second. You’re known for being the person who created the first Ted X.

Mm hmm. So tell me, how did that idea come about? And was the idea similar to what I now think of as Ted?

Yeah, but I think it scaled beyond our wildest imagination. I mean, it’s just, you know, and I think it’s a great example of what I call crowd scaling. The idea is that you not crowdsourcing, but you have an idea and you you design it in such a way that you give enough degrees of freedom for, you know, people to run with it and at the same time be true to your brand and what you believe in. So we approached TED with this idea.

I’m sure that we weren’t the first to approach TED, to say, hey, we want to do our own TED.

But we we said that we wanted to create something that was replicable. So they really like the idea and especially the fact that I oversaw the tech transfer office, too.

So we really understood licensing. So we helped work through the licensing model for something like that. And yeah, it was March 23, 2009, the first ever TEDX event.

And I’ll never forget when those but the the curtains were drawn and it started. And so that first Ted X was a USC. It’s sort of it was at USC tactlessly. Yeah. Most people don’t realize that TEDX started in L.A.. Got it.

No, I had no idea. 

So one thing I think about is sort of what are the fundamental structures, levers that hold back university innovation?

And I’m curious your thoughts on it.

One of mine is just sort of the incentive structure for professors is to publish more than it is to innovate, I guess.

I think that some of the fundamental things that need to change are more the role models, and I think that it’s already been changing and sometimes it’s changing to the negative. So it’s a little bit of a nuanced answer. Right. But there have been studies that looked at what cause faculty to commercialize their innovation. And across all of the different parameters, like like nothing made a difference, like just nothing except for one thing. It was actually it. Sorry, I shouldn’t say commercializing patenting.

So that’s a first step when it comes to technological commercialization. Right. The one thing that made a big difference was whether the dean or the department head had patents.

Hmm. So it sends a signal, right, that this is something that’s not only OK, but it’s something that’s really worthwhile doing and then that sort of flows down into the culture of the of the organization. The other thing that I think a lot of people miss, and maybe this is too wonky, but I’ll mention it is really strong conflict of interest policies because I’m a I’m a big believer in academia. I love academia. And I really feel like it needs to be.

The reputation of academia needs to be protected, and some people think that you can’t commercialize without creating a conflict of interest. And really what happens is the conflict of interest needs to be managed because you don’t want is you don’t want to have a professor, for example, who developed this new drug, you know, candidate or some, you know, concept that they want to commercialize. And then they’re the ones that are doing the clinical trials, because obviously then even if they don’t mean to, there’s at least a perception of conflict of interest that you want the clinical trials to say that this is working because there’s a lot of money on the line.

So whether or not there is a conflict of interest, a perception of conflict of interest is just as bad.

So having really strong conflict of interest policies make it possible to push against them. And when I first came to USC, there weren’t strong conflict of interest policies. So by but pulling it up into the forefront and go like, this is what you can do and this is what happens if you have a startup you want to do, you have to bring it to the conflict of interest committee and you have to make sure that that policy is clear and streamlined.

Interesting. I mean, is there anything else waving your magic wand that you think the universities could be doing in the L.A. to to just be more integrated with the Southern California innovation community?

Well, I’m really thrilled that the Alliance for Social Innovation has taken on FirstLook because the idea is that you you do it as a community, that that you celebrate as opposed to compete. People would say like, wait a minute, you’re at USC, aren’t you competing against UCLA? And of course, I came from Boston. So for me, like I’m coming to L.A., I love L.A. It’s my hometown. Like for me, the competition is not UCLA, it’s Stanford or it’s other places.

Right. So, I mean, I don’t even want to be competitive that way. But that was the big thing is create that ecosystem so we can support. And I think in particular, there is so much research happening in Southern California, like over three billion dollars worth of research happening in the top research universities alone, let alone in the hospitals, et cetera. That and a large part of that is in biotech. And unfortunately, L.A. is seen as a flyover city when it comes to biotech.

So San Diego and the Bay Area are really strong.

But the truth is that we we actually in in Southern California, we create more patents. The universities create as many patents as Boston, the Boston area, and way more than the Bay Area.

There’s so much going on here. We need that. We need a lot of like the wet lab space and a lot of support around, especially biotech, because I think that’s a super untapped opportunity.

OK, changing a little bit. But you taught did you teach innovation or entrepreneurship or something like that at USC?

Did you come up with your own curriculum? Yeah.

Not only were students appreciated my curriculum, but I what will what were the things where you’re like, I want you to walk away with these two ideas.

What was some of the the ones that did work?

Wel I wanted to impress upon the students that innovation is not about creating ideas like that’s like the one percent of the innovation process. What you need to do is you need to beyond the inspiration, the idea, ideation. You’ve got to iterate, iterate, and then you need to figure out how to make that impact.

So kind of prepare society for your idea.

So it’s. I like to think of it as like innovation is the process of turning the crazy into the inevitable.

And I wanted them to feel it. So I wanted them to feel so instead of like coming up with a business plan. I said, let’s come up with simpler ideas. So they may have been social experiments, for example, but we wanted them to iterate on that social experiment. We wanted them to create social change, some sort of a change. 

I think Bill Gross, Arnav from Idealab, he said that if he renamed it I mean, maybe tongue in cheek, he said he’d rename it Iterate Lab.

I’m curious about your ideas for what stands in people’s way from actually being innovative. Well, that’s a big question mark. 

I think that people’s mistake is to focus on passion rather than curiosity. So I think that passion is what you know, and curiosity is what you don’t know. And innovation happens when you focus on what you don’t know, because if you know it, everyone else probably knows it, too. 

I don’t think that innovation and entrepreneurship are concentric circles.

Right. I think that there are overlapping circles. So entrepreneurship is one way to innovate and innovation is one form of entrepreneurship. I mean, you could have you could start a. You could start a dry cleaning business, perfectly great business, not innovative at all, and that’s fine.

So, yeah, well, yeah, OK, so I agree with that and I’m actually OK, so I feel like I don’t know you super well, but I feel like a lot of your motivation comes from OK here.

I know. I know.

But now super we’re getting into the psychoanalysis.

But I feel like a lot of it comes from you do want to effect that change in the world, like you want to take what you’re an instigator.

Right. And do you want to see this change in the world? But then why? What’s your relationship with venture capital. I think that one of the greatest things about being in venture capital is having capital to deploy. So I think that the and I don’t want it to be the only thing I do. It is the majority of my time right now. But I but I think that the. The way I bring the most value to what I do as a VC is by doing other things too, so by doing some consulting and advising and right now working on a crazy project for the L.A. River, which we can talk about if you want.

And I’d love to. And, you know, just doing doing the podcast, for example, and, you know, having worked in government and I was an adviser for, you know, the Obama administration and for the World Economic Forum. And through that, you develop these incredible networks. And so I think that. Following your. Follow your curiosity, I like to like find things that are at the edges and at the intersections, you know, and I think that through that I have perspectives that I can bring to the investing.

Now, the question is like how you capture that value is harder when you’re in the flow rather than like the old way of thinking about things is people own IP, like they own the ideas. And it’s very like you build these walls. That is not the way innovation happens today anymore. Very dynamic. And there’s this flow of talent, flow of ideas, and it’s harder to capture that that flow.

But that’s where it’s important to be as an innovator is in the flow, not owning, but being in the flow. 

So Hamet Watt was on the podcast? Yeah.

He said that, you know, there have been a number of studies on what makes someone like prolifically innovative or what makes them an innovative. And there are two main things were being prolific and and that intersectionality, for lack of a better word. Yeah. Combining different fields. And so you’re saying it’s important to to follow those threads?

Yeah, absolutely. And I think that I really I think a lot of what he said, I heard that episode and I and a lot of what he said really resonated with me. And I think that he talked about curiosity, too. And he also talked about resilience. Right. And I think those are really resilience is another incredibly important part.

There’s so many so many paradoxes in entrepreneurship. I mean, one of them is the curiosity, will you need to focus when you are an entrepreneur? Right. So that’s a difference between. Being an entrepreneur and being like starting a company and then being between gigs as an entrepreneur and a friend of mine once described this to me as. Entrepreneurs are like like wildcats, like tigers in the wild, because, like most of the time, they’re just hanging around kind of sleeping there.

They’re like storing up the energy to do their next kill.

And so it’s OK during that time between the kill, which is at the startup, is to be thinking about the next thing and making those connections. And, you know, when I was driving cross-country, I was thinking last month I was thinking about like all the rows of corn versus the beans.

It’s like rotating your crops, like between the actually growing the corn, like you need to to put the nitrogen back in the soil and just start thinking.

And that’s where the connections happen.

But make sure that once you’re doing the startup, you got to be 100 percent focused.

OK, so resilience being part of this. Yeah. Um.

I know that your parachute did not deploy once and that you still kept skydiving after that.

Well, there you go. You said the punchline. Yeah. No, no, no, no, I totally didn’t.

There’s so much more. I know what happens when your parachute doesn’t deploy.

Yeah, so technically, what happens? Like, what are you asking, what do you do know? So.

So everyone has a so everyone has a reserve. So what happens is that you practice over and over again so that if your parachute does not deploy and you have to do two things, one of you have to cut away the old parachute because it’s just not because it may be like in my case, I just was spinning like crazy. And I just like what’s going on for the longest.

Ten seconds of my life, 10 seconds really in seconds.

And I know it’s ten seconds because my instructor had to happen to look up with a GoPro because she’s not she’s like she’s still falling. And then she deploys her parachute. So she looks up and looks at me and she’s like, You hear her go, huh?

Oh, as she sees my parachute get cut away and just sort of drift away and then she’s waiting and then boom, this like the green one goes away and then boom, the red reserve just opens up and she’s like, oh, thank God.

So, OK, so you have to deploy your second parachute while you’re free, falling and cutting away this other parachute.

Like like you literally have another maybe ten seconds. Like you do not have a lot of time.

Yeah, but. And does that build resilience or. Well yeah.

So I think that that, that taught me something really interesting because I think I think we have failure all wrong. Right. I think that sure. Like you can learn from mistakes.

I think you can also learn from other people’s mistakes, like better. You don’t have to have that experience to learn how to deal with it. I mean, you do a lot of practice before you actually have a reserve ride. And what happened was so because my instructor, you know, falls faster and then gets down like everyone at the drop zone had heard what happened by the time I kind of like real up in the truck and everyone’s coming up to me going, oh, my God, you’re so lucky.

I heard you had a reserve ride and you’re I’m lucky.

What are you talking about? I almost died. It was quite thrilling. But at that point, I was like, ready to throw up. I look so sick to my stomach.

And they said, oh, my God. Several people said, I’ve had a thousand jumps and I have not had a malfunction and I do not know if I could survive. So you now know you can survive.

So I think part of the key to resilience is having been through some rocky times and it’s not the failure, it’s the getting back up that gives you that resilience and that confidence.

Mm hmm. Mm hmm. Yeah, I know. Because, you know you know, so many times you’re sick to your stomach.

You’re like, I don’t want to do this thing. I had to fire people. They scared the shit out of me. And then you’re like, oh, I know. I’ve done I’ve gone to a RIF before. I’ve done that sort of thing. But that means that the way you build resilience is just by having this horrible, horrible, depressing, whatever. Sad.

I know. Well, hopefully, hopefully you do it smaller. And that’s the whole idea of iteration, right. Is that you you know, like imagine being in Apollo, an engineer on Apollo and you don’t really know if it’s going to work for ten years, you know, or right now the James Webb Space Telescope, which is being assembled right now in Southern California, and it’s like this multi, multi, multi billion dollar project that has delays, you know, budget increases.

All eyes are on them. They’ve had to testify before Congress about it. I actually had them on my podcast and we talked about how do you iterate on something that’s so complicated? And there are ways. There are ways.

OK, Z and I both ran off to do other things, but now we’re back.

So I’d love to talk about a couple of these other endeavors of yours that are hopefully feeding your brain or have fed your brain disease. You ran a nonprofit focused on manufacturing in L.A..

I did. Why did you do that?

Mayor Garcetti had reached out and asked, you know, it’s like I’d like to start something kind of along the lines of what you’ve done at MIT, USC.

You know, how do we have better interface between government and the entrepreneurial community. And so he had this idea of an EIR program, which, of course, in venture that’s pretty common. You know, you have year EIRs come in and and kind of keep their eyes open for things and and opportunities.

And I said, yes, I would do that, but only if I could focus on an area that was untapped. Well, it turns out most people don’t know this, but manufacturing is L.A. is the largest manufacturing center in the country. 

I had Eric Pakravan on the show and his dad is a button manufacturer or was a button manufacturer.

Is it mostly apparel or what?

What can you tell me about manufacturing and how what it looks like in L.A.? It’s incredibly diverse. So, yes, apparel is huge and so is aerospace and there’s a lot of advanced manufacturing innovations.

I mean, obviously things like. And plus, of course, the large companies here are the established defense contractors.

And so L.A. has been the center for that. So there’s that there’s there’s chemicals, there’s food and beverage is huge. And also just industrial transportation is big Hyperloop. I mean, there just a lot of really cool stuff.

Can you give me maybe a little bit of a tangent, but if I want to start a food and beverage company. 

In food specifically, it’s called a Copac. So you would work with a company that specializes and they have the facilities to do that. And they’re very specialized facilities and equipment for different kinds of food, beverage, et cetera. Then, of course, the packaging, all that. And then, you know, basically you put your brand on it and it’s it’s actually I’m not an expert in this, but I, I learn a lot in the process.

So because we have this program where we were supporting these startups that were which had this grant to help help startups, we had 16 startups and our program was like an accelerator and many of them were food, beverage.

And it’s really hard to develop a recipe that scales.

It’s it’s so that was something that I learned. Yeah. So like, for sure, if you’re I mean, in the same way that if you’re designing a something like a a box, like there’s the low scale way of doing it where you just like you could three print it, for example, you know, everyone talks about 3D printing. Well, you’re not going to just 3D print four million. So once you get to the next level in food, same thing.

There’s different ways that you have to formulate stuff.

Total tangent. If I wanted to go visit some cool manufacturing, is there anything is there a good field trip that I should know about? We actually created this thing called Maker Walk, which was these makers and manufacturers and startups, everything from they open their doors, you know, for tours. And so it’s kind of like an art walk. But it’s Maker Wall. And it was in the arts district with everything from custom furniture company to a lumber mill.

So we love this. So it’s so it’s like open studios.

Exactly. For manufacturers and mirrors. Oh, that is so cool when it comes back.

And was this an actual did you create a 501c3 three for this.

Yeah, it’s called Make It in L.A. So you’re going to L.A. dot org and sort of had you know, it’s primarily we created all these resources to put on the Web sites, all the stuff we’ve learned through helping entrepreneurs, et cetera.

Lots of videos on how do you how do you start a business where you make things? It’s not as easy as just kind of using AWS and your code and your ready to go. Right.

And you have this amazing podcast. It’s another great resource, the Art of Manufacturing podcast. Right?

Yeah. So that was a lot of fun.

Your podcast is really good.

It actually made me like, oh man, I need to do more with mine. Did your style change a lot from season one to season three?

I don’t think so. I think that I just got into a swing. So it’s just you have a system for finding the folks. I have to say to like I I’m a bit of a perfectionist. So it was hard to release the first episodes, right. Like that. My whole identity and my whole ego was wrapped up in it.

And you’re just like, OK, I hope people like it. And then you start getting tweets, you start getting some messages.

No, I mean, I totally agree. And I it I always feel bad if I don’t do my guests justice or something. Do you feel like it’s driven a lot by you, whether it comes out as like an interesting episode, or do you think it’s a lot about just whether your guest tells good stories? Oh, yeah.

I mean. Each episode is so different and each one is such a journey, and I think that I’ve had a few that were kind of snoozers and it was like, oh, man, what do I do with this? And so

And I tend to find that when there’s two people, it actually kind of clicks better generally.

And I also I find a way harder when David co-hosts.

Do you think you’ve gotten better at asking good questions? Uh, I hope so. I think. Yeah, I don’t know, I think a lot of it the most important thing is not the questions, but it’s the listening. Oh, it’s so hard.

I mean, it is really true to have good questions, but I think the key is not to have them all scripted out in advance.

Yeah. Oh, that’s so true.

OK, so I will I will move on into other things. OK, so manufacturing was kind of of the past, as you said a year ago. And now the L.A. River has been a big focus of yours recently. I know.

Just give me the basics of the L.A. River. OK, so there’s the L.A. River, which a lot of folks. You know, when I first started working on the L.A. River, people like L.A. has a river.

And so I’ve been involved in an organization called the River L.A. and the River L.A. The whole goal is to integrate design and infrastructure, to connect the communities and the people and the environment along the river.

So it’s really meant to tap into all the different opportunities for the community around the river.

If you think about one, a quarter of all Californians live within an hour drive of the L.A. River. It’s it’s incredible.

And so we how are we supposed to connect with the river? Please tell me.

Yeah, well, we just literally today launched Rio Reveals.

So basically, we’re hiring these amazing artists from across all the different cultures in L.A. to create these both in-person and online experiences like adventures I would encourage anyone that’s interested to go to Rio, reveals Dotcom.

That’s OK if I do a little plug. But like on an ordinary basis, like, can you go hang out at the river or have a picnic by the river?

Well, yeah, so a lot of people don’t realize that there are certain parts of it that have natural bottom. So like Atwater Village area and kind Frogtown, that area, and then also by Balboa Park in the Valley. So those have some natural bottom areas. You can do kayaking like honestly, like if you kayaking along, you would not realize that you’re in the middle of a city. So Los Angeles manufacturing, the L.A. River, Rio reveals you said.

So tell me about L.A. I mean, you and I both grew up in L.A., so I know it’s kind of weird to be back.

And then I love the diversity, just the arts, the culture.

I mean, we can never do anything.

I could have never done anything like Rio reveals in Boston, right, like it would not happen. So I just love living at the intersections of things. I mean I went to a private school in Bel Air.

I was a Westlake before all girls school, before it was Harvard Westlake which dates me. But and yeah, I did not fit in at all. And I, I was I had my friends but they were not kind of the I didn’t fit into this typical. I don’t know. How about you. Like who did you hang out with in high school.

No, I mean I was the same thing, private school here in Pasadena, but I just was very sheltered from it all.

But I just was like, I want to get out of L.A. because I was afraid I’d be to wasn’t like blonde and cheerleader enough for L.A.

OK. So before I wrap up, anything else, is good growth capital? Do you guys call yourselves GGC? No good. No, I don’t. I don’t like acronyms, but that’s my thing. I think that they’re what?

Well, of course you have some strong opinion about acronyms. Well, I think I do, because I. Let me let me take a moment. Please.

Please do. Well, first of all, like, it’s a very insular thing.

It’s like to think that I do it sometimes when I hate myself or because it’s like nobody else knows what that is like on this year, IBM or the IRS, like, you know.

Right. What is that?

And it doesn’t really you don’t you don’t capture sort of the essence of who you are. You work really hard on that branding. And the other thing is it’s jargon. Any kind of jargon, I think, puts up walls between you and the other. So it creates this kind of tribalism in a bad way that I think I just I think I do have a strong opinion.

You know, you have a strong opinion about a lot of things.

I will I would have instead then by saying anything else about good growth, capital tech entrepreneurs should come and approach you, especially awesome people who are going to change the world through science.

Yeah, they should come find you. Yeah, absolutely. You can do me on on Twitter or on LinkedIn. You know, Kristzina Hollywood that weirdly in the middle of it. So.

Yeah. Right. So OK so then great. So we don’t need to do anything. Exasperated. Yeah that’s OK. Enough of that GGC out the door. OK, here’s what I wanted to, to wrap up those.

You said something at the beginning and I wasn’t listening hard enough, but something about mentorship and deep mentoring, something like that. But you and I were at the beach on Sunday and I asked you about a mentor of yours and what you learned from him.

And you said to do everything with Grace. And I was like, oh, I’ve been thinking about that since. Yeah. What does that journalism. Yep. Greece. And what does that mean to you.

So, yeah, Woody Flowers. He was amazing.

And he was here with Dean Kamen, founded First Robotics and he was my undergraduate mentor to MIT and he was also the professor for the class which was called, which is 270 everything at MIT numbers.

Speaking of like it’s worse than acronyms, um he just passed away this winter and actually no it’s like the October 11th will be the one year anniversary.

So he had made such an impact on me. He was one of my mentors.

I’m lucky to have had many really amazing mentors and I think mentors of the kind of people who really will they believe in you. They will stick their neck out for you. They will make connections for you. They will see where you fit in in the world and help open doors for you.

And they really do put their kind of reputation on the line for you. And he did that. He also just filled my brain with all sorts of amazing things. So the first one is gracious professionalism. That’s probably the thing he’s the most well known for. And it’s just the philosophy behind first robotics. And the idea is like. You don’t have to win, but you should definitely, you know, whatever you do, make sure you do it with grace.

And that was really important.

I I’ve been thinking about it a ton. I struggle. Here’s where I struggle. Sometimes it’s advocating for myself. Feels like it’s not graceful or something for me.

And it feels like I’m being pushy. Mm hmm. And maybe this is just my.

No, I know exactly what you mean.

And you know what I think part of the challenge this is like going now we’re getting deeper into the L.A. thing, but there’s different cultures in different cities and in different subcultures within cities. Right. And I think I lived for 20 years in Boston and in New England you never to your own horn, you kind of wait for other people to recognize you and you know, and they do, because that’s the way it works.

And in L.A., it’s a very different culture. And so that’s probably one of the things I’d say that and the very transactional nature of a lot of folks, especially Hollywood, like it’s driven in the Hollywood sector, everything’s transactional. And so I think those are things that we have to get past in L.A. in order to really be truly a great community.

It’s a great thought to to leave on and sort of reflect on.

So I wish you a lot endless gracious professionalism in your future endeavors. Thanks so much for coming on the show.

Thanks. It was so much fun.

I mean, what I did say also was like when I first was like, hey, I start a podcast. You were the first person I called, remember? Like, I remember where I was when I was talking to you about it.

I remember where I was when you were talking to me about it. I was parked outside the L.A. Clippers, I think. I don’t know why I remember that.

Mark Terbeek — Greycroft

Mark is a leading B2B investor and on the board of Scopely, Icertis and more.  He shares his current investment theses and explains how Greycroft operates as a seed to growth stage venture fund.

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Mark Terbeek is a partner at Greycroft and one of the leading LA B2B investors. He’s on the board of Scopely, Icertis, Botkeeper and many others. Mark joined Greycroft in 2013 after a decade in venture at MK Capital. He has a reputation for being extraordinarily nice. Mark we’re thrilled to have you on the pod today.

Thanks. I appreciate that. Excited to be here.

Great. I also have my partner and sometimes co-host David Waxman. Hi there. Great. So, yeah, it’s great to be with you, Mark. I remember when you joined Greycroft and I think at the time was Dana the only partner here in L.A.? Yeah.

Yeah, correct. Yeah. We we the firm at the time and it’s funny, it’s been about seven and a half years, you know, sometimes it feels like a year and sometimes it feels like 20 and sometimes on the same day. But yeah Dana, Allen, and Ian started the firm in roughly two thousand six. And they were just in the process of starting to raise Fund Three when Dana had reached out and mentioned, you know, we’re starting to scale, you know, I could use some help in L.A. It was just here in L.A. and then Allen and Ian in New York.

So we had known each other for a long time. We had co-investor a few times and so that was in the early part of 2013 when I officially came on board. And it’s been great. It’s been a terrific fit for me and hopefully for the firm.

I assume if it wasn’t a good fit for them, they would have figured out how to get. I hope so. Yeah, exactly. So yeah, it’s been nice. And you were already in L.A., right. Correct. Yeah, I, my wife is a documentary filmmaker so we moved down. So after I left Stanford in ninety seven, I started an early SaaS infrastructure software company, and then my wife was kind of waiting patiently for me. She wanted to come down to L.A. to pursue her career. That was in 200 I called you the the leading one of the leading B2B investors in L.A. is that is that do you think of yourself as a B2B investor?

I mean, and then I said, you’re sitting on the board of Scopely, right? So, yeah.

Yeah, it’s funny. So I’d say I, I try to spend about 80 percent of my time looking in kind of enterprise software and then a little a little bit in the infrastructure software area too, which is kind of my background as a founder. And because of my history in L.A., the early days, I’ve also done some media investing over the years. And certainly gaming being the largest category of entertainment. That said, generally most of the consumer investing at our firm, you know, runs through Dana and then one of our partners in New York, Ellie Wheeler.

I tend to take the what I think are the sexy companies, but normally be thought of as the sexy B2B software, the sexy enterprise that’s got it.

So well, I want to hear about that, but I can’t leave that the gaming stuff go. I mean. Sure. Where do you think we’re all going to be in like five years with gaming? Are we all going to be, you know, running our lives through games or.

You know what? Yeah, it’s really fascinating. So, I mean, the first mega mega trend, right, is as I mentioned, it’s already way bigger as a category inside entertainment than all the other categories combined. Filmed entertainment, television, you know, any sort of radio, podcasting, whatever, all those combined aren’t even as big as gaming. Right. So and it’s growing way faster. So I think there’s a couple of reasons. Right.

One is the technology of games has gotten so good and so realistic and so similar to real world and real life kind of stuff. The second is there the interactivity of the games, especially player to player, both ability to play against somebody, but also to communicate and build relationships with people.

One of the one of the really interesting things about Scopely to me is that they you know, they saw this new platform in Mobile and just swarmed all the you know, they went all over mobile. And they’re really, I think, the dominant player in casual mobile.

What do you think the next platform is? And it’s sort of a leading question. I’m curious about about VR in particular. And they are. Yeah. Yeah.

So it’s interesting. When trying to figure out what the new platforms are going to be, we would always study where gaming and music because that those were the two categories that younger, let’s call them kids. But whatever they could be, teenagers, teenagers, young adults, whatever, they they tend to have time and not as much money.

And so they’re incredibly aggressive about adopting new technologies particularly gaming and music, because that that’s kind of where you get a sense of where the world’s going. And usually once they start going in that direction, they stay going in that direction for a long time. 

You know, there’s so much upside even from when it becomes obvious what the winner is to where it finally goes is an amazing so like even for public stocks and stuff, I think about that all the time of, you know, there’s still so much upside because the laggards in that are later adopters. The market’s so huge. 

While we’re talking about, Scopely, what do you you know, this is about you, but where do you lean in as a board member or, you know, what have been some of the things that have come to the board level

Yeah. No, because so so I guess like first, you know, for me philosophically, kind of when I join a board, I kind of and having been a founder, I kind of appreciate what the founders are trying to do in terms of setting the culture and creating kind of a model that is in their image and, you know, that resonates and is authentic. And so I try to figure out both the culture of the company as well as the relationship with the core management team and founders, like what do they need?

And then how can I fit in to their model? Right. So I try of course, I try to bring myself in my own authentic way to that. But I also try to be respectful of the way the culture is working and the roles and the personalities of the key founders, in terms of specifically on Scopely, I mean, they have such a thing I probably respect the most about that company of a lot of things is they are the single best company I’ve ever worked with at recruiting talent.

So they don’t they don’t just do a search and then look for somebody. They’re searching for that role way before they even need it. And they’re specifically looking for what they consider to be the five best people in the world that do that role. And they start building relationships with those specific people sometimes years before that person’s ready to come up. In an ideal world, they’d get them right away. But oftentimes it’s not the right time for that person to leave yet.

Or maybe it’s not even Scopely’s not even quite ready for the level of what that person is. But but they’re growing into that. But they’ll start a dialogue and effectively a recruiting process. That’s a relationship building effort that literally I’ve been involved with some of them that have gone on for years before that person has finally decided to come.

You know, I was able to kind of spend time as they got deep in the cycles with candidates to not only interview them, to provide my perspective to the team, but also to help the candidates understand a broader board perspective, investment perspective on Scopely.

How many people are who will you interact with at at a company like Scopely?

Like, will you well, a lot of your interactions be with the CEO or will it be a much broader set of interactions?

Yeah, good. Really good question. That I think also kind of depends culturally a little bit on the company. You know, Scopely has a very collegial approach, especially at the senior management team. So I spend I probably spend the most time with Walter, but I spend a fair amount of time with Javier who’s the co-CEO and really runs all of the games. So he operates all the games and is an incredible executive. And then also Tim O’Brien, who is their CRO and kind of does all their big licensing and partnership deals.

And then also Roxanne Lucas, who is their chief people officer. OK, bring it back to just Greycroft. General, I want to make sure I cover the basics. How do entrepreneurs approach you best? Like I called you a B2B investor, you know, did someone come directly to you? I feel like Brentt works a lot with you. Yeah, well, it’s on the team. What are the best entry points?

How does someone know who to talk to if they’re looking to raise money from Greycroft?

Yeah. Yeah. So so the best way is obviously, if you know one of us or if you know someone that knows us well is just to kind of, you know, get an email intro really to any one of us. Anyone will can receive the email and can get it to the right person.

Right. And so we don’t expect entrepreneurs and everybody to know exactly what areas we’re all working on. We internally understandable kind of route it the right way, but roughly the way we organize weekly inside Greycroft. We have kind of half our team roughly is kind of focused on the enterprise team. So in L.A., that’s that’s primarily me and Brentt. And then and then also we also include our New York team, which is like Will and John and.

We kind of together kind of review all the enterprise stuff every week, and then we also have a consumer team, which is primarily Dana and Ellie and Elena, and they’ll they’ll work kind of through that funnel. But if something comes in to me that’s obviously like more appropriate for them all, forded it off to them and say, hey, this can refer referred looks pretty interesting, but why don’t you guys take a look? And I’d say one other thing is we were also quite thematic in terms of how we operate. So each investor on the whole team has a handful of themes that they’re most excited about and believe are going to be big trends over the next 10 years, 15 years.

And so each one of us does research and and and kind of lays out kind of a handful of investment theses. And then we all share those across the firm. So if Brentt’s particularly excited about, you know, network security or something like that, you know, when something comes in.

Yeah. When something comes in, you know, everybody knows, OK, Brentt will probably have a point of view on this. And we try to spend roughly 80 percent of our time outbound looking and doing sector work and looking for companies in those areas.

You mentioned a couple of things. What are all your things I’d like to know?

So for me personally, the three that I’m spending time on right now, so I would call it future of work, but it’s not as broad as what that might, I guess, generally connote what I’m looking for, specifically are business processes that up until a year ago were primarily human to human in person interactions were necessary to really make that business process work. And now obviously those are going to be much more difficult to have happen. And so we’re looking for software platforms that can, you know, come in with certain workflows and either augment or fully replace the need for those people who have done it, kind of swivel chair management style.

You know, that’s that’s one area that we’re that we’re looking at.

Second would be kind of modern supply chain, so much more dynamic network orientation to how businesses manage their vendors and suppliers and how they’re going to basically not only try to be less single threaded on any one particular vendor, particularly if it’s in a country perhaps that’s going to have political challenges or just they want to have a better kind of way to manage a more dynamic nature.

So we’re looking at lots of things around that all the way from contracting, kind of like Icertis through procurement, down into even how they manage their individual vendors. We just backed actually a deal that that Brentt led for us called craft.io, which is basically a modern version of Dun and Bradstreet. So they have an ability to effectively understand and score vendors based on a ton of both public and some of their own data that tries to get at. Is this company healthy?

And then finally, like what I call the modern CFO stack in the world where, you know, there’s an explosion of data APIs, accessible third party, first party data that’s that’s exploding now.

Is there a way for the CFO office to better understand all of that data and therefore make better decisions to drive the business as opposed to being more backwards, looking on compliance and general ledger and accounting and stuff like that? I consider those all very sexy, how do entrepreneurs know that those are your themes.

I mean, like each of us, Brentt has two or three games, got two or three. Ian’s got two or three. So there’s probably a total, what I don’t know, 30 ish. And so we wouldn’t want an entrepreneur not to just because they heard my three to say, well, I don’t really fit in there. I would think Greycroft, because it’s quite likely somebody is working on a theme that was related. I would just probably, you know, know that right away and hand it off to that person, introduce them, I love to talk to you for a second about stage. I think when we were interviewing Dana, we called you a Series A firm and she recoiled in horror. Yes.

So but I still do kind of think of you as a series A firm. So, so correct me again.

So so we believe the way we think of Greycroft as a seed to growth stage venture fund. You know, we’re ideally finding companies, you know, first institutional round these days. That’s often called the seed round or whatever it is. But, you know, ideally we’ll get involved whether we lead that round or a co-lead or even just a piece of that round in those rounds are pretty collegial and syndicated around how they form were fired up to get involved as early as that level and start helping.

Certainly the series A we want to be aggressive in and follow into that round or if we missed that seed round, that’s certainly also a natural starting point for us. Is the series a round. And then we’ll typically, with our early stage fund, still follow through into the B round, kind of with the early stage fund. We then separately have a growth fund that’s, investing minimally. Twenty million and probably as much as 40 million single check. So in a perfect scenario, would be like a Scopely or an Icertis where we start in the original round and then we’re an investor in every single round of the company afterwards

But, you know, Dana’s reaction kind of to the A round is we think of ourselves as wanting to kind of be a part of the business as early as we can and as long as we can in the history of the company. Maybe it’s an obvious question, but do you just from the fund that you’re investing on? I think it’s a 250 million dollar fund, so not counting the growth, the the growth fund. Does your ownership grow or shrink over time?

I mean, when it exits?

Yeah, it’s a good question because so the way we’ve set up our fund strategy is. We’re trying to get in early and then the the growth fund will come into B rounds when they’re really scaling typically as a like as a rough rule, the company’s got around 10 million of ARR.

You know, as a B2B company, you know, it’s kind of definitely in the range of the growth fund. Typically that rounds going to be 15 to 50 million that they’re going to raise. So if you look at, for example, like a Scopely, so we were investors in the early stage fund with that and then a big investment of the growth fund. 

If you look at the company, like our ownership across the two funds, has actually gone up. What’s your relationship with this sort of Sand Hill Road?

Yeah, so so we you know, so historically, the firm has always been very collaborative and syndicate friendly, the firm has a view of when we invest in a company, you know, we always think of ourselves as a possible lead candidate for a we’re. You know, we have our own perspective, we don’t care what other people think or don’t think, we can be contrarian, we’re focused on our own view of the market

So at the end of the day, when the round is finishes and is selected by the team, you know, ideally we hope we win and prevail as the lead. But we’re also indifferent in the sense that if we’re the co-lead or even if we’re a smaller investor, as long as we think we can earn a huge rate of return on that capital and we can really be helpful to the management team in the syndicate, we’re fine even if we don’t end up kind of leading it, we’ll get going because we know we’ve got the growth fund and other instruments. And when the next round comes, we can lead that next round. 

And I think generally we’re well regarded because of our flexibility and because, frankly, our perspective on our network tends to be really complementary to a lot of the Silicon Valley funds because of our L.A. and our New York bases know we’re able to bring customer relationships, partner relationships and talent relationships in those markets.

Do you set expectations for subsequent rounds or do you just kind of decide ad hoc, like, yeah, what I tell them is, listen, you’re going to execute.

Your plans are aggressive, probably even more aggressive than we think you’re going to achieve. That’s probably why there was a bid/ask spread, at least in the negotiation. Right. And at our perspective on it is, look, you think you’re going to be growing even faster and that would make nobody other than you and us with that would be amazing. Right. If that’s the case, expect that we’re going to be aggressive and try to lead subsequent rounds or at least try to be a major player in those subsequent rounds.

That said, I’m not asking for you upfront to accept any offer that I’m going to give you. I’m going to compete just as. As any other new firm to kind of win your business, kind of about the next time,that said, other great firms are inevitably going to be trying to preempt you or competing in the same kind of round that we’re competing on. And you should absolutely do the best thing that’s for the company right in the board, you know, minus me, because I’ll be conflicted, will make a decision on kind of what the right thing to do is. And I want you to always know I’m 100 percent behind whatever the best. I guess hopefully I’ll convince you that our offer is the best.

But I also get you’re a great company. You’re going to have 10 other offers and you’re going to do the best thing for you. 

One thing David and I talk about is should we be doing more to build out our operating partners, board partners, mentor networks?

How what have you seen work really well and what have you done and where you going? Yeah.

So so this is this is one area that I’m super excited and proud of, kind of the evolution of the firm over the last really five years. When we talk to entrepreneurs about the flexibility I mentioned before of we can lead, we can be a co-lead, the other area of flexibility that we philosophically, fundamentally believe in is we want companies to build the best board.

They can build it. Right. It might make sense if I’m leading the deal and trying to break off that I would be the guy. But also, you don’t have to just take Mark because Mark’s leading the deal.

If there’s someone that’s better internally for whatever reason, that’s totally fine. We don’t have any ego. We don’t have any economics around the way we structure our firm. We want the company to be the best company it can be.We’re also happy to step off the board and just be a board observer and bring on someone else that they can recruit on and use some collateral to capital to kind of get them out there.

And we philosophically believe that companies have the best boards. We’ll get the best outcomes. So that’s on the investing side. Right.

We also then have built this platform team. That really fundamentally today we have three people that spend most of their time on that team, so we have Alison Lange Engel, who was the former CMO stripe and at LinkedIn prior to that. 

We have Stewart Easterby, who similarly comes from a sales and sales ops and kind of an H.R. manager operating background. So he helps companies kind of as they’re scaling all those aspects of geek out with like compensation models for the sales teams, whatever they need help with.

And then also how to Hannah Shore who runs our BD team. So she spends a lot of time outbound with large platform companies, big enterprise customers, CPG companies, relationships with, like, you know, Accenture and Deloitte and firms like that.Ddo you take board seats in your earliest investments like you’re leading and see, do we can we typically don’t in the seed stage only just because most boards are still forming, the entrepreneurs are still figuring out kind of what they want and need on a board. But if they have a strong perspective and say, hey, we feel this is the time to form the word, we’d like you to do it, then we’re definitely open to it.

You know for sure, by the time the company is at the series, a stage.So even if we’re start on the board and then turn into a board observer, there’s there’s zero difference in kind of how we work with the companies.

I think we’re going to have to move to the random personal question section of this right now looking at it, but it really, what sort of documentaries does your wife make?

So primarily she’s focused on on animal documentaries. She did a series of short documentaries for National Geographic on the Big Cat initiative. So she did some on the tiger or the lions and she did some kind of saving and endangered animals. And then the last two feature length documentary she did, the first one was called Black Beauty Breed, which was a deep kind of profile on the Rottweiler, which is a dog that we ended up rescuing and didn’t know anything about, rescued and fell in love with. He passed away a few years ago of osteosarcoma.

And so she did a documentary on on canine cancer and kind of all the new therapies that are out and ways to treat this, ways to prevent it. Not surprisingly, it’s a lot like humans where obviously food and a lot of the things that dogs eat and they’re they’re kind of exercise a lot of different things you can do to kind of help, you know, elongate their lives and prevent cancer.

Well, this is fantastic, it’s been fun to get to know you better and it’s fun to collaborate with you in the L.A. ecosystem.

So, yeah, I really appreciate you guys doing this. And we love working with you guys. And and hopefully we can find a bunch of great ones together in the meantime. And thanks for having me on.

David Fleck — FreeFlow

I deeply appreciate David’s approach to life and work. He founded FreeFlow to invest in startups coming out of Caltech that have the potential to improve our world.

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David Fleck is the founder of FreeFlow, a new seed stage venture firm that exclusively backs Caltech startups. Prior to FreeFlow, David was chief strategy officer at Disqus and also early at Google. But I don’t just know David from Google. David and I go back almost two decades and I’m pretty sure that I introduced him to his wife, Lauren. And David, as always, nice to be chatting with you. Nice to be chatting with you.

Thank you. Yes.

Well well, let me just let me just say thank you for for bringing up the personal piece, because it’s actually, to be honest, it’s actually one of the reasons why I wanted to do what we’re doing. But just because there are so many amazing people that you can work with and choose to work with. And once, you know, once you once you taste that, it’s pretty addictive, actually.

As you know, I almost was like, maybe I should be working at FreeFlow because it’s a great thesis and you’re a great person to work with. And I’ve known you for decades and you’re also a great surfer. So there you go.

You lie. But that’s not true.

Well, I have a lot of fun surfing with you. Give us give us a little bit of the origin story. I mean, I know you, but our listeners don’t.

Yeah. So I’m an Indiana guy. I was born in Fort Wayne, Indiana, went to Miami University then went to Kellogg for my MBA, went to Bain and Co., the consulting firm, and again worked in the private equity group for a couple of years and then was an early PMM, so marketing manager at Google still within Rosenbergs or for those who were tracking at home.

And then actually at a few startups actually along the way, culminated actually with the Disqus, whereas the chief strategy officer for about seven or eight years and it was just an amazing experience because it was one of those companies that we had to it was a good outcome, but we had to earn it, if that makes sense, you know, oh yeah, it didn’t come easy.

But then, you know, I reached I reached this point where in twenty seventeen, you know, over that Disqus we’re of seven years. You know, you know, I lost my my, my my father, I lost my brother and had also had three young children born Lulu, Leo and Fiona and and I wanted to go into the next phase of my career with with intention is how I literally was describing it, I was drawn to science and really want to work on things that I thought were large and impactful.

And so started to, in essence, explore more around Caltech, I really started to become interested in and obsessed. I don’t know how else to put it, but just that that that founder obsession and just became obsessed with, you know, the amazing, number one, amazing scientists that are there in the number two. I just wondered why the ecosystem, the venture ecosystem around Caltech was was was what I considered to be underdeveloped. 

I’ve been following along closely and I think you saw this opportunity at Caltech.

And, you know, I think people kind of try to throw some barriers and tell you, oh, you’re not scientific enough, you don’t have a professorial background or you don’t have enough of a venture background or this, that and the other.

And what you said about being stubborn, I just think you you almost had a founder mentality and just said, I see the opportunity. I have this vision, I’m going to will this into existence. And I was very impressed by that. Is that an unfair characterization? No, you’re making me blush, it’s but it’s true, I mean, sometimes you have to, you know, in my you know, some moments, you know, you just you literally have to say, I don’t care.

It’s a good idea. And I don’t really care what anybody else thinks. With all due respect. Everyone has an opinion. Everyone has opinions. Opinions are like assholes. Everybody has one.

So I didn’t know the punch line, but.

But everybody is going to have an opinion, right? So you have to kind of really be considerate or thoughtful about who you actually care about. So, yeah.

Tell me more about what it was that you saw about Caltech and sort of the startup landscape that led you to start FreeFlow.

Yeah, so. Really, what it boils down to is just do you think there’s enough deal flow there, I think conventional wisdom is cast a wide net, you know, kind of, you know, within, you know, have a thesis, but within reason. Let anything come in and at least give it, give it, give it, give it a look. See. Whereas for us, we took a pretty different approach, which was, visiting or speaking with Caltech professors about entrepreneurship, I think is a bit off the beaten path for most VCs.

I think they really respected the fact that we were dedicated to them and understood that, and so were willing to really spend time with us just as we were willing to spend time with them, oftentimes not even knowing if there was a potential venture there. We start out really just curious about what people are researching. Right. And then we get in the translation all the time.

Sorry. Go ahead.

Yeah, no, I just want to make sure I get the basics of FreeFlow, which is like you’re just investing in Caltech startups and not even Caltech alumni or, you know, I understand from you, I’ve watched you just kind of go lab to lab, professor and professor at Caltech, but maybe you just sketch out, you know, your investing, you know, when someone is, you know, just commercializing products out of Caltech or how do you approach that?

Yeah, no, but you’re right. I mean, we know the way that I describe it is our core is is is is physically Caltech itself. Right. And that and professors more specifically at Caltech. 

And how do you think about the sort of time to revenue and the amount of money that these companies will need? If you’re, you know, out of Caltech, you’re looking at a lot of things in life sciences or that sort of field where there might be longer regulatory horizons or it might still be more fundamental science.

We’re almost always, you know, have have line of sight to revenue actually and sometimes the companies already have customers. But we do have we will have some that will have longer time horizons in that way. So, for example Appia bio. You know, that one is more kind of FDA.

They’re doing basically cell therapies, delivering a more effective, lower cost cancer treatments. So we will do some of those, to give another example, so of a different flavor is Entos, so this one is founded by Tom Miller of Chemistry Division at Caltech and really is this beautiful partnership between kind of what I would think of as traditional, you know, machine learning and AI cloud infrastructure, but then also quantum chemistry. So how do you how do you basically, you know, use those things together to find new targets? So they basically allow for order of magnitude improvement in terms of time of time to find different molecular targets, targets that could be for drugs, for drugs.

Exactly. Like targets. Could be for drugs. Targets could be also for industrial applications to serve as chemical companies. Think about. You know what they’re manufacturing, how are they manufacturing it. 

So, I mean, I had a D.A. Wallach on the the L.A. Venture podcast, and he said that the pharma companies, Big Pharma, is spending 15 to 20 billion dollars a year acquiring startups, which was amazing to me. And so is that do you think about that as sort of potential exits for for some of these companies?

Yeah, yeah. I mean, it’s it’s there’s there’s different ways that you can work with with with the big companies, but they’re extremely acquisitive. And that’s almost the model, you know, you get to sometimes, you know, complete the stage two you know, some people believe in that religion or stage three. But, you know, right around that time frame is when there’s oftentimes interest because it’s been de-risked. And conventional wisdom is, oh, you need to get any, you know, company like biotech company or one that’s going after a target, etc.

, you know, they need at least ten million dollars. Where is that we we don’t we think that conventional wisdom is false and a lot of times it’s because of some of the some of the tooling that’s going on with that really, you can go back to the computer science, you know, where they’re beginning to be so much smarter in the lab.

You know, that’s actually that’s essentially what Tom Miller’s company, Entos, is doing. Right? They’re trying to make the that the chemists, if you will, or the people that are hunting down molecules so smart that they’re they’re they’re very, very prescriptive in how they think about their tests and spend a lot more time in the cloud, you know, looking at the data and thinking about how they want to construct the test and they spend their time in the lab much more efficiently to make back.

So, you know, it makes sense. Right.

And I assume the lab is where the costs are. And if you’ve got great software helping you out, that makes it more capital efficient.

Yeah.

So tell me tell me more about Caltech, I mean, Caltech, it’s amazing that there hasn’t been a whole lot of innovate.

I mean, there hasn’t. But it is amazing. But there have not historically been a ton of startups sprouting out of Caltech.

In terms of IP production, you know, that they produce twice as many patents per researchers at MIT and three times as many as per year per researcher and Stanford.

That’s amazing. 

Tell me about if you’re going from, you know, getting a patent, say, do the professors actually have that IP already and then license it to the companies that are spinning. Tell me about that relationship.

Yeah. There’s an office in a Caltech. It’s called the Office of Technology Transfer. And and generally along the way that, you know, an office like that is the one who’s going to be filing the intellectual property for all these scientists, not only the ones who say, hey, I might want to do something translational, but just kind of do this.

I call it it’s hygenic exercise, right. Where they’re just they’re doing this for for a lot of the researchers, you know, just to kind of cover themselves, you know, and all the amazing IP that’s being produced. But it’s the you know, the researcher said, hey, I actually think I might want to start an entity and actually pursue this translationally.

There’s economic terms that are associated with that in a very, very fair. It’s generally, you know, a royalty and or equity in the company.

And there are a pretty low amount. You know, again, they’re pretty low single digit percentages on those. And and. Then they assign the IP to that entity for the duration of it into perpetuity. So it’s really it’s really fairly done, I have to say, and so but, you know, but as but that’s just the IP, but IP doesn’t really get you very far. Right, right.

So you’re pairing them with the business. You know, I don’t know. Does Caltech have a business major. I bet they do. And I bet it’s like theoretical econometrics or something.

The way we think about it, who’s the who is the scientific founder, you know, who’s the scientific soul of this thing? And that person needs to be coming out with it.

And we have flexibility on how much time it requires. But we need we need that fully dedicated to. And then also who’s going to who who’s at least the first and least business person or business people that are also part of this. Right. And so as a professor. You can either take 20 percent of the time and dedicate to to your your your company and retain your lab and retain your professorship and things like that. Or you can also, in many instances, also take a sabbatical.

Well, say the 20 percent thing is like a that’s like a standardized thing that Caltech says you can take 20 percent off of your time off. So did Google copy Caltech was going to be my question with this whole 20 percent time.

I don’t know the historical background of that.

And do do do a lot of your companies get an undiluted funding as well? Like, do you come up? I don’t really know iCore.

I know SBIR some I don’t even know what it stands for. Small business something.

Yeah, the amounts generally for the SBIR in the Rothenburg and others individually are generally, you know, start out on the small side and could be like 100, 250 or something like that.

And if you get to, you know, particularly on the SBIR side, can definitely be one of seven figures.

I’m taking a slightly different direction. But you are.

FreeFlow is independent of Caltech,we’re a friendly face, a friendly voice. But we also know that or think that the best decisions are made when you’re completely independent from, you know, an entity like that where independent means.

You know, we don’t want to have anyone else impact who we invest in, how we invest, those types of things, we want to be completely independent and not have, you know, a person’s role there or, you know, relationships, their impact, whether or not, you know, at the end of day, it’s an investable idea. You know, our customers are the professors. Caltech’s most important customers, or at least one of I think they might even say this is the most boring. But like is is, again, the professors as well. So we have the same customers.

What you were just saying about the professors, is something that a lot of people don’t understand about universities, is how much, you know, sometimes you’d say, well, why doesn’t that, you know, computer science department go in this direction or that direction?

Really, it’s because the professors are really, you know, sort of very independent entities and you can’t so much tell. My dad always says my dad, who is a professor at Caltech. So he’s telling me about how important the professors are.

Yeah, well, I mean, it’s true. And I mean and I mean, we we’ve had several people tell us that what we’re doing is is, you know, it’s against our own very beginning way, but solving a pretty important strategic. Potential strategic issue, which is, you know, Caltech needs to attract and retain the best talent in the world. And when you think about it, the expectation now for professors at the world’s largest research institutes is if I come across something I want to be able to do and it has translational potential, then I want to be able to do that.

I want to I want to explore that optionality. And we’re just trying to make that a lot easier, a lot more seamless.  

Yeah. Is there anything else we need to hit on FreeFlow? 

No, I think we are OK. Well, you know, I’m interested in Disqus I know you had different phases of your career, but you were discussed for a long time.

I’m curious, sort of what do you think you got right there? What you what did you guys you know, what went wrong or what would you have done differently? 

You know, that one was probably the biggest few lessons from that. One were number one, you know, we talked about just stubbornness or resilience.

That one just is that writ large, right, where you just have to believe in what you’re doing and that you don’t get to and a good outcome. You know, you just have to keep with it. And so that was just stubbornness being a good thing in this context.

And I think everyone now calls it grit, Fleck. So if you just would call it grit, that’s very trendy to be stubborn nowadays.

Hashtag grit, I need to ask you more about your personal life, because, you know, I know too much. I’m dangerous.

But like you are, you know, stubborn could be one word, but it’s it’s actually kind of chill is the way I would have said that, which is, you know, people can throw shade, say this, say that not to you, but like, you know, and you’re just like, yeah, we’re going to get there.

Like, you remain positive, you know, how do you how have you built that up I mean, if you’re asking for tangible things, meditate for 30 minutes a day. It’s it changes the wiring. And it doesn’t mean that you’re not thinking about that stuff. It’s coming through, but you’re not attaching to. And so I find that stuff very useful.

When you get to just how do you. You know, drive through the wall, if you will, I mean, sometimes you have to drive. You might try to drive around the world and if you can’t see, just say, screw it, I’m driving through it.

I have to feel connected to it. You know, that it matters that I care about it if I care about something. I mean, forget about it, I’m I’m going to I’m just I’m going to be tenacious. I’m just going to be pretty fucking tenacious if I care about something. And and that’s that’s really what I you know, in some ways I feel like I’ve lacked for I’d like at certain times in my career. You know, I mentioned I lost my my dad, my brother. But even when I was younger, I was 18, I lost my mom. And so, you know, that’s why I forget to be happy. AP I just had so many different things for me personally. I mean, I’m like, yeah, man, I’m in it.

And we’re going to win this thing because this problem is just too damn important. I’ve been really impressed, actually.

You know, obviously, I know your family situation and yet you’ve managed to channel in positive ways.

How do you what do you think? Like what are you focused with teaching your children, like when it comes to like values and and how they should think about their approach to the world?

Oh, man, that’s a great question. Well, we’re in it, we have I mean, you know that I have a third child the same age because your wife pressured me to do so.

So so I’m thinking about the same things. You know, I mean, one thing that’s just showing them the passion that that that I feel for what we’re doing, and we do try to educate them on some of the problems in the world.

Right. Well, you know, the two most relevant ones recently are, number one, why are we not going to school right now? Why are we in our home for six months? Or why is the air versus smoking? Why is it so smoky every autumn, like every September and October? Why is the air so smoky? And those are really important problems, right? Really important issues for us to to resolve. And what I tell them is I’m working with people and I say I’m not the person, but I’m trying to help people that are trying to solve those problems for us.

Having them understand that you can go after a role and a job where you can actually try and go after some of the big some of the big issues, you know, that’s you know, that’s one of the things that began to frustrate me to some degree at the at the tail end of my maybe more traditional Silicon Valley career was.

What about all the people I work with, amazingly smart people like me, and this is the question really wrestling with, this is what we’re trying to do, why aren’t we trying to do something? You know, this is going to sound judging. But why are we trying to do something more meaningful? You know, about the people in this room could actually solve carbon sequestration.

You know, why are we trying to do stuff like that? Right. And so I think it is a day when if I had to explain, we’re trying to make that a more palatable and an obvious direction that people can go into, too, and say, you can do that, too. These companies need you guys just as much as as Google or Facebook or name your, you know, big company that is, you know, kind of harnessing and capturing a lot of the, you know, top tier talent.

No, that’s great.

I mean, I think it’s a really a great note to end on and sort of about why you’re doing what you’re doing. And I’m I’m really glad that that Freeflow exists and that you’re here not only in L.A., but actually in Pasadena and doing what you’re doing. So, David, thanks so much for coming on the show today.

Thanks for the invitation, Minnie. And it’s always a pleasure.

Brian Schwartz — Canaan scout

Brian Schwartz is a hub of LA startup deals, a scout for Canaan Partners, the founder of SIZE advisors, SIZE capital, and an advisor to unicorn startup goPuff.

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Brian wears many different hats and is a hub of the L.A. venture community. Brian is a scout investor for Sandhill Road-based Canaan Partners. He’s the founder of SIZE advisory group and SIZE Capital. He has deep marketing and operational expertise from his time running global retail and marketing groups at DreamWorks and Expedia. Brian, is that a fair summary, did I get it right?

I think you got it 100 percent correct. Great.

So DreamWorks, Expedia. And now you’ve been you know, as I said, you’re really you really are a hub. You say that you send deals to everyone and I have seen that to be true. But start a little bit with your background.

Yes, so I’m an operator. I spent 10 years corporate roles, I lived in London for three and a half years and I went to school part time for my masters in finance while working a full time job for an early stage company.

They put me in a sales role overseeing kind of the UK PNL in less than a year totally transformed that market and they asked me to move to L.A.

I was there for about six months and then I joined DreamWorks Animation, was there for about six years. First three, I worked in marketing for the films internationally. And then the second three years, I work for a gentleman named Michael Francis. He was previously the chief marketing officer at Target.

Now, he worked very closely with Wal-Mart and he was our chief brand officer, moved over to retail consumer products, retail marketing, retail loyalty, merchandising, essentially owned the PnL for all DreamWorks branded consumer products and ultimately left when they got sold to Comcast and made the move up to Seattle and joined Expedia.

I was at Expedia for about a year and a half. I was vice president, global marketing there for the hotel group. So truly global had a team in 12 countries, oversaw seven functions of marketing from digital to brand creative operations, et cetera, but just wasn’t really happy in my job. I hired an executive coach between the two and I did it because DreamWorks was twenty five hundred people, two years, thirty thousand people and I thought I could use some help.

It’s always a joke. I paid a guy a lot of money tell me to quit my job and that’s what happened.

Can you take the experiences of running, you know, global marketing campaigns?

And when startups come to you, you know, what are you usually coaching them on? Yes.

If you would have asked me when I was at Expedia, I’d be like, no way. I think the biggest realization was that it’s shocking how much startups could learn from big enterprise and vice versa, how much big enterprise can learn from startups just in terms of nimbleness and getting stuff done.

So I learned very quickly a superpower I had I never knew I had, as I could sit with the founder for 30 minutes and completely dissect their business and figure out incremental revenue streams and incremental ways to be able to drive traffic or conversion.

The one thing I would say is when you’re not in a corporate role and you’re kind of on your own, it’s hard to learn, right? Like in a corporate role, you’re always learning and you’re always challenged with new things. So I used the challenge of meeting founders and entrepreneurs. Just learn about business. And I really stretch myself like all me, my sweet spots, consumer or B to B to C, but I’ll meet like gene technology companies or things that are like really outside of my wheelhouse just because I want to challenge myself to learn as much as possible.

So how how if people want to learn from your experience, like how do you sit with someone for for 30 minutes and then help them find new incremental revenue streams or something like what?

What sort of process? How can we create that? That’s a good question.

For some reason when they start talking about the business, just my brain works in a manner where I just start identifying ways for them to be able to transform their business and take it from kind of the current stage. It is to quote unquote that hockey stick growth.

And so if they’re trying to get to that hockey stick inflection points, you know, are you usually coaching them on growth marketing type initiatives?

They could they could follow. So I would say the answer should be yes, but the reality is it’s all people, right? So typically you get the best idea in the world, the best business in the world. But if you don’t have the right people on the right processes, you don’t have the right culture. That’s the stuff that I really start with. So, you know, taking my own experience of having an executive coach, one of the founders here definitely goes for our company.

We all know got a coach and I kept preaching to him, get a coach, get a coach, get a coach. A week later, he’s like, Brian, you just changed my life. And I’m like, yeah, how would you like? I had the experience myself. Like, it is life changing and a lot of the coaching for his basket is really and he said it perfectly. He he’s like, I have to go from a founder to a CEO.

And I’m like, that is the right statement. Because being a founder, you’re rolling up your sleeves, you’re doing a lot of stuff. But as you start to grow in scale, you’re being a CEO it’s just about how do you build a culture and how do you attract and retain the right talent to be successful going forward?

So I’ve I’ve gone through different, like culture exercises, I have a question for you, like how how do you help someone build the right culture or how do you help them dissect their culture even? I think it starts with you as an individual, first, you need to do a lot of self inflection. Again, I’m not I’m not, quote unquote a startup founder, but I kind of did the self reflection myself when I realized, like, what my personal values were and then what my what the work values or culture is already created.

So I think as a founder, your personal values, one hundred percent need to align with the culture you’re trying to build. Otherwise you’re not going to be a good fit for your own organization. And then from there, once you bring on the first employees and you know the guys that go off, which is a company, I advise they told me they got this advice from their investors that the Series B, which I thought was phenomenal, is the investors that take 30 days to do nothing with the business and just focus on the culture.

And a lot of it was a bottoms up assessment and survey of understanding all the people that are already there already on the team. Why do they come to work every day and what excites them? What do they feel is the mission?

Yeah.

So Go Puff is a great example because if I understand, go puff.

It started it was started by a founder, a couple of founders when they were in college and then, you know, has raised hundreds, hundreds and hundreds of millions of dollars maybe from Softbank.

They got a huge I don’t know whether there’s a Series B or what it was. What has been sort of your involvement there?

So just to backtrack, it’s probably at like the equivalent of like a series E who is the Softbank investment? So that was a seven hundred and fifty million dollar investment.  Funny enough and actually leaked wasn’t supposed to get out there. There was a whole article in the information. The great thing about Karpoff and I really admire these founders and they’re young to your point, they founded it and Drexel there was twenty eight and twenty nine years old. Business is going for six years is if you’d gone on their crunchbase prior to that announcement, like the last fundraise you would have seen was their seed round 

So, yeah, you know, in total, they’ve probably raised just under a billion dollars valuations, probably a couple billion dollars at this point.

Do they serve L.A., but not in L.A. and they’re not in New York. So part of it is those are two of the more complex markets. They started in college towns because if you have to think about their business model, their distribution centers. So that’s the courts, right. Bringing back and then having these independent contractors or in the state of Indiana, they’re full time employees who pick up and deliver super fast from the DC to the customer.

So New York is problematic because as you can imagine, bicycles, cars are really difficult to stop on the side of the road. It has its own issues. And L.A. is really difficult because you probably have to drive 30 distribution centers to deliver within 30 minutes, which is some college towns, typically within 15 minutes. But in major metros, they deliver within 30 minutes. So, you know, myself living in the valley, if their DC is in Venice and it’s rush hour, there’s no way I’m getting in 30 minutes.

So they’re going they are going to come down at some point. They use Dallas as the example. Dallas, I think they dropped thirteen distribution centers, which was the most they’ve ever done as kind of a case study to see how it will work out. And hopefully within the next year or two, L.A. will be on the road map as well. And so one thing you told me about your role as an adviser that I liked is he said sometimes you’ll say the things maybe that the VCs won’t or maybe the other board members won’t.

So what’s like what will you say that other people won’t? The truth.

So I think we talked about this before. And I and this is no disrespect to anyone. And I’m sure, you know, the reality is when you have a venture fund, your duty is to return to your LPs, that is the goal of a fund. So you could be sitting on a board in a conversation with a company, and it could be all about what is your goal and mission, and it might not necessarily align with the business.

So I think I tell you about this for there’s a business in town who had an offer from Wal-Mart to buy them for a lot of money, and the VC bought it because they said they could get a much larger valuation later on. And now the is insolvency. So it’s just a great example of like if I’m a founder and I put myself in the founder’s shoes, life is long, life is a journey.

So if you can get an exit and get a single or double, I take it and run and move on to the next thing. Right. You’re eventually going to get your home run, but you don’t need your home run immediately. You’re going to have three, four or five, seven different things that you’re going to do in your career that if Wal-Mart called the Wal-Mart like one of the largest companies in the US comes and is going to give you a cash and stock offer, I would take it and run all day long.

And obviously, a VC fund might feel differently.

Well, that brings me, I guess, a bit if we could talk a little bit about your scout investing. Sure, so I met Hrash, one of the partners at Canaan, probably like three years ago, pretty early in my journey, and we just became friends. And as I started to network and meet a lot of different folks and I started to come across a lot of different opportunities and I would send a bunch of their way.

And as you noted there, San Francisco, as well as New York based, didn’t really have a presence in L.A. And I was seeing just a bunch of really interesting opportunities in L.A., but also outside of L.A. and I kept sending it their way. So when they decided they were going to start their first scout fund because they haven’t done it before, he called me and said, would you be interested in doing this? Because obviously you’re sending a bunch of really interesting opportunities our way.

And I said, sure, absolutely. So fast forward a year later and 18 investments later, super active in the space. I have to be really clear with founders that the strategic value is not necessarily me, it’s Canaan as a VC, because the whole point of the scout fund is, you know, hopefully Canaan builds an early relationship with the portfolio company and then it leads to a potential lead investment in the series A. So I say, look, they’re going to bring you into their ecosystem.

You’re going to be like any other founder who’s part of the portfolio. You’re going to build a relationship with them. And I’ll be your liaison as well. But that’s the real value add, and most scout programs, as I understand them, you know, they’re giving you some allocation of their capital and you get to make sort of autonomous decisions about what companies to invest into. But then the idea is that Canaan would then lead the series A. Pretty much, I would say so far, every deal I’ve submitted has not been like they haven’t said no to, if there’s like a questionable one, like there was one that you know of that happens to be a UK entity, I send a note before I submit the deal memo to see if that’s something that we can do, I think it’s really interesting for companies to know. They know that you are a scout, know who is a scout, because I think that, you know, then you get all the infrastructure and support of of of someone like Canaan behind it, which is interesting.

Well, I would also add to I would also add to is, you know, a lot of times the best deals come from who you know, in the network. With that said, I recently put scout investor on my LinkedIn profile on the amount of outreach, cold outreach I get is pretty crazy. 

I noticed that. And it’s we had Mike Stoppelman on the show and he’s a scout, but he doesn’t talk about for whom. And so, you know, because there is this, as I understand it, for your checks, Canaan probably does not appear on the cap table. Right?

Correct. Yeah. So so it comes back to like they’re not on the cap table, but it’s really your call. You’re getting a name, right? You’re getting a leg up with the relationship with Canaan versus any other VC out there.

Right. But as you said, it’s not what is paying your bills. So so tell me more about SIZE Capital and SIZE Advisors.

Sure. So as I was kind of going on my journey post Expedia, the advice I was given by Neil Goldin, who was the former CMO at McDonald’s, was going to meet three hundred people and you’ll figure out what you want to do with your life. And I’m like, that’s pretty good advice. So I took it to heart. Past two years, I met just north of two thousand people. And as part of that journey, I started to meet a lot of people like me, you know, for some reason other.

They, too, were done with the corporate world. They were all former C Stewart acts who were advising, consulting for a multitude of high growth companies, but each one doing it in their functional lane. So finance is doing finance. Marketing is doing marketing is doing it. My whole thesis was why don’t we bring them together as the dream team where collectively we could add a lot more value to growth stage companies than we can individually.

But I would say per our conversation before most of the problems happen, when you get your largest injection of capital to date, which is typically the series B, so I like to say were quote unquote bringing some adults into the room.

So how it typically works, which we’ve learned works the best way as we go in and say, look, here’s where you’re at today from a valuation standpoint.

Here’s what you want to get to. It’s kind of like an a la carte menu. What are the one or two key functional areas to get you to the next? Capital raise a liquidity event at a larger valuation. So at the core size of the business, we’re not doing it for sweat equity. But that’s one size capital comes into the mix. So just when you were talking it it has some similar sounding characteristics to like an accelerator and not I feel like a lot of accelerators will talk about being able to bring in that sort of talent and help people get to the next stage of fundraising.

But they’re just doing that at the sort of seed or precede to series A stage.

Is that a fair comparison? I think it’s a I think it’s fair-ish comparison. I would say there’s probably two. So there’s private equity funds who have teams of operating partners because they have large AUM, and they can afford the level of talent on the management fee. And then there’s the other role.

There’s there’s accelerators that are like pre-seed and seed. But again, these companies can’t afford the fees. So the operators are not getting compensated what they would get if they were a private equity fund, for example.

And so SIZE capital, that’s where you’re actually getting. The equity side of things; SIZE advisors is just payment.

I always say I’m an operator at the core. So my partner, Jeff Kendig, who leads Size Capital, I mean, he’s an investor. He’s been in private equity and venture for 15 years. So he diligences is these companies just like any investor would?

And I keep using this term that everyone tells me I shouldn’t say. It’s like we’re essentially insider trading within a private company. I mean, like we’re inside the company. I shouldn’t say that. Right. I know. Right.

But I but I say when I say it anyways, because, like, we are inside the company, like typically the best engagements are we’re working with them for six to eight months before they raise capital. We can do any diligence calls with funds and family offices with them and give our point of view. And then, oh, by the way, typically we will invest in a warrant or a convertible note discount ahead of a much larger rate. So it’s not there isn’t necessarily a price round. It’s a note, as you say, or an SBB.

No, it’s a note or a warrant. I mean, what we’re doing right now is because we’re still early. So on this part of SIZE capital or doing SPVs right now in our companies, because it gets like our family office network ability to have choice as opposed to having like a committed, quote unquote, fund. We’re going to kind of play it by ear at some point, maybe in a year or two we might actually raise a fund around it.

I kind of like going it to my friend Adam Freed, who has the K fund where there are about a twenty five to fifty million dollar fine, but they have about seven or eight family offices that actually give them access to like two hundred and fifty million dollars in capital. Because you got to remember, like we may look to write like a one to three million dollar, check at like a Series C, but that’s going to be like a thirty five point fifty million dollar round.

So if we have our family office partners, in theory, they may pay us a fee on the one million bucks that they can write, a ten million dollar check with no fee and no carry directly in the company.

And so if you’re coming in and the companies at 10 million in revenue and you’re helping them create a strategy to 5x, that 10x that 5x, you know, how do you create a strategy?

I mean, maybe that’s a very basic question of like I went to business school and how do you think about the strategy components. There’s strategy and execution.

So, you know what what VCs do and I give them credit is they make intros. If you if you ask founders, hey, this VC sits on your board of this VC investor, what have they done?

They said, oh, they made an intro like once a month to this person or this person.

So I do that scale, but I end up but I join for all the meetings because typically these companies are retail technology, marketing, technology, restaurant, technology company, which is where my background and skill set is. So I get immersed into the business and actually help them on the execution side. So long story short, it’s not just about the strategy, but it’s actually being able to help them get the closure on deals. Got it. And one thing you said there was you said you went out, you know, you got the advice from the what?

McDonald’s, CMO, Tagami, you know, a few hundred people. You met 2000. Right.

And here this year, clearly this hub in the community, do you do you have tools to sort of productize, institutionalize, to actually make that work for you?

Like, do you have massive air tables of your friends, all classified in certain ways, or what are you doing?

So I’m going to give you my secret. Yes, please. There’s a few different things and you’re going to be like, you’re crazy. So I typically. So let me be really clear. I do everything I say to people. And that in itself, I feel like it’s an anomaly because and it’s sad because if you say you’re going to do something, you should do it. And a lot of people just don’t. So if I look at a week time, typically back to back meetings, calls all week, so on Friday evenings and luckily I don’t have kids, if I have quit when I have kids, this whole strategy is completely out the window, you know, Friday evenings and even Thursday evenings.

If I can get to it, I start doing all the follow up from every meeting and call I had the week before. So that’s number one.

So I make sure everything I said I’m going to do, if I’m going to connect with this person, I’m going to do this, this, this, everything’s done. Then what I do on Saturday morning is I go back to my inbox from the Saturday before and I go through every single email that was emailed to me for the week. And the ones that have like an action I like a lot of women just respond to if I hadn’t. But the ones that have an action item, I’ll open in a new tab to be able to address it on Sunday.

And then the second part of Saturday is I go through all my set mail because I typically send anywhere between two hundred and three hundred and fifty emails every Monday. So my schedule goes Monday and Tuesday are insane Wednesday gets better, Thursday is good. Friday is like amazing, right? Because it goes every single time. So I’m going back to on my set now for any follow up that I need to do. And then on Sunday, any action items, which is usually the things that just take a lot more time.

I do Sunday and I try and do it on the mornings, on both times and be done by noon so I can actually go enjoy my weekend.

Did we cover everything we need to cover about your investing and advising activities?

Well, I would just add on the size capital front. The other thing we’re looking to do, which I don’t think there’s a bunch of people out there doing it, is we’re looking at least to start to do one or two control investments for a venture backed companies that have gone kind of sideways somewhere along the way. I’d like to say probably like the bottom one third of a VC portfolio. You kind of mentioned it before. You know, once you’ve been in it for seven or eight years, on the cusp of profitability, just can’t can’t figure it out.

And there’s not really an exit that’s there in the VC is just kind of stop caring about it because they want to focus on the winners. Our thought is, could we find one or two gems in there, similar criteria to size, like real revenues, like ten million plus in revenues, but maybe the cost side, we just can’t figure it out and essentially take a controlling stake from the VC and deploy our advisory team onto the company to kind of help reimagine or rebuild it.

So this kind of comes back to the private equity approach, but taking it to growth stage venture, but having economics that are much more highly in favor of the operators, the folks doing the work, because as part of my journey, you know, I went down the route of potentially joining a private equity fund as an operating partner. And I love the fact that I’d be able to work with so many different diverse companies. I didn’t like the fact that I was going to do all the work and the investors were going to keep the majority of the money.

So I wanted to create a model where if you’re an operator, this is like the inverse of size. Like we are really doing it for sweat equity. There’s not going to be a lot of cash component. There might be minimal, but if you turn it around, you are really going to be compensated heavily for doing it. So we haven’t done one yet. We’ve been looking at a lot of different things, but we’re in in the market for that.

So being on this podcast is super helpful because it’s really good to get the word out. Once we formally launch, we’ll try and do it in a much better way to VCs to say, hey, you know, I’m sure there are some in your portfolio that you love for us to take a look at. Like take it to us, because there’s these shops out there that help, quote unquote, wind down companies and we want to see it before they go to those shops because we think we could still do something before they start selling them off for parts.

So onto the personal questions. And so so why do you do it like you’ve got all this hustle, like that’s that’s people describe you, you got so much hustle, you’re working on it Saturday and Sunday.

You know what?

What are your goals for yourself? Yes. This comes back to the executive coach is I figured out that my personal mission is to help others and give back. You know what I’ve become great at, which I’m not an executive recruiter is helping people get jobs.

I think there’s more because a marketplace in a business for someone to create and I just kind of do it for fun to actually represent talent like people, individuals, because all the executive search firms represent the companies and they don’t really look out for the best interests of the talent. And, you know, because I’m so connected, like I love helping people get jobs. So I think that help about 12 or 15 people get jobs in the past year. I’m still super help, like trying to help more people get jobs constantly.

Yeah. Now I’m in L.A. I’m new ish to L.A. and everyone’s got a manager and an agent and there’s, there’s a lot of individuals have that right.

Why can’t you have like if you’re a great talent and you’re a CEO or CMO or a CFO, why can’t you have an agent.

Yeah, me maybe that’s a coach. Well, Brian, it’s been great to get to know you better. I’m really glad that you are providing this sort of hub connection to all these the venture backed companies in L.A. And how can people find you?

You can find me on LinkedIn, BrightSource. You can email me at Brian at SIZE dot VC. Normally in a non covid environment, my office is our tavern in Brentwood and Montage in Beverly Hills. So you can normally find that’s great fun.

Great. Well, thank you so much for coming on the show. That’s perfect. Thank you so much for having me. Really appreciate it. 

Alex Gurevich — Javelin Venture Partners

Javelin’s Alex Gurevich talks with us about investing in Masterclass, Thumbtack, Mythical Games and more.  Alex also tells us why VCs should be getting performance reviews from their founders.

View Transcript

Alex Gurevich is the LA based partner at Javelin Ventures where he’s focused on Series A investments. He’s invested in some great companies like MasterClass Thumbtack, Mythical Games, Hit Record and Stensul, among others. He’s from L.A. and lives in L.A., but he was in the Bay Area for many years prior. Alex, thanks so much for joining the L.A. Venture podcast.

Yeah, thank you for having me. I really appreciate it. It’s great to be here.

Yeah, fun to learn more about you and Javelin. And so maybe we start with that, which is tell us more about you and Javelin. Yeah.

Yeah, sure. Yes. The Javelin we’ve been around since 2009. At this point we’re on our fifth fund, primarily focus on post-Seed, and early series A, which to us just means, you know, check sizes between five to six million, really focusing on rounds of four to six million or we leave those type of rounds. But the real the real story behind Javelin is a fund that was started by entrepreneurs for entrepreneurs. Every partner at the firm has built a company or several companies in the past.

Did you start Javelin? I joined in 2010 and it was started in 2009 by my partners Noah and Judd.

Noah Doyle, one of the partners. He was a co-founder of Keyhole, which was acquired by Google and became Google Earth. And then my partner, Jed Katz, was a co-founder of Move Dotcom, which was a large exit. And myself, you know, as you mentioned, I grew up in L.A. I moved up to Stanford for undergrad. And that’s kind of where I got sort of exposed to Silicon Valley for the first time.

I was lucky enough to do an awesome work study program there called the Mayfield Fellowship Program. And that kind of sucked into the Silicon Valley scene. And the first company I got involved with, I was pretty much the first employee was called Ooma, which is a consumer electronics voice over IP company. So I spent three or four years building that out. The company eventually went public, so it had a big hand in kind of building the foundation of that business.

Yeah.

What did you learn from from your time being that what did you say, first or second employee there?

I mean, I think, you know, one of the big lessons there that was a hardware company. So as I mentioned earlier, Javelin, we don’t invest in hardware. So I think that was the big lesson away from capital intensive businesses.

I feel like a lot of VCs don’t invest in, like, the thing that they used to be doing.

Yeah, yeah, yeah. I think when you learn the lessons the hard way, you know what is really into. You kind of want to stay away. So what is it about the hardware that makes it so hard? Yeah, I think the biggest part, and I think it’s changed a little bit over the years has become a lot more nimble and flexible. But back then and I think to some extent still true, you don’t it’s like software.

You can’t iterate your way to a great product. You sort of have to make that initial investment. You hope it’s the right one and you don’t have that many shots on goal. So if you don’t if it doesn’t kind of hit the product market fit from day one, it’s very expensive to to keep iterating on it. So we do invest in some hardware. Javelin, but it has to be really kind of inexpensive, sort of inexpensive hardware where there’s a big software component to it or doesn’t.

It’s not going to take, like, you know, 20, 30 million dollars. Just see if this thing has product market fit. That’s just not our profile. And that was kind of an issue that we saw at Ooma was, you know, we have to iterate our way through it and we have to raise a lot of dilutive capital along the way. So that was a big lesson.

But then one of our investors at Ooma, was Draper Fisher Jurvetson, now called Threshold Ventures. And I had a great relationship with them and they were starting a venture fund in Eastern Europe.

So I was actually born in the Ukraine, speak Russian. I’ve always had a fascination with economic development in that part of the world. And this is like in the 07 08 timeframe. And so they asked me, do I want to build a venture fund from scratch in Eastern Europe? And I just thought that was just a crazy experience that sort of tapped into one of my interests, which was international development, economic development and technology and entrepreneurship.

Yeah. I had forgotten that you set up DFJ in Russia.

So right now, do you invest internationally or where does Javelin do? How much of your portfolio is Bay Area? How long have you been in L.A.? Yeah.

So well, I mean, I grew up in L.A., but to the Bay Area, I was there for 18 years and I was always looking for a way to to get to get back to SoCal. At Javelin we invest in, you know, in the US primarily, I would say about fifty percent of our portfolio is in the Bay Area. 

I do have a very bullish kind of thesis on L.A. over the next 10 to to 20 years.

So I think, you know, I know you moved here as well around the same time after a long stint in the Bay Area. I think we’re a bit ahead of the curve there in terms of I agree.

We are kind of thought leaders. I like that. What is it about L.A. that makes you so bullish? Yeah, you know, I think in the past, LA has had a lot of buzz and excitement, you know, Snapchat, Silicon Beach, these kind of things, I never thought those were real, real moments for me. The real moment for L.A. is when a lot of these larger tech companies I’m talking about, like Apple, Netflix, Google, Amazon started setting up large operations here, opening up big offices, investing in some of these SVOD services that they’re offering.

What the what to me, what that does, it not only brings tens of billions of dollars of investment to the L.A. ecosystem, but it creates massive amount of job opportunities for for technologists. And these are these are people that are constantly going in and out of the startup ecosystem. Right. So in the Bay Area, it’s like you go start a company at any point. If it doesn’t work out, you know, you could always go get a job at Google, right?

So that whole ecosystem, I think, is longer lasting. To me, it feels like a decade plus type of a bet that’s been made in L.A. And that’s that’s one of the reasons I’m super bullish on what’s going on here. What about so the competitive competitiveness of deals? And do you think, you know, L.A. seed companies or series companies are more likely to work with series investors who are here? What do you think? They’ll just, you know, keep going back up to where like they’ve done?

Yeah, well, I think the seed ecosystem is super robust. I think on the Series A fronts, I think there’s still this bias towards Silicon Valley 

One thing that I found interesting in my last year and a half is by saying that I am a partner or a managing director at a Silicon Valley firm, but I happen to live in L.A. It’s actually been the best of all worlds for a long, long entrepreneurs.

They kind of love that like, oh, it’s and it’s a Bay Area fund. You have Bay Area, Bay Area network, Bay Area partners, but you happen to be here. So I can see you face to face at any time and have that access without having to fly up there. That’s great. That’s ideal. So that’s worked out well for for us, at Javelin. And I do wonder if that’s going to happen more with other firms where they’re still going to be based in Silicon Valley.

But you’re going to have a partner or principal or someone down and based in L.A. and more accessible to the entrepreneurs.

And and I guess it’s it’s sort of even a broader question, which is regardless of, you know, even when you were back up in the Bay Area, how do you position yourselves Javelin? Like, how do you win against a Sequoia, Benchmark, whoever else is also looking at deals or do you look at them sooner or do you build a relationship? How does that work?

Yeah, if we’re competing against the those firms, we’re not doing our job. Right. OK, that’s it. Yeah. I mean, we’re we’re positioned at this, as I mentioned earlier, between seed and series A, so we’re we’re ideally coming in earlier than the Sequoia or an NEA. So that means we’re taking on more risk. And frankly, that’s the stage that works the best for us. You know, we get excited on that stage where there’s still a lot of questions to be figured out on product and distribution strategy, business model.

So we’re comfortable with that risk. In fact, it’s the one way that we sort of fool ourselves as former entrepreneurs that it’s OK to be doing venture capital totally by doing it at that stage where it feels like you’re you still have a hand in company in sort of the foundational work, but it’s something that I’ve really taken to heart and sort of Kuret-su type approach. Kuret-su is a Japanese term for, you know, kind of a small, intimate network of people that know you and know what you like.

And I thought it was like a complicated, odd business structure that was hard to unravel in Japanese businesses. But maybe it’s more what you said.

Yeah, that’s right. That’s that’s that’s what I thought of it. But okay, great. Well, what was your definition of go with that one.

So yeah. So just like a more sort of less quality, more sort of quality and, and depth of connections. And these are other entrepreneurs we’ve invested with before, other investors, investors we’ve invested with before, who just to get really understand the kind of the kind of opportunities that we’re attracted to and vice versa.

So we prefer that approach versus, you know, kind of a a broader you know, let’s create a lot of content. Let’s, you know, blog a bunch of Twitter.

But we don’t we don’t really do that.

It’s not authentic to to our style, which means we’re probably we’re probably missing some of the hotter deals, but we shouldn’t be honestly in those hot deal conversations anyway because we’re not we’re just not going to win against Sequoia or Benchmark.

So like a Thumbtack or a Masterclass, which you mentioned, do you think that you saw something early in those companies that I mean, other investors must have also looked?

What do you think you saw that other people missed? Yeah, yeah.

We got really lucky on both, but so with a Thumbtack. Yeah. There’s a sort of famous story with that team where they went out and pitched everybody in the valley and they got like forty five no’s and they talk about it all the time.

We were the forty six and we, we did say yes, but there was a caveat there.

They were raising more money and they were raising like 10 million and they adjusted and they raised, they started raising at five, a five million round which is more in our sweet spot. So we were fortunate to see them at that point. But they didn’t have a business model. They had a marketplace that was sort of working and some basic liquidity dynamics that were there. But you also just explain what they do.

I think that’s sort of them. But go ahead.

The problem there, marketplace for consumers and service providers. So if you wanted to book a plumber or a roofer or a tutor, you know, a clown for your kid’s birthday party, you would go on Thumbtack kind of a new YellowPages, you know, to compete with home advisor Angie’s List. So now, you know, it’s a company that’s been backed by by Sequoia and Tiger Global and Google Capital, you know, north of 100 million revenue company with close to two billion dollars valuation.

So pretty, pretty large scale. We saw that when they had zero revenue.

And, yeah, they had you know, they had a little bit of a marketplace working, but no business model, no revenue. What we saw was that they were extremely methodical in how they measured everything.

They built their own internal dashboard. So we knew that they could test a lot of different hypotheses and get to the right answer eventually after thousands of little optimizations. The other thing that they had, which sort of fits our model of investing in, you know, capital efficient businesses with high leverage as they were masters at SEO so they could get to large scale without spending a lot of money on marketing. So that was extremely appealing to us as well.

So we didn’t hesitate and pulled the trigger pretty quickly.

And I think they have so much data, as you say, and I guess you saw that early. But like, I feel like I know them also because they publish interesting things sometimes that say, like there’s too many clowns or there’s too many plummers. You know, if you you know, California has too many yoga instructors, go be a yoga instructor in Wisconsin, you’ll do much better or something.

They do like a small business survey, actually, where they have local data for how service providers are performing and working in those local areas.

And so they they create this really useful tool that is great for small business owners, but it’s also great for just consumers in those local areas. The other side benefit of it is it’s great for their SEO. So that actually helps build their their linking strategy.

So, yeah, I think it has the very creative over there.

Were there any interesting things we can learn from, you know, that you saw them do when they were early stages and they were iterating and optimizing things that, you know, stories you remember you can share. Yeah, I mean, I think they’re the company I think of most when I think of, you know, scrappiness at the start and that kind of a scrappy spark. I think one of the best things that they did was how do you build supply and demand at the same time.

And so, you know, the early days they would go and essentially manufacture demand by creating these SEO pages and asking consumers, hey, who wants a plumber in San Francisco? And somebody would respond to the ad saying, hey, I’m looking for a plumber. Then they would take that ad and they would, you know, that response that lead and go to a plumber and say, hey, here’s some money for you. Do you want to sign up for a thumbtack?

Right. So I thought that was extremely clever. And, you know, in a marketplace, you have to figure out kind of that that that scrappy way to get the supply and demand flygirl going. And that team had it in spades. So I remember that vividly.

Do you have any view on review sites generally?

I think that for thumbtack, reviews are important. But what they really excelled at is giving consumers choice and quality of match. Right. That’s what they’ve invested a lot of time and energy into the product and honing that part of it.

So whenever you have a request for a job, you’re going to get three or four quality response responses from different pros. And you can you can decide which one you want. And you’re more likely to have a positive experience and leave a good review if you were matched with the right type of pro. So the matching engine is really where they stand out. And they’re their match rate is something crazy, like 80, 90 percent in terms of successful matchmaking.

Yeah, very cool. How about masterclass? Have you taken any masterclasses? Oh, yeah, yeah, yeah.

I’ve been lucky enough to go to a few recordings and in the early days, so that was so I got to see it live as it was happening, which was really, really a treat. But yeah, no, I’ve taken many classes including I think the last one I took was the er Franklin barbecue class. That was my goal of the summer was to become a master of barbecue. So, so I did that. But yeah, the story of a master class in terms of how we got involved was founded by David Rogier, who was my good friend and classmate from the GSB.

And I remember when he he always wanted to start a company and when he started kind of ideating through different concepts, Michael during Harison Metal, gave him some money to do that.

He came to me maybe like a year and a half into that process. We had we had lunch or dinner. And he told me the idea. He said, hey, I want to create this online learning platform that will allow people to take classes from the best minds in the world, the geniuses in their categories. And my initial reaction was, well, that’s that’s a nice, nice idea. I’m sure lots of people have that idea. How are you actually going to do this?

And he slides a piece of paper over with like ten names on it. And these are like amazing maverick like James Panio.

James Patterson’s on there, Serena Williams and many others, Wayne Gretzky. And he’s like, see these names? They’ve already said yes to me, already in.

And I’m like, how how did you do that? Like, you don’t have a brand. You don’t have any funding, you don’t have any revenue. Nobody knows where you are. And you got these amazing people to say yes to you.

To me. I mean, that was an unbelievable kind of testament to his ability to get this thing going. 

So for us, you know, it was a bet on David, it was a bet on the market. It was a huge market opportunity. And then it was a bet on a very capital efficient approach because we felt like each instructor they would bring on would bring their audiences, would generate a lot of earned media and press. And so that would effectively lower the customer acquisition cost of each subsequent subscriber.

So to us, it also fit sort of the business fundamental bucket. So we we made the investment nine months before they launched. It was a free revenue pre launch about October 2014, and then they launched in May 2015. And that’s that’s gone pretty well since then.

Wow. I feel like now there’s a lot of you know, there used to be Uber. Hey, I’m Uber for X, I’m Uber for Y it seems like there’s a lot of masterclass for education, masterclass for youth sports.

Or where do you think where do you think the world is going with with the masterclass for X or where do you think masterclass is going.

I guess. Yeah.

No, I think we see ourselves as sort of a combo company of between entertainment and education. We don’t want to be all the way in the education bucket. We want it to be entertaining enough that you’re taking these classes, not because necessarily you want to become an expert in that field. Maybe some some folks will take it for that reason, but maybe you just want to get inspired or maybe you’re just curious, you know, more kind of like TED style of what is that career subject area all about, so so those are some great examples of what you invest in. And I think at the start of the show, you said that you’re a generalist. Do you think things have changed?

I’m very interested. Like, are there things where you’re like, oh, yeah, I used to invest in something and then I learned that I’ll never invest in that again. Or, you know, has your thesis evolve?

Yeah, I mean, I think well, I mentioned hardware was the big one for me.

Yeah. That area trying to stay away from that said, you know, you’re always finding exceptions like, you know, we have our sort of Peleton horror story or because of that rule we missed out on Pilton. So I think the one rule I think that we have is keep an open mind.

And one thing that we are not a job where we’re not sort of like ivory tower, you know, pontificators that are thinking about here’s where the future is going. We don’t think that’s our job. We think our job is to respond to entrepreneurs who are the real visionaries or the people are setting the course for the future.

Yeah.

So I was chatting with someone else who his point was that if you play out venture capital in 10 years or something, everyone’s going to have a specific the we’re going to be more thematic or we’re going to be more focused and you’re going to have to develop yourself as you are the go to expert on marketplaces or whatever.

And there won’t be the generalist funds. You know, you’re not allowed to keep an open mind in his in his vision of the future. You have to be more close minded.

I’ve heard that. I mean, I’ve heard a lot of that. You hear that from LPs a lot, too. And there’s certainly merit to that strategy. But you have to go really, really deep and I think also depends on the stage that you invest in. So I think it’s easier to have that if you’re multi-stage or later stage. I think at our stage you have to keep the peripheral vision open because a great opportunity and an outlier could come from from, you know, from any direction.

You know, I don’t know. I got some great advice of the job, actually, from one of my mentors, Peter Lendell. I don’t know if you I know the name, but he’s he was a founder of Sierra Venture, the founder of Sierra Ventures. He teaches a GSB entrepreneurship. And, of course and he his advice was, don’t take yourself too seriously as an investor. Yeah, that’s good to be ready to you know, there’s a lot of power and self deprecation.

Right. So I’ve always taken that to heart. And I think that goes along with the sort of idea that, like, you know, our job is to be a service provider to entrepreneurs and help them build those companies. So, again, I just don’t kind of believe in the you have to be a specialist in one particular area. I think it kind of happens over time anyways, like you have certain companies that you invest in more often.

So we’ve done a number of marketplace businesses. Yeah, for sure. We have more data points. More. Some marketplaces, but I’m a little bit shy about waving the flag, about being just a marketplace expert, because I think we have other stuff to bring to other companies.

So I told you, I definitely wanted to talk about you as a board member and working with your portfolio because you have this amazing medium post up about getting feedback from your founders.

So I thought I’d ask you about you getting feedback, which is a very unusual, but I’d love to hear about that.

Yeah, no, I appreciate you asking about that. It’s definitely a topic I’m very, very passionate about. Yeah.

It sort of arose from the fact that it always bothered me that feedback flowed one way.

And most board settings, you know, usually from VC to the entrepreneur, it’s sort of the perceived job of the board member to give that constant feedback. And it’s accepted. Everybody accepts it. And which is fine. Let’s that’s that comes with the territory of of being a fiduciary and investing money into an entrepreneur, into a venture.

But I didn’t understand why the feedback that also flowed back to the board member and especially in those early stages. I mean, I you know, I truly believe that you have as a as an early stage investors, a seed series A investor, you have a lot of impact on how that company is built on the foundation that’s that’s that’s put in place.

Why isn’t there feedback flowing back to help you be better at your job? And I, I want to be the best board member I can possibly be. I want that feedback. I’m hungry for that feedback.

And it wasn’t coming to me and for good reason because of the board dynamics. A lot is not going to just give you unsolicited feedback because, you know, who knows how you’re going to react to it. So I actually think it’s the job of the board member to proactively go out and ask for that feedback. And entrepreneurs will be more than happy to give you that feedback. I guarantee that they’re going to be excited by the ask itself. And that’s what I found out.

You know, I did the survey, which is part of the medium post basic question, very basic survey of strengths, weaknesses and how I could tangibly be helping more where I’m doing things that are bad for them and not not helpful that I don’t maybe not be aware of. I had such a positive reaction from all my entrepreneurs, like their minds were blown that I would even ask for feedback. Like this is the first time anyone’s asked for feedback as a board member.

So really positive reaction. And then I learned a whole bunch about myself. You know, things that I was doing that was that was that was good. And then things that I was completely oblivious to that maybe we’re not so good and help me course correct those those points. And then I kind of tied it back to, you know, a few experiences that I’ve had as a as a as a board member, where I’ve had companies that were in a privileged position to receive multiple term sheets and multiple offers and roughly same economics and all that.

So kind of it comes down to the references. And, you know, this particular company I’m thinking about, you know, ask for those references. And they got a lot of firsthand references from the VCs. Like here are my references of the entrepreneurs that should tell you good things about me. We called those up and we got negative after negative piece of feedback, like, no, I would never work with this person again.

Or like, this person’s done really something really bad.

And I was blown away.

I was like this. These are the references that you thought were good and they were actually negative. And you just you never asked around. If you had asked, you would have known that maybe you need to work on that relationship or maybe you just something and they would have helped you in that deal.

So I started playing out to myself thinking like maybe I’m oblivious to something. And I was so so I was really I was really grateful. I’m really happy that I did that. And it’s something I want to do on a continuous basis once every year or two.

What’s with all my entrepreneurs just to kind of like get that, you know, VC investor board member NPS score, right?

Yeah, yeah, yeah. Exactly, exactly.

To see if I’m doing my job and if it’s if I’m truly helpful or if there are areas where I could be better.

That’s pretty ridiculous. Yeah.

When you give out your names and you give out your name and references, they come back. Yeah.

Some people not self-aware. Yeah. Well OK, so staying on that without being personal, not like. So what exactly did people say you weren’t doing. Well not asking that but like how have you evolved maybe. And learned what, what makes a really useful board member or investor. Yeah.

No, I mean like I think I got a lot of positive feedback too. I like to think but I got to highlight the negative, like one negative thing that I think I actually think of board members are guilty of this. You don’t understand. The impact of some of your asks and requests to come right, you might have like a random question that comes up and like, oh, well, you know, what was the you know, what was the product decision behind?

That’s right. Why did you guys decide to do this? And it’s just like a haphazard question that you asked. You don’t then think about the workflow that you set off of that company because of your request that then ends up wasting a ton of time because they’re going to jump on it like they jump on it. The CEO will ask the product manager. The product manager was there. People don’t like do a bunch of stuff to get you this answer that wasn’t really even that maybe important to you.

I mean, if it’s important, great, do it. But you just have to be more conscious of, you know, some of those asks, some of those requests, making sure that there truly are important versus just like a random like, hey, I had a I had a thought.

So I have I totally understand that from being on the other end of things. I’m like, oh, like send the. Here’s my draft email. I’m going to have five people read my draft email or whatever.

But you’re not leading a Series B like you’ve been the series investor. Do you actually have the power dynamic is weird because it sort of doesn’t exist, right? Like, why do they care what you think? Sort of, yeah.

Well, I mean, I think it’s part of the dynamic. You’re still I mean, you’re still a board member, right? Yeah.

Is there anything else with Javelin and what you’re doing now? Like big things that we didn’t cover fundamental to who you are. Alex, we should highlight on this podcast.

Yeah, I mean, look, I think probably the one of the biggest things is sort of the type of companies, the thematic thematically, the kind of companies that we love investing in. And entrepreneurs with that mission driven approach is investing in. We love investing in companies where the product and technology ends up helping and working for people instead of against them. I think that’s like a fundamental theme for for us across across the board. And I think if you look at some of the investments like Thumbtack or Masterclass or Hit Record carbon health, they they have that profile where those companies are building technology to help small business owners, to help educate people, to help bring digital health to the masses at an affordable, affordable way to us.

By definition, if you’re working on products and companies that are again helping helping people and having technology improve their lives, it’s by definition a mass market product not as excited about the whole, you know, automating jobs away kind of thing. We do those. But, you know, there’s I think it’s a higher bar for for us to get excited about that. So my personal preference is to invest in, you know, the kind of companies that are more mass market and have have the same goal that they’re really helping people.

Yeah, I remember you said once something like, I don’t like investing in EHI or something. It was a pretty strong statement considering every other investor I know loves to invest.

And I know I like I like investing. I if it serves that goal. Right. So yeah.

If they’re using like some stock using AI to help in the matching algorithm to help small business owners. I love that, I don’t like the look we’re going to have and it’s going to eliminate fifty jobs like that’s not like this much stuff.

OK, so one more random personal question I read maybe on your LinkedIn. Are you avid sci fi reader? Yeah, I love sci fi.

What it’s what some cool concepts, things that have made you see the world differently. Oh, man. I mean, I just remember as a kid, just the power of it or the power of sci fi to help predict the future. I actually think sci fi writers are amazing at envisioning the future.

And not only that, it’s sort of a bit of a self-fulfilling prophecy because a lot of our technologists and engineers and product people, they read those books as kids and as adults, and it actually helps them figure out what film they want to build, what they read it about.

So I remember reading like the Orson Scott Card, Ender’s Game series. And, you know, I remember reading that 20, 30 years ago. And to me, I’m looking at like life now.

And other than the cosmic travel, like they were using iPads, they were you know, they were doing VR.

I mean, it’s just amazing to me how accurate was. And of course, you have the the new batch of sci fi writers like Romney’s name with Nexus and, you know, the three body problem, which I think is one of the best trilogies ever made. 

Very cool.

Alex, I will end there and say thank you so much for coming on this L.A. venture podcast today. Thank you Minnie.

This is great. I really enjoyed it. It was really fun to talk to you. 

Eric Pakravan — TenOneTen

Eric and I work together at TenOneTen!  We talk about our partners, Lava Lab, AmplifyLA, Scopely, marketplaces and the sort of companies that thrive in LA.

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Eric Pakravan knows everything about every startup and every investor in LA. He’s a principal at TenOneTen. And before joining us, he was seven years at AmplifyLA. six or seven years, something like that.

Before Amplify, Eric was the founder of USC’s Lava Lab and one of the earliest employees at Scopely.

Eric, what’s up? Hey, happy to be here.

Yes, so give me give me kind of the short version of your background. 

Yes, so I went to USC the most interesting thing I did was interning as an intern there when it was still about 20 people, I grew to like 50 people by the time I left, but I didn’t know what a startup was before that. And I went in and I was blown away. I mean, I’ve always been a tech, but just at the company side of it was something I never really dealt with before.

And Scopely actually had on their mobile game publishers that the right summary.

Yeah, I think the grand vision of this at the time was to almost be the Warner Brother of gaming, where they’re going to work with a bunch of different studios from the studios own, you know, in part of the games. But just to own all the distribution and gaming works differently than movies. It’s not exactly apples to apples, but. That generally worked. Now they own more of their titles and it’s a lot more of, from what I’ve seen from the outside, partnerships, so partnerships with people that own IP and turning that IP into games versus just really, really clever small indie game studios and broadcasting them less of that, more of the you know, let’s bring Scrabble to the masses on mobile and be the distribution arm and monetization arm for, you know, mobile Scrabble.

Hmm.

And that must have been sort of seven years ago or something that you were there when it was 20 people. And now what is it?

It’s probably valued at a billion plus.

We have to ask Eytan is that I think it’s about two billion but Eytan would know.

Right? Well, I know. I just I mean, it’s it’s got to be one of the more successful and interesting startups in L.A., especially to us.

And we have connections there.

And tell me about Lava Lab and maybe you could also put it in.

Well, tell me about Lava Lab, but I will ask you also if you can explain USC and the different you know, the there’s the launch, the Blackstone launch pad and the different entrepreneurship endeavors that go on, because I’m always trying to sort out which ones, which and which one, you know, to get to know better.

Well, USC is ever changing. And there’s all there’s the way that US is set up is that there is, I want to say, 14 different schools. I think more. And each school basically doesn’t like to share. And so almost every school has their own little entrepreneur, at least not the time to develop. But almost every single school now has its own little entrepreneurial division. So the business school has one of the engineers who has a lot of communications, who has on the film school has one, some have multiple, and then there are student driven initiatives.

And then there’s hybrid’s of student driven initiatives and stuff, and then there’s university driven initiative. So it’s all over the board. But what that means is that there’s just a lot of resources on campus everywhere you look for students, and that’s just been growing over the last ten years. And so Lava Lab, I just wanted to fill a void that I saw on campus, which is why I was I, you know, a couple of years into school and not even having a discussion about a startup, even though I was in the engineering program and and the the business school and the business school, we didn’t talk about startups.

The engineering school is where we need to go to Microsoft. And and what I thought was the most impactful thing on campus was some of these new organizations that were mimicking what it’s like. So let’s say be a consultant, but you’re just a consultant for the community.

So the whole premise is, you know, we pick students from all across the University of Business, engineering, design, film wherever, put them in teams of four with the goal of just. Giving students the opportunity to try getting something off the ground, working with others, see what type of people they want to work with, and then also seeing that it’s not scary to start something, the company doesn’t need to go anywhere. I mean, there are companies that have gone on and joined a science incubator and Y Combinator and some have raised several million in funding.

That’s not the point. Most don’t really go anywhere. The point is to learn in a sandbox, so to speak, so that you’re not afraid to start things. And then there’s also a lot of Lava alums in in the industry. So here in L.A. is an avalanche, is not a great craft.

Ibos and lobola. She’s not Wunder Ventures. I feel like I’m forgetting a few people, but this is why I say, you know, everyone in every startup in L.A., it’s awesome.

And then you’re going to Amplify and we had Paul Bricault on the L.A. Venture podcast.

He said that it’s sort of morphed over time from being an accelerator to preseed with benefits, which I still find amusing.

But yeah, maybe you can tell me a little bit about what you guys were offering when you were an accelerator and sort of how Amplify has evolved going back to 2011, L.A. was was not what it is today. Again, you could be Scopely and raise a seed round. And you’re one of the most well-known companies in L.A. because there weren’t really companies raising multimillion dollar rounds just happened. But it was it was a little bit more rare. So, again, the goal is to catalyze LA tech, be a bridge between, you know, capital from outside the city, talent inside the city, advisers in the city and just this hub and I think I was was largely successful, so successful to the point that it’s outgrown the need to necessarily write a 50 K check just to bring someone to the market.

I think you’ve told me that Amplify was doing 250 K for 10 percent was kind of like a standard term. Maybe this is a number of years ago.

Yeah, I kept it. It always gradually changed just to respond to the market. The first first check. I remember like 50k for five percent, you know, that was like twenty thirteen timeframe and and now the amplifiers leading a million and a half, sometimes two million all around.

Interesting and then on top of that, you also housed all of our earliest stage companies. So, yeah, they’re also building things. They’re all collaborating with each other. My favorite moment was whenever you saw one Amplify CEO and another CEO in a breakout room whiteboarding together. There was a lot of collaboration there, and now you’re at 10 one ten, which is fantastic. But it’s interesting I said this to you on email the other day. I was sending you a pitch deck saying, what do you think of this one? And then you said, yeah, it looks interesting. I said, I can never predict what you’re going to find interesting.

So I’m still struggling with that.

But can you tell me now where you see your areas of focus or what you do find him? Can you explain this in here? I’m not even sure I will say that. About 50, 60 percent of the time when I when I see a deck, yeah, I’ll start getting excited because, you know, they’re explaining the point and I’m like, yeah, like I think I know where they’re going.

And then they’ll go in a totally different direction, know. And then I’ll lose interest. But when when the pain point and the solution align, I get really excited because I’m like, OK, I believe there’s an opportunity here.

OK, when you read a deck, I usually just flip through like I skipped the first like five slides. Like I skip most of the pain point. Usually the I’ve learn not to do that. I used to do that. I used to do that. I used to just skip to the end, see the good part and then come back to the beginning if I’m interested and try to read through it. But, founders spend so much, though not all founders.

Hopefully it’s got a lot of time on their deck and and they want to guide you through a story, and I will often realize that I’ve misinterpreted what they’re trying to tell me if I go out. Hmm, yeah, I do often.

Yep, I do that, um. Well, let me rephrase my question.

What are the areas that you think you are most articulate about that would be interesting for us to discuss on this podcast, for us to discuss in the podcast?

Well, the ones that I think I’ve spent a lot of time really trying to understand the mechanics and why they succeed and not are our marketplaces commerce and SaaS just because I feel like their bread and butter industries that you just see a lot of. And, you know, I want to be opinionated there. What am I.

Let’s talk about those. Tell me about Marketplaces part of why I’m more excited about marketplaces is I just feel like if you’re going to build a. A marketplace, especially a consumer facing marketplace. L.A. is a city to launch them. There are only so many cities that look like Manhattan and downtown San Francisco. Most other cities, at least domestically, look like L.A. and L.A. is the biggest version of it where it’s just, you know, wide, expansive city with maybe a small corner. And, you know, how can you build a consumer facing marketplace with that sort of density?

You know, I just feel like you build the playbook in L.A. and then you can take it anywhere.

And would you say that consumer marketplaces are still interesting to you, even though, as you said, they’re it’s they’re so sort of prominent. You see so many of them right now?

Yeah, I think they’re interesting. And I think they’re interesting because the way I see it, it’s like commerce to some extent, is this idea of taking consumer products that have always existed and now selling those products via the Internet. And in many ways, a lot of these marketplaces that are in my mind are getting funded, are really taking and what our services that you might otherwise be buying in an analog world and figuring out a way to deliver them more efficiently using the Internet.

Yeah, OK.

Right. And so for these services marketplaces, there’s often is this a true statement?

There’s often sort of a SAAS component or you get a lot of lock in because the person who’s providing the supply side often will have a SaaS component in addition to to sort of having the the marketplace.

Actually, Crexi in our portfolio was a good example of that.

Yeah. And I think in many ways you’re starting to actually see a blurring of the lines to some extent between SAAS and the marketplaces. It’s odd, but they kind of meet in the middle of something of like a managed marketplace. More on the consumer side or vertical source, more on the south side, WeeCare is is a great example of another company that’s a marketplace or vertical SAAS, depending on how you want to define it.

They’re giving software to daycares, but they’re also, you know, have a front facing side that deals with the the daycare customers, parents or something because they care and want to be able to interact with the day care and all that sort of stuff and pay.

So, yeah, now you’re often educating me on like, oh, that looks more like what did you say the other day, like SAAS with lead gen as opposed to SAAS with the marketplace. Right. There’s a lot of subtleties there I mean, you have a lot of thoughts on marketplaces, why they should be in L.A., you know, is the same apply to all other types of businesses there are very few companies that you can’t build in L.A. and they’re actually in many ways, there are very few companies you can’t build anywhere. Yeah, it’s going to be a little bit harder in one place or another. But, I mean, you can be an e-commerce company today without a CTO because you’re using Shopify and every other software that’s selling into e-commerce that enables you to essentially, in many ways deliver a product, you know, and act like a technology company without actually building your own technology.

And I think that you’re starting to see that paradigm go deeper and deeper and deeper and deeper. So e-commerce is first, but then it’s starting to move in some marketplaces. You can start to build the services business with with mostly off the shelf technology, maybe some orchestration tech. And I think that’ll just that trend will continue to move on. And L.A. is perfect because you have the largest industry in L.A., only eight percent of the economy. That’s entertainment.

Entertainment, only eight percent of the L.A. economy, is that what you just said?

That’s not surprising to me, actually, still. You just said something else that was interesting to me.

Was it orchestrated?

I didn’t actually know what that was. What is orchestration tech? Maybe it’s a term I made up in my own, but I’ve seen it with companies, which is I like there’s a there’s a company that delivers physical service to to the home and they’re covered by insurance. And it’s a great, great marketplace.

They don’t they’ve built some tech. Most of their tech is off the shelf, but they’ve just built technology that allows this off the shelf, you know, tech to work with itself. And so I called arbitrage tech. Maybe it’s a term, maybe it’s not.

I can make a blog post and then it’ll be a thing. Here’s the piece that I actually that I meant to pick up on it. Here’s the piece that I that I think is still most missing, maybe in L.A. or that I notice, I think senior product people who build products to sell into enterprise customers.

I think that actually requires you can’t just cobble together the Shopify and the other pieces together.

Yeah, there’s a few areas that I think San Francisco, by a wide margin, still still is is has the edge. One of them is that they’re on they’re all related to enterprise type companies or one of them is just, you know, enterprise product people. The other one is enterprise marketing people. And then the other one is, is senior level enterprise sales leaders know you have the, you know, ex Oracle, ex Salesforce and then X every other company.

Then what? They’re after people in the area with their Rolodexes and and, you know, and it it it’s so much easier to hire for an enterprise company in the Bay Area. That’s not to say that it can’t be done in a LA, FlowCast is a great company. Blackline is their biggest competitor. They’re both in Sherman Oaks and the of the Valley. And, you know, Black Line is public for billions of dollars. And I saw on a list somewhere that flow cost is a soonicorn soon for the unicorn.

Oh,no, I’ve actually been surprised that the engineering talent almost feels slightly more accessible, hireable in L.A. but that but yeah, those enterprise functions, I think might be a little harder.

Do you think that e commerce benefits from a lot of the Hollywood I don’t want to just call it Hollywood, but sort of the the DNA around connecting with consumers, building brands, building engagement, or do you think it’s there’s less to that?

Well, it certainly benefits from it. 

Obviously the networks here. And so it’s easy to do. But I do think that that’s a smaller part of a much bigger reason as to why L.A. is better. I don’t think it’s the only reason. I mean, one of them is just like manufacturing is here. So if you’re in apparel company, it’s a lot easier to do in L.A. than the most of the cities in the country.

Shipping, same thing.

Yeah, I am actually realized that most a lot of cities don’t really have manufacturing capabilities. Is that a true statement?

Well, specifically in apparel, that’s an area where L.A. just historically has always had, you know, manufacturing base far less now than the 80s, like NAFTA after a lot of that has just just just moved overseas, particularly China.

Your dad your father is in is an apparel manufacturing, is that right? Buttons buttons. Did I remember this correctly? Yes.

My dad had a factory called the Button Depot and I was a kid and it was a ton of fun. I used to go there and it was like City of Industry, Vernon area and he had a full warehouse full of like button makers and just basically buttons and and a lot of that has moved to China.

So now you have just a lot of import exporters using the same warehouse space, maybe not manufacturing as much because it’s not economically viable. But they’re there historically has been a lot of that in L.A. and a lot of the infrastructure around that still exists. I remember a while ago talking to a company called Lumi that just packaging. And, you know, when I was on the phone with the founder, she was literally sitting there in a warehouse in the city of industry.

And she’s like, we are here and this is where we’re shipping everything out of. And this is where we have all of our inventory. And all the e-commerce companies like me is the client. And and I feel like that’s only something you would really see in L.A.. Yeah.

And also because we’ve got all the shipping, right. I mean, so I guess you go from the button warehouse down to the port, right?

I mean, you can not only import everything to the port of Long Beach is, I believe, the largest port by container volume in North America. And then the second largest is the port of L.A. and functionally the same port. They’re just on opposite sides of the city line. So together they’re just a mega port. And and it’s just a lot easier to to ship internationally, to source internationally, you know, maybe do some assembly here, some light repackaging and then sell it or else.

Well, sometime we should take a field trip. That sounds very interesting.

Maybe what else in L.A.. So do you still follow gaming?

So obviously you were early at Scopely, which is how you know Eytan, our partner, you know. Do you think gaming is just are we all going to live in our metaverse? Is in the future? Why bother go outside when we can just live online all the time?

Or what do you follow in gaming? I hope not.

I hope that’s not our future. But I do see a future where there is a little bit of a hybrid and you’re starting to see that already. I mean, our social media personas are different than us. They’re connected to us. They’re different from us. And I think that that trend will continue and they’re just going to be new ways to express ourselves. New new mediums, new new. It’s kind of just Instagram this week. Introducing all the Tik-Tok features is just another way to express yourself inside of Instagram is just basically in my mind, I’m adopting kind of the new language of how a new generation is speaking and connecting online.

So here’s here’s what I’ll say about gaming. Gaming is this weird hybrid between a media content business and a startup. It’s it’s driven, but it’s also your brain. You know, there’s a lot of engineering that goes into a game. You know, you need teams. You know, the kind of the a lot of the work behind the scenes looks like building a software company. But the actual final product has a lot of in common with a film in that one game might totally flop, but the next game becomes fortnight.

And you don’t know exactly, you know, after millions of dollars of investment into a game, you don’t really know necessarily. But this one is going to be a fortnight and this one is just totally going to be a forgotten game that never going to get traction. And so I think it makes it’s always a tricky one for VC because, you know, like this U.S. will never fund the movie. And so thinking about the type of gaming company that if you see my investment is always tricky.

And in my mind, there’s there’s really one answer that at least I would consider. And it’s is there are some new emerging platform.

And can you be one of the winners on that platform early in a way where you’re kind of betting on gaming existing on that platform and just kind of building up distribution, maybe getting a distribution player versus investing in a single title and, you know, and then and so few great examples are obviously mobile. There’s an explosion. So, you know, it’s going to be in Zynga or some of the winners in that in that world. There’s a company called Volly that does it for voice.

And they were like early to the to the platform. Little ABB’s attempted to do that for for the watch. I don’t think people are playing that many games on the watch. But but the the largest gaming platform on the Apple Watch there is another company I met a long time ago called called Game Cake that was hoping to be that for the Apple TV. And it’s kind of unclear if and when there’s going to be another platform. I think you could probably make the case that VR is a winning platform for just going to ask.

We just did a VR investment. I mean, we kind of just invested in a game, did we not? Well, we invested in a company that wants to build a bunch of fitness driven games for a new and emerging platform like boxing is is their first title.

And yet here you are at tenoneten. And I would say that the thing that you have sort of pushed us on many things, but actually I think you’ve pushed us to be nerdier what I love about TenOneTen is that our team, again, your you started a company. You have a technical background. David started three companies with a technical background. Gill has started two companies with a technical background. I I’m trying to think of another fund in L.A. where the whole team just has a technical background and is able to relate and resonate with both the engineering team, but also the management operations CEO type team person. And even more so when that person is a single person.

And I think that that gives us a very unique edge.

Yeah, I, I didn’t tell you I was going to ask you this. What surprised you about David Waxman? A lot of things surprised me about this. Me, too. He says he’s a quirky dude. No, he’s not as OK. Once you get to know him, you realize how quirky he isn’t.

That that was what surprised me the most, because because you meet him at a big social event and I think in a very short time frame, he gives off a quirky vibe. But the minute you sit down for a longer conversation, the quirkiness disappears.

He’s kind of like a family guy. Three kids goes on to three kids. Super professional.

Yeah. And and that’s the opposite of what you get when you meet up for two minutes. I love it. I’m keeping that in there. How about I’m on a roll?

How about Gil? Gil? Gil.

So I’ve known Eytan obviously since 2012 because he was a co-founder of Scopely and I in a weird way thought that Eytan would be exactly like Gil would be exactly like Eytan and he’s not, he’s totally different.

Who else in the ecosystem who are some other people in the ecosystem that you think are our real pillars of of the community here or thought leaders you look up to?

I think there’s a growing number. I mean, I’m a very like I admire Paul Bricault greatly, partially because he’s been my mentor and my introduction to the L.A. tech scene more than anyone else. And and I think, you know, just just the virtue side of yes, he’s started, you know, Amplify, you know, as a business. But also he’s extremely mission driven and has figured out a way to do both. And so so I like that.

Right. Who else in L.A. do I do?

I mean, I admire a lot of people in L.A.

Are there any, like news sources or people you follow who you, you know, may or may not actually know, but, you know, you read the StrictlyVC newsletter or whatever.

It’s kind of a boring one. I was devastated that day. Marc Andreessen deleted all his tweets.

Not only not only was he a great tweeter because he’s he’s reading books and articles and finding the most interesting facts and then knows what’s actually interesting and tweeted and sharing those.

He started tweeting again, although it’s gone and the saying so I’m sad that that’s not there anymore.

Who do I this one’s not really related.

It’s all related. But I check Urbanize L.A. every morning and I’ve been reading it since it was a blog spot on blogger called Building L.A., I think like ten years ago. And, you know, if you’re curious to see how the city is physically shaping, you know, they are surfacing every new potential and ongoing development architecturally in the city. And actually, a lot more of that has become tech related. They keep covering the new Netflix studio or Scopely’s new building in Century City.

There’s I think I think you can tell that the L.A. startup scene and the L.A. tech scene is really here because now it’s, you know, tech companies that are getting the coverage in real estate news.

I actually thought one of our more interesting podcasts, we had all the podcasts. I loved them equally, but I thought Brandon Wallace was pretty interesting on just how he’s built Fifth Wall from zero to whatever. He said one point something billion in three years. He and team any other. You listen to not all of the podcasts.

You listen to some of the podcasts, any any guest that stood out or things you learned there.

Just to ask about my own podcast, one of the first ones I listened to was Michael Palank and ah hearing his thoughts on where consumer tech is headed was really interesting because he had opinions that I’ve never heard anyone say before. And and and in ways that I thought were actually. Surprising, but also on point, so I would highly recommend listening to Mike. I mean, I find that about you, actually, which is not only do you have opinions that no one else has, you come up with, like orchestration tech, you come up with terms.

I don’t no one else knows.

I don’t know if I made that up. I use OK, I might have heard it somewhere.

What are some other opinions? What’s an opinion you have that no one else knows has?

Oh no. Here’s another here’s another term that I made up. So productize content. I’m pretty sure I made that one up.

And I and I kind of use it to bucket all the companies that are somewhat of a hybrid between selling you content, but also kind of giving it to you in a product form. So like Headspace and Calm, but also Pro Guides, which is is like a master class for eSports learning. And then there’s there’s videos. But there is you can collaborate with other, you know, players and learn from them. You know, the same thing is true with Activ.

It’s a workout app. And I just I see the world as all being related to each other without a name. Maybe there is a name if someone is curious.

No, I like that because, I mean, it’s kind of what you were talking about, which is you don’t want to bet on the writer or some group of two writers or something who are people who are producing the content. You want to bet on the productize content. OK, one more personal question about you, Eric.

How do you describe yourself? How do I describe myself? I don’t know. How do your friends describe you? I’m definitely quirky, I’m the quickest one of all my friend groups, I think, which is part of why I think we should lean into being the nerdy fund in L.A. And I like that we’re all kind of nerdy and quirky in our way.

A lot of people describe me as a walking encyclopedia. I just was going to say get intellectual game facts. Yep. Yeah, you do.

You do. You’re kind of intellectual, too. You read books, do you? I read books, yes.

That makes you intellectual. I have a low bar for intellectual ism.

I don’t read the tech books though, which is. Yeah, I’m constantly talking to other friends I have in tech industry and they’re reading like every other book that every other person is reading. 

What’s a good one? I recently finished reading this book called Generations, that was written 1990, and it just talks about kind of how different generations collaborated and how that affected. It basically is a generation, my generation history book of the United States since the 1500s. I’m really glad I wasn’t sure I’d be able to have you on the podcast and have it sound authentic, but I. I always really enjoyed our conversation. So anyways, thanks for sort of agreeing to do this.

Thanks for having me. And it’s been there and I haven’t seen you in five months, but it’s been a blast working together.

And I just my like, my fear is. I’m like being an ambassador, I guess, for four. I think it’s spoke well, yeah, I know.

You mean I know the problem was it’s a little it’s a little unnatural for me to ask too much of like, tell me why you joined 10, 110 and why were so great, you know what I mean? Like, it just it’s a little.

But anyways, I think there might be some stuff in the amplified part that I can cut out that just makes it a little shorter. Yeah, it just became more concise is the thing I was thinking.

Yeah. Cool.

I thought it was actually I mean not that I’m surprised, but I actually think it was really good.

I mean that like oh I’m kind of surprised now. OK, here’s the bad part. I feel good about it now. Right. And I hate hearing my own voice. And so just the list. I have to listen to it.

Yeah, no, it’s hard to have to listen to it. But the good news is it’s not so bad to listen to yourself when you actually sound really smart like it. It’s harder when it’s like when it’s a worse interview or whatever, like oh that one. I said some stupid things.

Let me wrap up again because I didn’t like my my ending was too silly.

Eric, it’s great chatting with you today. Thanks so much for coming on. I’ll venture. Now, whatever, it doesn’t matter, I’m not eating, that is what I think.

Yeah, no, you can take my text from last time I thought what I said last time was good. It’s just your voice is timeless. Yeah, I thought it was great. I think we covered a lot of interesting. You just have a lot of facts in there which is good.

Or opinions or opinion. Facts. Yes. Cool.

Well, that was been talking about a lot of consumer, which is bizarre because, like, we don’t really do much consumer.

But I you know, I never can exactly script these things. And maybe I should have just, like, picked up on the SARS thing and asked me about SARS that.

But I actually do have more consumer opinions because. We talked about Marketplace SACE combo stuff. Yeah, hopefully you get more vertical fast companies. Yeah, yeah, exactly. And now we just need to convince David to come on. Yeah. Oh my gosh.

Actually, your stuff about David and Gil was pretty good. I kind of liked your comments there.

I just I hope I didn’t offend them.

That’s my only I think I was offensive, but I don’t think so.

I know I feel like at this point. I know David really well, like, really well, because I just spend so much and he’s kind of what you said, which is he’s I think you said sort of like he’s professional or something. He’s unflappable to like he’s fully adult in all ways, like small little things like, you know, he doesn’t he doesn’t get slapped by the small stuff. So, like, there’s no way you could say something like what you said and he’d have any take any offense at it.

Gil, I just don’t know as well.

Yeah, me neither. And I was like when I said opposite, I was like but like I was just so complimentary.

I can always like I’ll listen to the transcript and see how it all sounds. And just please, President, because I will I’m going to yeah.

What I’ll do is I’ll get the one I get because you’re part of ten minutes is easy.

When I get the rough cut back from Michael, we can both listen to it and then decide, you know, if it sounds good, but it’s easy. Michael’s fully he’s we’ve gone in a good rhythm, so it’s really easy when I get the rough cut back to just request changes if we want anything like that. Sounds good.

Dan Abrams — Cobalt Capital

Dan Abrams is a partner at Cobalt Capital. Prior to Cobalt, Dan (and the entire Cobalt team) was at CAA-affiliated Evolution Media. Cobalt leads Series B rounds, but likes to get to know founders earlier in their journey.

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I have Dan Abrams with me today. Dan, let me see if I get this right. Dan, is a partner at Cobalt Capital, Cobalt is a new fund made up of the former Evolution Media team. The Evolution Media team spun out of TPG growth where they were affiliated with CAA as Evolution Media. The team invested in some great companies like Calm, Tonal, The Athletic, Masterclass.

They led the Series A of Scopely, so really strong investing team now at Cobalt Capital, investing in venture, mostly Series B companies. Dan, it’s great. I’m so glad you’re here. Glad we get to connect.

Thanks for having me. Super excited to chat.

Yeah, well, it’s it’s a special treat because I feel like you guys are kind of new on the scene even though you’re not really new.

So tell me if I got kind of the the. You nailed it. You did great. Perfectly done. Well, you know, I practice we practice a little bit. Right. Fair. No, that’s true.

No, that’s right. We were the fund that no one’s really heard of. And and we didn’t make that easier by re-changing our name just now. So but we were for so long investing out of TPG and originally in partnership with CAA, like you said. And then we spun out and were an independent fund underneath TPG growth and then just recently spun out again at the end of last year to create Cobalt Capital. And so we for so long never really had to market ourselves.

We every time we we needed capital, we we would be we would call TPG and, you know, we were they had enough capital for us every time they’d raise a growth fund that we would be a part of it. So, you know, we we haven’t done all these things where we’ve been making a name for ourselves until now. So I’m excited to be here and chat with you.

Well, you know, being someone who has to do fundraising, it seems like a great set up. And yeah, that sounds awesome. So. So you’re affiliated with TPG and TPG owned CAA, correct?

Yeah. TPG Capital did. Yeah, right.

OK, and TPG Capital is different in TPG growth. And you were affiliated. You said just TPG growth would raise money and then give you some portion of that.

Yeah exactly. So right. So a lot of different facets in terms of TPG. Their capital is their buyout group and one of their buyout transactions buying CAA and their growth arm. Does the growth later stage growth and then we invest in and we were the early stage part of TPG growth. So the pool capital that we were using was part of the growth program at TPG.

And were you doing were you still doing sort of entering at the same stage when you were Evolution Media like series A, series B?

Yeah, definitely. And I think what we’ve learned along the way of making almost 40 transactions in our history is that there’s a sweet spot. L.A. is a little bit earlier market than than other parts of the country. And I think that part of our DNA is investing, you know, on the earlier side then TPG, I mean, TPG sort of it was a continuum, right? They were looking at a later stage businesses. We were looking at the earlier stage part of it.

It worked really well.

And so so we we sort of learned and grew a niche for ourselves, focusing on early stage companies that are growing out of predominately L.A., but also San Francisco, New York at it.

And the other part that I find confusing is Evolution Media Capital is different than Evolution Media.

Yes. So I’ll give you the whole story. So that started as evolution media capital insights here. Originally an investment bank that was built to advise clients on transactions and trends and media and entertainment and technology. And so that deal flow was an immense amount of deal flow that we were part of. Originally, I wasn’t there, but at the time it was an investment bank. And then when TPG bought the they set up a separate fund, also called Evolution Media Evolution, Media Capital also just.

Called that Evolution Media that invested along out of TPG, just like we were talking about, you know, and having access to deal flow that originated out of CAA.

So first Evolution media Capital then came Evolution media and then came Cobalt Capital. 

And so were you leading rounds before when you were Evolution media, and will you be leading the rounds when you’re Cobalt?

Yes, for sure. I mean, we were. Let’s go. Let’s go. Serious. We mentioned that in the opener. We we’ve let Abdelal at Epic Books, which is a kid’s. It’s like Netflix for kids books. Forty thousand library titles of children’s books. We’ve led a few. We led a business called Mux that’s an API for four streaming video. 

So we’re happy to lead. In fact, we we love to lead and take a board seat and be active because we don’t make as many investments as several as many of the other venture funds. We want to make fewer concentrated and then develop deeper ties and see how we can be helpful. And we’re talking about oftentimes we’re talking to CEOs and and founders every other week, every week, you know, not just the cadence of a typical board calendar, but just as often as possible to see how we can be helpful.

And so before I get to just the basics of of Cobalt, then sort of what size checks you say you prefer leading deals.

I said my own or I think it’s mostly Series B is your sweet spot.

You know, give me a little bit more about about the shape of those. Yeah. I think our our preferred check size would be somewhere from five to 10 on the smaller end and we can go up to twenty or twenty five on the larger end. That’s sort of there’s an exception to every rule. Obviously we’re comfortable going earlier and so what we want to do is develop those relationships early and start talking to founders, develop really friendships really. And then when they come time to want to raise capital, we want to be a part of that conversation. And if we can lead, then we’re thrilled to do it.

I know that’s really good to know because that means that people who maybe have raised their series or still early in their journey, they can come to you, you’ll give them advice, you’ll tell them, hey, look, this is what we want to see in order to to lead your B.

So it’s my favorite part of of honestly of doing this is that we get to talk to people and learn about their businesses so early on in their journey, do you have sort of ownership thresholds and are you often co investing with other investors or is it like gobble it all up?

Because that’s the reputation that I have of Series B investors.

Maybe we got to do better about changing that perspective. But I think I think there’s a lot to that. And I think that at the Series B, oftentimes maybe the book’s written and it’s a success already and to the early success and and then investors want to pour as much money into that business at that stage as possible because it’s been somewhat de-risked and they want to be part of that growth curve. And that’s not a bad strategy at all. It’s a great strategy, especially for a capital deployment strategy.

How much can you put behind your winners you want to continue to follow on? And for earlier investors, the B is the follow on round. But for us it’s the entry point. You know, we sort of like if we made friends with and build connections and done well sourcing by building relationships early. We’ve heard about the journey, but we haven’t been a part of the journey yet. We haven’t been on the coffee table yet. And so for us, the entry point is, is the B, and so we’re trying to take that same approach that everyone had in the seed and A stage.

And then the B is like. They’ve already known it’s there for us. We’re trying to figure out that’s working at the B and then we’re going to pour more money at the C and the D. 

And who are the best sorts of entrepreneurs to for you to be building that friendship with?

I understand what stage they are, but, you know, are they how do you characterize them?

So I think maybe the best way to say that is kind of talk about where we like to spend our time and we like to invest. And I think our history has been at the early stages. It was in digital content and media. I mean, the name was, you know, Evolution Media, but that we didn’t only invest media, we also invested consumer and technology businesses. But a lot of them were were predominantly on the content side.

And so today sort of, pardon the pun,  the evolution of that thesis is that we know we know that we’ve seen so many digital content businesses that content businesses that that make use of and benefit from technology can be incredibly powerful at transforming the way they connect with an audience. And so I think I use The Athletic as a as an example of that, where we if the digital content publisher of sports content. Right. Long form journalism, that’s done really, really well.

We were early backers of The Athletic. We we know that using that technology, they’ve been able to unlock what would otherwise have been journalism that was stuck behind many newspaper paywalls. And so that democratization of content using technology is really transformative. And so we really like spending time there. We know so much about that. Calm is another great example Masterclass is another great example, some of these digital content investments that rely on technology to really increase access for as wide an audience as possible and make the user experience better.

And so we started with that. That’s sort of our history. And then from there, we learned a lot about a lot of different things. We learned on the front end of that about how the users engage in that content and when it’s really successful, how it can be transformative. And so we started making more front end experience investments, sort of like how it touched the consumer, some more consumer experience, focus and testing. And then we also learned sort of the back end of that, some of the infrastructure investments that enable that content.

Mux, is a great example that I already mentioned, where it’s it’s digital video and it’s the infrastructure to allow better streaming video on the Internet. So we kind of look at the world in that way. And so if we’re kind of looking at the back end, we’re looking at the picks and shovels approach. We look at the front end, we’re looking at a consumer experience approach. But in every single one, kind of like I was mentioning, in every single example where we’ve made an investment or built a relationship and learned about a business, it’s informed us and how we can be better investors along that continuum.

And so we actually do make just consumer experience investment investing that’s on companies that are not content related. We’re happy to do that. In fact, we’re looking for those. It’s just that I think what our DNA has proved us is that the content is a great way because it’s iterable and you can learn how consumers are consuming it live in real time.

How do you know if it’s a trend and how do you sort of steady those trends?

Yeah, it’s a great question. And we I think the hardest time we have around the table and investment committee is are we investing in a good piece of content that’s well written and are you taking like are taking content risk or are you taking a hit risk like is this somebody is writing a good story or really good at producing content and are you backing them? And then at the end of the day, that’s not the type of risk that we want to take.

And I think the way that Masterclass and athletic and calm have done so well is that they’re not relying on one or two or ten people to write really good content. Athletic’s are pretty simple. It’s just it’s not the content that’s winning. It’s the technology and experience consuming that content. And it’s really hard because it’s it’s a really gray area. But we spent a lot of time parsing through and we are investing in a platform that allows the distribution of a better distribution content or we invest in the content itself.

And for us, that makes the biggest difference. And we try really hard to to invest in the platform and the technology rather than the content itself. And I think Epic books, which is a business that we’re in that’s done also really well. Since the dislocation. We all worked from Zoom at home and our kids went to school and had to have remote learning and we and so epic has done really well.

It’s, it’s, it’s forty thousand kids books in a library, a digital library. So and teachers were assigning books, reading over Epic during the pandemic and that’s worked out amazingly well. 

Do you end up buying a library for your children when your young children. And do you want to do that or is it easier to have like a renting digital rental library where you can read as much as you want and that just makes much more sense.

And you’re not investing in the content itself. You’re investing in how they distribute that content, which is novel. So that’s a good example of there’s actually a technology that’s enabling the the preference shift, the consumer behavior, but there must be.

But it’s you know, consumer preferences change all the time, not only driven by technology.

Right. And so, you know, you do think about that as well. And do you have some theses around how to understand changing consumer behavior and changing norms and or is it always like a tech component as well?

It’s a great question. It’s a really good question and I think that. We’re students of culture and we’re students of technology and we’re students of these these areas, we’re really passionate about certain areas and we spend a ton of time there because we talked to a number of founders and friends and relationships to try to learn, you know, up and down whether it’s content, where where you’re consuming the content, you consuming it in home, out of home.

What are trends for consumption of content at home, like a Pelton or Tonal or out of home? And a good example. Our first investment of Cobalt is basically Feather, and they are a subscription rental furniture business. So catering towards millennials. And what the trend that we’re looking for there was a sort of millennialism is sort of defined by finding freedom, a freedom and flexibility solution for many different products.

You think about cars, there’s Uber, Lyft. You don’t need to own a car anymore. Think about homes you have Airbnb.  Music, you have Spotify.  Clothing, you rent the runway. There are all these different. The trend of millennialism is that you don’t need to own the product. You can rent it and you can decentralise where it’s coming from. And so we look at that trend. That’s not that’s not a quick trend. That’s one that’s been building over the last decade.

And we thought, what are other ways where, you know, that millennials, for example, are are changing the way that we as a society kind of have an interaction with goods. And we thought another trend that we have, which we know and we’re aware of, is that millennials are moving more and more often than any other generation previously, or they’re more they’re changing jobs more often and they’re more mobile across the country. And so when you move so often and you don’t need to own things, your relationship with furniture changes.

And so Feather is a great example of a consumer experience investment on our side that relies on technology that allows you to take advantage of that trend where millennials don’t need to own furniture, they can rent it.

Well, I’m glad it’s a good example, it was also the only example, the public example of an investment because you guys are still new enough. It’s your only public investment, right?

Yeah, we’ve we’ve just closed on another one that’s going to release announced in a day or so. So I want to keep a lid on that one. We’re really excited about it, Cobalt. But that is the we have to one that’s public. 

So I don’t know if this is a fair question because I don’t quite understand how CAA affiliated or affiliated with sort of the Hollywood world.

But I feel like Hollywood does this great job of sort of building brands of understanding consumer preferences.

And I wasn’t sure that there was stuff that we could in in the tech investing world sort of take from a Hollywood, if you will, about how they understand what’s going to resonate with a consumer, what’s going to be a big hit.

Do you think that I mean, it’s great. I mean, you did a way better job of explaining what I was trying to explain in, like five minutes about how our relationship at CAA. I mean.

There are people who really understand consumer talent and consumer behavior, and that interaction with with an audience is really powerful. And when you understand your audience, you can sell a product, you can sell content, you can sell a movie better than anyone, the next guy. And that’s what there’s a whole industry of marketers who are doing really well at that. And we’re trying to emulate the. That’s the best we can.

I sort of missed asking you about who else is at Cobalt. I’m going backwards. A whole. Should you see I’m going back, read the whole section. So who else is at Cobalt’s with. So there.

Yeah, there are eight of us on the team. We it’s the same entire same team at Evolution. My partner Rick Hess started evolution within CAA and and he and I run the firm here and we have a great group of people that that are just, you know, really excited and hungry and love the space and and have been studying it for all these years. And and now it’s the same team. So it’s really great to be able to do this together.

And what role do you play? Like, are you the pragmatist or you like the crazy one or what’s your, Gosh.

We need interview everybody else to find out because I don’t know if I’m qualified to answer that question, but

I think I really like I really like to study and understand the nitty gritty of of a space. I’m, like, fascinated by it. And so if we’re going to make an investment in the furniture subscription space I like, I dive headfirst in and I learn everything there is to know about it. And and I love that part. And I go very deep in each segment that we that we invest in because I think that’s again, that’s my favorite part.

And so how did you end up. I mean, so you did the JD MBA. I have one of those two guys.

How did you end up, you know, making the jump over to being a full time investor? I think it’s always been my passion and I think, you know, I’ve been I was doing deal work on the structuring side as a lawyer, and then I did it as a as an on investing team. And then more and more, I you know, I just got really interested in in how these businesses work, understanding their spaces, understanding the levers are they make them grow and what the levers are that don’t make them grow and try to avoid those and try to avoid pitfalls that I’ve seen. Do you think there’s any pitfalls that really stand out these you still see a lot of and just want to help people avoid those pitfalls?

So many founders don’t pay attention to the small stuff and they’ll have an investor who wants to give them money and they’ll gloss over a lot of the different nuances and they’ll give themselves a problem in setting up for future success and either limiting or structuring their deal in a way that limits their ability to attract additional capital.

And hopefully they’ve been coached otherwise. But I think, you know, and it’s not it’s clearly like founders, like, oh, I’ll just. Figure that stuff out later, we’ll have a better have a good problem solved if I’m so successful and I think I think the well run businesses are ones that I’ve thought about the big picture and the small picture enough.

So that’s like a liquidation preferences or things like that.

So actually you’re talking about. Exactly, yeah. I mean, that’s one example I can go on and on, but I think that’s one example of where I. Yeah. Like where I’ve seen, where we’ve seen problems where you know, they, they’ve given away the house, the farm on to early, early rights that are given away just because they were so happy to get capital.

Yeah, I always say you need a good lawyer. Right, exactly. Got it.

So so, you know, doing being a full time VC is still relatively new for you to be 100 percent on this side. Do you think I mean, coming from the PE world, do you think there’s things that have surprised you in the VC versus PE, do you characterize them fairly differently?

You know, at the heart of PE is buying a good business, and I think you’re buying in just a later and the maturity scale. And so, you know, it’s not that the discipline isn’t the same. I think it is the same that the discipline that is required to buy a whole business is the same is to invest in the business at the early stage. You’re doing it right. You have more information at the later stage and do like tax diligence and, you know, figure out insurance plans and you can figure out all the read all the material contracts that they have and you can get your arms around a lot more information has a buyer of a business.

And that’s sometimes comforting, but sometimes also misleading to think like just because I’ve read all the stuff in the data room that I can understand this business. And so I really think, like, you really need both skills to be able to understand what’s going to help this business grow. And also, what do I need to know about this business that might pose risk? I mean, I think the later stage buyout companies are looking at how how can how can I lose money as a business matures and overgeneralizing, obviously.

But then on the earlier side, you’re thinking, how can I help this business grow? And so to know both is actually I think, you know, really helpful.

Mhm. Yeah. I’m glad I’m not having all the ability to do all the tax diligence and I know I would want to do that either.

This is kind of an oddball question.

So let’s see.

But, you know, being in sitting in CAA and being, you know, working with influencers, some, you know, on digital media, is any of that still seem exciting?

Like is there any glamour?

Still were like occasionally you go home and, you know, you call your mom or whoever, you know, your partner and say, guess who I saw today?

You know, of course. I mean, you’d be crazy not to say that. I think that it’s such a different world than the world that you and I live in all day long that it’s just and people that you see in other contexts when they come into your world, it’s like, you know, it’s so bizarre and it’s exciting, obviously. And I think that when you have when you can. OK, let’s just use the influence or one example, because it’s a great one.

It’s an easy one. But if you have influence or they could come and lend their name to one of your businesses and all of a sudden bring millions of followers like that, that’s really powerful. And it’s not often that you we’re confronted with someone with that sort of reach. And I think that you can not could you become starstruck, but you can just be like it’s a ton of admiration and respect for people who can can bring a lot of big audience to to and be influential with so many people as influencers.

They can be they can be so influential, influential with so many different people from all different walks of life. And it’s an incredible power when they have that. And when you bring it to bear in a really meaningful way, it’s it’s great.

One of my favorite questions is good advice you’ve been given. Wow, um. Make sure that you’re you’re doing doing the right thing, doing. Well, by doing good and and I think that that has a lot of different meanings to not just charitable, but be honorable, do the right thing and a situation, do right by a founder, do right my colleague, do right by a peer investor.

And I think that that’s served us really well, served me really well. It’s worth I like to live by. And, you know, there’s that sort of it’s always in short supply. You can never have too much people trying to look out for each other.

Well, that’s a great note to end on. But I forgot to ask one question, OK, which is how L.A. focused are you guys? We’re very LA folks. I mean, I think that L.A. focus is so much of our thesis. I mean, it’s so much of our history. It would be remiss to say it wasn’t you know, we didn’t look at the world because we sit in L.A., we look at the world in a certain way because we sit in L.A., I should say.

And I think, you know, we love we love the L.A. community. We’re so personally invested in it. We’re so passionate about it. And we want it back as many L.A. businesses as we possibly can to to create a vibrant L.A. venture scene, which I know you’re passionate about, which I’m thrilled about. And I think, you know, so, so much about, at least in the content thesis, is about how you reach an audience. And that’s what L.A. does best as the, you know, so much of the industry here as an exporter of content.

And so I think that it informs what we do and how we invest every day. And we think it’s a special power that we have that we’re in L.A. and we love that and we look at the world differently.

That’s great. Well, makes you a great guest for the L.A. Venture podcast, but really, it’s it’s really great to have Cobalt here in L.A. Thank you so much that we’re excited to be here and be part of the community.

Hamet Watt — Share Ventures

We had a chance to hear about Hamet’s newly launched venture foundry, Share Ventures, focused on human performance.  We talk about brain health, Hamet’s role at Upfront, and insights on early stage innovation.

View Transcript

Hamet Watt is an all around L.A. innovation all star.  Hamet just announced his new venture foundry Share Ventures. Hamet has been a board partner at Upfront since Upfront was called GRP. He’s also a co-founder and former chairman of MoviePass and co-founder and former chairman of bLife, a wellness innovation company that sounds like it has some similarities to what he’ll be doing at Share. Hamet, thank you so much for coming on the show today.

Thank you so much for having me. So congratulations on your ventures. Thank you. Thank you. It’s been in the works for a little while. It’s the whole venture studio model has been of interest to me for a long time. So I’m really, really feeling good and excited about where we are. Cool. Great to see it happening, so yeah, so tell me about what it is. Yes, so I’ll give you the back story, I’ve always been sort of curious about being able to do more than one company at a time, and that pushed me into studying, you know, firms like Idealab and GoogleX and Pioneer Square Labs and others that are in the space in this venture studio space.

And so I met with as many people as I could in the world of venture studios and to some extent incubator that I say sometimes incubators are similar to the studios, sometimes are very different. But I think in this day and age, I felt like actually this was pre-Covid, but I felt like with the number of tools that we have to discover product market fit on new ideas and the speed that we can actually develop products, it kind of necessitates a new way of thinking about company building.

And I got really excited about just the timing being right to do this. And I was fortunate enough to be working with some folks that believed the time was right as well. And so we’ve been able to raise some capital, grateful to the Upfront ventures team, had just a great experience working with them and their early investors in Share along with Alpha Edison and several others. So, yeah, we’re off and running. We’re we’re focused on what we call human performance, which is a kind of a fancy way of talking about health and wellness.

I guess we’re looking at some big problems in how we live or trying to solve some big problems in how we live and how we work. And so things like sleep and mental health and nutrition are all super interesting to us on the future of living and then on the future of working. We’re thinking about teaming and culture and lots of things that we think will need to change in the way that we work. Well, it’s so so just pausing on a second on the studio model, the studio in foundry, I mean, obviously I know, but for my listeners who don’t know our studios and foundries kind of the same thing, you know what we start off with?

We like the word foundry. We like the word lab. But you know what? The term of art, I think is now like venture studio. I think most people refer to company building companies as studios. So I actually don’t know how to distinguish between a foundry and a theater, kind of the same kind of thing. But we’re definitely different than accelerators or what I guess people might think of as traditional incubators where you just have space and you invite, you know, companies to come in and they pay you a little bit of rent and you help them with a little bit of legal or finance.

That’s not our our model. We’re actually planning on staying with our company for a bit longer than many others. Some will experiment and and then, you know, immediately hire on a CEO and raise outside capital, I think. And, you know, we’re flexible in this. But I think so far we’re going to spend a little bit more time using the machinery that we’ve built to ideate and validate and launch. And we’re going to spend more time in that process before we’re then building out entire management teams.

And, you know, our goal is that we are de-risking these ventures a lot more and getting a much clearer line of sight, if you will, on product market fit. 

Tell me more about why human wellness.

I guess it’s a human performance. Is that what it when you’re calling, you know, is that not a good term? You know, you’re not the only one that here’s the connotation.

Here’s the tiny connotation. Like, I like to go on a run and maybe this just makes me old.

I don’t really like to know how far I went. I don’t want to know what my heart rate is. I don’t want to be maximized. But so tell me the goal of of the human performance focus.

Yeah. So human performance in in our definition goes definitely just beyond like quantified self. Certainly some quantified self things are very interesting, but we’re really looking at so many of the things that we do in our daily lives to make ourselves better that need to be reimagined. And so that’s I mean, there’s some big areas that we’re looking at. We really think a lot about brain health and. Yes, and being intentional and calling it brain health instead of mental health, because I think there’s going to be some some sort of nomenclature changes that hopefully address some of the stigma.

We know how big the problem is. We know how necessary it is for all of us in our daily lives. And so being able to think about that space in a new, well branded, design driven way is really interesting to me. Can I just go back there? Yeah, I want to learn about brain health. Do you think are there certain things in brain health that we should be doing today or what are the components?

I guess sleep is a big one, obviously.

How do you think is what we should be? We should be. Yeah. Yeah, I want some tips. That’s what I’m saying. Yeah.

You know what I think? Yes. The short answer is yes, especially in this day and age. And I know you are super healthy and thoughtful, so I’m sure you’re doing a lot of these things. But many of us need reminders and I think there’s so much there’s so much incredible opportunity to democratize some of the things that that that many have at their disposal, like therapy or executive coaching or even certain types of training. And I think there’s an incredible opportunity to use technology to democratize some of those things so that lots of people can can can do that.

You know, hundreds of millions of people one day will have. In our opinion, and so there those are the kind of opportunities that we’re talking about. We’ve also been looking at a lot about what’s happening in work. And, of course, all of us are looking at the future work. But you know what would happen to me when I was spending more time on the pure venture side is I would say, well, hey, how come no one’s doing, you know, blank for this company was doing something in this space.

It seems like there could be a really big market. I always have that feeling. And, you know, sometimes I find a team and they were great and they’d want like five hundred pre for their very early stage business or something. Or sometimes they just maybe they didn’t feel like they were taking the right approach on the product. And so that’s actually one of the reasons why I got so excited about the studio model. We feel like there’s something that needs to be done, we’ll do a very deep investigation into it, and we’ll look at all the players that are playing in the space.

And if we still don’t see something that is, you know, exists in the market in the way that it should exist, we’ll start that company.

That’s great. It’s kind of a dream, actually. I kind of want to start 100 things, maybe, you know, how many things would you start at once or by the way, because it’s the dream and it’s also the danger, right?

Yeah. Very careful on, you know, how many things we can do and do. Well. And so we have invested in some tools and some people on the team that are really focused on getting the infrastructure right at the studio so that we know what I’m putting in air quotes. The capacity of our plant needs to look like how many things we can do well at once. And one time we think right now it’s around two to four new ventures a year and it will take us a while to get towards the top end of that range.

We’re still building out our team now, and so that’s a big part of it to get to those two to four. We’re doing lots of experiments on many others. And, you know, we’re we’re choosing to take an approach. And it’s part of our value system and culture to be extremely optimistic about the future, but also extremely pragmatic in how we execute and how we do things.

No, I feel like you’re always very thoughtful, like you’ve sort of studied innovation a lot more than than most have.

In fact, did you tell me what is your podcast going to be on? You’re going to start a podcast, a rival podcast, right?

Yeah. And that arrival is synergistic. Yeah. Yeah, of course. Yeah. So we’ve been playing around and we have a number of neuroscientists that are advisors, have been mentors of mine or advisors over the years that really get into behavior change. And I would love to geek out on behavior change. And I always find myself calling on some of these folks. That is a guy named Bob Builder, who is the head of the neuroscience research lab at UCLA.

And he he has done some really cool research. And even when we were dealing with the George Floyd murder and and riots and all this stuff like I called him that like I want to understand the psychology of how people react to things.

But we want to talk about the psychology of shit that’s like. Psychology of stuff, the psychology of hiring, the psychology of firing, the psychology of innovation. So we’re calling Your Brain On, but it’d be like your brain on whatever. And most of the topics will be entrepreneurial topics and company building topics. But maybe we’ll delve into some other things every once in a while, too.

Very cool. Yeah, I mean, I’m super curious on how you get people to change. I know that’s a big question, but like just in my lifetime, the consumer norms of behavior, like, you know, I have this great photo of my mom smoking a cigarette nine months pregnant at the doctor’s office.

Right.

And you should think you should put a put a picture that at different times, different times, you know, like everyone wears, you know, helmets now or seatbelts or, you know, diet sodas are like not cool to drink anymore.

So, like, a lot has changed. I’m like, how do you have those changes that are the big changes for the better? Like, how can we move society towards towards more of those?

You know what a global pandemic doesn’t hurt to change? Yeah, it is. Obviously, there’s a lot of really bad things that are happening, needless to say, with this. But, you know, you think about the last crisis and the behavior change that that triggered and then what new opportunities emerged from that. And so I think that those kind of things that are happening now, we’re already seeing it.

Remember when it used to be like, I don’t know if you go to a partner meeting and the team would present and they say, oh, yeah, we’re all distributed. And then there was someone that was kind of like, oh, no one in the same room. And used to be a little bit like it used to be a very much a mark on a company. I don’t know that that’s going to be the case anymore. Like maybe we’ve changed our behavior for life on that.

I don’t know. Or just I mean, you know, I still am hearing, but I think we’ll get there. I’m still hearing people say, oh, we can’t fund a company that we haven’t met in person.

Maybe some might say that we’ll say we’ve just funded our first company that we never get. Like it’s happening now. Like we were experimenting with that.

Yeah, yeah. No, I think that’s that’s exciting.

And have you I mean you guys don’t a yet where you haven’t met the team in person.

Totally. But like I’m, I’m all I’ve done a lot of hiring actually.

I’ve hired people who I’ve never met in person and it’s gone really well. So yeah. No, I think we’re all going to get there. We just have to grumble about it a little bit more.

Yeah, yeah. Yeah. Well, the thing is, like forced behavior change is always a good way to behave because when you like, you try and you’re like, you know what, it’s just not as bad as I thought it was.

Yes. Let’s keep let’s keep doing this. Yeah.

Are there any other things coming out of this crisis that you think have been like, oh, that was a really good for his behavior change for us all?

Yeah. I mean, it’s pretty amazing to see what’s happening in the digital fitness space as well. I mean, I think, you know, there’s some studies that were released. I think I want to say that MindBody did a study on just fitness and fitness behaviors, gym going behaviors. And the stat I remember is fifty six percent of everyone that has a gym membership is planning on canceling it because they have found digital alternatives that are more than sufficient for their fitness needs.

So that just as one example, another behavior change that is happening at that scale. But yeah, I think even things like the way we the way we think about teaming and the way we think about hiring and the way we think about what it takes to do that, I think all those behaviors are changing. The way we think about building our cultures for our companies is changing. When you can’t rely on ping pong tables and foosball and water coolers and nights out on the town, you know, you have to think about new ways possibly that are more deep around getting aligned on mission and purpose to really get at what’s important when we work and work together and we’re happy about.

Our work, that’s really interesting, I feel like I feel like I’ve seen people kind of take the old model and try to put it via in kind of the way you’d see like, oh, we you have theaters like performances now. We have movies so we can so but it hasn’t caught up yet. Like it still feels like you’re taking the old model and just putting it on zoom. But it’ll be interesting to see how that innoculation, that culture stuff happens online.

Yeah, it will be I think another area and I think you and I have talked about this before, but gosh, I hope that education has this is the catalyst that changes the way that education gets done. Right. Because it always bugged me that it felt like the online learning was just like trying to take a classroom setting, which most of the time was kind of messed up anyway and wasn’t as thoughtful as it could be and just putting it to a screen.

And now maybe we hopefully can get at, you know, more personalized approach to learning now that we’ve had this forced behavior change for online learning. Now, maybe we able to go to the next level of what that means.

Yeah, I also think I mean, it’s been interesting to watch learning change so much towards social emotional development. Like these things seem kind of linked human behavior and education, you know, in our education institutions.

Let’s talk about work for another second.

I kind of feel like and this is a I kind of feel like jobs increasingly are making people stressed out rather than, like, making them feel fulfilled or something.

You mean the whole zoom zoom daily? I mean, it more broadly unfolds. I just mean, like, work is not. Well, maybe it’s changed. I don’t know.

Tell me more about the future of work is a better question, you know, but I think you’re on to something about this. The stress. It wouldn’t tell me what you mean more about like this.

The way that I think it’s maybe the always honest like I sometimes like just like, oh, if only I were a dentist and I would come home and at six o’clock I wouldn’t have any more work to do.

Right. Right. Yeah. No, I guess I don’t know. I’m honestly I’m struggling with that as well. We have a couple of behavioral psychologists and organizational psychologists that are trying to help us think through all these spaces and the future work. And we that that’s one thing we’ll have to crack, which is how do you put a you know, put a line because everyone can intellectualize it and say, OK, you know, at a certain time, you know, it’s time to shut down and and not be accessible what have you.

But damn it’s hard. I mean, I don’t think this is what the science says or what doctors would say, but I tend to be. I really get immersed in the work that we’re doing. I have so much fun doing it. I just try to treat it like I try to treat it like a sport.

But I think the goal is just to make sure that there are other things that I really love spending time with my family. So I think just as I really love working, I, I need to when I’m spending time with my family, I just really enjoy that and immerse myself in that world. 

You’ve been innovative multiple times. You’re starting a studio to be innovative, you know, where do you think that? And you say you still love it. So. So where does that where does that come from for you or more broadly? Yeah, you know, I’ll talk I’ll talk more broadly, first of all, I also am a senior adviser over at BCG who does a whole lot of innovation, really innovation, work with big corporates.

And it’s fun to see them do it, too. So I’m sending it from many perspectives. And I do think that it starts with just being a curious person in general and being curious and oftentimes frustrated with the status quo, and sometimes that frustration drives you to frustration combined with that, curiosity drives you to say, well, why the hell isn’t anyone trying to design something for this? And I also asked, I think, about so many things that took forever to come to reality, that weren’t necessarily technologically break technological breakthroughs sometimes of just design breakthroughs that happen.

And so since I don’t code, it actually is inspiring to see some of these things, maybe design driven and it just requires the right kind of thought and experimentation to solve a problem. One example I would point to, and I’d love for someone, maybe one of your listeners has done some research on this, but it’s crazy. This is a silly thing. OK, the wheel has been around forever, right? The box that we carry, it has been around forever.

It took forever for someone to think about putting on a suitcase, having a wheeled suitcase, you remember before back in the day when you didn’t have the wheel suitcase you set to carry it, if your never used to have, like, a suitcase, just hold. Right. Someone put wheels on it. And then it took another 20 years for them to put four wheels on it so that you actually just had that roller and you don’t need to prop it up.

And I just use that as an example for so many things. That may seem obvious, but it took years for designers or product people to actually pull all together. So I still think there’s some of those innovation opportunities hiding in plain sight that that a lot of a lot of folks can go after. You know, one of our advisers, again, the same adviser I mentioned in this neuroscientist he got commissioned by this hedge fund guy to study the most innovative people in the world, the most innovative and creative people in the world, and to study their brains and their behavior.

So he looked at their journals and their diaries and their calendars, as well as putting them under an fMRI and looking at their brains. And so after he did, that sounds like Bob. What what what what is the secret? What’s what is it about the most innovative people in the world? And he said and he broke it down and he said some of the things were really obvious and some of the things were really not so obvious. The obvious things were things like the volume of work.

Right. So Picasso had, I think fifty thousand paintings or something like that, like this. The volume of work, the sheer volume allows you to pick out things that were innovative amidst all that work that you did. And then the other thing that was a little less obvious was the ability for people to combine seemingly disparate worlds to come up with something new. And so the example I like to use a little bit more simple, but it’s like fusion food, right?

You combine one cuisine with the next and all of a sudden it’s actually tasty or it’s a new flavor or new new a new sort of culinary innovation. And so he said that he saw that the pattern suggested that people, I guess, longer term memory for these disparate, disparate, seemingly disparate concepts, but they could pull them together in efficient ways to consistently develop innovative or creative works. And so I saw that as one that was really I think that’s a framework that I think about often when I think about innovation, I really like that.

I think it’s interesting. The prolific. Yeah, if you’re prolific, you know, it’s not about percent hits. It’s it’s absolute number. You know, you’re bound to do something innovative and it’s a muscle. Right. And I think I just had DA Wallach on the show. He talks about like musical creators, musicians, that’s what they’re called.

They listen to tons of music all day. And so, you know, you’re you’re you’re building that muscle by being innovative.

It’s interesting the curiosity thing, too.

You I mean, I think people have curiosity directed in different directions. Right. And you have a curiosity also around like business models or businesses. And design. I think I design I’m not a designer, but we have a lot of designers that are bringing we’re bringing in our firm and that in our ecosystem. And I just I have always found myself, you know, when I’m looking through an investor lens, being very attracted to design driven products and designer led companies.

And so that’s part of our our thinking and framework. 

OK, so scale of one to ten. How mentally fit are you? Oh, wow. On a scale of one to 10, how many I just thrown it out there.

You know what, I think if I break down what mentally fit is, I think a big biggest part of being mentally fit is being resilient and only we know how resilient we are. Which, by the way, was another one of Bob’s secrets to the most innovative people. They are more resilient. They have that stick to it even if they keep going and they don’t let themselves get taken out of their game. And so I’m a pretty resilient person and I think it’s because intentional about it.

I talk to myself when I when I’m when I’m being hard on myself. I talk to myself. I try to coach myself, do the right direction. So I would I still don’t think I’m I still think I’m in for some reason, seven point seventy five comes up really well.

That’s good. That’s good there. I would I would absolutely like to be nine and I think I’m working towards that.

But I still beat myself up sometimes too much. And I don’t know where that’s from.

I don’t know, you know, just, you know, being in industries where, you know, folks are tough or, you know, my dad is pretty tough. So I think when I do and we all beat ourselves up to some extent. But what I do do myself up. I just want to make sure it’s it’s the net outcomes are net positive out of that. And I think oftentimes when we beat ourselves up, the outcomes suffer because you’re not you’re not fully in the game.

And so that’s that’s really that’s really where I’m working.

Yeah. Yeah. It can be motivating to beat yourself up a little bit to to drive yourself harder. It was interesting. OK, so you interviewed Ice Cube on stage. I saw it. It was awesome.

And do you remember like I think it was one of your first questions was has gotten any easier and you know what he said?

What do you say?

He said, no, no, that would surprise me.

I mean, you know, you look at what he’s all the different things he’s done. You’d think you think he’s sort of at a pinnacle of success.

You think. But you know what? He’s he he like like others, I shouldn’t say like others because it’s not that bad. He would do what he does, which is just trying new shit is trying something that’s totally out of his comfort zone, like his you know, he’s, you know, jumped, made a few jumps and he started as a as a rapper. And then he said, I’ll try my hand at being a producer. And then he was I’ll try my hand at being a an actor and then I’ll try my hand at being an entrepreneur and then I’ll try my hand at being a sportsman.

It’s like all those things are new muscles that you have to build. Because you’re inevitably not going to be perfect when you’re starting something new.

You’re not going to maybe not even be good when you start something. So somebody is going to talk shit about you and say, what are you doing, dude? You’re not good at this. You have to be strong enough to be able to come back and say, you know what, I’m going to be better on the next one before you know it. They’re resilient, resilient muscles and stronger than could ever be.

I mean, that was that was a related question, which is like, why do you think people don’t bet on themselves.

I think it’s that it is that that that self talk that this was all a mind game. Right? Yeah, all the mind game. And so if you’re in your own head and you’re worried and your your your you’ve got too much negative self talk and you’re beating yourself up and not realizing that it’s making you less capable or less likely to perform and whatever you’re doing, or even worse, maybe you have that negative self talk and you’re not even fully honest with yourself.

And so you might have that negative self talk, but project a much different, more, more confident attitude than you actually are. And that creates the whole thing that you have to live up to. And then you won’t try new things because you’re worried about perception and that gets into a suit that’s not as fun to play in. And so, you know, I think that I think that’s a big part of it. Yeah, I also think I think there’s also like your friends can be can talk you out of things to like I feel like I’m very sensitive sometimes to someone saying like, oh, why are you doing that?

Like, yeah, maybe I shouldn’t do it.

One hundred percent. I completely agree. I should. That’s right. It should be. It’s either it’s either yourself or you’re someone next to you. And that’s unlikely to be a loved one. Right. I think even as I go through this this journey with Share and we’ve got all these new ventures that we’re working on. In some cases, they’re science driven. In some cases they’re design driven. We’re careful with who we talk about these new babies, if you will.

These new companies, they’re sensitive, they’re sensitive. You know, whatever you want to call your baby ugly at the wrong time, because it might it might it might impact how things go. And it’s just part of the journey. It’s not to say that, you know, these early things. Of course, there’s a time where you want someone to pick out all of the flaws and that you want those things to be the things that you laser focus on the floor.

But when you’re just getting going and I think this is relevant for anyone starting a company, when you’re just getting going, I think you have to be thoughtful on who you talk to and when. And people could be very well-meaning and say, oh, well, that’s because of X, Y and Z and. That might be helpful right here at the right time, but it also may not be helpful because you need to be in the right mind space to push past all those flaws. It’s kind of empowering, I like it, I have nervousness for me sometimes doing a podcast, like just putting your voice out there.

So OK, so but let’s stick with the entrepreneur journey, not me like.

So are you still affiliated with Upfront or. But you were you were Upfront for many years as a board partner or a venture partner as a venture partner.

Then I transition to a board partner and I’m still a board partner at an Upfront. And I have a couple of boards that I sit on for them. So part time. And, you know, really we’re upfront and and I are very aligned because they’re also invested in share. And so really all of my energy is going into share and the company that we’re creating. Then I also have very proud to be on a couple boards of companies that Upfront is invested in.

I couldn’t start a firm that was just a version, you know, a different version of I want to do something very different. And many people will hate on what we’re doing. And they’ll say it’s stupid for X, Y and reason or whatever, and that’s fine. We’ll embrace that. We have deep conviction that not only is the model that we’re focused on. Right.

But the location, the idea that our model can also unlock black and other underrepresented entrepreneurs, scientists, executives, designers, many folks that may not be as likely to participate in the innovation ecosystem or as able to participate from an equity standpoint in this world will now be able to do more of that.

I mean, I sometimes forget that this is an audio podcast and you’re black. I’m very white, you know.

Do you think we should just I think people can tell by the by the voice and maybe maybe maybe you’re black and I’m white.

I don’t know. I don’t think so.

I think they can tell. I think they have that. But, you know, I mean, we’re we’re clearly in a in a historic moment right now. I mean, hopefully historic moment right now. I also here’s a question.

Do you think more people notice or something that you’re black or care or like it’s a bigger thing? Like it’s changed a lot for me, just being female in tech and in business. Oh, hell, yeah.

I mean, I think and honestly, I’m surprised by it. Like I mean, if you would have asked me why, because the problem, like the problem that we see, the social justice problems have been front and center, obviously, for all my life. Right. I’ve always felt it and seen it and experienced it as a 6’2″ to African-Americans to to to an African-American person from Washington, DC. I’ve had a glock in my face more than one time, right?

Mistaken identity every time. I thought we obviously experienced that.

Yeah, this is an experience that everyone has had some very direct experience. So it’s not new. But if you would have asked me that one day, there would be kids in Japan protesting for Black Lives Matter. I would never have believed you ever, ever, ever. So the fact that we’re seeing that level of support feels great. It really does feel great. And I think I’m seeing it also with institutions that are tackling this head on. And so, yeah, I think there are many more conversations that that that we’re able to have now than ever before.

And frankly, when we do have those conversations, I believe that people are significantly more present than they were before as well.

You’ve left me very inspired by this whole conversation and just sort of.

Thank you. Up.

Yeah, it’s been really nice. I kind of think that’s a great note to end on unless we missed some big things on Share.

Now, it’s great, I enjoyed the conversation, as I always do with you, so I appreciate your inviting me on and let’s do this together. Maybe you can come on Your Brain On.

Great. Well thank you so much, Hamet.