The Operator Approach to Venture Capital with Chris Van Dusen (Part One)

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Forbes Books presents the Startup Science Podcast with Gregory Shepherd,
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brought to you by Startup Science dot Io. Greg is
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an entrepreneur who has built and sold twelve businesses. He's
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a recipient of four Private Equity awards and is a
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featured ten X speaker and Forbes author. Here's Gregory Shepherd.
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My guest today is Chris Van Duson. Chris is the
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senior partner at Salaiico Capital, a vertically integrated investment firm
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that takes a unique private equity approach to venture capital.
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Chris, Welcome to the podcast.
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Oh my pleasure. Thank you so much for having me.
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Yeah.
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I mean, you have an incredible background and it's a
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real honor. So maybe for the listeners you could start
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out by sharing a little bit about your background and
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how you got involved in the VC world and private
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equity and all of that stuff.
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So you mean my nonlinear journey.
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As a dynamic approach to your journey?
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Yeah, so yeah, As I said, nonlinear is the best
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way I like to say it. So I grew up
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in Connecticut, went to college of the college that we've
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to marry, graduated an economics degree. Certainly the greg the
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more you get to know me, the more you'll know.
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I'm not someone who goes and sits behind a cube
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after college, so an analyst was not the job that
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I was going to get. So I started in sales.
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Ended up doing sales in the financial world as a wholesaler.
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Moved to California in nine, about seven years after I graduated,
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and company came out for let's just say, ran into
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a smidge of financial trouble. So I'm marooned out in
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Newport Beach, California, and not a bad place to be,
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but big difference between that Williamsburg, Virginia. Ended up starting
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a marketing firm. I met my wife a few years
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earlier and she had started one as well, and we
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did converser rate optimization and high intech media buy staples
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of marketing today that really just kind of weren't that
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back in twenty fifteen, and we scaled that up for
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a lot of amazing brands. And you know, a through
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mutual friend met these five guys and they were endeavoring
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to start a CBD company they had started at the
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end of twenty sixteen. I joined them as the initial
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and first CMO and within a couple of years, we
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had scaled that business up quite dramatically. We ended up
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being the second largest CVD brand in the world, behind
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Charlote's Web. And it was a fantastic time. I learned
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what it meant to do a parabolic rise and then
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as you look at discretionary spend around COVID parabolic compression,
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and it was just a very interesting time. I call
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you got a master's degree in in what it means
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to scale and reduce if you will. Within the same time,
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at the same time, you're right, yeah, you know. The
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same time, my wife and I co founded with another
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couple a liquor distillery here in Huntington Beach where I
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live called Serf City still Works, raised some capital for that.
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We had also built another beauty care brand in the
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CBD space that we had merged with my original company. Now,
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we sold the CVD brand in twenty one to a
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publicly traded company, and we did a merger with the
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liquor distillery in twenty one as well. So I'll tell
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you you've ever tried to do two transactions in one
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year as an operating lead. It's quite a bear, let's
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just say. And then I had a friend of mine
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from college. We raised two funds in the cannabis space
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at the same time in eighteen nineteen, all around picks
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and shovels, ERP systems, analytics companies, accessory companies. I was
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kind of fascinated by the build versus buy model that
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would happen if you're kind of bullish on federal legalization
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long term, and so kind of back up two seconds back.
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In twenty seventeen, I joined this group called Older. It's
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all around generational leadership, and it's really there's an old
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Greek proverb goes, the world's a better place when old
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men plant trees who shade they'll never enjoy. That's really
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what the group's about, right, a collective of individuals across
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the country come together and try and make the world
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a little bit better place. At that time, I met
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this gentleman, John Garcia, who was starting this firm called
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Select Capital. They ended up being an investor in the
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liquor distillery, so they watched this come full cycle as
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well as you know. We just became friends and I
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would talk quite often, and after the last exit and
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August to twenty one, he asked me if I wanted
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to join as a c your equity partner at Salaika,
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and fell love with the firm, fell in love with
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the ethos. It's a very gritty, gritty firm. And what
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I mean by that is we love operating and helping
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as all of us being ex operators inside of our
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portfolio companies. So we take this private equity approach to
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venture much different than than traditional adventure.
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I mean, I got to tell you, it's so great
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to hear that somebody in venture has been a founder,
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you know, Like there's so many people in venture that
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are telling founders you know, what to do, given them
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advice that have never ever driven the bus before.
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Like the fact that.
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You're a serial entrepreneur is like just really incredible in
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that by itself differentiate you guys dramatically from the rest
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of the world. Right, they're all out there. You know,
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you're talking to some deal hunter. You know, they get
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on the phone with you. You know, they want to
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raise I don't know anything about they're just making overrides, right,
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so they don't know anything about it. And then they
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just work through the process and get on a monthly
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call and harass you. And you're on the other side
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of this as a founder having experienced that saying, let
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me help you. It's really beautiful. Let me ask you
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more about that, like, you know, how do you guys
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actually operate in that way?
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In more specific details.
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Yeah, So we have a large firm all things considered.
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So there's eleven of us senior partners and we have
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about forty staff, and so it's quite a large, large team,
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but multidiscipline operators, you know, actually working in operations, finance.
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We have a tax division, and so you know, as
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we engage with companies inside you know, and end up
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inside of our portfolio. It's by no means mandatory, but
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we're there of service and we'll go in and help drive.
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We like calling it, you know, going faster on less
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fuel to use a race analogy, right, And the way
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we look at it is kind of twofold. We'll go
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in and four a fee right for service. This is
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a would end up being what you'd consider our management
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consulting firm in helping them you know, early stage. But
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a lot of ways the deals that we structure, we
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don't charge a management fee or we have a one
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time management fee upfront. That isn't a two and twenty model.
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Wow.
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So for us, we like saying our interests are aligned
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a lot differently than a traditional kind of two and
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twenty venture. But more importantly, we can go in and
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our interests aligned with founders were already an investor. We
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are proven operators in our own right, and we have
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a team that are just as good as we are
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right as partners in helping drive and that could be
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by offsetting part of your accounting team, it could be
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being an interim CFO or Cso for me, my first
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year at the firm, I was a chief revenue officer,
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which is really where I sat right from a sea
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level position inside of these companies, driving what we were
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doing on our product mix with the product team, driving
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and putting operational rigor around marketing spend, helping hire the
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vps of sales and marketing. And then six months, eight
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months whatever the term is later, they don't need a
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full time chief revenue officer. They needed someone to come
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in with the expertise to drive that piece for that
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period of time and put the people align the board
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with where that's going with all the different parts of
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the team. Then you're out. And so that provides a
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lot of value and to be Frank. If you look
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at a lot of early stage companies with a quantum
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of cost for a talented lead in a role like that,
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especially in called the LA market or the New York market,
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is extremely expensive when you add full time salary, full
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time FT carrying costs, plus stock options and all the
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things that you great startups do. Well, we're already in
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our interests already aligned, and we just get in there,
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roll up our sleeves, do the work and help that
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company move forward. And when you look at the totality cost,
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it ends up being, you know, a fraction of what
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it would be to hire that lead that now you
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may have outgrown at some point, because these are these
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formidable years of seed through b these four years, you
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may have outgrown their skill set or you needed a
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different operator operator long term, and they don't have to
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necessarily deal with that during that first period.
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This is really cool, like really really cool. I've done
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a massive amount of research on this whole subject.
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I wrote a book about it.
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And it's extremely rare just to have the investors, having
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even done a startup let alone, offering fractional services as
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part of the investment.
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That's like, I mean, this is really extraordinary. I wonder.
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So you're from the gp CpG space, So what do
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you guys usually look at. Are you into tech? Are
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you just into consumer goods or what? Do you guys
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have a certain focus for the founders that are listening.
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Yeah, So it's what's really interesting about our firm, even
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even further and maybe even saying we don't have those
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management piece right, is we don't have necessarily a mandate
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or thesis against what we're doing because we don't raise
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a fund. You think about going out and raising a
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fund traditionally as a mandate, traditionally as a focus for us,
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we're able to go out and identify great founding teams, right,
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we invest in people as much as investing in platforms
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and others. Amazing teams, amazing opportunities, amazing let's say total
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addressable market, and do we believe the founders can do it.
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It's much more intensive diligence process than what I'm saying
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right now. But then we go out and we build
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a deal and raise the capital for that one deal.
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So we have in our portfolio fintech, property, tech, we
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have AI, we have hospitality, We even have some straight
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play real estate. Really at the end of the day,
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it's where we can find amazing alpha for our investors
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and be able to bring the kind of totality of
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our value as a firm to help drive those company scored.
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And so we work on traditionally, what we've been doing
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is an SPV model, and then we might have eight
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companies with our portfolio that are raising their next round
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and we'll put those together in what we call portfolio SPV,
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so very different than a fund, and that you can
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see the eight companies, you can see the growth valuation forecast.
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It's not a raise against a thesis saying you know,
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we're going to raise one hundred million dollars and we're
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going to deploy it against these type of companies that
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fit this certain thing over the like this company, this company, Yeah,
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this performance, these projections.
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That you know, this is team everything.
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Yeah, very different, dude, that's so cool, Like, I like
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this the syndicate model so much better because the you know,
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the traditional fund model is the same as wealth managers. Right,
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you lose, they make money, you win, they make money,
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like they make money no matter what. But you're aligned
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with them, you're a real partner. Right, It's almost like revshare. Right,
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you're a real partner in the deal, and you're offering
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all these services and expertise. I mean, this is a
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really I need to come and see you. I'm in
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San Diego, so I need to come and see you
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because this is like so cool.
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What's interesting, And I'm glad you brought it up. And
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I'm not going to sit here on a platform of
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you know, traditional venture is broken, right, That's not the
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platform I run on. But I think you brought up
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perfect incentives are aligned when we as a GP make money,
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when our investors make money, we're aligned with our founders
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when we're in helping them grow and helping them steward
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their vision forward. And because in my opinion and what
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I've seen at least you know, be an investor in
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deals way before I joined, you know, and on the
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GP and as a venture partner, most deals take way
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longer than you ever expect them to. But most funds
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have time mandates that they need to turn capital. And
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we can go into a long I'm sure another whole
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podcast on why they need to turn capital. Yeah, right,
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but it becomes very different, right for how we approach
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these companies, and you know, the home office for Selecos
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out of the Midwest, and I like to talk about
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the Midwest values.
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Right.
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Our our founder John Garcia, talks about kind but fierce, right, Like,
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that's the ethos of this this firm is to go
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in and really again interest a lie, but truly drive value,
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not only the capital stack for our investors, but also
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certainly for the founders and the ecosystem. And that ecosystem
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is important. We have about thirty two companies in our
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portfolio today and we look as part of the due
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diligence process and say, ay, how can we help scale?
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But how does this company fit inside the greater Sallecco ecosystem?
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And how are their partnerships and how can we powerbroker
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deals and how do we put things together to help
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all ships rise? And it becomes a very unique way
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of you know, looking at it. We don't think of
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it as a zero sum game.
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Yeah, I mean the involvement that you have, like just
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that is crazy, right. I Mean usually they'll have like
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the entrepreneur of residents and this is some usually a
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one hit wonder, right, and they throw them in there
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and they go, okay, yeah, we give you all this
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help and then they put some cat in there who
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doesn't really care. You have a vested interest, you've got
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skin in the game. It's dramatically different. It's a really
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cool model. I wonder if you could, I want to
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kind of go backwards to go forwards. So you and
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your own right, you've had several exits, right, is there
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anything that you could tell investors and founders that are
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listening to the podcast about what you learn during this process,
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about what are the most important things from those two perspectives,
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Because you know the investors looking through their glasses, the
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founders looking through their glasses. You have experience on both sides.
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It's very unique.
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There's a lot, so I'll just start with there's a
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ton but one of the biggest things a don't try
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and do to it once. By the way, if you're
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an operator, that's really tough. I have a lot of
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gray hair scars and maybe about of alopecia to share
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for it. Right, it happened during the time. All come
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back now, but very stressful. Light, but really don't over promise.
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And I think that's the toughest part because if you
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think about the seesaw that we're both on. When you're
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selling a company. As a founder and certainly an investor
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of being on the board, you want to drive the
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highest valuation possible, and traditionally that's a multiple on valuation,
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a multiple on ebida something right. As a buyer, you
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want to spend the least amount you possibly can to
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acquire something that will give you the most value long term.
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Our interests are alignment. We're always doing this and that's
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usually where massive tension comes. Everyone hugs in the first meeting,
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everyone fights, and then hugs again after the ink starts trying,
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but in between it's really tough. And if you think
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about from the founder's point of view, trying to drive
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the valuation up is to focus on where the company's going.
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But what most people forget is this isn't a handshake.
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You sign some paperwork and you're done. These deals can
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take six months, nine months year to truly get through,
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which means on the by side, you're having six months,
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nine months, twelve months to watch the forecasts come to life.
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And it's always better to do better than to exceed
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expectations than to be falling short, even by a small
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margin for things you can't control during seasonality or other
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things that you may have incorrectly baked in throughout the transaction.
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And so I would say, don't forget. You're gonna get
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retraded if you do not hit those actual forecasted benchmarks
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around the way. And that becomes a tough pill to
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swallow when you have a number that you're driving towards
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a transaction and you know within the last thirty days
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of the deal they're going now or not for you
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ten percent last and you're so tired and so exhausted
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for going through this.
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Problem, the deal fatigue.
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Deal fatigue, people just go fine, right and there you
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can watch other podcast you watch, you can listen to tons
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of stories, read papers on it. Uh. It's very common.
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Uh.
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And the way I've seen that not happen is to
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be really focused and transparent out executing, which is the
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hardest thing to do when you're also having management meetings
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and getting data rooms together and having to explain files
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in data rooms while you're trying to work with your
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you know team to continue to hit all the major
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milestones within that period. And so it's just be really
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realistic on what your company will do during the period
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of sale. Is I would say a very big lesson.
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Yeah, I mean, yeah, it's like a I mean it's
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pretty much a full time job, just.
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Just doing a deal.
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I don't know how you did too at the same
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time and run two businesses. That is mind blowing. I'm
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surprised you didn't have a heart attack or something.
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It's probably about thirty five pounds heavier than I am
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now too. You can jump to stay you up way
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too late, but.
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Yeah, I get it, I get it fixed. Y.
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Yeah, So why don't you tell me a little bit
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about the specific industries and verticals that you guys are
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focused on if there are any you said previously it's
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pretty much open right to anybody.
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Is there anything you know?
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And I'm talking on this side, I'm talking to you know,
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the LPs and the angels right that are like I
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like to focus on this. Maybe you can say, you know, well,
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the majority of what we're seeing because you know, you're
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a victim of what you see, right, so, so you
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know what we're seeing now is this or we're making
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investments in this space just to try to get their
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attention on Well, maybe we should make a phone call
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to you guys, and you know.
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You know, as we look across the portfolio. But you
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look at a few kind of trend lines that come through.
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We have a few in sports. I think it's a
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very interesting topic. We haven't gone to the place of
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doing you know, minority deals in teams or leagues that
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are starting to come over. But you're seeing more and
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more globalization of sport as you find. As you see that,
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you're seeing a really interesting new leagues like padel coming
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over from Europe. That's very hot and it's like pickleball
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and racquetball kind of merged together. It's a fantastic and
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for the Padell lovers, they'll probably send some nasty messages
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for me saying that, but you know, optically, if you're
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not familiar with it, think about that. But looking at
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the numbers in Europe coming over, it's really taking a
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foothold in New York and they're trying to scale that.
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That is a very interesting opportunity in a new league.
361
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You know, sports tech around recovery and then certainly AI
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in sports is fascinating. We've made an investment in a
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company in that space that we are extremely excited about.
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But we have a few in sports. I would say
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industrial manufacturing is a big spot for us, right, we
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have a great company, Peltronics. It's a smart palette company.
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Fantastic industry first of all, because the whole world runs
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on palette. Every good and service that we both have
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on our walls and in our offices came on a palette.
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It's one time, right, but you start looking at some
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of the inefficiencies in the business around sensors and you
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know the technology around it, and you think it Chipotle
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with their e Coli scare, and you know, where's the
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actual temperatures in the cold shipping, not at the palate
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level in the truck. If you can build a sensor
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technology built in which we have, and make a palette
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that's as light as wood but as durable as plastic
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with sensors in it, that becomes a very interesting play.
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And so that's a company we've been invested in for
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many years. We love platforms. So there's another company, Free Power,
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that does platform charging. So if you think about going
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to a conference, going to a restaurant, going to hotel,
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actually greg just you being in your office right now
384
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and setting down your phone and having it start charging
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right on platform, it becomes a very interesting opportunity. And
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they're endeavoring to make it as ubiquitous as Wi Fi
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right now. And you might say, well, I see these
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charge mats that are all over the place. You know
389
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you can buy and direct to consumer on Amazon or
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somewhere else. Well, it comes down to the technology, because
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the original, you know, technology for wireless charging is that
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magnetic ring on the back of your phone meets a
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magnetic ring on a pad and they end up overheating
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and if they're not aligned, they barely charge. They develop
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this amazing technology with repeating coils, firmware, hardware software. You
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can put down an Android, an iPhone, AirPods and it
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builds the ring under the actual device, knows what it is,
398
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and starts charging it at the highest peak rate. Well,
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I mean it's a very interesting technology mixed with being
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built into countertops, being built into deaths, being built into
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new smart homes, smart hotels, and you look at where
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we're going. That becomes the technology du jour for powering
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devices and charging devices all over. Fassating company. We have
404
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a company, ev Mode here out of California in Irvine
405
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that's doing EV chargers. Now there's no lack of EV chargers, right,
406
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but one of the biggest problems in EV charging is
407
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the fact and I used to have an electric vehicle
408
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that like sixty percent of them are down at any
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one time. So you think about the infrastructure. You go
410
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up and it says there's four available, and there's one
411
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or two and they've all been taken, right, And I
412
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had that happen to me many times, sitting for forty
413
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five minutes for an hour. They built a better product,
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military grade you know, certified product that has a ninety
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nine percent up time and then worked on a different
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incentive plan for the installers and for maintenance and how
417
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it works, and they're working on you know, the level
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two and level three chargers. Like that's a very interesting
419
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way of looking at an existing market and finding a
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piece that's not being addressed, and so we look for
421
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those type of things. We have another fascinating company in
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biotech that embeded a novel way of you know, taking
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new medicine and they're working on some great licensing agreements
424
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right now as a technology. So we really have these
425
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different different companies in different industries, but all are trying
426
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to solve something in traditionally an existing industry that's not
427
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being addressed and that's what we get excited for.
428
00:22:04.680 --> 00:22:07.960
Yeah, you have really good like industrial transformation. You have
429
00:22:08.079 --> 00:22:12.400
the palette deal, which is huge right now, you know,
430
00:22:12.680 --> 00:22:15.400
you have the AI which is just kind of in everything.
431
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Now you have the charging thing, which is a big deal.
432
00:22:18.119 --> 00:22:20.319
They should make a charger so you can drive over
433
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it in your garage instead of having a plug in
434
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your car.
435
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That would be amazing. Yeah.
436
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So it's one of those that and I'm not saying
437
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anything out of the bag, but like you can see
438
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it going there. But the massive amount of and this
439
00:22:33.759 --> 00:22:37.200
is probably I'm over my skis on a knowledge totality,
440
00:22:37.200 --> 00:22:38.920
but I will tell you what that would have to be.
441
00:22:38.960 --> 00:22:40.359
To just pull your car up and have it start
442
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charging would be a monumental feet But I don't think
443
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impossible within our lifetime.
444
00:22:46.400 --> 00:22:49.039
Yeah, I think so too. You know, you could see
445
00:22:49.079 --> 00:22:50.000
them in parking lots.
446
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You know, you just drive up it's charging while you're Yeah,
447
00:22:53.839 --> 00:22:57.160
it's an interesting idea. So let me ask you a
448
00:22:57.160 --> 00:23:00.279
little bit about some of the decisions that that you
449
00:23:00.400 --> 00:23:03.799
think founders make that are bad decisions. One of the
450
00:23:03.839 --> 00:23:06.640
things that I specialized in is I did this five
451
00:23:06.720 --> 00:23:09.319
year research project on why, when, and how founders fail.
452
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So a lot of what I try to do on
453
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the podcast is really tell founders like, hey, don't do
454
00:23:15.240 --> 00:23:18.279
this or look out for this. Maybe you could give
455
00:23:18.319 --> 00:23:19.119
them some advice.
456
00:23:19.680 --> 00:23:22.039
Well, so my quoes should be what percentage of the
457
00:23:22.079 --> 00:23:26.799
companies in your research had founder infighting as a reason
458
00:23:26.839 --> 00:23:27.359
for failure?
459
00:23:28.039 --> 00:23:29.839
Oh, it's like twenty eight percent.
460
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That is a big number in totality.
461
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Right, it's a huge number. It's huge, almost a third. Right,
462
00:23:35.559 --> 00:23:36.759
it's a massive number.
463
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You get married to this vision that you share and
464
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if you think about the amount of just to be
465
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frank divorces that happen in this country, they had a
466
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shared vision too when they started. And sometimes as as
467
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life and as direction goes, they start veering away, and
468
00:23:59.079 --> 00:24:01.880
founder infighting for truly where the company needs to go
469
00:24:02.640 --> 00:24:05.319
becomes a big thing that we look at as that chemistry,
470
00:24:05.319 --> 00:24:08.559
because you're picking your dance partner, right, You're picking the
471
00:24:08.680 --> 00:24:11.640
person that you're hoping knows what lane and what part
472
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of the company they're in charge of, and the other
473
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person knows where their lane is and what they're in
474
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charge of, and they work together beautifully to go make
475
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the thing that they've endeavored to do. I would say
476
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understand who you're doing this with really well, and make
477
00:24:27.240 --> 00:24:30.440
sure your values interests. How do I want to say this,
478
00:24:30.519 --> 00:24:33.880
your amount of effort you're willing to give to make
479
00:24:33.960 --> 00:24:37.319
this successful are aligned. Because it's tough. I mean, if
480
00:24:37.319 --> 00:24:39.920
you're the capital partner who has no expectation at the
481
00:24:39.920 --> 00:24:41.920
beginning to do anything on a day to day basis,
482
00:24:41.920 --> 00:24:44.000
then there should be very clear lines that you're not
483
00:24:44.039 --> 00:24:47.279
going to be there grinding on this new project. But
484
00:24:47.359 --> 00:24:49.240
if you're a fifty to fifty or fifty one to
485
00:24:49.319 --> 00:24:52.519
forty nine partner that is sitting there supposed to be
486
00:24:52.559 --> 00:24:54.440
looking at each other again, you know, across from a
487
00:24:54.480 --> 00:24:58.319
desk working and grinding, and one's off doing lick with
488
00:24:58.440 --> 00:25:00.920
lunches on Fridays and hanging out with their families. No
489
00:25:01.000 --> 00:25:04.359
offense to that, right Like, it's I understand it. And
490
00:25:04.400 --> 00:25:07.359
the other one sitting there for fourteen hours grinding. That's
491
00:25:07.440 --> 00:25:10.400
gonna take its toll over the long run. And traditionally
492
00:25:10.519 --> 00:25:15.960
does number two define your lane? Do very well in
493
00:25:16.000 --> 00:25:19.200
your lane as a company before you decide to go
494
00:25:19.279 --> 00:25:23.400
do something else. Attack another vertical. So let's say you're
495
00:25:23.400 --> 00:25:26.200
doing you know a B to B SaaS company and
496
00:25:26.599 --> 00:25:31.359
it is designed for you know XYZ group. What I
497
00:25:31.480 --> 00:25:33.920
see happen a lot of times is they go, yeah,
498
00:25:33.960 --> 00:25:37.920
but we can also go into this other area or
499
00:25:38.079 --> 00:25:42.000
this other area or this other area, and with limited resources,
500
00:25:42.559 --> 00:25:45.960
they will try to do that, not realizing the speed
501
00:25:46.000 --> 00:25:50.640
to sale or the incumbent foothold is a higher mountain
502
00:25:50.680 --> 00:25:53.000
than they can climb with the resources they have today.
503
00:25:53.359 --> 00:25:58.079
And they wasted time, energy, money, just fully opportunity costs
504
00:25:58.160 --> 00:26:02.640
going and chasing that new thing versus taking that same
505
00:26:02.759 --> 00:26:05.039
quantum of effort and putting it and doubling down into
506
00:26:05.079 --> 00:26:07.319
what they're doing really well and building a moat around
507
00:26:07.359 --> 00:26:11.119
what they have. And they're one vertical showing that and
508
00:26:11.160 --> 00:26:15.400
then going either raise capital or utilizing you know, revenue
509
00:26:15.440 --> 00:26:18.960
to go scale into one other vertical, but you find
510
00:26:19.000 --> 00:26:20.680
they go to five or six right out of the
511
00:26:20.680 --> 00:26:22.359
gate because they can try to pick up little bits
512
00:26:22.359 --> 00:26:25.319
of revenue and then they're you know, an inch deep
513
00:26:25.319 --> 00:26:27.640
and a mile wide instead of being an inch wide
514
00:26:27.640 --> 00:26:32.599
and a mile deep, which those footholds help you be
515
00:26:32.680 --> 00:26:34.960
able to do the next vertical, the next vertical to
516
00:26:35.000 --> 00:26:38.039
show proof points. And I think rushing to say we
517
00:26:38.079 --> 00:26:41.519
can do it all is a huge lesson that, I'd
518
00:26:41.559 --> 00:26:44.359
say certainly we learned as well in different companies that
519
00:26:44.400 --> 00:26:45.119
I've been involved in.
520
00:26:46.000 --> 00:26:48.920
You know, when I look at deals, right, I'm looking
521
00:26:48.960 --> 00:26:51.720
at the horse. I call it the horse and the jockey, right.
522
00:26:51.799 --> 00:26:55.119
So you can have an incredible horse and a jockey
523
00:26:55.119 --> 00:26:58.160
that falls off, or you can have a really great
524
00:26:58.240 --> 00:26:59.839
jockey and an old donkey.
525
00:27:00.119 --> 00:27:00.319
Right.
526
00:27:00.960 --> 00:27:04.279
So when you're looking at these scenarios between the horse
527
00:27:04.319 --> 00:27:06.559
and the jockey, right, you sometimes you're like, Okay, well
528
00:27:06.559 --> 00:27:09.119
the jockey can't ride, but maybe if they lose some
529
00:27:09.200 --> 00:27:10.839
weight and then I teach them how to ride, then
530
00:27:10.880 --> 00:27:14.440
they can ride the horse. How do you, guys, assess
531
00:27:14.680 --> 00:27:18.480
and evolve this situation? And you know, because sometimes you're wrong.
532
00:27:18.519 --> 00:27:20.680
You think you have a great jockey. It turns out
533
00:27:21.000 --> 00:27:23.759
that they speak really well and they seem like they're
534
00:27:23.759 --> 00:27:27.880
on point, but then execution seems to fumble. So how
535
00:27:27.880 --> 00:27:29.920
do you think about that and how do you work
536
00:27:29.960 --> 00:27:33.240
with the companies to help these two things along? In
537
00:27:33.279 --> 00:27:35.559
which one do you focus on more than the other
538
00:27:35.720 --> 00:27:36.960
or is that even the case?
539
00:27:37.279 --> 00:27:39.839
Yeah, so I'll probably start from a due diligence perspective
540
00:27:39.839 --> 00:27:43.799
before we get into actually like working right one naturally,
541
00:27:43.839 --> 00:27:47.359
if they're on their second or third. That tells me
542
00:27:47.400 --> 00:27:50.839
they have the executional prowess to do this again. So
543
00:27:50.880 --> 00:27:52.839
it's owther they get a free pass, but they certainly
544
00:27:52.920 --> 00:27:55.759
get a little asterix right, which says, You've already done
545
00:27:55.759 --> 00:27:58.480
this a couple of times. You know what it takes, right,
546
00:27:58.559 --> 00:28:01.200
This isn't because there's a polyishness. And I think that
547
00:28:01.319 --> 00:28:04.240
said that word right to thinking I want to be
548
00:28:04.400 --> 00:28:07.279
an entrepreneur, having a great idea, but not understanding what
549
00:28:07.319 --> 00:28:10.279
it truly takes to get it done, because it is
550
00:28:10.920 --> 00:28:15.519
the struggle. It is a struggle. Yeah, it is a journey,
551
00:28:15.839 --> 00:28:19.000
and you know it's it's not one for everyone. And
552
00:28:19.039 --> 00:28:22.799
I'm not one of those individuals that stands up and says,
553
00:28:23.359 --> 00:28:25.519
go be an entrepreneur, Like there has to be a
554
00:28:25.599 --> 00:28:29.319
level of craziness that says I'm going to almost recklessly
555
00:28:29.359 --> 00:28:33.160
abandon a comfortable life to go add some really hard
556
00:28:33.359 --> 00:28:37.160
stuff into it on a daily basis that is most
557
00:28:37.279 --> 00:28:40.200
likely statistically going to fail or not be sellable. I've
558
00:28:40.200 --> 00:28:42.200
just built a lifestyle business, so that's great too, but
559
00:28:42.279 --> 00:28:45.200
also like it's not the dream I had but number
560
00:28:45.240 --> 00:28:47.079
two and it was actually one of the gps at
561
00:28:47.079 --> 00:28:50.880
benchmark and forgive me. I forget his name, but said
562
00:28:50.880 --> 00:28:53.759
a great thing he goes. Where founders make mistakes is
563
00:28:53.799 --> 00:28:56.680
if they're building a sailboat company. They want to tell
564
00:28:56.680 --> 00:28:58.240
you about the rigging. They want to tell you about
565
00:28:58.279 --> 00:29:01.519
the beams, they want to tell you about the you know,
566
00:29:01.559 --> 00:29:03.960
the galley, and they want to tell you about all
567
00:29:04.079 --> 00:29:08.599
the things that make the sailboat. What's actually most important
568
00:29:08.960 --> 00:29:13.519
is sell me the wind, because if the wind is going,
569
00:29:13.839 --> 00:29:18.799
it will make all boats launch, and you have time
570
00:29:19.119 --> 00:29:24.039
to change your boat in situ like in flight. But
571
00:29:24.079 --> 00:29:26.319
you do not have time and you do not have
572
00:29:26.359 --> 00:29:30.400
the ability to change the wind. So show me the market,
573
00:29:30.599 --> 00:29:33.559
show me what's possible, show me your ideas on where
574
00:29:33.559 --> 00:29:37.160
this is going and why you're a perfect fit because
575
00:29:37.160 --> 00:29:38.799
there will be more boats just like you that are
576
00:29:38.839 --> 00:29:41.400
going and attack it, and you can get really smart
577
00:29:41.480 --> 00:29:43.759
and figure out how to dial your boat in to
578
00:29:43.839 --> 00:29:46.680
get there faster, be bigger, be stronger. But if there
579
00:29:46.759 --> 00:29:50.559
is no wind, no one's going anywhere. And that becomes
580
00:29:50.599 --> 00:29:53.119
a really interesting point. So we talk about it a
581
00:29:53.160 --> 00:29:56.720
lot of especially in diligence or when I'm having managed
582
00:29:56.759 --> 00:29:59.759
with meetings, like really describe to me as market why
583
00:29:59.759 --> 00:30:03.160
you this is going to change, right, And you know,
584
00:30:03.200 --> 00:30:05.680
we have a company and i'll call property Tech kind
585
00:30:05.720 --> 00:30:10.240
of reworking owning of your primary residence. And they built
586
00:30:10.240 --> 00:30:12.519
this financial instrument that allows you to do some very
587
00:30:12.519 --> 00:30:17.799
meaningful things. And we spent so much time focusing on
588
00:30:17.839 --> 00:30:20.799
their bybox and what that means across the country, and
589
00:30:20.799 --> 00:30:22.799
what that means for the people who own these type
590
00:30:22.799 --> 00:30:25.240
of homes and why this is the largest piece of
591
00:30:25.240 --> 00:30:27.400
their retirement and what that means if they could unlock
592
00:30:27.400 --> 00:30:30.039
extra value out of it over a ten year period.
593
00:30:30.480 --> 00:30:32.799
And like it had nothing to do with their company,
594
00:30:32.799 --> 00:30:34.640
it had everything to do with what's happening in real
595
00:30:34.759 --> 00:30:37.440
estate over the next twenty years and what's happened in
596
00:30:37.480 --> 00:30:40.759
the past twenty years and understanding patterns and understanding what
597
00:30:40.799 --> 00:30:42.880
it can unlock. And you know, and you're starting to
598
00:30:42.880 --> 00:30:44.680
see some things in the news, not about that company,
599
00:30:44.680 --> 00:30:47.400
but about things that people are locked into their homes
600
00:30:47.440 --> 00:30:49.920
and all this and it was a bet for us,
601
00:30:49.920 --> 00:30:52.400
and it was a big one from up to totality
602
00:30:52.359 --> 00:30:55.759
of investment dollars. But we believed the wind, we believed
603
00:30:55.799 --> 00:30:58.319
the market, We believe what they were saying, and we
604
00:30:58.359 --> 00:31:00.799
believe this instrument was sound to be able to capture that,
605
00:31:00.960 --> 00:31:03.359
and they are off doing that and it became one
606
00:31:03.400 --> 00:31:05.480
of those things where it was focusing on the market
607
00:31:06.119 --> 00:31:09.359
and their ability to deliver. And both founders are serial
608
00:31:09.480 --> 00:31:12.319
entrepreneurs who have been working on this as a passion
609
00:31:12.359 --> 00:31:15.359
project for four years where they were operating and you know,
610
00:31:15.480 --> 00:31:18.480
gearing up to sell their company, and you go, you know,
611
00:31:18.519 --> 00:31:20.319
this isn't two guys sitting in their basement and had
612
00:31:20.359 --> 00:31:22.440
a good idea one night. These are guys who are
613
00:31:22.720 --> 00:31:26.720
you know, serial entrepreneurs who have done this before, who
614
00:31:26.759 --> 00:31:29.160
are in this market before, who have seen this gap
615
00:31:29.240 --> 00:31:31.640
and no one addressed it before. And then they're explaining
616
00:31:31.680 --> 00:31:35.000
the market in a way that you're going, that's undeniable,
617
00:31:35.039 --> 00:31:37.200
that's there in coming, and you guys have built an
618
00:31:37.200 --> 00:31:42.359
instrument to help address that. Well, that's an amazing marriage, right, Like,
619
00:31:42.400 --> 00:31:43.880
that's an amazing piece together.
620
00:31:44.559 --> 00:31:47.599
I mean, this is so cool and I really hate
621
00:31:47.599 --> 00:31:50.279
to do this, but we have to stop here. Coming
622
00:31:50.359 --> 00:31:54.160
up next time on the podcast, Chris van Duson, senior
623
00:31:54.200 --> 00:31:57.759
partner at Telecno Capital, will discuss the vital role of
624
00:31:57.799 --> 00:31:59.880
cultivating connections when buildings start.
625
00:32:00.480 --> 00:32:02.200
We love these deals. We put our own money on
626
00:32:02.240 --> 00:32:05.200
the deals, and we want to have this great ecosystem
627
00:32:05.279 --> 00:32:08.559
of people that want to participate in helping this next
628
00:32:08.599 --> 00:32:12.200
generation of entrepreneurs build wonderful, amazing companies that could transform
629
00:32:12.240 --> 00:32:14.319
the world. And when they feel that and see it,
630
00:32:14.359 --> 00:32:16.599
I mean it all comes down to that relationship as well.
631
00:32:18.440 --> 00:32:22.039
This Startup Science Podcast with Gregory Shepherd is brought to
632
00:32:22.039 --> 00:32:26.599
you by Startupscience dot Io. Founders can log on too
633
00:32:26.759 --> 00:32:31.160
startupscience dot io and use code Forbes to get free
634
00:32:31.200 --> 00:32:34.960
access to connect and find out more about greg Go
635
00:32:35.039 --> 00:32:39.839
to Gregory Shepherd dot com. The Startup Science Podcast is
636
00:32:39.880 --> 00:32:41.880
a production of Forbes Books.