Jeremy Milken is a partner at WaterTower Ventures. Prior to WaterTower, he was a founder multiple times with several successful exits. He started his career in investment banking and private equity, has been an entrepreneur for 20 years, and is now on the other side of the table.
We're in his beautiful office here. Hi, Jeremy.
Great to be here.
Is it really? You were the hardest guest to get on!
Well, I'm Sorry about that, but, hopefully it'll pay off even though it's unlikely. I would say, so.
I think you said it's going to be a better episode than Derek’s.
Yes, I can guarantee I'll be better than my partner Derek that's for sure.
Okay, great. let's start there then. Great place to start WaterTower. So, you're the newest partner?
Yes, that's correct.
And this is Fund II.
Fund II, yeah, exactly. So uh, yeah, I can give a little overview on WaterTower. So, uh, we are a $50 million, what we call a first institutional capital fund. We'd like to invest just right after, I would say the friends and family round kind of at the earliest stage, check sizes, you know, probably the half a million to $1.5 million range.
In terms of our focus, we, you know, I always say I hate buzzwords, but we, uh, we're focused on the connected consumer on the evolving enterprise, my personal background is in the enterprise software category.
My partner, Derek, leans more towards the consumer media side of things. Um, and, um, you know, I think it's just. Talk a little about kind of what we, you know, what our differentiators are, I think would be helpful as well. One is, you know, we help our companies with access to following the
you know, Derek well, Derek was, yeah, Derek
Derek knows everything. He's the ultimate social butterfly. That's what I said about Derek.
That's funny. He is. He’s always like you want to hang out? Sure. Hang out.
Exactly. Exactly. So. Derek's been a venture banker for over 20 years and, has a lot of experience in the financing categories. So we provide, you know, our portfolio companies, really great access to follow on capital.
It's one. of the things We do. And we always say that if you take money from us, you're never going to knock on a cold
door.
uh, for follow on financing. I think also we have,
Can I ask you a question about that? Is that usually a series a and, and I asked because I see you folks pushing really early, mostly in these sub $10 million valuation.
Yes exactly. I would say ideally we're. I mean, so valuation, you know, like it's there there's a hard valuation cap where we enter deals. But, yes, I think normally we're in single digit opportunities.
Because often when we entered, there's still another round after us, before the series, a lot of times.
Yeah, I think it depends. It depends on the situation, I think. Um, and obviously every situation is unique, but you know, like I said, that, that that's the goal. from our perspective.
Never knock on a cold door.
I like that. Uh, that was number one.
Yeah. Also I think, we have a lot of, uh, you know, Derek and I have been in the, in, in the the business for 20 years.
Um, Me more on the, on the founder side Derek on the banking side. So we have a very strong corporate relationship network as well. And we use that to help our portfolio companies kind of cut through you know, I would say the time-wasting, right. um, and, uh, and you know, and see if there's opportunities selling their product you know, whatever large customers, et cetera, we can help cut through that. Um, and then I think, you know, the the last point is really just operating expertise, right. And kind of, I would say perspective on things. So. We, um, you know, we've, we've, we've lived through multiple downturn cycles you know, up cycles and down cycles. we both been multiple time founders as well, and we have, had You know, success and we've also suffered, So, uh, you know, I think we can bring a lot of great perspective, uh, to the portfolio companies, um, and, and, and help them, you know, it's, it's, it's, it's, it's a difficult process, right.
I mean, I've been through this several times in my career and it's, it's not easy.
Yeah, but you kept doing it, right? Like you've been a founder, multiple, multiple
times.
Well, the joke is The joke is, is that I started out my career, obviously working in a traditional job and I quickly realized that I was
unemployed. Right, right. You had a boss briefly.
exactly. I just, it just wasn't for me, it wasn't for me. And, you know, I think, I think it's just kind of the mentality. Right. It's like, you know, if I like to, I like to kind of exist in more of a. Ambiguous kind of risky environment.
That kind of, uh, environment. I'm a, you know, you've, you've been
at it, but that's why I'm a VC now because the highs and lows
it's difficult, but you can look, I mean, like I said, there's there's, there's no lower, low, and there's no greater high.
Right. Um, and I think that's, uh, that's kinda my perspective. on it, so,
Well, yeah, no, I don't. Um, you were, I think I told you the hardest guests to research and the hardest guests to get on, but there's not much about your past or you don't do a lot on social media. It's suffice to say, tell me about some of your founder journey, maybe your most recent
company.
Yeah, sure. Absolutely. Yeah, so Obviously, I, I, I'm definitely not on social media. I don't know if that's a good or a bad thing. I think I was just saying I don't have
time. Oh, right, right. Good. That's strong Kim bother.
Yeah, no, no, no, no. There's no good reason. I just, just, it's not part of the workflow. Um, but yeah, we can talk about my most recent, company, a company called workspace.
it was a commercial real estate enterprise software company. The websites go workspace.com If anyone's going to take a look at it. Um, I partnered with a guy prior to that. I'd been in the, uh, in the ad tech space for several years and a partner with a guy, um, who I had done business with. We actually in the, the senior care category, one of several categories we were in together. but, Um, and his wife was, uh, actually worked for a company called Lincoln property company, which is a big property management company in the United States. Um, and he went into their office one day and he, uh, he sat in the office, this was like an. 13, maybe early 14. And he sees, a work orders coming over on fax machines and he sees binders of COI sitting on the tables, et cetera.
And he sees them FedExing manual checks around the United States for payment. And he said to himself, this is, You know, and meanwhile, the company's managing probably close to a hundred million square feet of commercial office. And he's like, this is, there's a huge opportunity here. So, so started the company with, um, building a, uh, you know, very simplistic, just simple work order system right. where you could enter work orders.
Uh, the tenants could log in and put work orders into, uh, just kind of a workflow system. and, took that from it to an, uh, a full property facility management system that you would use to operate kind of like this building you were in today, everything from visitors security to vendor management. to kind of payables, workflow,
et cetera.
And how did it start? So you started and did you hire engineers initially? Like, what was
Well, my party apps on my phone, my partner, is, is an
engineer
by
trade.
Right. That, that, that, that that's
his, So
he literally, he just coded it
himself
basically. Yeah. And we started kind of working, you know, kind of with, in conjunction with basically Lincoln property company.
They
were
you know, they basically gave us kind of all
the input
that we needed to
build
this
system.
Um, and, uh, So that, that's
how
it
started.
uh, yeah, give me more of that sort of founder journey. So you were, what were you, were you the
CEO? of the company. Yeah, exactly. And, you know, we started, it was like, a, you know, super small company.
It was just really just like
three
people.
kind of thing. We ended up, you know, very shortly thereafter after building the system, rolling it out basically to the entire
liquor property
company.
Right. So we had very explosive growth with it. then we ended up kind of really falling into, I guess you could say, kind of a, I don't want to say it was luck necessarily or not, but, getting feedback from them, they came to us and said, Hey, you know, we, we have a problem where we have to allocate, you know, they, they manage buildings on behalf of maybe 20 or 30 different.
owners in the United States, maybe more at certain times, and every owner is on a different accounting system, a different chart of accounts. And like, we have this challenge where we get a bill, like a centralized build. We need to allocate it. We're logging into 20 systems to input this information. So we said we can solve that problem for you.
Right? So we went in and we basically, you know, wrote integrations with all the major real estate accounting systems to from simplistic perspectives to post payables information. Uh, so they could set up pre allocations and post the bills After we did that, we said, wait a minute. Well, We can't, we know that it can be posts to this data, we actually can pull
the
data
as well.
And, uh, and that really kind of made the company. Um, we built kind of a industry leading asset management product, out of that. he's the example of Angela Gordon, which was one of our big customers. they, uh, had 40 joint venture partners. Everybody's on a different chart of accounts accounting system.
So we provided the layer of the platform for them to aggregate their portfolio data. Before that they were getting PDF books every month. of people sending in and they had people in New York typing and information to spreadsheets, to aggregate the portfolio. And We basically provide real time data connections to that.
So, and you know, and then I think the, the reason why we actually have a grow quickly was really because we were fortunate enough to take advantage of a of network effect. Right? So the example was, you know, like we would enter, you know, we would have the owners, like an Angela Gordon mandate that if they wanted to do business with them, they had to use our product for reporting purposes.
Because it was so efficient for them. Um, and then the owners we would integrate with the, with the JV partner and the JV partner might have one building with Angela, but they might have another 15 or 20 part properties with other people. And once they were integrated, we could
light
up
the
system
for
them.
Then they would go to their other partners and say, Hey. This is such a great system. And then they would it went and we just created like
a chain.
Yeah.
with the product.
And did you have Lincoln from the get-go kind of paying you so you didn't need to raise money
yeah, we actually ended up never raising capital for the business. which is always sucks. I always joke that it's quite
quite
amusing
now
that
I'm in
venture capital business, because I used to spend my days, not taking money from venture capital, companies. right.
Everybody's calling me to invest. And, um, now I spend my days convincing people
to
take money
from people
like me.
Great.
Um, no, So we bootstrap it. Yeah, exactly. I mean, we were, we were Very fortunate and very lucky with that. Um, we never,
need
to
raise outside
capital.
How long did you do it? Journey to the end.
Yeah. So we, uh, we built the company up over a period about
five
years.
Um, yeah. And we had, and we sold the company to a private equity company up in San Francisco because we had it bootstrapped obvious. It was a great outcome for us. We sold the company in September of 19 and, you know, we had about half a billion dollars, half a billion
feet
on the
platform
we sold
it.
Um, yeah. So it was, it was, it was pretty significant, uh, um, uh, product and yeah, and it's still going strong. Um, and, uh, You know, they, bought a hundred percent of the company and, uh, that that, that,
that
that. that. And it was up into the right the whole time.
Yes, it was up until
the
right the
whole time.
Pretty much. Yeah. I mean, I think, you know, I, I would say that we, um, we, uh, it was up until the right, but we realized, you know, like I said, through the process that just being a property facility system, I don't think was going to get us to the next level of where we wanted to be.
Right. So. I think we got you, know, got to a point, we kind
of fell into
this other
product,
um, which
ended
up transforming
the company.
So I would say
obviously,
like everything,
it was
luck,
A lot of it
was
luck. Right. Um, but, uh, but in that specific
opportunity
we
did summer and so, right. Okay. Good. Good for you because you've done a number of other companies before this.
did you set out, do you know, do you think of yourself as setting out to build sort of startups or what did you set out to think I'm building a different sort of company bootstrapped sell the private equity.
Yeah, no, I, I don't really think about outcome, I guess so much Right. when I when I get involved. I mean, maybe, I guess you could say that that's maybe a good thing or a bad thing, right?
I mean, I think more about the value proposition, you know, what, what the problem solution type thing is in, in, it. Um, I, um, that I would say that our goal was not to sell
it
to private
equity. Right. That was not our goal, obviously. but I think, you know, it, it goes to that kind
of
situation where. You know, you evaluate every offer and every opportunity.
Right. And I think, you know, I, and I think our perspective is, is we had the opportunity I mean, to let's say, sell the company for the same valuation that we would have
financed
it
for.
Right.
and, uh, so it was a very significant trans, you know, let's say significant, you know, sale opportunities. So we decided, Hey, you know, let's, let's take advantage of it because we don't have any investors.
Right. So it's not, you know, it was just the two of us,
And in
retrospect,
we
look
smart,
right. Because, because obviously, you know, as we're sitting here in person, right. Um, together today,
um,
you know, I I think the building, I think this building today is, you know, for the last, uh, you know, whatever it's been since it started the pandemic, it's been a it's not, it's not even 10% occupancy
here today. Wait, wait a second. When did COVID happened? When did you sell it? I didn't, I wasn't putting those together. We
September of 19
and co and COVID was
March, February,
March
one. So that seems kind of brilliant.
Yeah. Well, there was, no, there was no plan
to
be
brilliant.
That's for sure. Like I said, it goes,
It
was
just
pure
luck, And then, and then soon after doing that, which sounds like a good success, you're like, great. I'm going to join water tower.
I mean, it's been longer than that, right? I mean,
first
of all,
I've
known
Derek for
20 years.
Okay. Derek, Derek was actually an investor in my first, company.
I started in, uh, Two I think it was 99, 2000 when I was much, much younger, but, in the, and that one had a lot of
pain
and
suffering,
so we'll
skip
over
that time. But he was a, he was a banker then, or he was it.
Now he's part of a fund then he was part of fun
then. Yeah. Yeah. Yeah. So, um, so, um, and, um,
yeah,
so, okay, so skip 20 years there.
we'll see. We'll just fast forward. All the pain and suffering
and everything
was
on how great.
I am here today. Right. Okay.
your brilliance.
Yeah. So, like I said, I'm no Derek 20 years, I was an investor in in the prior fund. I actually chaired the ELPAC committee of the prior fund as well.
you do anything that's cheering the out back?
in terms of activities to turn the ELPAC, no, because there was a to do in that, but in terms of working with Derek, I was actually working pretty closely with Derek over that timeframe, just because I'm super
passionate about
this category.
and you know, over the years I've invested, I would say informally. You know, and I've I've done that throughout my career. And, um, so I'm just always interested in this category and looking at new opportunities, new businesses. I love working with founders. Like it's just one of my passions, like I said, for better or worse it's something I enjoy doing.
Um, so, Yeah, I was working pretty closely with Derek over the, uh, let's say three year investment horizon of
the prior fund.
Um, and, um, you know, we, we had loose conversations about it, right. Obviously I had my company and, uh, And I wasn't going to leave that opportunity to join water tower. you know, I think for lack of, a, some great story that I could give you, I think it just, the timing just kind of
worked
out
right. perfectly.
Right. It's kind of like he was, you know, he had, he was finishing as the investment cycle in fund one. He was ready to get started for the, for fund two. And, um, I, uh, I just, uh, you know, I just sold my company and then we just came together and was perfect. And the great part about it was we started fundraising actually.
Uh, in, uh, in February of 2020 about, I think it was
one
week
before
the
LA
lockdown.
So it was, uh, it was, it was definitely very interesting
times.
Let's put it that way.
Didn't have to travel though.
True. Exactly. Exactly. Exactly. So, you know, we closed the closed fund, July 31st of uh, 2020. And, um, you know, it's been great. I mean, like I've been,
uh,
you
know,
I'm definitely
enjoying things, $50 million. Yeah.
And, um, so it's, a,
it's
a,
uh,
it's
been
great.
Uh, it's been great. W well, let me think of my question there. Uh, how do you, when you looked at Watertower, like, how did you think of the VC ecosystem?
Like, did you think about, Oh, I'll go join Mark Mullin over at bonfire. Like, you know, you know, I'm not trying to pick on Mark.
well, I don't, I, I don't think Mark
Mullen would ever hire
somebody,
like,
me, you know?
So, no, but I mean,
how did you think about water towers place in the ecosystem?
Yeah. Well, I think, look, I mean, obviously I'd have been an investor with Derek and I've known him for 20 years.
Right. So I, you know, I think my view on the situation, I was looking to get involved with somebody,
um,
at the ground
level.
is
my
view
on the
situation. Right.
Um, you know, we, uh, and, uh, so, you know, I was looking for an opportunity
to
enter
ground level
and I was also looking for the
right partner.
Right. And I think It's an important thing. you know, so I was looking for a partner. I think that could, that, that would be a good compliment to me. Uh, you know, we were joking earlier about Derek, you know, in the sense of that, I would say that I would characterize Derek
as the
eternal
optimist.
Um, and Like we already talked about it, the social butterfly, and, uh, you know, I, I would say that I'm, I'm not a polar opposite to him necessarily, but, you know, I, I always say I'm a cautious, cautiously
optimistic.
And, uh, and uh, definitely, I, I, you know, I, I don't compare
to
him
for the
social
butterfly
perspective.
He said that you secretly love all the
VC parties though. That's what he
said.
Yeah. Well, you run an event,
you know, you've heard of it, you know, exactly. Last
you.
Yeah, exactly. Obviously I was enjoying myself. Um, but, um, you know, so I was looking for a partner. I think that could, that, that would be a good compliment to me. Right. And I think that, um, and, uh, that's what Derek provides really. Right. And, and I think obviously Derek has a, uh, You know, very extensive relationship set in the venture community.
I, you know, I have that obviously now that I
didn't
have it originally. right.
So, so I think it was just a good partnership all along. I mean, I think that, I, you know, and I think also from terms of our own personal focus, I'm probably more focused, operationally, with the portfolio companies, I would say.
and you know, I definitely definitely lean harder on Derek, um, in terms of the, uh, you know, financing and, You know, relationship,
network
building
and
stuff
like
that. So,
and do you have a, would you say your network, you're looking at more the enterprise space and you have more of sort of like corporate relationships?
Yeah, I would say, I would say that I'm looking. Yeah, I'm definitely more, I want to say solely focused, but pretty focused
on enterprise
software
Right. That, that that's, that's where I I've had my success and I have a lot of kind of knowledge in the category. And I would say in terms of the corporate network, you know, w I would say corporate network, rarely from the finance financial side of things.
Right. More so than, let's say the media companies. I mean, obviously I know a tremendous amount of people there, but I would say more so on the financial markets type stuff, obviously the real estate industry, you know, the hedge fund industry, just things like that. I have a lot of, private equity, a lot of deep relationships there, um, which are advantageous for certain types
of
enterprise,
you
know,
companies that
we're
pursuing. Yeah, definitely. I think Derek. Duh. I think Derek doesn't, I'm not sure how to say this, but I think Derek doesn't want, I think Derek's roots are kind of in digital media and I think Watertower really has evolved, especially with you here to have a broader focus of he's still got digital media, but having you means it's a lot more enterprise SAS type folks.
Yeah, I think so. I mean, I think that we, um, you know, the prior fund there were some various we have some successful investments in the enterprise category. Um, and, um, so. yeah. Look, I mean, I, you know, I I always like to, you know, everybody wants to say that they're not, th they don't operate reactively necessarily
right In business that They're proactive
for say, or their, or their thesis driven to
hit a
buzzword. Um, you know, but I think, you know, look, I mean, we, we, you know, I wouldn't say that we have, you know, we, don't have like a mandate or a absolute, you know, like we're only investing in this and we're not going to look at that type of thing.
Um, we, uh, you know, we're, we're broadly focused, right. Just so happens that, you know, a lot of the opportunities, uh, out of the first five investments we've made in the current fund, a lot of them are more, I would say lean more towards the enterprise side,
yeah. Do you want to talk about a couple investments you've led or companies you're leaning in on?
Yeah, sure. Absolutely. Yeah. I always say I have to take it the, uh, The opportunity to, uh, to promote as as
Derek,
would say,
yeah,
I, one of our portfolio companies, but yeah, look, I mean, we've led four of our first five transactions.
we co-lead the fifth actually. So we're heavily involved with the portfolio. Um, right now the one company we're talking about probably as a company called Seesaw. the website is, uh, ccu.co. it's a, uh, residential real estate. transaction management
platform.
and, uh, we, it's kind of like an all-in-one platform for
residential real estate from managing lead process to, you know, putting listings into transactions all the way through closing.
Um, you know, the vendors are involved, brokers, involved, title, escrow, et cetera, across the map. Right. And it's actually quite an interesting company companies based in, I'm based in Utah. We've been spending quite a bit of time out in Utah. Um, it's we have two investments out in Utah in the fund, um, and, uh, it's been a, a, you know, the company's doing extremely well.
They have about 40,000 users on the platform they're processing, I'd say around 15,000 transactions a month. We're We're, we're big believers, in this, uh, you know, I don't want to, say, I don't want to give us credit that we're contrarian thinkers, I wish I wish it were that smart, but the, um, you know, everybody in the venture business, I would say Well, not everybody, but a lot of the venture capital. in the real estate market is going towards
displacing
the
brokers.
Right. Um, and you know, it was interesting. when you look at these I buyer platforms, you could say, I mean, less than 1% of transaction volume in the real estate industry goes to those platforms, Meanwhile, these, some of these
companies
have
raised
hundreds of millions
of dollars.
Right Now. We can talk about what the future is and all that kind of stuff. But the reality is, is, you know, 99% of the transactions are going
through brokers.
And we don't, think there's a lot of innovation
in that category
today. And CSO provides really one of the industry leading platforms in, in
that category.
Um, and there's a lot of characteristics about it I mean, it's an, it's an independent platform it's independent of. Let's say the Zillow's or the, or the, or the real Ajai or, or, um, you know, KW command with Keller Williams or all these different internal systems or Compass's
system. And then,
you know, I think the brokers like it because they feel like they, they control their own destiny.
They own their data. Right. It's it's not, it's not being
housed
at
Zillow
as
an
example.
Right.
Um,
and it's been a very valuable
product, so
yeah. So we're probably the gearing up I'd say in the next, uh, you know, probably a month or so to go out and raise
a series,
a
financing
for
next. Very cool. So I want to probe on this, not being contrarian, but having a bit of contrarian in you, like where Jeremy are, you kind of contrarian
when
you
look at
sort of venture.
Yeah. I don't
Let's say that that's
too
difficult
a question.
I
think many for this. I mean, you know what I mean? I thought
they were going
to
keep it high level here. It's too. It's too difficult. Um, you know, I don't, I don't know initially how to respond to that, I mean, I think, I think, you know, obviously we look at it on a, on a, um, on it, let's say we can look at it from a track transaction specific basis.
Right? I mean, I think our perspective is that. You know, like everybody in the business, we're looking towards the future, we're looking towards future trends, right. So we're trying to evaluate maybe what people are doing today and saying to ourselves, you know, what are people doing today? Is that a good thing or a bad thing?
You know, in terms of the venture market in general, being a contrarian thinker, I mean, you know, having been a founder multiple times I would say that we're sensitive to have to, I would say founder dilution, raising money at the right time, you know, for the company, you know, I think sometimes people you know, can fall into a trap of, of, uh, of raising too much money. Right. And, you know, look, you know, this it's a long
journey.
I
mean,
as you
know,
from your
experience, right, I mean, it's a long journey and you know, Uh, you know, all you do is read about, you know, every, every minute you read about this person raised that and this person raised that.
And it's, you know, it can get kind
of,
I don't want to say caught up and that a little bit. Right. Um, but you know, it's funny, like, you know, the most successful
businesses
are
not raising.
okay.
Right. And, and I, think that the people, sometimes they don't really, you know, they need to really think about that. Right. You know, so. So I think it's a, that's kind of, I don't want to say that's our contrarian perspective because obviously we're looking to put capital to work.
Right. But but I think, you know, that's kind of our view right. in the sense of, you know, we, we kind of come from the mindset
of,
we want to raise the capital that we need and when
we
need
it.
Right. and, and we want to protect ownership, you know, for our
founders
and
really
for
ourselves
as well. Let me ask you a question on that.
Like, is there anything concrete you can say, like if, if a company is coming to you and the founders of less than. Half the company that they own or something like, do you have any rules of thumb there that you're looking at?
Yeah. I mean, I think, I think in a general perspective, I mean, if
you
asked me what what's
a
vanilla
right.
Series a transaction,
right. okay, we want the owners going into that transaction
owning
half
the
company. Right. I mean, that's kind of
our
goal,
In advance of a series, a financing, ideally, maybe even a two thirds
ownership
of the
company. Right.
And we didn't go into it much, but you started your career in private equity or investment banking.
How do you see that relationship with VC private equity and a lot of the, the public market people coming into private markets?
Yeah, I think it's very interesting these days, right? I mean, it's, a, you know, the, um, you know, obviously we, we sold their private equity company that is interested in buying as num numerous ones in the Mark that they bootstrapped Non venture backed, you know, SAS businesses. Right. And there's a number of companies that do that today in the marketplace. And, um, you know, it goes back to kind of
a,
you know, so how does it
compare?
But they wouldn't wait on that point, but they wouldn't buy the company. They wouldn't buy someone who was venture backed.
It's something they wouldn't buy somebody that's venture backed. You know, the problem is, is that, oftentimes the. Valuations right. Are,
you
know, we
can talk
about the
general
venture, market. And then we'll, we'll, we'll we'll flip it into that discussion. But yeah, so obviously the venture market today, um, as you know, right. I mean, it's, it's become incredibly competitive with the late stage financings, um, and that's kind of trickled down even into, you know, even the series a level financings, I would say today. Right. I would say what's, what's quite interesting is where we kind of operate you as well. you know, valuations, You know, have remained pretty much constant right? over the last five years, I would say, or within the range of constant wall, series a financing, might have made it valuations have tripled, And then you know, you get later maybe even quadruple. so I would say that, you know, so anyways, so that's kind of that, that, do with the top heavy nature of the venture capital market today. Um, so the private equity companies, but Obviously there's that, there's the traditional, private equity companies that are not looking to buy these types of businesses,
but.
A lot of, a lot of these, I would say mid tier type private equity companies um, are looking to get into this business because like everybody else they're searching for growth and opportunity. Right. And you know, the premium that's been paced on growth versus value in the last, you know, five years has gone is just crazy.
Right? I mean, growth
is
so
much
higher
value
than
value,
let's say, right. That, which is good for us you know, in the room, but. But it makes it difficult, right. For these private equity companies to put capital to work everybody needs to put capital
to
work.
Right.
Um, and um, so in the sense of that, you know, our people, are people,
um,
uh,
you know, why would a project we can not get involved with a venture backed business?
Um, well it just depends on kind of what stage it is. Once a business goes really series a financing. My perspective is, is that, you know, first of all, the valuations are
high.
Okay. So, and in addition, The businesses are usually going
into
some
type of a
growth
mode.
Right?
And you know, it doesn't really, and and the private equity companies are not They're not set up for high
growth
investing.
Right. They're set up for
more
of
kind
of
like,
I would say moderate
growth
investing because what
I would say. Right. So, so, you know, they're looking for those types of companies that can kind of fit into that mold. I would say, like I use see Susan
example. I mean,
it's, virtually almost a profitable company today. so they have had a tremendous interest from the bootstrap private equity
guys.
And, um, because it fits into
that
mold.
Right.
Um, and, uh, so, so that's how I kind of look at it. So I wouldn't say that that the, the private equity, the mid tier guys are not wouldn't purchase a business that was
venture
backed. I just don't think it's really the type of company they're looking for. And also the venture investors, right. At the series a
levels.
And
in past that. They're
not
looking
for
that
type
of an
outcome.
Yeah. So like, if, if CC was getting approached by private equity, let's say they continue to do well, continue to get approach.
They continue not to raise their series a because they don't have to.
How do you
counsel them?
I think it's an excellent question. Right? I mean, I, I, joke one of the positives is, is
that
we,
you know, w
w we're
not
the
final
decision
maker,
right? Yeah.
Okay.
Sorry.
It's mixed.
So I think so I think it's an interesting thing.
you know, always choke is, you know, It's it's always easy when you don't have to make a decision yourself. Right. So, I mean, the founder is going to
make
a decision
on
what
works
for him
Right. I mean, he owns a significant portion
of
the company.
Um, and, um, you know, we would just kind of counsel that, you know, it's, it's just, it's just an opportunity.
It's an opportunity. Trade-off right. It's it's it's what is a, you know, what does an offer today? Obviously, you know, a lot of factors come into what's what's the founder's personal situation, you know, things like that, obviously. Um, and what the potential is of the business. Right. As well. And, and how, and how, how, how close are we
to
that potential
Right to, to being able to get to the next
level, things like that.
Um, and uh, so, you know, you're weighing all those, all those factors. I mean, I, like I said, I don't, you know, it's, it's, it's, it's a discussion that, you know, we will have, Right. um, you know, and, uh, our perspective is, look, I mean, like I said, we're, w w we're, in the business of supporting our founders. And a great outcome is a great outcome, I mean, you know, it's, it's, it's uh, it's you know, like I would say, it's, as you know, from your experience, it, it, it's very
hard
to
get,
to
have a
successful outcome.
Right. And to get an, and I always say to get liquidity, So, you know, I mean, even myself, I've been involved in companies where I've had on the verge of selling them. And then two years later they're bankrupt
One more question with the private equity and the CCU example, what the private equity person come in and actually allows you to continue operating, like, how does
relationship work?
Well,
I mean, I don't know of a
specific,
specific situation, No, but I mean, like, I can tell
you
from
our
perspective,
right? I mean, we, you know, When these companies are coming, in, what these companies are doing is they're kind of building, I would say kind of like I use the example of like Vista equity partners,
obviously
significantly further,
down the road, but they build kind of like a shared, they have like a shared
services
kind of
theme
or
goal
where they have a shared services group.
And then they want to latch on right. all these vertically vertical kind of SAS businesses along. it. So they'll have like shared technology, shared marketing, shared HR, et cetera. And they can leverage that across all
these
different portfolio
companies. So.
yeah know, I think, I think in the examples, you know, a lot of these companies they're looking to purchase, I mean, it's all over the
map.
Right.
But
some of them are looking to buy
a hundred
percent
of the company.
But
I would say that, you know when. The private equity guys get involved. They're looking can you make significant investments right there. They're not looking
to make, you
know, to buy 15%
of the
company,
or 20%
of the company right there. They're
looking
to
buy
control
positions
in
the assets
and
whether the founder stays or not.
I mean, that's kind
of,
you
know,
just depends
on the
circumstances
I
would
say,
right?
Each one,
Every
situation
is
unique.
Um,
And so I think you said you're involved with your family office investing. And will you invest in private equity?
Do
you know, do
do a lot of private market investing as well as public market? yeah, yeah, I think
we can talk about the family office obviously and we have a significant family office operation. I wouldn't say that I'm involved in the family office investing activities. I
do
my
own
thing.
It's kind of what I do Yeah. I mean, you know, we say that we have a very talented group of people over there, that work on all of our activities I mean, we invest. everywhere in anywhere across, across the spectrum pretty much. And we also do a tremendous amount of, uh, philanthropic work as well.
you know, we have the milk and family foundation, the websites, uh, www.mff.org. If people want to look at our programs, we're focused on education and medical research. Also, we also have the Milken Institute I'm sure everybody is familiar
with the global conference
that
host.
Um, so. You know, there's a lot of activities going on in the family office.
You know, also I think that we have, you know, some
very
smart
people over there, so
that
are smarter than me,
So, you know, it's not, I, I don't think it's a good use of my time, but I think it's, you know, I think it is worth talking about not so much what we're doing over there, but just giving some perspective. I think your listeners might find it.
Interesting. you know, I would say a decade ago, speaking for our family office, we had zero
exposure
to
venture
capital
right in the market. And I think it was it's. it's interesting. And, uh, you know, I think maybe about seven years ago, I think we made a decision to you know, focus more on the, on the venture category, primarily from the, from the mid to late
stage
investment category.
and, you know, as everybody that has invested started investing that it's paid off in a significant
way.
Right. and you know, and I think that we're, you know, obviously we're continuing that and we talked about the growth premium that's priced on assets today. Um, so, you know, we're, we're expanding our venture
focus,
I would say.
but at the same time you know, I would say that we have virtually zero
exposure
to the early
stage
venture.
market.
Why is that?
you know, I think it's a good question. Right? I think, I think part of it has to do um, I don't want to say
that
early stage
venture
has kind of a
bad,
reputation a little bit, you know,
not of course, of course not because with ten one 10 of course.
Right. you're
not
contributing to it. No, but I mean, I think maybe It's just kind
of,
I think people that, you know, have, uh, I don't want to say a significant capital conceptually. They just think of, you know, they,
they
don't
really
think
about
the
early
stage
investing.
I thought is it? I thought maybe it was just small checks,
It's smell. Yeah. Well, it, it, it doesn't solve a capital allocation problem in a significant way.
Right.
And I also think that, you know, it's, you have to have the right kind of investment horizon focus
for
it. Right.
Um, you know where you're talking about, you know, liquidity horizons at a minimum,
let's
say
a five
years.
in Best
case
scenario,
right?
Maybe
even
a
decade. Right.
So,
so I think we have, we don't have enough exposure.
We have virtually very minimal exposure to that category at the same time. You know, it's interesting when you look at the market today, at least we, I think about the market and the venture market,
and you
look
at
the,
kind
of the
risk
reward
ratios
in
the
market,
Right? we talk about, it. we can talk about asset classes like the public markets or the real estate
markets,
or,
you know, the bond markets are everything.
Even the private equity markets, right. Um, you know, asset prices are at
an all
time
high
today. Right. And, um, and it's, it's
it's
hard
to
make
it, it's
hard to
invest.
Let's
say
today,
it's hard to invest today. Yeah. It's difficult to invest today. It is. And, you know, and I think that, you know, so my, my feedback, or my, obviously I'm spending my own, time, I spend my time on it.
Right. But my feedback is, you know, I think, I think there's still a lot of attractive investing in the early stage category. Right. Because evaluations have not. Really creeped up that much as, as much as the, the, you know, the rest
of
the
venture
market,
conceptually.
Um, and uh, so, you know, and also coupled with that, it's getting harder and harder and harder to get into these transactions.
Right. There's just more and more competition. So those pro-rata rights are just more valuable than ever. And a lot of the people that invest even with us, and I'm sure with you, you know, they look at it as just like, you know, putting a stake in the ground, right? They're like, look, I want, to be able to, I want to have a pro-rata right
to participate
these transactions.
Um, and, and do you get involved at all in the philanthropic side of things?
Yeah. I do. I'm, I'm, I'm involved. I mean, you know, as much as I can be. Um, but, um, yeah, I'm, I'm, I'm involved primarily with
some
of
our
educational
activities.
So
that's great. Uh,
Uh,
you should tell the office about this great stage.
That's early stage investing. Um,
well,
they
don't
want, they
don't
want
to
invest with
me,
they might wanna invest with you
with you money. Okay. They, they,
they
only
want invest
with
successful
people.
Okay.
Uh, Derek said that you're the most modest self-deprecating person. I said, well, that that's not what I need on the podcast.
I need
some hype here.
Um, what about, uh, you know, where should I go? Watertower? W where do you think? W where's my question go? Uh,
what
you wanna
talk about?
Um, that's a good question.
we talked about,
the deal. we
talk, we talk about water
tower.
talked about Derek. We can Tell we
can
talk
about
Maybe
the other points
you had numbers, like advice for
entrepreneurial advice
and
stuff
like that.
And
then personal
stuff.
I
don't know
what else
do you
I want to cover.
Yeah.
Uh,
Okay. So,
uh, Let me just, so you're from LA, you went to UCLA Anderson
and you know, what advice you have for young folks today?
Well, it's kind of funny actually. I'd say, I'd
my
first
piece
of
advice
don't work for a
VC
know,
how
can I
say that?
How
can I say
that?
I know you want
them
to go through the
blood, sweat and tears of,
yeah. Well, I just think, you know, I think, I think that, um, you know, it's kind of interesting. when I went to UCLA Anderson, Um, and they characterize themselves as an entrepreneurial, focused school. Right. And granted, this was a long, long time ago.
Unfortunately,
I went
but, um, and I, and and they've drastically transformed themselves.
since then, But you know, what's interesting is, you know, at the end of the day, most of the MBAs there, we're not going into
entrepreneurial
careers.
Right.
They were going to more traditional careers and, you know, there's all different kinds of reasons for that.
You know, obviously it depends on
everybody's
personal situation.
Um, but yeah. you know, my view is if you asked me, what's made me a good investor, what's made me a better investor. It's really just my experience. Right. and, and I think that that kind of experience as you've had as well you know, being a founder and living that That, type of day-to-day and everything, you just, you can't, learn it yeah. from
the
outside.
Right. and, we always, kind
of
joke with our
founders
that
we can
tell
you everything
not
to
do
Right. so I think, you know, I, that's just kinda my view on it, I think, you know, if I'm giving advice to, a MBA students, is that. You know, you could argue now is, is, is one of the greatest times in history, right? To be, to be able to, to start something, um, there's capital, you know, people are very focused on the category and you know, not nothing you're starting a business for a lesson because obviously you're not right.
You're starting a business
to
have a
successful outcome,
but
I think it's a very
valuable
thing.
Right. So that, that, that's kinda my advice, uh, advice to people. And then the other joke, I always say, you know, on the, on the entrepreneurship situation. is
that,
in
terms of
this
stuff,
is
it,
you
know, nobody,
nobody
really,
knows anything.
Right. It's,
it's kind of the joke, right? I mean, I could sit here in this room and try and convince you how smart
I am
and everything, but I don't
know anything.
Okay. I don't know anything more than anybody else. And I think it's an important lesson, right? for people, you know, in terms of, you know, especially people starting companies and things, you know, it's
like,
do you know, it's just stay focused on what you w what you think
is right.
You know, you're going to hear opinions on everything from other people on the whole thing. It's like, You gotta, you gotta stay focused and do what you think is
right.
Um,
and,
uh,
cause nobody
really
knows
anything.
Yeah. I, I sometimes like I need to go lock myself in the closet and think for myself.
Oh, a hundred percent. Yeah.
It's very difficult. Well, that, that goes back to my a, that, that, that's why I'm not
social
media.
or anywhere, you know, I'm, I'm, I'm,
I'm
a
private
person.
What about, what about, is there anything going through that journey that you can pinpoint when you're talking to entrepreneurs about what not to do, or like some of those big lessons you had from going through your own entrepreneurial journey?
Yeah, I think it's a, that's a good question. Yeah. I think, I mean, honestly, it's situation specific, right?
but
I I use the term and I try to live by it myself as well, which is, you know, it's it's always easy to be busy for
busy
sake.
Right. It's always easy to be busy. you know, you need to kind of just, you know, it's one of those funny kinds of things.
Like I, I use the term
that
it's okay sometimes just to be, do absolutely nothing. Right. You know, in the sense of that, you just, just do nothing. I mean, and I always say like, you know, it's
like
sometimes if you don't know what to do or you, you know, just, just do
nothing.
Yeah, Right. Kind of thing. And, and things will you'll hopefully a clarity, more clarity from that than being busy.
So I think, I think a lot of entrepreneurs. And rightfully so, you know, especially when it comes to things like fundraising and stuff. I mean, it's just, it's, you know, th th they're, they're wasting a lot of time Right wasting a lot of time. And so we,
We want to layer focus on to these, to these companies, and make sure that they're, you know, and obviously work with them to figure out what that focus should be but make sure they're focused
on.
Value added
activities
and
they're
not
busy
for busy. That's really good. Do you live that? Are you able to do nothing?
I do live that actually Yeah. Yeah.
Can, you can
ask,
you can
ask Derek about
that.
I think,
I think
it
probably
annoys him a little bit, but I think, you know, I look, I think, like you said before, like sometimes you need to go away and be by yourself and think, you know, it it's in this business it's difficult. Right. I mean, you're, You know, you're being pulled in so many different directions.
You've got you're fundraising.
You're,
you know,
you're, you're, you're
looking at new opportunities. You're. Working with existing portfolio companies. You're raising capital. I mean, it's it's all over the map. Right. And I think, you know, obviously the founders are in that same situation, so yeah, you need to kind of just have a very kind of balanced perspective.
You can't take every meeting, you can't take every
call,
you can't
do that. And, and, you know, and from my perspective, I want to, I want to make sure that I'm focused on value creation for the portfolio
companies as
well.
Right. Um, and I want to make you, so I want to
make
sure
I'm
focusing
my
time
in there.
their time properly.
Yeah, but that's, I think where I run into the most problem is there's so many things I could do and, and they asked me, can you make this, can you do that? And there's so much to do. And then I want to do it all. And I, can't not be busy.
I agree. I agree. And I, like I said, it's a fine line. You know, I mean, obviously you want to be, a, like I said, look.
I mean, we're, we operate like a startup here, we're available 24 seven to our companies, you know, we'll, we'll do whatever it
takes,
right.
For
our companies.
Um, but you know, at the same time we got uh, You know, we got to make sure that like, what they're calling
us for
is a
value
added
activity. Yeah. Yeah. Derek says, I should ask you about your piano playing. Is that part of the doing nothing or does that count as playing the piano?
I
don't know about that.
I don't know
why
Derek would bring
that
up.
You know, I, Derek would bring that up, but no, but yeah, so I, I started playing the piano. I don't know what it was about. Uh, I played as a kid a little bit but about maybe it's been a decade
or so.
Um, of being just focused. I have this kind of long-term horizon commitment in my life where I. Uh, look at things I'm like, okay, fine. So I'm going to start
this project
and I'm going
to
do
it
for
the
next
15
years,
and see
what I can
get
right. I can accomplish. So,
yeah, so I'm a whatever. I mean, there's not that much, that much, exciting to talk about.
I'm just sedan but a little bit of an amateur, uh, jazz
piano player,
and,
uh,
you
know,
just, just,
just
struggling
every
day.
So
I was gonna say, does it bring you some joy?
Oh, absolutely. It does. But my family. Has a re like, you know, it's kind of funny if I said to you, Oh yeah, like your, your husband plays a piano.
You'd be like, Oh, that's so great.
It's so
fantastic.
But
my
my wife
and
kids
don't
feel
that
way.
I think they're past the point.
My husband does play the piano
and I quite enjoy it. I actually, um,
He's better than me then.
That's
well, let's talk about your 10, 15 year horizons. What do
you have
in your 10, 15 year horizons for yourself
or for a water tower?
Well, that's a good question.
That's that's a good question. Yeah. So, um, I think obviously for water tower, you know I mean? Like everybody else, like you guys as well, we're looking to build a world-class venture capital company you know, and, um, and you know, but I think our focus is we want to stay
in this
kind of early
stage
category.
Right. We
think this is where we're most effective, where there's most value
creation
for
us.
Um,
I would want
to
say this
category,
how do you see all the good deals in the category? Like, do you go or does I didn't go to pitch competitions? Or like what, or where do
why, why
to you
deals so good? Your deals are good too.
are there? Yes. And we should do more of them together.
Um, but yeah. Where do you, how do you stay there? How do you see all the great deals?
Yeah. Well, I
think,
look,
I
mean,
it, like
I said,
w
don't
see
all
the great deals. I mean, obviously I
can sit
here
and tell
you
that,
we sell like retails, but we don't. um, we have. You know, like when we have deal our deal
flow
comes
from
our
relationship
network
right? obviously it comes from our founders relationship network as well that we have, um, and referrals.
And, uh, you know, we also do a lot of, uh, you know, we, we, we, we have kind of like given my affiliation with UCLA we have, a, we,
we
save
have an
army
of, uh,
of
UCLA
uh, interns, MBA students that work here. because we have a venture ship scholar program where they
can work
as a paid part of the team in the summer. And then they can continue through the year.
with us, and the goal is to learn the venture capital business, and it's been a
very
successful
program
for
us.
Um, so,
you know, the reality is, is we, we lean
on
that pretty much, right. We, we we, we know that we we only
have
so
much
bandwidth
capacity
right. and we only
have to spend
time
doing
nothing.
As we talked about.
Right.
And,
uh,
that's be
time for
the
dog
of course,
as
well,
my golden Ridge, my golden retriever chance.
Right. And, uh, and, uh, so, you know, we lean a lot on them. pretty much. Right. But it's just, you know, we just find ourselves, we it's a mixture of obviously covering. All of the, you know, incubators and different things in the marketplace to doing your own thematic, you know, research, um, to relationship building to, I mean, it's all over
the
map,
I
would say,
you
know, but
are we seeing the best deals?
I,
guess
we'll
find out.
So
when we, when
we,
have our reunion
uh, session.
here in five years,
We'll see,
we'll
see if we saw the
best deal.
ultimate hope it gets you back on before five years go by, uh, Jeremy, anything else?
Um,
I think we got a lot, it's an hour.
I'm
good.
if you're
good.
If you think we can think we have, Oh,
I've got
to
hit
my
wife's
flexible,
erotic.
too. I got to hit that. Yeah. Otherwise
I'll
be
divorced. Wait, Jeremy, you have to tell me more about your wife and her podcast, um, which is called the flexible neurotic. And I'm so curious on, cause she's analyzing her guests and I'm so curious about how she would analyze you. Just tell me more about her
Well, first of all, was My wife has a podcast, you can find on Instagram at, at the flexible
neurotic.
Okay. Um, and, uh, the, um, it's, uh, I always joke that I'm not only an expert in the venture capital business, but I'm also an
expert
in,
uh,
in
self
recreation
for
in the
second
half
of life.
So That's fun. that's
one
of
my
other talents. I'm not sure
that's
going
to
bring
any
value on portfolio
covers.
That's big self recreation for women. Yeah.
In the second half of
life,
So the theme is, so the theme
you know,
obviously
like
you know, people
have been,
of life now,
I don't know
about
that.
many. I don't know. I don't know about that. I don't know about that. We think of you. as very young,
many. Okay. You're young at heart young at heart. Um, so yeah, so she has a great podcast, you know, covering all these
kinds of
topics, you know, from,
um,
women's health to nutrition, too. I mean, all over the map really. And I encourage people to check it out. I
think
they
would
enjoy it.
Um, in terms of analyzing me, I only get analyzed
offline.
with her. So, uh, you know, the, the the joke
is,
is
that
I've been
successful
in
knocking on
her
podcast.
but I wasn't successful and not going on your podcast.
Well,
tell her, I appreciate 📍 it. Um, I did listen. I have been listening and you do come up in her podcast.
I do.
Yeah, exactly.
Well only
my
best
qualities
though.
outlook.
Um, well, Jeremy, thank you so much for coming on the podcast on my podcast and, um, I hope to see more of you.
Great. Thank
many. it's
been great
and,
uh,
hopefully
we can do a
deal
together
in
near
future.
Thanks
for that. Fantastic. Um, great. Okay, good. We did a lot.
So I'm free now. Many
do I do an okay job?
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