How VCs REALLY Evaluate #Startups | #Investor Mindset & #Founder Mistakes

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Language: en
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[Music]
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hello and welcome back to another
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episode of By Design where we believe
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organizations should be run by design
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and not left to chance Today I'm here
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with my good friend and partner Marty
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Marty Osborne That's a hard word to say
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It is It is And our good friend Joe
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Mancini from Front Porch Venture
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Partners out of Raleigh Uh today we're
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going to get uh a little bit of his
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thoughts and insights in the venture
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capital world and what he looks for
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mistakes all that fun stuff like like we
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usually do Joe thanks for taking the
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time and chatting with us today
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Absolutely Yeah it's great to see you
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guys Um tell us a little bit about Front
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Porch Ventures Sure Um so Front Porch
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like you said based in Raleigh Um we are
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a hybrid venture fund Uh so we we invest
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about half our capital into other
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venture funds and about half our capital
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directly into companies
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um strong belief in the southeast and a
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thesis around the region um and its
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growth and the potential for great
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startup outcomes the next couple of
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decades Um so we spent a lot of time DC
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to Miami west too but not including at
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this point Texas and uh yeah great week
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in Greenville uh scouting out a bunch of
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companies and connecting with folks in
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the ecosystem and excited to see you
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guys So yeah it's a bummer it's not on
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the golf course but yeah well we we
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thought about doing that in the golf
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cart It's hard to get Andre following us
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around but one thing you talk about is a
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hybrid I thought that was unique because
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when we think about sort of venture
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capital we don't think about other funds
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and so forth So is that normal or is
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that different unique i mean you'll find
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the structure um you know in other parts
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of the venture world um you'll find
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really big firms like Hamilton Lane with
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a similar strategy and a similar
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structure Um ours is unique in that it's
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focused on the region Um and you know
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really designed by design to um uh you
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know to mimic the way that uh big
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institutions succeed in the asset class
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over the long term Um and that's that's
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you know what they do is they basically
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scout out and find the best funds build
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relationships with them back them and
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then leverage those relationships to get
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into great deals Yeah One thing I was
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really interested reviewing your website
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is your investment strategies Uh not
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specifically like companies and that
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sort of thing but the fact that two of
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your investment strategies are being
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focused and being purpose built which
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again sounds an awfully lot like by
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design Can you just talk a little bit
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about why those two are are two of your
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big investment strategies yeah per I
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mean purpose-built you know is is
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important to us uh we spent a lot of
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time working through exactly how we
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wanted to build the firm and build each
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fund and build a an approach to the
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market that we feel like could be
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lasting and you know is purpose-built
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for the moment um and purpose-built for
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what you know our clients our partners
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you know our investors are looking for
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um and that was I mean that was a long
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process right I mean we spent a we we
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talked to a lot of people we tested a
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lot of things ourselves we um we spent a
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lot of time trying to make sure that we
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got to the right you know model Um and
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we're really happy with it And then we
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do we believe in focus We believe in
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focus for ourselves focus for our fund
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partners focus for our founders that we
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back Um minimizing distractions and just
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um taking the time to get really good at
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something and then be really focused on
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it um is key to each of these entities
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that we're backing succeeding over the
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long term So yeah Marty's favorite word
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is intentionality Yeah Yeah I think well
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every business when we're not
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intentional right then we start
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to move in all different directions and
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so it is interesting to see your focus
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especially on the southeast and that
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portfolio what you guys are doing it's
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kind of exciting for us being in the
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southeast so yeah um hopefully you're
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finding success here Yeah Yeah I mean
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it's our point of view is that the
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primordial ooze is finally coming
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together um across the region and you
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know the benefit is you know I drove
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down from Raleigh on Wednesday I guess a
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couple days ago right I stopped through
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Charlotte on the way it was two hours
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there I saw some folks there two hours
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then down to Greenville right these
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places uh I think as they've continued
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to grow have become highly collaborative
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and have become better together um and
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the you know the beauty of it is that
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they're not far right you can get in the
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car and drive from Birmingham Ham to
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Atlanta or Atlanta to Greenville or
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Atlanta to Chattanooga or Raleigh to
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Richmond right so it's um uh it's you
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know we just every
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ecosystem I would say is different but
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is also similar and we spend a lot of
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time just trying to get to know the
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right you know the right folks in every
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ecosystem and then try to connect them
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as best we can to opportunity and make
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sure that everybody sees kind of if they
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look left and right they look
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north,southeast and west that there's
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interesting things going on across the
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region So so one of the things when
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Marty and I decided to to try to launch
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something was coming up with a name That
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to me that was one of the hardest
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hardest things we did Front Porch
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Ventures sounds interesting Can you kind
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of maybe walk us through how you came up
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with that name yeah it's funny I'll give
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you the director's cut which I'm not
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sure we've ever said like in a you know
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in a uh uh a setting like this before So
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is this a by design exclusive this is a
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by design exclusive So just for you guys
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but we we um I mean the original uh kind
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of the background background story Greg
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Nick and I met in grad school and uh got
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to know each other well and one of the
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things we did uh during school was we
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had done a mentored study with a
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professor whose research was all around
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startup ecosystems and how they emerge
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how they succeed over the long term and
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then also just on different kind of
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private market structures and how the
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private markets work And uh we did all
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of our work for that project on one of
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our front
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porches So I mean I still have the
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binder uh of uh at the time it was front
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porch capital Um and we just really
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enjoyed uh sitting out doing the work
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together having good discussions and you
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know that was a long time ago We kind of
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left that concept at the time to the
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side But as we started to come back
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together after we each had careers doing
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other things um you know the name just
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was still present in our minds right and
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then I think as we've built our brand we
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want it to represent the way that we
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want to do business which is you know we
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want to be able to do it on the front
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porch Yeah Right So I the one thing I
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that stood out to me in that is when I
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started looking at venture capital I was
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always a bootstrap guy was you always
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hear these stories about how mean you
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guys are right how how difficult and
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they're out to get you I know And that's
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I always like to me the more I got in
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and and I always laughed when we first
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met it was we were down at Venture
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Atlanta and we were they had bus tours
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going around and I think you were
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sitting there and I just sat down and we
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just started strike up a conversation
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and we started talking about football
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and ACC You're a Virginia guy I'm a
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Clemson guy And it just always struck me
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because the persona or the thought was
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always like there's this battle and and
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meanness and I was just kind of struck
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by how nice you guys are It just
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friendly and like it's not what we do to
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each other but what we do for each other
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So I don't know Talk more about that
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I I mean I I think anybody who's
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building something you know there's
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there's you know great things are built
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when you can build great partnerships
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and recognize you know the you know the
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incentives that every party at the table
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has and then just try your best to align
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those and be upfront about what your
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incentives are and um try to understand
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on the other sides of the table what
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those people's incentives are and then
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you know try to figure out a way to do
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the work together right um and you know
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that's the way we that's the way we want
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to approach it So I know you're a sports
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fan and it's NFL free agency and you
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hear all these folks say "Hey it's not
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personal it's business." But really I I
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think that's incorrect I think business
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is personal People like to do business
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with people they like If I can sit on
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the front porch and drink a sweet tea or
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in my case an unsweet tea um you know
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you I'm more likely I want to do
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business with those folks I don't want
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to do business where the phone rings and
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Marty has it right What kind of leader
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do you want to be when that phone rings
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do you want to answer it yeah And
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there's a lot of people when they say
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business isn't personal Those are the
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folks probably when they show up on
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somebody's phone people are like "Oh
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god." Well I mean even the investor
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right if you call a company you invested
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in do they want to answer from Joe or
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Nick or Greg right that's to me kind of
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a real telltale of your brand Yeah Yeah
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And it's I mean that doesn't mean for us
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it doesn't mean you're not going to have
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tough conversations but the best tough
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conversations happen from a foundation
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of trust So you know we we just try to
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spend a lot of time building that trust
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with everybody we work with and then you
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know when we have to have a tough
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conversation hopefully it it you know it
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it lands because it's coming from a
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place of of of trusting each other right
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yeah I mean one of our core values was
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simplicity over complexity and I think
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that sort of that front porch gives that
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feeling about simplicity and again it's
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you have an investment thesis like you
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have to make money and and so I think as
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you lay it out that's where the
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relationship is you're upfront here's
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what we're investing in here's what
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happens and if you can meet these
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criteria then y it works it's when
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things I think aren't said is when
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people get in trouble Yeah And our point
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of view is that venture just overall is
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way too mystical a space Yeah Like what
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is it how do you get it who does what um
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and you know we've experienced this
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ourselves We hear from founders all the
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time who experience it And you know we
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want our voice in the mix to be you know
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a voice that's trying to help demystify
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venture right and be upfront about what
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it is and what it isn't have honest
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conversations about whether you know a
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company should be on the venture track
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or shouldn't Um what it means to be on
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the venture track Um and you know that's
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it's it's rocket fuel right you got to
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uh uh you got to you got to know what
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you're putting in the tank Um and uh you
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know uh but like you know we want to
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have those conversations and be upfront
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about it Yeah Yeah And then one of the
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things we try to offer is just
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demystifying the process and acting as a
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resource for founders as they're
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exploring what to do And I'm going to
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put a shameless plug for your newsletter
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because I think it does a great job of
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kind of peeling back that curtain a
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little bit on some of this stuff because
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I always thought you know my venture
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capital is the great and powerful Oz you
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know but it's not the man behind the
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curtain You guys are literally trying to
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pull back that curtain and and show
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folks that hey there's there we're not
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this mystical creature controlling
00:10:56.000 --> 00:10:57.590
everything up here I appreciate that The
00:10:57.600 --> 00:10:59.590
last one we said uh the tagline at the
00:10:59.600 --> 00:11:01.350
top was something like this is and will
00:11:01.360 --> 00:11:03.590
always be an artisal newsletter written
00:11:03.600 --> 00:11:06.230
by hand and not by AI You know any
00:11:06.240 --> 00:11:08.790
hallucinations are our own And you know
00:11:08.800 --> 00:11:10.790
we we always say to people like you know
00:11:10.800 --> 00:11:13.750
get a cup of coffee sit down you know uh
00:11:13.760 --> 00:11:15.590
try to digest this thing We put a ton of
00:11:15.600 --> 00:11:18.150
effort into it and you know try to bring
00:11:18.160 --> 00:11:19.670
a little bit of a perspective on the
00:11:19.680 --> 00:11:22.230
market as well as highlight you know
00:11:22.240 --> 00:11:23.670
some of the investment decisions that
00:11:23.680 --> 00:11:25.829
we've made uh with some context around
00:11:25.839 --> 00:11:28.550
them and then always encourage people to
00:11:28.560 --> 00:11:31.829
reach out ask questions clarify Um and
00:11:31.839 --> 00:11:34.389
it's it's been fun We enjoy uh doing it
00:11:34.399 --> 00:11:37.110
Um but it's it's it's purpose-built It's
00:11:37.120 --> 00:11:39.430
it is on purpose only quarterly Yeah
00:11:39.440 --> 00:11:41.350
Right because it's it's the depth of
00:11:41.360 --> 00:11:43.509
information you know we try to make uh
00:11:43.519 --> 00:11:45.430
make pretty deep and offer a lot So yeah
00:11:45.440 --> 00:11:47.509
I the one I think was it December where
00:11:47.519 --> 00:11:50.630
you laid out your whole deal portfolio
00:11:50.640 --> 00:11:52.710
the structure of it I mean I was kind of
00:11:52.720 --> 00:11:56.389
blown away just by how much depth was in
00:11:56.399 --> 00:11:59.509
there and transparency but it also just
00:11:59.519 --> 00:12:02.230
said this is how we do business Yeah
00:12:02.240 --> 00:12:04.310
Yeah Yeah I think you only get you know
00:12:04.320 --> 00:12:06.470
every you know everybody's on every
00:12:06.480 --> 00:12:08.389
social media platform seeing you know
00:12:08.399 --> 00:12:10.310
you see podcasts you're seeing videos
00:12:10.320 --> 00:12:12.150
you're seeing LinkedIn posts you're I
00:12:12.160 --> 00:12:13.829
mean you're just everybody's just a wash
00:12:13.839 --> 00:12:15.670
in information in their inboxes or in
00:12:15.680 --> 00:12:16.949
every app that they pull up on their
00:12:16.959 --> 00:12:19.750
phone And we want to make like the times
00:12:19.760 --> 00:12:21.269
when we have people's attention we want
00:12:21.279 --> 00:12:23.949
to make meaningful and try to represent
00:12:23.959 --> 00:12:26.069
our brand and the way that we do
00:12:26.079 --> 00:12:27.590
business and try to share information
00:12:27.600 --> 00:12:29.670
that's useful and you know kind of shoot
00:12:29.680 --> 00:12:32.230
that shot Well right So it's we had that
00:12:32.240 --> 00:12:34.470
conversation because there's this sort
00:12:34.480 --> 00:12:38.230
of adage you know just a pound pound
00:12:38.240 --> 00:12:40.310
and I think it gets to the point where
00:12:40.320 --> 00:12:43.269
it gets boring and you're just like same
00:12:43.279 --> 00:12:45.990
thing said and so when you see somebody
00:12:46.000 --> 00:12:47.829
put something out that's intentional
00:12:47.839 --> 00:12:50.069
that's at a certain interval like it's
00:12:50.079 --> 00:12:52.550
almost refreshing Yeah Yeah I mean
00:12:52.560 --> 00:12:54.230
that's what we want to be because it it
00:12:54.240 --> 00:12:56.230
um Yeah Yeah it's and I think it's you
00:12:56.240 --> 00:12:57.750
know I don't know say what you want
00:12:57.760 --> 00:13:00.230
about it but we've we've evolved into a
00:13:00.240 --> 00:13:03.430
144 character world right so the vast
00:13:03.440 --> 00:13:05.350
majority of people are scrolling on
00:13:05.360 --> 00:13:06.949
these screens not actually reading or
00:13:06.959 --> 00:13:10.150
digesting that much Um we you know it's
00:13:10.160 --> 00:13:12.550
intentional that we put more than 144
00:13:12.560 --> 00:13:15.430
characters way more Yeah into the things
00:13:15.440 --> 00:13:18.949
that we put out because you know uh we
00:13:18.959 --> 00:13:20.870
want to represent the depth of thought
00:13:20.880 --> 00:13:23.430
that we put into the business So and
00:13:23.440 --> 00:13:24.710
since we're talking about that where can
00:13:24.720 --> 00:13:28.069
folks go to to to subscribe so they get
00:13:28.079 --> 00:13:29.990
that newsletter oh sure Yeah just uh
00:13:30.000 --> 00:13:31.590
frontvp.com
00:13:31.600 --> 00:13:33.750
Yeah I highly recommend everybody do it
00:13:33.760 --> 00:13:35.110
even me Sometimes I'm reading it and
00:13:35.120 --> 00:13:37.590
it's like a foreign language but um it
00:13:37.600 --> 00:13:40.069
it's really interesting stuff So since I
00:13:40.079 --> 00:13:41.269
think most people are probably listening
00:13:41.279 --> 00:13:43.750
because they want to hear an investor's
00:13:43.760 --> 00:13:46.310
mindset around some things So maybe
00:13:46.320 --> 00:13:47.829
let's start like what are some things
00:13:47.839 --> 00:13:49.590
you look for you know you just said you
00:13:49.600 --> 00:13:51.190
went to Charlotte you came here What are
00:13:51.200 --> 00:13:52.710
some things you look for in an
00:13:52.720 --> 00:13:54.310
organization that even piques your
00:13:54.320 --> 00:13:56.710
interest in maybe deciding whether you
00:13:56.720 --> 00:14:00.150
either sit down with them or not um yeah
00:14:00.160 --> 00:14:03.670
I mean uh many things I would say I mean
00:14:03.680 --> 00:14:05.350
at the start on the founder side we
00:14:05.360 --> 00:14:07.110
spend a lot of time on founder market
00:14:07.120 --> 00:14:11.110
fit um and making sure that uh the folks
00:14:11.120 --> 00:14:13.910
that we back are really you know a good
00:14:13.920 --> 00:14:15.350
fit for the businesses that they're
00:14:15.360 --> 00:14:17.990
building Um we like really focused
00:14:18.000 --> 00:14:20.790
businesses Um you know going back to the
00:14:20.800 --> 00:14:23.030
to the theme of focus So you know we'll
00:14:23.040 --> 00:14:25.990
invest in a lot of vertical SAS
00:14:26.000 --> 00:14:27.829
businesses I mean amongst others but the
00:14:27.839 --> 00:14:29.750
the the reason that we focus on kind of
00:14:29.760 --> 00:14:31.829
the vertical aspect of it is twofold One
00:14:31.839 --> 00:14:34.069
is that we feel like the SAS world is
00:14:34.079 --> 00:14:36.389
evolving such that you know these
00:14:36.399 --> 00:14:39.110
businesses can be built with uh much
00:14:39.120 --> 00:14:41.430
more intentionality for a specific space
00:14:41.440 --> 00:14:44.949
Right Right And that gives uh the people
00:14:44.959 --> 00:14:47.590
who are creating those businesses some
00:14:47.600 --> 00:14:49.829
uh the ability to uh charge a little
00:14:49.839 --> 00:14:51.750
more right because they've built
00:14:51.760 --> 00:14:53.189
something that isn't just you know kind
00:14:53.199 --> 00:14:56.389
of vanilla and offered to a broad set of
00:14:56.399 --> 00:14:58.389
users and companies but is you know
00:14:58.399 --> 00:15:02.230
purpose-built for the vertical Um and
00:15:02.240 --> 00:15:04.870
you know we also just think it it uh the
00:15:04.880 --> 00:15:06.550
kind of the next wave of software is
00:15:06.560 --> 00:15:08.870
going to be uh built in that way and
00:15:08.880 --> 00:15:10.629
that there's huge opportunity for
00:15:10.639 --> 00:15:12.870
founders who have really great you know
00:15:12.880 --> 00:15:17.350
market fit and uh are are zoomed in
00:15:17.360 --> 00:15:19.430
laser focused on a vertical and then
00:15:19.440 --> 00:15:21.509
serve those customers really really well
00:15:21.519 --> 00:15:24.069
What what thing was you see a lot of
00:15:24.079 --> 00:15:26.629
discussion even in the SAS world like
00:15:26.639 --> 00:15:29.590
MVP minimum viable product and certain
00:15:29.600 --> 00:15:31.110
development tools like just get
00:15:31.120 --> 00:15:33.509
something out there but I always wonder
00:15:33.519 --> 00:15:35.750
like you sign a bunch of people up but
00:15:35.760 --> 00:15:37.590
just you have this minimal viable
00:15:37.600 --> 00:15:39.110
product but do you really have something
00:15:39.120 --> 00:15:41.110
to scale like how do you make that
00:15:41.120 --> 00:15:44.310
evaluation or where do you see companies
00:15:44.320 --> 00:15:47.750
in that like product life cycle can they
00:15:47.760 --> 00:15:50.150
get themselves in trouble trying to be
00:15:50.160 --> 00:15:52.230
too minimal signing people up or is that
00:15:52.240 --> 00:15:53.990
a good way to go it's interesting I It's
00:15:54.000 --> 00:15:56.389
a great question I um I think you know
00:15:56.399 --> 00:15:59.030
we try to take it uh kind of opportunity
00:15:59.040 --> 00:16:02.069
by opportunity Um I would say if I was
00:16:02.079 --> 00:16:04.550
painting with like broad strokes we what
00:16:04.560 --> 00:16:07.110
we try to test for is you know there are
00:16:07.120 --> 00:16:08.629
investors out there who have revenue
00:16:08.639 --> 00:16:10.870
thresholds for their investments right
00:16:10.880 --> 00:16:14.389
we don't Mhm Um and uh we're we're
00:16:14.399 --> 00:16:16.230
instead really focused if it's at the
00:16:16.240 --> 00:16:18.790
early stage with you know an opportunity
00:16:18.800 --> 00:16:21.030
in a business that's you know just
00:16:21.040 --> 00:16:22.629
securing their first customers and
00:16:22.639 --> 00:16:25.350
starting to grow We want to understand
00:16:25.360 --> 00:16:26.870
you know okay how many customers are
00:16:26.880 --> 00:16:29.430
there who are they and then what has
00:16:29.440 --> 00:16:31.350
their experience been and and have they
00:16:31.360 --> 00:16:33.030
yet had a moment where they could have
00:16:33.040 --> 00:16:36.389
decided not to pay for this and decided
00:16:36.399 --> 00:16:39.509
to continue paying for it
00:16:39.519 --> 00:16:41.910
Um and then you can match that with you
00:16:41.920 --> 00:16:43.590
know great founders typically have the
00:16:43.600 --> 00:16:45.590
next 10 or 15 things that they want to
00:16:45.600 --> 00:16:47.590
build in mind and you have really
00:16:47.600 --> 00:16:49.910
in-depth discussions around that And um
00:16:49.920 --> 00:16:51.590
I think the good news around you know
00:16:51.600 --> 00:16:53.030
the startup space right now is you can
00:16:53.040 --> 00:16:55.990
get an MVP out faster than ever Right
00:16:56.000 --> 00:16:57.590
Right And from our perspective we'll see
00:16:57.600 --> 00:16:59.590
companies at the preede that are far
00:16:59.600 --> 00:17:04.069
more mature than they've ever been Um
00:17:04.079 --> 00:17:05.429
but you always want to you know you want
00:17:05.439 --> 00:17:07.669
to kind of uh not get ahead of your skis
00:17:07.679 --> 00:17:08.949
right
00:17:08.959 --> 00:17:11.189
Um yeah How much of the decision process
00:17:11.199 --> 00:17:14.470
to invest is not or not based on the
00:17:14.480 --> 00:17:17.669
product and based on the founder so how
00:17:17.679 --> 00:17:19.110
much how much are you betting on the
00:17:19.120 --> 00:17:20.549
person versus how much are you betting
00:17:20.559 --> 00:17:22.949
on the product yeah I mean it's both
00:17:22.959 --> 00:17:24.470
right so we spend a lot of time on the
00:17:24.480 --> 00:17:26.230
product side It's we you know you you
00:17:26.240 --> 00:17:27.429
have to be offering something that's
00:17:27.439 --> 00:17:30.070
differentiated valuable um you have to
00:17:30.080 --> 00:17:31.110
demonstrate that you're building
00:17:31.120 --> 00:17:32.789
something that can continue to evolve
00:17:32.799 --> 00:17:35.789
and go you know across the road map into
00:17:35.799 --> 00:17:38.549
um uh into something that matures and
00:17:38.559 --> 00:17:41.270
matures and matures over time Um but
00:17:41.280 --> 00:17:44.070
it's also I mean the you know uh
00:17:44.080 --> 00:17:47.350
creating a company is a long journey
00:17:47.360 --> 00:17:49.270
right and we spend a lot of time with
00:17:49.280 --> 00:17:52.950
founders uh trying to discern whether
00:17:52.960 --> 00:17:54.310
you know you know kind of what they're
00:17:54.320 --> 00:17:57.750
in that journey for and um and try to
00:17:57.760 --> 00:17:59.029
make sure that they're ready for the
00:17:59.039 --> 00:18:01.029
long journey because these these are not
00:18:01.039 --> 00:18:04.710
two and three years this is no no it
00:18:04.720 --> 00:18:06.070
just reminded me of the call we got like
00:18:06.080 --> 00:18:07.510
I've been at this six months and I'm
00:18:07.520 --> 00:18:09.430
just ready to get out You know it just
00:18:09.440 --> 00:18:12.789
it just takes a long time right um I I
00:18:12.799 --> 00:18:14.789
always laugh I think entrepreneur I say
00:18:14.799 --> 00:18:17.029
this and I just did a podcast where I I
00:18:17.039 --> 00:18:19.110
think we're half crazy because in the
00:18:19.120 --> 00:18:20.870
startup world it's like pushing a train
00:18:20.880 --> 00:18:24.470
up the hill Yeah And you can get so far
00:18:24.480 --> 00:18:27.110
and if you slip up that thing is just
00:18:27.120 --> 00:18:29.990
going to run you over and it's so hard
00:18:30.000 --> 00:18:33.350
to get there And so that founder and
00:18:33.360 --> 00:18:36.150
their ability like their why probably
00:18:36.160 --> 00:18:37.750
cuts to are they going to be there when
00:18:37.760 --> 00:18:39.909
the going gets tough Absolutely And
00:18:39.919 --> 00:18:41.750
there and there are tough moments right
00:18:41.760 --> 00:18:43.830
and um what we try to do is build a
00:18:43.840 --> 00:18:45.750
relationship with founders You know more
00:18:45.760 --> 00:18:47.669
often we're partnering together with a
00:18:47.679 --> 00:18:49.350
lead investor when we come in on the
00:18:49.360 --> 00:18:51.750
direct side So the the lead we believe
00:18:51.760 --> 00:18:54.789
in really good strong lead investors and
00:18:54.799 --> 00:18:56.950
uh have been fortunate to know many of
00:18:56.960 --> 00:18:58.710
them and back many of them here in the
00:18:58.720 --> 00:19:00.990
southeast Um and then we try to
00:19:01.000 --> 00:19:03.990
complement you know it's lead investors
00:19:04.000 --> 00:19:05.270
the founder is going to see them at
00:19:05.280 --> 00:19:07.190
their board meeting every quarter right
00:19:07.200 --> 00:19:10.070
and the board interaction is a a certain
00:19:10.080 --> 00:19:12.549
type of interaction right um we try to
00:19:12.559 --> 00:19:14.710
offer ourselves because we're not you
00:19:14.720 --> 00:19:16.470
know typically doing a ton of board work
00:19:16.480 --> 00:19:19.070
as a resource for founders and founding
00:19:19.080 --> 00:19:21.750
teams you know on happy Fridays and on
00:19:21.760 --> 00:19:24.789
frustrating Fridays right um so like
00:19:24.799 --> 00:19:26.470
we're always happy to be the call when
00:19:26.480 --> 00:19:29.190
it's you know hey we had this great week
00:19:29.200 --> 00:19:30.789
I want to tell you about it Can we go
00:19:30.799 --> 00:19:32.390
get a beer if they're if we're somewhere
00:19:32.400 --> 00:19:36.070
in town absolutely Right Um or hey you
00:19:36.080 --> 00:19:37.990
know I got a call one time you know I
00:19:38.000 --> 00:19:39.750
need to fire somebody I've never fired
00:19:39.760 --> 00:19:41.669
anybody before
00:19:41.679 --> 00:19:45.510
you know and uh just you know first off
00:19:45.520 --> 00:19:47.430
you know this is this is not going to be
00:19:47.440 --> 00:19:49.029
a great experience for you right but but
00:19:49.039 --> 00:19:51.350
but walking and and you know worse yet
00:19:51.360 --> 00:19:52.390
for the person who's going to be
00:19:52.400 --> 00:19:54.470
impacted right but here's the best way
00:19:54.480 --> 00:19:56.710
to do it you know in our experience and
00:19:56.720 --> 00:19:59.510
trying to give them some coaching um
00:19:59.520 --> 00:20:01.990
around topics like that So yeah I mean
00:20:02.000 --> 00:20:03.510
one thing we always said you got to
00:20:03.520 --> 00:20:06.470
weigh in to buy in And what happens is
00:20:06.480 --> 00:20:08.230
hopefully you get a board that's
00:20:08.240 --> 00:20:10.310
weighing in Like sometimes they think a
00:20:10.320 --> 00:20:12.549
board meeting should be no discussion no
00:20:12.559 --> 00:20:15.190
challenge But that is actually the worst
00:20:15.200 --> 00:20:16.870
scenario Like the best boards and you
00:20:16.880 --> 00:20:18.470
might talk about this are ones that
00:20:18.480 --> 00:20:20.390
challenge Doesn't mean they're not doing
00:20:20.400 --> 00:20:21.830
the right thing They're just want to
00:20:21.840 --> 00:20:23.909
push that Yeah Entrepreneur Are you
00:20:23.919 --> 00:20:25.750
thinking about and just almost their
00:20:25.760 --> 00:20:27.830
thought process yeah Yeah And we like I
00:20:27.840 --> 00:20:29.430
said we don't do a ton of board work
00:20:29.440 --> 00:20:31.110
just given our model but we certainly
00:20:31.120 --> 00:20:32.950
have seen and been on a variety of
00:20:32.960 --> 00:20:34.789
boards over time And there are way too
00:20:34.799 --> 00:20:38.149
many sleepy boards out there Um but I
00:20:38.159 --> 00:20:39.510
also think you know it can cut the other
00:20:39.520 --> 00:20:41.029
way where you have boards that are that
00:20:41.039 --> 00:20:43.350
are kind of you know acting in a way
00:20:43.360 --> 00:20:45.669
that's beyond their remitt right so I
00:20:45.679 --> 00:20:47.350
think it's important for the for the
00:20:47.360 --> 00:20:48.710
founder and for everybody who's
00:20:48.720 --> 00:20:50.230
participating in the in the board to
00:20:50.240 --> 00:20:52.149
have a conversation around kind of who's
00:20:52.159 --> 00:20:54.310
going to do what and then being in touch
00:20:54.320 --> 00:20:56.310
through all moments of the company on
00:20:56.320 --> 00:20:59.110
you know are we are we are we value add
00:20:59.120 --> 00:21:00.710
to the founder the founding team in the
00:21:00.720 --> 00:21:05.029
company Um so it's uh it's an it's a I
00:21:05.039 --> 00:21:07.110
think it's a fascinating topic because
00:21:07.120 --> 00:21:09.230
many of our investments are
00:21:09.240 --> 00:21:11.590
happening in the first moment that a
00:21:11.600 --> 00:21:15.029
board is created right so you don't
00:21:15.039 --> 00:21:16.950
really see that interaction yet Well
00:21:16.960 --> 00:21:18.070
it's interesting Yeah there may have
00:21:18.080 --> 00:21:19.990
been advisers around the table who are
00:21:20.000 --> 00:21:21.750
giving some advice to the founder along
00:21:21.760 --> 00:21:23.830
the way but you know the lead investor
00:21:23.840 --> 00:21:25.510
is going to create a board right and
00:21:25.520 --> 00:21:27.430
it's it's going to be a real board right
00:21:27.440 --> 00:21:28.630
but then you're going to have the first
00:21:28.640 --> 00:21:30.950
board meeting Um and then you're going
00:21:30.960 --> 00:21:32.390
to have the second And you know as with
00:21:32.400 --> 00:21:34.149
anything just having a a check-in
00:21:34.159 --> 00:21:36.070
periodically of like how this is going I
00:21:36.080 --> 00:21:38.870
think is is important Um and then as
00:21:38.880 --> 00:21:39.909
with any group of people working
00:21:39.919 --> 00:21:41.750
together trying to understand what
00:21:41.760 --> 00:21:43.590
everybody's working styles and strengths
00:21:43.600 --> 00:21:45.750
are you know such that those strengths
00:21:45.760 --> 00:21:47.750
can be maximized around the table Right
00:21:47.760 --> 00:21:51.029
Now obviously viewers of of this um
00:21:51.039 --> 00:21:53.270
YouTube channel know Marty and I are
00:21:53.280 --> 00:21:55.990
disc and working genius evangelist We
00:21:56.000 --> 00:21:57.270
believe in it You just mentioned knowing
00:21:57.280 --> 00:21:58.470
people's work Do you guys use
00:21:58.480 --> 00:22:00.070
assessments in your partnerships with
00:22:00.080 --> 00:22:03.110
these founders or well um our our firms
00:22:03.120 --> 00:22:05.430
do We typically will layer on an aspect
00:22:05.440 --> 00:22:08.710
of it as well Um it's it's interesting I
00:22:08.720 --> 00:22:10.789
mean I I I find this stuff fascinating I
00:22:10.799 --> 00:22:13.350
I was first introduced to it I long ago
00:22:13.360 --> 00:22:17.110
I was at at Google and Google had a a
00:22:17.120 --> 00:22:19.270
tool called True Colors and it was kind
00:22:19.280 --> 00:22:21.830
of the four colors version of um of
00:22:21.840 --> 00:22:23.510
Working Genius which I think now was six
00:22:23.520 --> 00:22:24.630
And there's you know different versions
00:22:24.640 --> 00:22:27.510
of this thing right but I hadn't it's
00:22:27.520 --> 00:22:29.190
funny I I I was having a frustrating
00:22:29.200 --> 00:22:30.549
interaction with somebody that I was
00:22:30.559 --> 00:22:33.029
working with Um and this guy we were
00:22:33.039 --> 00:22:34.710
good friends like we were very close but
00:22:34.720 --> 00:22:35.950
from a working
00:22:35.960 --> 00:22:38.870
perspective we had conflict right and
00:22:38.880 --> 00:22:40.310
like couldn't it was just like kind of
00:22:40.320 --> 00:22:44.390
like talking past each other Um and only
00:22:44.400 --> 00:22:46.230
like the unlock for us was eventually
00:22:46.240 --> 00:22:48.870
doing this true colors training where we
00:22:48.880 --> 00:22:51.029
we realized that I was naturally blue
00:22:51.039 --> 00:22:54.070
and gold so people in lists and he was
00:22:54.080 --> 00:22:56.909
naturally green and orange so logic and
00:22:56.919 --> 00:23:00.950
action right and that we we were just
00:23:00.960 --> 00:23:02.630
naturally going to we had different
00:23:02.640 --> 00:23:05.110
working styles right and the unlock for
00:23:05.120 --> 00:23:07.110
us was that that created a language for
00:23:07.120 --> 00:23:08.950
us to have a conversation about it And
00:23:08.960 --> 00:23:10.390
once we had that we were off to the
00:23:10.400 --> 00:23:12.310
races Yep Right but prior to that it was
00:23:12.320 --> 00:23:13.669
a super frustrating experience for both
00:23:13.679 --> 00:23:14.950
of us because he would say I would say
00:23:14.960 --> 00:23:16.310
"Well what about the people?" And he
00:23:16.320 --> 00:23:17.830
would say "Why do you care about the
00:23:17.840 --> 00:23:19.110
people what about the logic where's the
00:23:19.120 --> 00:23:20.149
action?" Right and I would say like
00:23:20.159 --> 00:23:21.510
"What about the list?" And he's like "We
00:23:21.520 --> 00:23:22.630
have to take action." It was like this
00:23:22.640 --> 00:23:25.110
whole you know circular circular thing
00:23:25.120 --> 00:23:27.590
right um but we and he's still you know
00:23:27.600 --> 00:23:28.950
great friend to this day But until we
00:23:28.960 --> 00:23:30.710
had that experience you know we weren't
00:23:30.720 --> 00:23:32.390
really all that good at working together
00:23:32.400 --> 00:23:34.070
And what's crazy is you both needed each
00:23:34.080 --> 00:23:36.070
other Like that's what's the you get
00:23:36.080 --> 00:23:37.830
this friction and you get this oh they
00:23:37.840 --> 00:23:39.430
annoy me But when you really unlock it
00:23:39.440 --> 00:23:41.510
it's oh my gosh they helped me bring out
00:23:41.520 --> 00:23:43.029
the best and you're helping them bring
00:23:43.039 --> 00:23:44.390
out the best And once you figure it out
00:23:44.400 --> 00:23:46.549
and have that framework and conversation
00:23:46.559 --> 00:23:48.390
like you said it's it's rocket fuel to
00:23:48.400 --> 00:23:50.230
the moon Yeah And you feel I mean I that
00:23:50.240 --> 00:23:52.310
for me was a career like a professional
00:23:52.320 --> 00:23:54.149
light bulb moment right you look back
00:23:54.159 --> 00:23:55.990
and you have some of those throughout
00:23:56.000 --> 00:23:57.669
you know throughout your career And you
00:23:57.679 --> 00:23:59.190
know we've then we we've applied that at
00:23:59.200 --> 00:24:00.950
Front Porch with the dynamic between
00:24:00.960 --> 00:24:03.430
Greg Nick and I um and trying to make
00:24:03.440 --> 00:24:05.029
sure that we have a language to talk to
00:24:05.039 --> 00:24:06.310
each other about the way that we work
00:24:06.320 --> 00:24:08.950
and make decisions Um we strongly
00:24:08.960 --> 00:24:10.310
encourage and want to make sure that
00:24:10.320 --> 00:24:12.390
every fund we invest in has an approach
00:24:12.400 --> 00:24:14.549
to this Um and we spend a lot of time
00:24:14.559 --> 00:24:16.310
trying to understand what the founder
00:24:16.320 --> 00:24:17.990
and the founding team look like from a
00:24:18.000 --> 00:24:19.990
working styles perspective as well It's
00:24:20.000 --> 00:24:22.070
funny Do you get when we go into
00:24:22.080 --> 00:24:23.750
companies you get there's always one or
00:24:23.760 --> 00:24:25.510
two that don't want to take it because
00:24:25.520 --> 00:24:27.190
they I don't know if they just they're
00:24:27.200 --> 00:24:28.630
scared of the results or don't want to
00:24:28.640 --> 00:24:29.830
know the results They think there's a
00:24:29.840 --> 00:24:32.390
good or there's a pass fail that you
00:24:32.400 --> 00:24:34.230
know that kind of stuff but it's not It
00:24:34.240 --> 00:24:36.470
really just opens up who you are What
00:24:36.480 --> 00:24:38.390
one of the things um Jim Collins wrote
00:24:38.400 --> 00:24:40.549
the book Good to Great and I thought it
00:24:40.559 --> 00:24:42.710
was always interesting because he talked
00:24:42.720 --> 00:24:45.110
about getting the right person and the
00:24:45.120 --> 00:24:47.510
right seat on the bus Yep But he never
00:24:47.520 --> 00:24:51.430
really talked about what right is And he
00:24:51.440 --> 00:24:52.870
did make one other comment that I
00:24:52.880 --> 00:24:54.789
thought was interesting that said that
00:24:54.799 --> 00:24:56.549
getting these right people is more
00:24:56.559 --> 00:24:58.149
important than strategy because if you
00:24:58.159 --> 00:25:00.789
get on the bus with the right people
00:25:00.799 --> 00:25:03.029
you'll figure out where to go And so
00:25:03.039 --> 00:25:04.630
talk a little bit more like we've talked
00:25:04.640 --> 00:25:07.190
about people but how that plays into
00:25:07.200 --> 00:25:09.269
your investment decisions and just
00:25:09.279 --> 00:25:11.909
looking at you know the leadership team
00:25:11.919 --> 00:25:13.750
Yeah Look look I mean we're not invest
00:25:13.760 --> 00:25:15.590
like at the phase that we invest in
00:25:15.600 --> 00:25:17.590
These are not organized buses You're not
00:25:17.600 --> 00:25:19.990
like you're not like getting your ticket
00:25:20.000 --> 00:25:23.269
and you're in A1 and you're in like C14
00:25:23.279 --> 00:25:24.710
and you know it's I was trying to think
00:25:24.720 --> 00:25:26.549
of like an airplane analogy but it's I
00:25:26.559 --> 00:25:28.789
mean it's it's uh I mean I'll use a
00:25:28.799 --> 00:25:30.789
silly one I mean the the the airplanes
00:25:30.799 --> 00:25:32.390
are you know are being built as they're
00:25:32.400 --> 00:25:35.430
flown right and you know I mean many of
00:25:35.440 --> 00:25:37.110
these teams like hey you started off in
00:25:37.120 --> 00:25:38.549
row one and you're doing this type of
00:25:38.559 --> 00:25:40.710
work but then oh hey we need to go do
00:25:40.720 --> 00:25:41.909
this type of work now so you're going to
00:25:41.919 --> 00:25:45.510
go sit in row four And um I think you
00:25:45.520 --> 00:25:46.870
know it's interesting to watch companies
00:25:46.880 --> 00:25:48.630
that we've invested in as they've grown
00:25:48.640 --> 00:25:50.470
because at a certain point you do start
00:25:50.480 --> 00:25:53.909
to build in more rows and seats and
00:25:53.919 --> 00:25:55.990
tickets I'm extending the analogy too
00:25:56.000 --> 00:25:57.510
far but you know you get what I mean
00:25:57.520 --> 00:25:58.950
right they're going to be committees and
00:25:58.960 --> 00:26:00.789
policies and working groups and things
00:26:00.799 --> 00:26:03.750
like that Um the best early early stage
00:26:03.760 --> 00:26:05.430
companies have very little of that
00:26:05.440 --> 00:26:06.870
because they're just chasing an
00:26:06.880 --> 00:26:08.710
opportunity and they're filled with
00:26:08.720 --> 00:26:10.390
people who say "Okay fine I'll go sit in
00:26:10.400 --> 00:26:12.789
row two I'll go sit in row seven right i
00:26:12.799 --> 00:26:15.830
am here to make sure that this bus
00:26:15.840 --> 00:26:18.470
accelerates." We can we could uh we
00:26:18.480 --> 00:26:20.070
could extend the analogy way too far but
00:26:20.080 --> 00:26:24.630
it um it uh it's yeah it's it's uh I
00:26:24.640 --> 00:26:26.870
think anytime we feel like there's
00:26:26.880 --> 00:26:29.750
structure it's interesting like you will
00:26:29.760 --> 00:26:31.590
see companies that have too many like
00:26:31.600 --> 00:26:33.990
too much of the you go sit in this seat
00:26:34.000 --> 00:26:37.269
too early Yeah Um but then you'll also
00:26:37.279 --> 00:26:39.029
see companies that don't have enough of
00:26:39.039 --> 00:26:40.230
hey like everybody needs to like have
00:26:40.240 --> 00:26:41.350
like you have to like sit in a seat
00:26:41.360 --> 00:26:43.190
right at least sit down At least sit
00:26:43.200 --> 00:26:45.909
down We're moving Exactly Exactly Well
00:26:45.919 --> 00:26:48.149
and that's my analogy is I think the
00:26:48.159 --> 00:26:49.909
smaller you are the earlier you are the
00:26:49.919 --> 00:26:52.710
more important this assessments are
00:26:52.720 --> 00:26:54.789
because I my analogy is always if I'm in
00:26:54.799 --> 00:26:56.390
a canoe and you stand up start jumping
00:26:56.400 --> 00:26:58.149
up and down we're tipping over Yeah If
00:26:58.159 --> 00:27:00.070
we're on a cruise ship and you start
00:27:00.080 --> 00:27:02.149
jumping up and down it's not even going
00:27:02.159 --> 00:27:04.310
to rock right so if you if you're just
00:27:04.320 --> 00:27:06.070
growing and you okay we've got another
00:27:06.080 --> 00:27:07.590
row we need to fill and you fill that
00:27:07.600 --> 00:27:10.149
with the wrong person it just sets you
00:27:10.159 --> 00:27:12.710
back so much farther than you know if
00:27:12.720 --> 00:27:14.950
you're a 300 person firm and you hire
00:27:14.960 --> 00:27:17.669
one bad one you'll survive Yep Yep Yeah
00:27:17.679 --> 00:27:19.990
It um Yeah I think it's I think it's a
00:27:20.000 --> 00:27:22.630
great analogy Um I mean we believe so
00:27:22.640 --> 00:27:24.950
hard at by Design that in the early
00:27:24.960 --> 00:27:28.390
stages like those hiring mistakes we
00:27:28.400 --> 00:27:30.549
kind of talked about this last night is
00:27:30.559 --> 00:27:32.310
people get money and the first thing is
00:27:32.320 --> 00:27:33.830
they want to run out and hire a bunch of
00:27:33.840 --> 00:27:37.510
people Yeah And it's such a mistake Yeah
00:27:37.520 --> 00:27:39.269
And it just I mean every of those
00:27:39.279 --> 00:27:42.470
decisions is I mean amongst the most
00:27:42.480 --> 00:27:44.310
important decisions you're going to make
00:27:44.320 --> 00:27:46.390
And you know the the success rate in
00:27:46.400 --> 00:27:49.269
hiring just in general is low right and
00:27:49.279 --> 00:27:50.950
you need to maximize your chances of
00:27:50.960 --> 00:27:52.789
success because you're going to have you
00:27:52.799 --> 00:27:54.710
know right now the the average the
00:27:54.720 --> 00:27:58.029
median series A company has 13
00:27:58.039 --> 00:28:01.350
employees right so people will go raise
00:28:01.360 --> 00:28:02.870
around and they're going to try to go
00:28:02.880 --> 00:28:04.789
from having five or six employees to
00:28:04.799 --> 00:28:08.310
having maybe you know 13 right and each
00:28:08.320 --> 00:28:10.630
of those hires have to be great hires
00:28:10.640 --> 00:28:12.870
And then for those teams if any of them
00:28:12.880 --> 00:28:16.630
are not it's best for everybody if you
00:28:16.640 --> 00:28:18.389
move on from that person as quickly as
00:28:18.399 --> 00:28:19.990
you can and find the next person who's
00:28:20.000 --> 00:28:22.230
ready to go Marty mention you mentioned
00:28:22.240 --> 00:28:23.350
in the book you mentioned it in a
00:28:23.360 --> 00:28:24.950
previous episode What are founders
00:28:24.960 --> 00:28:28.149
really bad at we suck at hiring because
00:28:28.159 --> 00:28:31.430
our our we sit because one is we don't
00:28:31.440 --> 00:28:33.990
want to take the time So we see somebody
00:28:34.000 --> 00:28:35.669
we like and we're like "Bring them on."
00:28:35.679 --> 00:28:36.830
And then we
00:28:36.840 --> 00:28:39.269
realize they're not the right person or
00:28:39.279 --> 00:28:40.789
they're not the right fit And then we're
00:28:40.799 --> 00:28:43.110
like "Crap." And then we're nice people
00:28:43.120 --> 00:28:45.190
So then we don't want to let them go So
00:28:45.200 --> 00:28:47.269
we put up with bad behavior We put up
00:28:47.279 --> 00:28:50.470
with bad performance And so to me
00:28:50.480 --> 00:28:52.470
building a process that sort of takes
00:28:52.480 --> 00:28:56.070
our gut out that helps us If we know we
00:28:56.080 --> 00:28:59.669
need a high tenacity person then we can
00:28:59.679 --> 00:29:01.430
figure that out if we need a more
00:29:01.440 --> 00:29:04.070
creative or a more galvanizing like
00:29:04.080 --> 00:29:05.750
that's what those assessments just do
00:29:05.760 --> 00:29:08.310
for you so quickly Yep Yep And the best
00:29:08.320 --> 00:29:10.230
teams I mean you guys say this all the
00:29:10.240 --> 00:29:11.750
time the best teams are made of a
00:29:11.760 --> 00:29:13.990
combination of working styles right with
00:29:14.000 --> 00:29:18.230
a language to talk about you know uh
00:29:18.240 --> 00:29:19.990
talk about navigate conflict and help
00:29:20.000 --> 00:29:21.430
maximize everybody's strengths at the
00:29:21.440 --> 00:29:22.870
table Yeah Um but it's interesting
00:29:22.880 --> 00:29:24.310
because it's not you know you'll see you
00:29:24.320 --> 00:29:26.549
know big companies hire hundreds and
00:29:26.559 --> 00:29:28.950
thousands of people you know every year
00:29:28.960 --> 00:29:30.549
and the margin for error is a little
00:29:30.559 --> 00:29:32.389
wider right when you're at the early
00:29:32.399 --> 00:29:33.909
stage and you've gotten a relatively
00:29:33.919 --> 00:29:35.430
small amount of money and you have a
00:29:35.440 --> 00:29:37.510
relatively finite amount of time to make
00:29:37.520 --> 00:29:39.750
it work like you've got to make those
00:29:39.760 --> 00:29:42.230
hires work Um yeah there's a recent
00:29:42.240 --> 00:29:44.070
McKenzie study that came out that said
00:29:44.080 --> 00:29:46.870
65% of all startups fail because of
00:29:46.880 --> 00:29:49.029
people or organizational issues So it's
00:29:49.039 --> 00:29:51.430
not product issues it's it's really the
00:29:51.440 --> 00:29:53.750
people the processes So what's the one
00:29:53.760 --> 00:29:56.549
thing that we can't create more of and
00:29:56.559 --> 00:29:58.870
it's time And it used to kill me in our
00:29:58.880 --> 00:30:01.190
company is if we brought a salesperson
00:30:01.200 --> 00:30:04.470
in I would lose a year because I didn't
00:30:04.480 --> 00:30:05.990
know if they were going to work out or
00:30:06.000 --> 00:30:07.430
not By the time I get them trained get
00:30:07.440 --> 00:30:09.590
them out in the field a year goes by And
00:30:09.600 --> 00:30:12.310
if it's a bad hire I lost a year And
00:30:12.320 --> 00:30:15.430
that's so hard in any startup Yeah And
00:30:15.440 --> 00:30:17.029
people you know these are small teams
00:30:17.039 --> 00:30:18.789
people see when somebody's not a good
00:30:18.799 --> 00:30:22.549
fit Yep Right And I mean I think often
00:30:22.559 --> 00:30:23.990
when we'll see you know the best
00:30:24.000 --> 00:30:25.750
founders take action on that quickly and
00:30:25.760 --> 00:30:27.350
it it will bring the rest of the team
00:30:27.360 --> 00:30:29.510
relief I was just going to point that
00:30:29.520 --> 00:30:30.950
out It's amazing how sometimes people
00:30:30.960 --> 00:30:32.549
don't want to fire someone like the team
00:30:32.559 --> 00:30:33.990
will be upset The team will be upset
00:30:34.000 --> 00:30:35.430
Then when it happens three or four
00:30:35.440 --> 00:30:36.789
people will come in and be like "Thank
00:30:36.799 --> 00:30:38.789
you I was having to cover their work my
00:30:38.799 --> 00:30:41.190
work the other work." Like "Thank God
00:30:41.200 --> 00:30:43.190
he's gone." Now let's switch We've been
00:30:43.200 --> 00:30:44.789
talking a lot about people but again I
00:30:44.799 --> 00:30:46.310
know we want to dig into a little bit
00:30:46.320 --> 00:30:48.149
with you valuations the valuation
00:30:48.159 --> 00:30:50.470
process and and that sort of thing Can
00:30:50.480 --> 00:30:52.230
make can we get into that with you and
00:30:52.240 --> 00:30:54.149
and not specific deals or specific
00:30:54.159 --> 00:30:56.710
customers just in general what is a
00:30:56.720 --> 00:30:58.549
valuation process when you go and look
00:30:58.559 --> 00:31:00.070
at a company like how do you start to
00:31:00.080 --> 00:31:01.830
formulate what this company might be
00:31:01.840 --> 00:31:03.750
worth yeah it's interesting I mean we'll
00:31:03.760 --> 00:31:05.590
run our own process in general because
00:31:05.600 --> 00:31:07.269
we're not presenting term sheets nor
00:31:07.279 --> 00:31:09.750
leading deals right somebody another
00:31:09.760 --> 00:31:12.630
person in the market is uh setting the
00:31:12.640 --> 00:31:14.549
price and negotiating with the founder
00:31:14.559 --> 00:31:17.269
The benefit to us is that we then get to
00:31:17.279 --> 00:31:19.430
take all that information and do our own
00:31:19.440 --> 00:31:22.230
work around it and try to figure out you
00:31:22.240 --> 00:31:23.830
know whether the valuation is something
00:31:23.840 --> 00:31:25.590
that we find compelling in terms of the
00:31:25.600 --> 00:31:27.590
overall riskreward setup of the deal
00:31:27.600 --> 00:31:31.190
itself Um and yeah it's an interesting I
00:31:31.200 --> 00:31:34.870
mean the the process for us is um you
00:31:34.880 --> 00:31:36.789
know it's it's it's an in-depth process
00:31:36.799 --> 00:31:38.789
to you know Greg just does a fantastic
00:31:38.799 --> 00:31:41.190
job digging through every single term
00:31:41.200 --> 00:31:43.190
sheet every single financial model every
00:31:43.200 --> 00:31:45.190
single I mean in terms of strengths like
00:31:45.200 --> 00:31:46.789
he's just he he just he just does a
00:31:46.799 --> 00:31:48.549
fantastic job at digging through all of
00:31:48.559 --> 00:31:49.830
those things
00:31:49.840 --> 00:31:52.630
Um we then will do a debrief together on
00:31:52.640 --> 00:31:54.310
what we found ask a bunch of tough
00:31:54.320 --> 00:31:56.630
questions of each other ask some
00:31:56.640 --> 00:31:57.909
questions of the founder and the
00:31:57.919 --> 00:32:00.710
founding team And you know the benefit
00:32:00.720 --> 00:32:04.470
of investing in the Southeast is that
00:32:04.480 --> 00:32:07.029
you know nobody here yet and maybe this
00:32:07.039 --> 00:32:08.630
will change over time but nobody needs
00:32:08.640 --> 00:32:11.669
to chase or underwrite typically unicorn
00:32:11.679 --> 00:32:14.950
decacorn IPOs in order for the investor
00:32:14.960 --> 00:32:17.590
the founder the founding team to succeed
00:32:17.600 --> 00:32:20.310
right so you're coming in typically at a
00:32:20.320 --> 00:32:22.710
valuation where you can look ahead and
00:32:22.720 --> 00:32:24.590
underwrite a great outcome for everybody
00:32:24.600 --> 00:32:28.389
involved that may or may not ever hit
00:32:28.399 --> 00:32:30.630
you know the wire and hit uh you know
00:32:30.640 --> 00:32:35.029
hit you know hit the news Um and you
00:32:35.039 --> 00:32:36.950
know we we see that as a feature of the
00:32:36.960 --> 00:32:40.070
region for the most part um because we
00:32:40.080 --> 00:32:42.710
have a chance to to uh invest at
00:32:42.720 --> 00:32:45.190
valuations that are you know just you
00:32:45.200 --> 00:32:46.710
know at at a material discount to where
00:32:46.720 --> 00:32:47.750
you would see in other parts of the
00:32:47.760 --> 00:32:49.750
venture world Yeah I mean I guess talk a
00:32:49.760 --> 00:32:51.190
little I mean one of the challenge
00:32:51.200 --> 00:32:54.230
always with valuations and there's mixed
00:32:54.240 --> 00:32:57.269
bags because obviously owners want to
00:32:57.279 --> 00:33:00.149
give less away and take more money but
00:33:00.159 --> 00:33:03.110
that sets a higher valuation than they
00:33:03.120 --> 00:33:05.830
can get How do you I guess as you look
00:33:05.840 --> 00:33:09.110
at that if there was any advice to
00:33:09.120 --> 00:33:11.870
somebody looking at taking venture of
00:33:11.880 --> 00:33:14.870
balancing valuations equity for future
00:33:14.880 --> 00:33:17.190
rounds that kind of stuff Yeah Yeah Yeah
00:33:17.200 --> 00:33:20.870
It um I mean in our uh you know our
00:33:20.880 --> 00:33:22.389
approach and those of our fund partners
00:33:22.399 --> 00:33:24.190
we want founders and founding teams to
00:33:24.200 --> 00:33:26.950
succeed Right So it is a red flag for us
00:33:26.960 --> 00:33:28.549
if we feel like the founder and the
00:33:28.559 --> 00:33:31.110
founding team are being too diluted in a
00:33:31.120 --> 00:33:33.350
deal Right Right like we I mean just
00:33:33.360 --> 00:33:34.789
again going back to just aligning
00:33:34.799 --> 00:33:36.310
incentives around the table We don't
00:33:36.320 --> 00:33:39.029
want that to be the case Um there's also
00:33:39.039 --> 00:33:40.630
then the balancing act of how much money
00:33:40.640 --> 00:33:42.389
to take in against what the reasonable
00:33:42.399 --> 00:33:43.750
valuation is going to be and you want to
00:33:43.760 --> 00:33:46.389
take in enough money to press through
00:33:46.399 --> 00:33:47.750
you know with with a little bit of a
00:33:47.760 --> 00:33:49.590
margin for error the you know the
00:33:49.600 --> 00:33:51.190
milestones that the company has in front
00:33:51.200 --> 00:33:55.350
of it Um so we always like uh start with
00:33:55.360 --> 00:33:56.789
you know encouraging founders and
00:33:56.799 --> 00:33:59.590
founding teams to start with that right
00:33:59.600 --> 00:34:01.110
um as you're going to raise your next
00:34:01.120 --> 00:34:03.269
round like where are you trying to get
00:34:03.279 --> 00:34:05.029
what's the next you know set of
00:34:05.039 --> 00:34:06.789
milestones you're you're uh you're
00:34:06.799 --> 00:34:09.430
trying to achieve and then work back
00:34:09.440 --> 00:34:11.589
from that right how then are you going
00:34:11.599 --> 00:34:12.869
to get there starting with the market
00:34:12.879 --> 00:34:14.950
and the customer and the product and
00:34:14.960 --> 00:34:17.589
then work back all the way through to
00:34:17.599 --> 00:34:19.669
eventually the sources of capital and
00:34:19.679 --> 00:34:23.349
how much you need right Um and uh yeah I
00:34:23.359 --> 00:34:25.510
mean it's it's it's it's as everything
00:34:25.520 --> 00:34:27.190
this you know it's a it's a balancing
00:34:27.200 --> 00:34:30.069
act right and the best success stories I
00:34:30.079 --> 00:34:31.990
think in the region have done a you know
00:34:32.000 --> 00:34:34.069
have done a good job of striking that
00:34:34.079 --> 00:34:36.629
balance such that everybody's incentives
00:34:36.639 --> 00:34:38.149
are aligned around the table and the
00:34:38.159 --> 00:34:40.389
company has enough you know and
00:34:40.399 --> 00:34:41.510
appropriate funding to get the
00:34:41.520 --> 00:34:43.109
milestones you know achieve that they
00:34:43.119 --> 00:34:44.869
want to achieve Yeah I've seen some
00:34:44.879 --> 00:34:47.550
really good writeups that sort of go
00:34:47.560 --> 00:34:49.710
through from
00:34:49.720 --> 00:34:52.710
preede to you know whether it's angel
00:34:52.720 --> 00:34:55.990
investing getting to A B C and how that
00:34:56.000 --> 00:34:58.950
sort of dilution model looks And it's
00:34:58.960 --> 00:35:01.270
kind of fascinating that sometimes they
00:35:01.280 --> 00:35:03.670
always say start with an end in mind So
00:35:03.680 --> 00:35:05.910
can you sit down with an entrepreneur
00:35:05.920 --> 00:35:08.310
and say yes this is this is not the end
00:35:08.320 --> 00:35:10.630
all be all This is just a start and
00:35:10.640 --> 00:35:12.150
here's where you're going So they
00:35:12.160 --> 00:35:14.230
understand that path Do you do you talk
00:35:14.240 --> 00:35:16.750
through that with people yeah of course
00:35:16.760 --> 00:35:19.589
Um it's a it's not a perfect crystal
00:35:19.599 --> 00:35:22.550
ball I would say but it's a it's a it's
00:35:22.560 --> 00:35:24.390
it's good discussion and it's a good
00:35:24.400 --> 00:35:26.069
it's it's it's the right thing to do
00:35:26.079 --> 00:35:27.430
right the reason I say it's not a
00:35:27.440 --> 00:35:29.270
perfect crystal ball is because the you
00:35:29.280 --> 00:35:31.829
know series A B and C kind of the later
00:35:31.839 --> 00:35:33.349
stage funding markets have been pretty
00:35:33.359 --> 00:35:36.230
quiet the last couple of years Yeah And
00:35:36.240 --> 00:35:38.630
typically at the A you know that's where
00:35:38.640 --> 00:35:41.349
investors are really keying in on uh a
00:35:41.359 --> 00:35:44.230
set of KPIs And if you have met those
00:35:44.240 --> 00:35:46.790
KPIs you get the meeting And if you have
00:35:46.800 --> 00:35:48.390
not met those KPIs you don't get the
00:35:48.400 --> 00:35:50.470
meeting Yeah Right And I think founders
00:35:50.480 --> 00:35:53.430
often underestimate that leap Right And
00:35:53.440 --> 00:35:56.390
you need to start practicing how to run
00:35:56.400 --> 00:35:58.550
your business that way early Not too
00:35:58.560 --> 00:36:00.230
early but early enough such that you
00:36:00.240 --> 00:36:03.990
have great reps you know uh you know
00:36:04.000 --> 00:36:06.069
managing what you measure right as you
00:36:06.079 --> 00:36:09.109
head towards the A Um and then you know
00:36:09.119 --> 00:36:12.230
I mean uh as of late the goalposts have
00:36:12.240 --> 00:36:13.910
changed a little bit at the a right
00:36:13.920 --> 00:36:17.230
people are looking for more revenue Um
00:36:17.240 --> 00:36:20.310
and founders you know it's founders have
00:36:20.320 --> 00:36:21.510
a tough job right now trying to make
00:36:21.520 --> 00:36:22.790
sure that they balance the money that
00:36:22.800 --> 00:36:24.310
they have in the bank and the runway and
00:36:24.320 --> 00:36:26.710
how they're investing it uh trying to
00:36:26.720 --> 00:36:29.349
then hit that you know series A and B
00:36:29.359 --> 00:36:31.190
set of KPIs to get that next round of
00:36:31.200 --> 00:36:33.589
funding So one of the things I was going
00:36:33.599 --> 00:36:36.710
to say that we do at By Design and when
00:36:36.720 --> 00:36:38.550
we work with clients and Dale you might
00:36:38.560 --> 00:36:41.030
want to uh share this we've talked about
00:36:41.040 --> 00:36:44.710
it but getting down to a strategic plan
00:36:44.720 --> 00:36:46.470
and we do something called working
00:36:46.480 --> 00:36:49.670
broken missing And what's fascinating
00:36:49.680 --> 00:36:51.829
about this is we basically go through
00:36:51.839 --> 00:36:54.390
this exercise If it's working you just
00:36:54.400 --> 00:36:57.030
keep doing it We look at what's broken
00:36:57.040 --> 00:36:59.190
what's missing and we have the team pick
00:36:59.200 --> 00:37:01.990
three strategic Mhm And it's so funny
00:37:02.000 --> 00:37:03.589
because we go back and forth and they
00:37:03.599 --> 00:37:05.510
want to pick six or eight And what they
00:37:05.520 --> 00:37:08.710
don't realize is it's by design to pick
00:37:08.720 --> 00:37:10.310
three because we want to see over the
00:37:10.320 --> 00:37:12.630
next 90 days can you actually execute on
00:37:12.640 --> 00:37:15.829
three yep And what's crazy is we work in
00:37:15.839 --> 00:37:18.150
the startup world and I've done it is
00:37:18.160 --> 00:37:20.069
we'll sit down and they'll pick three
00:37:20.079 --> 00:37:22.710
and a week later they're like got three
00:37:22.720 --> 00:37:24.550
more and three new ones and we're like
00:37:24.560 --> 00:37:27.030
what about that and I think what we're
00:37:27.040 --> 00:37:29.750
looking for is it's not so much what the
00:37:29.760 --> 00:37:32.550
three is but can you actually execute on
00:37:32.560 --> 00:37:34.069
what you say you're going to do yeah I
00:37:34.079 --> 00:37:35.349
mean we talk all the time about this
00:37:35.359 --> 00:37:38.069
There's a say do ratio
00:37:38.079 --> 00:37:39.829
right and you know we're going to sit
00:37:39.839 --> 00:37:41.430
and try to understand what you're saying
00:37:41.440 --> 00:37:43.670
you're going to do And yeah I mean we
00:37:43.680 --> 00:37:45.990
don't want those lists to be super long
00:37:46.000 --> 00:37:47.910
You know we call it the relentless
00:37:47.920 --> 00:37:49.829
execution framework because in our
00:37:49.839 --> 00:37:52.950
experience the ideas are there They know
00:37:52.960 --> 00:37:54.470
what they need to do They know where
00:37:54.480 --> 00:37:57.030
they need to go They just don't have the
00:37:57.040 --> 00:37:59.030
framework to do it Which is why we do
00:37:59.040 --> 00:38:01.030
three every 90 days and just start
00:38:01.040 --> 00:38:03.030
checking them off And if to Marty's
00:38:03.040 --> 00:38:05.270
point if you if you pick three easy ones
00:38:05.280 --> 00:38:06.950
let's say and you can't even check those
00:38:06.960 --> 00:38:08.390
off then how are you how are you going
00:38:08.400 --> 00:38:10.870
to meet these big milestones KPIs
00:38:10.880 --> 00:38:12.150
revenue numbers that you're going to
00:38:12.160 --> 00:38:13.990
have to hit So that's where we see a lot
00:38:14.000 --> 00:38:15.349
of companies struggle They know what
00:38:15.359 --> 00:38:17.190
milestones they know what they need to
00:38:17.200 --> 00:38:19.109
do but they struggle with the execution
00:38:19.119 --> 00:38:20.390
piece to get there I don't know if
00:38:20.400 --> 00:38:22.550
you've seen that in Yeah it's it's we
00:38:22.560 --> 00:38:24.950
the best founders uh that we see are
00:38:24.960 --> 00:38:27.670
both macro and micromanagers
00:38:27.680 --> 00:38:29.430
Micromanagers meaning that they you know
00:38:29.440 --> 00:38:30.950
they have an ability to go incredibly
00:38:30.960 --> 00:38:33.430
deep on the business and if they need to
00:38:33.440 --> 00:38:35.510
and often they do they you know there's
00:38:35.520 --> 00:38:37.109
been the term thrown around you know
00:38:37.119 --> 00:38:38.950
founder mode recently right they can be
00:38:38.960 --> 00:38:42.390
a micromanager of the business right and
00:38:42.400 --> 00:38:44.230
at the in the early days step into just
00:38:44.240 --> 00:38:46.710
about every seat and you know push along
00:38:46.720 --> 00:38:48.630
every team member to hit the the the
00:38:48.640 --> 00:38:50.310
milestones that they want to hit But
00:38:50.320 --> 00:38:52.550
they're also really great macro managers
00:38:52.560 --> 00:38:55.109
in the sense of like reminding everybody
00:38:55.119 --> 00:38:57.109
of the arc of the story the arc of the
00:38:57.119 --> 00:38:59.109
journey like where we're headed over the
00:38:59.119 --> 00:39:01.670
long term right and then striking that
00:39:01.680 --> 00:39:04.470
balance of you know the the the big
00:39:04.480 --> 00:39:06.230
picture as well as the small picture
00:39:06.240 --> 00:39:07.829
That's really hard right it's hard to
00:39:07.839 --> 00:39:09.750
find people who can do both and do both
00:39:09.760 --> 00:39:11.270
really well But great founders do both
00:39:11.280 --> 00:39:14.710
well Yeah I uh I did a piece called TNT
00:39:14.720 --> 00:39:17.109
It takes no talent Like how many things
00:39:17.119 --> 00:39:19.990
do we see every day in business that
00:39:20.000 --> 00:39:23.750
really take no talent showing up
00:39:23.760 --> 00:39:25.829
doing what you say you're going to do
00:39:25.839 --> 00:39:28.069
Like being relentless and focused That
00:39:28.079 --> 00:39:30.870
really doesn't take talent It just takes
00:39:30.880 --> 00:39:33.750
focus And so we start to look at and I
00:39:33.760 --> 00:39:36.710
know I look at a lot of leaders is not
00:39:36.720 --> 00:39:38.470
only how smart they are and everything
00:39:38.480 --> 00:39:40.710
else but what are the things that are
00:39:40.720 --> 00:39:42.390
doing every day that just don't take any
00:39:42.400 --> 00:39:44.550
talent but they do it Yeah it's
00:39:44.560 --> 00:39:46.550
interesting We have a a founder we
00:39:46.560 --> 00:39:49.750
invested in recently Um just fantastic
00:39:49.760 --> 00:39:52.710
founder and I went for a visit recently
00:39:52.720 --> 00:39:55.349
and you know the team's in an office at
00:39:55.359 --> 00:39:57.589
a co-working space and there's a big
00:39:57.599 --> 00:39:59.990
giant whiteboard like the biggest
00:40:00.000 --> 00:40:01.910
whiteboard I've ever seen It's huge It
00:40:01.920 --> 00:40:04.550
was probably I like 15 by 15 or I don't
00:40:04.560 --> 00:40:05.510
know where they got this thing I don't
00:40:05.520 --> 00:40:08.470
even got it in there but huge And on it
00:40:08.480 --> 00:40:10.790
he has I mean he must have had to like
00:40:10.800 --> 00:40:13.030
get up on a ladder to like draw this But
00:40:13.040 --> 00:40:14.470
at the top of the thing he's got like
00:40:14.480 --> 00:40:16.710
the arc of the of the journey right and
00:40:16.720 --> 00:40:18.310
here's the big milestones that we're
00:40:18.320 --> 00:40:20.550
chasing And then underneath it he's got
00:40:20.560 --> 00:40:23.349
all of the depth and detail around you
00:40:23.359 --> 00:40:24.550
know how we're how they're going to get
00:40:24.560 --> 00:40:26.550
there more tactically And what was
00:40:26.560 --> 00:40:27.829
interesting to me and what I what I
00:40:27.839 --> 00:40:30.150
thought was really cool about it uh two
00:40:30.160 --> 00:40:32.030
things One was it was clear that the
00:40:32.040 --> 00:40:35.750
team was referencing this
00:40:35.760 --> 00:40:37.430
like it it was a part of their
00:40:37.440 --> 00:40:39.430
day-to-day to to look at this And then
00:40:39.440 --> 00:40:40.550
the other was that there were different
00:40:40.560 --> 00:40:41.430
you could tell that there was different
00:40:41.440 --> 00:40:43.510
handwriting
00:40:43.520 --> 00:40:46.230
right so it wasn't all him right writing
00:40:46.240 --> 00:40:48.150
down everything and and commanding it
00:40:48.160 --> 00:40:50.310
out from the whiteboard right i mean it
00:40:50.320 --> 00:40:52.310
was other people had participated in
00:40:52.320 --> 00:40:53.829
creating these lists You could some
00:40:53.839 --> 00:40:55.430
things are smudged some things are you
00:40:55.440 --> 00:40:57.990
know crossed out I took a picture of it
00:40:58.000 --> 00:40:59.270
cuz I'm like I'm gonna we're gonna come
00:40:59.280 --> 00:41:01.190
back when this is a big giant business
00:41:01.200 --> 00:41:03.670
Yeah and you just make sure you save
00:41:03.680 --> 00:41:05.510
this because you know knowing this guy
00:41:05.520 --> 00:41:07.589
like I I mean I I I'd bet most of what
00:41:07.599 --> 00:41:09.109
he wrote up there he's gonna he's going
00:41:09.119 --> 00:41:11.109
to deliver on Yeah And it goes back to
00:41:11.119 --> 00:41:12.309
weighing in to buy in right when you
00:41:12.319 --> 00:41:14.230
allow your team to weigh in and and kind
00:41:14.240 --> 00:41:16.630
of co-author the journey then they're
00:41:16.640 --> 00:41:18.390
bought in and now now that's not your
00:41:18.400 --> 00:41:19.990
milestone You're telling me to hit that
00:41:20.000 --> 00:41:22.390
milestone It's that's our milestone and
00:41:22.400 --> 00:41:24.309
we have to go hit it So that's a
00:41:24.319 --> 00:41:25.750
brilliant I just took a note on that
00:41:25.760 --> 00:41:27.910
That's a brilliant idea to get big giant
00:41:27.920 --> 00:41:29.829
whiteboard Everyone big white board I
00:41:29.839 --> 00:41:31.030
think everyone needs a big giant
00:41:31.040 --> 00:41:33.190
whiteboard now Well I mean whiteboards
00:41:33.200 --> 00:41:35.270
just lay out vision They lay out
00:41:35.280 --> 00:41:37.190
strategy And I always said you know why
00:41:37.200 --> 00:41:40.630
pencils have erasers Yeah Because you
00:41:40.640 --> 00:41:42.510
can change And I think in
00:41:42.520 --> 00:41:44.710
business things are always going to be
00:41:44.720 --> 00:41:46.790
changing I mean we none of us can
00:41:46.800 --> 00:41:49.190
predict what's going to happen We don't
00:41:49.200 --> 00:41:51.349
can't predict the market up or down We
00:41:51.359 --> 00:41:53.270
have to be ready to erase and not get
00:41:53.280 --> 00:41:55.990
tied to it but we also have to remember
00:41:56.000 --> 00:41:59.589
where we're going Absolutely So people
00:41:59.599 --> 00:42:02.150
love to learn about mistakes there I
00:42:02.160 --> 00:42:03.589
think for some reason Marty and I can
00:42:03.599 --> 00:42:05.589
put out a video about everything you
00:42:05.599 --> 00:42:07.910
should do It gets some views We put out
00:42:07.920 --> 00:42:09.910
what you don't do and it gets hundreds
00:42:09.920 --> 00:42:11.910
of views Make mistakes all the time What
00:42:11.920 --> 00:42:13.510
are some mistakes you you commonly see
00:42:13.520 --> 00:42:15.750
owners making founders making top three
00:42:15.760 --> 00:42:17.069
I thought it was going to be my own
00:42:17.079 --> 00:42:19.990
mistakes We can start there too Top
00:42:20.000 --> 00:42:21.430
three We should do that too Turn about
00:42:21.440 --> 00:42:22.790
our guests have never made a mistake
00:42:22.800 --> 00:42:24.790
ever They're they're always perfect But
00:42:24.800 --> 00:42:25.990
you know when you're when you're looking
00:42:26.000 --> 00:42:27.349
at businesses when you're looking at
00:42:27.359 --> 00:42:28.790
founders what are maybe some of the
00:42:28.800 --> 00:42:31.109
common mistakes you see being made out
00:42:31.119 --> 00:42:33.670
there um I mean the first thing that
00:42:33.680 --> 00:42:35.270
pops to mind I wouldn't describe it as a
00:42:35.280 --> 00:42:36.870
mistake necessarily because I don't want
00:42:36.880 --> 00:42:40.069
it to sound like I'm kind of judging it
00:42:40.079 --> 00:42:43.109
Um but I would I I would say that I
00:42:43.119 --> 00:42:45.270
think maybe founders underestimate how
00:42:45.280 --> 00:42:47.270
important communication is and that it's
00:42:47.280 --> 00:42:49.430
okay to be open in your communication
00:42:49.440 --> 00:42:52.309
with people who have invested in you
00:42:52.319 --> 00:42:55.030
right and you know sometimes it can take
00:42:55.040 --> 00:42:58.550
a little too long for investors and
00:42:58.560 --> 00:43:00.230
founders to get into a dynamic where
00:43:00.240 --> 00:43:02.390
that's the case right and the earlier
00:43:02.400 --> 00:43:04.470
that we or anybody else who's invested
00:43:04.480 --> 00:43:07.670
hear about something that needs an extra
00:43:07.680 --> 00:43:11.270
hand the faster we can um you know the
00:43:11.280 --> 00:43:13.910
faster that we can lend a hand right um
00:43:13.920 --> 00:43:15.510
so not necessarily a mistake but I think
00:43:15.520 --> 00:43:17.030
it's this odd dynamic right because
00:43:17.040 --> 00:43:18.309
everybody's pressed through the process
00:43:18.319 --> 00:43:21.030
of getting a deal done By the way I more
00:43:21.040 --> 00:43:22.950
you say that like that one's such a good
00:43:22.960 --> 00:43:25.109
one because what do you think probably
00:43:25.119 --> 00:43:27.829
the hardest thing sort of an
00:43:27.839 --> 00:43:29.430
entrepreneur does right is to be
00:43:29.440 --> 00:43:31.750
truthful on what's happening right and
00:43:31.760 --> 00:43:33.990
if they're not communicating when the
00:43:34.000 --> 00:43:36.309
number gets bigger and bigger or they
00:43:36.319 --> 00:43:38.710
fall off it gets harder and harder So
00:43:38.720 --> 00:43:41.589
the earlier they let you into the window
00:43:41.599 --> 00:43:44.390
but in some reasons our ego doesn't want
00:43:44.400 --> 00:43:47.430
us to to say the truth like we're afraid
00:43:47.440 --> 00:43:49.990
to tell you the truth But yeah Yeah And
00:43:50.000 --> 00:43:52.630
I I um and I think we we get that We try
00:43:52.640 --> 00:43:54.069
to cut through that with the folks that
00:43:54.079 --> 00:43:56.550
we invest in early right which is just
00:43:56.560 --> 00:43:57.990
you know we're going to be upfront and
00:43:58.000 --> 00:44:00.550
transparent about you know what we're in
00:44:00.560 --> 00:44:02.150
this for and what we can reasonably help
00:44:02.160 --> 00:44:04.470
with and can't And you know we we're
00:44:04.480 --> 00:44:06.790
hoping you can do the same right um and
00:44:06.800 --> 00:44:09.750
it's the best deals that we've ever done
00:44:09.760 --> 00:44:13.109
Every month without fail we get an
00:44:13.119 --> 00:44:15.190
investor update Yeah and it's structured
00:44:15.200 --> 00:44:18.309
in a you know in a in a similar way and
00:44:18.319 --> 00:44:20.230
includes at the bottom a set of asks
00:44:20.240 --> 00:44:21.510
that are going out to the broader
00:44:21.520 --> 00:44:25.990
network Um and you know we we we we read
00:44:26.000 --> 00:44:28.230
all those and you know do our best to
00:44:28.240 --> 00:44:29.910
take action on what we're asked to do Is
00:44:29.920 --> 00:44:31.510
the issue more that to Marty's point
00:44:31.520 --> 00:44:32.950
they kind of want to present it as a
00:44:32.960 --> 00:44:34.870
very rosy picture and everything's fine
00:44:34.880 --> 00:44:36.230
and everything's good and then you've
00:44:36.240 --> 00:44:37.910
like oh gosh well it's a tough seat I
00:44:37.920 --> 00:44:39.190
mean you're it's it's an incredibly
00:44:39.200 --> 00:44:40.470
tough seat as a founder I mean you're
00:44:40.480 --> 00:44:42.550
you're selling the dream right you're
00:44:42.560 --> 00:44:44.630
trying to get other people to to to
00:44:44.640 --> 00:44:46.790
bring money to the table and believe in
00:44:46.800 --> 00:44:48.710
you over a long period of time And
00:44:48.720 --> 00:44:51.030
anything that you know and I you know
00:44:51.040 --> 00:44:53.670
I've I've I've sat in that seat before
00:44:53.680 --> 00:44:56.630
Anything that um you know any kind of
00:44:56.640 --> 00:44:59.430
derivation from the dream that you've
00:44:59.440 --> 00:45:01.030
sold you can you know you can be
00:45:01.040 --> 00:45:02.470
hesitant to share because you don't want
00:45:02.480 --> 00:45:04.790
to stop selling the dream Yeah Right But
00:45:04.800 --> 00:45:08.069
I would think self-awareness again 25
00:45:08.079 --> 00:45:10.309
years in the the talent business to me
00:45:10.319 --> 00:45:12.230
the biggest predictor of success are
00:45:12.240 --> 00:45:15.150
people that are self-aware Like if I
00:45:15.160 --> 00:45:17.670
know I'm struggling here and I can say
00:45:17.680 --> 00:45:19.990
it and not just hey I'm struggling help
00:45:20.000 --> 00:45:21.349
It could be hey I'm struggling and
00:45:21.359 --> 00:45:22.870
here's what I'm trying to do but do you
00:45:22.880 --> 00:45:25.030
have any better ideas to me those would
00:45:25.040 --> 00:45:26.870
be the folks I'd want to bet on long
00:45:26.880 --> 00:45:28.550
term Not the ones that just everything's
00:45:28.560 --> 00:45:30.550
great It's the old meme with the dog
00:45:30.560 --> 00:45:31.910
sitting around and everything's on fire
00:45:31.920 --> 00:45:33.349
and he's like everything's fine
00:45:33.359 --> 00:45:36.470
Everything's fine we're cool we're good
00:45:36.480 --> 00:45:40.390
I Yeah I think that um that piece though
00:45:40.400 --> 00:45:42.870
getting that understanding that there
00:45:42.880 --> 00:45:45.589
are going to be ups and downs and almost
00:45:45.599 --> 00:45:48.550
my my visual is you guys are in the boat
00:45:48.560 --> 00:45:50.470
with them You're not on the sideline
00:45:50.480 --> 00:45:53.349
shooting cannonballs into them because
00:45:53.359 --> 00:45:54.790
you know you're not trying to sink their
00:45:54.800 --> 00:45:58.790
boat No you know we're in the boat I
00:45:58.800 --> 00:46:01.670
need that boat to float So totally Yeah
00:46:01.680 --> 00:46:03.910
So you're in it together So the more
00:46:03.920 --> 00:46:06.309
open and honest and to me what you're
00:46:06.319 --> 00:46:09.030
looking at is if I'm going to deliver
00:46:09.040 --> 00:46:11.270
bad news my question is are you doing
00:46:11.280 --> 00:46:14.710
everything you can as opposed to well I
00:46:14.720 --> 00:46:16.550
didn't get out this email or we're not
00:46:16.560 --> 00:46:18.150
doing the marketing campaign We're not
00:46:18.160 --> 00:46:21.030
following up on our execution then we
00:46:21.040 --> 00:46:23.030
have a different story then if you're
00:46:23.040 --> 00:46:25.510
doing the right things but the market is
00:46:25.520 --> 00:46:27.270
taking longer or something's happening
00:46:27.280 --> 00:46:29.910
then and we try not to overstate what we
00:46:29.920 --> 00:46:31.270
can help with because we're we're on the
00:46:31.280 --> 00:46:32.550
boat right now we'll switch from buses
00:46:32.560 --> 00:46:33.910
to boats but like we're on the boat
00:46:33.920 --> 00:46:36.309
we're trying to sink in
00:46:36.319 --> 00:46:38.069
uh and we got money in the boat right
00:46:38.079 --> 00:46:40.950
but we're also not I mean it's I I think
00:46:40.960 --> 00:46:42.150
uh you know there's memes around
00:46:42.160 --> 00:46:44.150
investors all the time around you know
00:46:44.160 --> 00:46:45.990
the people who are here to help right
00:46:46.000 --> 00:46:48.870
and um you know we we we we really do
00:46:48.880 --> 00:46:50.710
want to help but We also try to be
00:46:50.720 --> 00:46:52.470
upfront and have honest conversations
00:46:52.480 --> 00:46:53.990
early around what we can help with
00:46:54.000 --> 00:46:57.510
versus what we can't help with right um
00:46:57.520 --> 00:47:00.470
and that can run the range Um but not
00:47:00.480 --> 00:47:02.390
overstate
00:47:02.400 --> 00:47:04.069
you know we're in the boat but but but
00:47:04.079 --> 00:47:07.109
it's it's uh the or you know I mean we
00:47:07.119 --> 00:47:09.270
will of course we will but it's it's
00:47:09.280 --> 00:47:11.109
it's it's a different dynamic in the
00:47:11.119 --> 00:47:13.829
sense of there's only you know I don't
00:47:13.839 --> 00:47:15.030
know I don't want to extend the analogy
00:47:15.040 --> 00:47:16.630
too far but there's only so many so many
00:47:16.640 --> 00:47:19.670
types of ores we can grab to kind of row
00:47:19.680 --> 00:47:21.829
right um the others are going to be for
00:47:21.839 --> 00:47:24.470
the team and the founder to to row Do
00:47:24.480 --> 00:47:25.910
you guys have a sweet spot that you look
00:47:25.920 --> 00:47:26.829
for
00:47:26.839 --> 00:47:29.349
size-wise industry-wise anything like
00:47:29.359 --> 00:47:30.790
that yeah it's I mean it's pretty broad
00:47:30.800 --> 00:47:33.430
So we invest in lead investors um and
00:47:33.440 --> 00:47:35.309
those funds invest across both tech and
00:47:35.319 --> 00:47:38.470
healthcare Um and then you know in in
00:47:38.480 --> 00:47:39.990
general we have a bias for early So
00:47:40.000 --> 00:47:42.150
typically seed and series A We'll come
00:47:42.160 --> 00:47:44.630
in at the A for things that we you know
00:47:44.640 --> 00:47:46.309
uh and markets and verticals that we
00:47:46.319 --> 00:47:47.630
feel like we want to see a little bit
00:47:47.640 --> 00:47:52.150
more risks derisked right um but on the
00:47:52.160 --> 00:47:53.510
kind of tech and software side we'll
00:47:53.520 --> 00:47:56.309
typically come in at the seed Yeah Um
00:47:56.319 --> 00:47:58.710
are there any published statistics just
00:47:58.720 --> 00:48:02.550
on success or rates or whatever at seed
00:48:02.560 --> 00:48:04.309
or a I mean I know that's still a
00:48:04.319 --> 00:48:07.349
difficult time and it's still still a
00:48:07.359 --> 00:48:10.150
gamble I mean I guess are there any
00:48:10.160 --> 00:48:12.950
published statistics on success or
00:48:12.960 --> 00:48:15.349
failures at the A level or Yeah I mean
00:48:15.359 --> 00:48:18.150
it's still Carta has a uh if folks don't
00:48:18.160 --> 00:48:20.710
um follow all the the Carta data
00:48:20.720 --> 00:48:23.910
insights uh uh newsletters and things
00:48:23.920 --> 00:48:25.589
like that I'd encourage them to to
00:48:25.599 --> 00:48:27.910
follow those Carta has data on probably
00:48:27.920 --> 00:48:31.190
3,000 venture firms inclusive of all of
00:48:31.200 --> 00:48:33.109
the underlying investments within those
00:48:33.119 --> 00:48:36.549
firms and publishes out regularly now
00:48:36.559 --> 00:48:39.349
quite a bit of data um around success
00:48:39.359 --> 00:48:41.109
rates and graduation rates and things
00:48:41.119 --> 00:48:42.790
like that We benchmark oursel regularly
00:48:42.800 --> 00:48:46.390
against those things right um and we
00:48:46.400 --> 00:48:48.069
think that's that's good There's more I
00:48:48.079 --> 00:48:49.510
would say there's more and more data in
00:48:49.520 --> 00:48:51.030
the industry these days than I think
00:48:51.040 --> 00:48:53.349
ever before which is good for everybody
00:48:53.359 --> 00:48:55.670
right because we can benchmark ourselves
00:48:55.680 --> 00:48:59.030
and also um set expectations and
00:48:59.040 --> 00:49:01.829
understand with a founder you know for
00:49:01.839 --> 00:49:03.430
instance you know it takes three or four
00:49:03.440 --> 00:49:06.150
years typically to go to go raise your a
00:49:06.160 --> 00:49:08.950
right um so let's make sure that we have
00:49:08.960 --> 00:49:11.270
enough money in the tank to get to that
00:49:11.280 --> 00:49:13.589
process to get you know to get to that
00:49:13.599 --> 00:49:15.109
yeah I mean it's kind of the beauty of
00:49:15.119 --> 00:49:17.430
it right wrong is there is regulations
00:49:17.440 --> 00:49:20.230
around it there is rules so data is
00:49:20.240 --> 00:49:22.710
gathered so it's very transparent it's
00:49:22.720 --> 00:49:25.349
not like these deals are done in back
00:49:25.359 --> 00:49:28.230
rooms and closed doors and I I thought
00:49:28.240 --> 00:49:30.150
it was interesting um through one of the
00:49:30.160 --> 00:49:31.670
accelerators
00:49:31.680 --> 00:49:35.270
we have a venture guy does a talk on
00:49:35.280 --> 00:49:38.230
capital and money and you know he really
00:49:38.240 --> 00:49:40.309
brings up one of the things just legally
00:49:40.319 --> 00:49:42.790
what you can say or if I can't offer you
00:49:42.800 --> 00:49:44.710
a deal and then turn around offer a
00:49:44.720 --> 00:49:46.870
different deal than the next guy you
00:49:46.880 --> 00:49:49.670
know it is there are rules around this
00:49:49.680 --> 00:49:52.630
stuff and so it is interesting for
00:49:52.640 --> 00:49:54.470
founders ers to understand that to not
00:49:54.480 --> 00:49:56.630
get themselves in trouble Yeah And we
00:49:56.640 --> 00:49:59.109
we're always happy to trade notes on
00:49:59.119 --> 00:50:00.790
what those things are Obviously we're
00:50:00.800 --> 00:50:03.750
not we're not lawyers Um but we do have
00:50:03.760 --> 00:50:06.069
a good perch in the market on what
00:50:06.079 --> 00:50:09.349
market looks like and what you know uh
00:50:09.359 --> 00:50:11.430
you know what kind of the standard types
00:50:11.440 --> 00:50:13.430
of you know deals and structures look
00:50:13.440 --> 00:50:15.430
like and we're always happy to chat
00:50:15.440 --> 00:50:17.349
through that with founders So Joe we've
00:50:17.359 --> 00:50:18.950
talked a lot about owner mistakes and
00:50:18.960 --> 00:50:21.510
organizational issues Um now I get to
00:50:21.520 --> 00:50:23.829
share mine made a comment You thought I
00:50:23.839 --> 00:50:25.510
was asking you about yours So I'm going
00:50:25.520 --> 00:50:27.670
to open the floor and let what what
00:50:27.680 --> 00:50:29.430
mistakes have you made or or what would
00:50:29.440 --> 00:50:30.710
you do differently if you were starting
00:50:30.720 --> 00:50:33.270
over today yeah it's funny what's what's
00:50:33.280 --> 00:50:35.670
been rolling through my head uh in
00:50:35.680 --> 00:50:38.630
anticipating answering this question is
00:50:38.640 --> 00:50:40.470
the benefit that I have having worked
00:50:40.480 --> 00:50:42.630
with Greg and Nicken for so long and
00:50:42.640 --> 00:50:45.030
that they know uh I don't know if
00:50:45.040 --> 00:50:46.790
mistakes is the right word or not but
00:50:46.800 --> 00:50:48.790
they certainly know what I am inclined
00:50:48.800 --> 00:50:51.190
to do or say and what my biases are and
00:50:51.200 --> 00:50:55.109
can check me on it right um just like I
00:50:55.119 --> 00:50:57.349
can with them right and I think the
00:50:57.359 --> 00:51:00.390
three of us uh uh you know just super
00:51:00.400 --> 00:51:02.230
complimentary skill sets And if you were
00:51:02.240 --> 00:51:05.030
out on the front porch hearing us you
00:51:05.040 --> 00:51:07.109
know debate things and chat about things
00:51:07.119 --> 00:51:08.549
you know you would hear them checking me
00:51:08.559 --> 00:51:10.549
on hey Joe like you're you're doing the
00:51:10.559 --> 00:51:13.750
thing that you have a tendency to do or
00:51:13.760 --> 00:51:15.750
you get swept away with this Let's kind
00:51:15.760 --> 00:51:19.190
of check it a little bit And um and uh I
00:51:19.200 --> 00:51:22.309
think that helps avoid some of the
00:51:22.319 --> 00:51:23.829
mistakes that I would otherwise make if
00:51:23.839 --> 00:51:25.510
I was doing this on my own Yeah I think
00:51:25.520 --> 00:51:28.069
that number two position is so important
00:51:28.079 --> 00:51:30.390
I know at Evokco Marty and Steve just
00:51:30.400 --> 00:51:31.829
balanced each other out It sounds like
00:51:31.839 --> 00:51:33.750
your partners balance that balance and
00:51:33.760 --> 00:51:34.829
having
00:51:34.839 --> 00:51:37.109
different profiles different ways of
00:51:37.119 --> 00:51:38.470
doing things different ways of thinking
00:51:38.480 --> 00:51:41.109
I think is very important I just trust
00:51:41.119 --> 00:51:43.349
in a you know to me when you build a
00:51:43.359 --> 00:51:45.670
leadership team or you're a founder with
00:51:45.680 --> 00:51:48.870
a partner is having that trust to check
00:51:48.880 --> 00:51:51.430
each other and I laugh because Dale and
00:51:51.440 --> 00:51:54.390
I were talking and I bought a new house
00:51:54.400 --> 00:51:57.349
and something came up and I always
00:51:57.359 --> 00:51:59.430
believe in negotiation you never give
00:51:59.440 --> 00:52:01.670
without getting whatever it is and it
00:52:01.680 --> 00:52:03.270
doesn't have to be big and it was
00:52:03.280 --> 00:52:05.270
something small and I was like plotting
00:52:05.280 --> 00:52:07.589
what I had to ask for and Dale just
00:52:07.599 --> 00:52:09.190
looked at me he says do you always have
00:52:09.200 --> 00:52:12.710
to win
00:52:12.720 --> 00:52:14.309
It was like a rug or something It was a
00:52:14.319 --> 00:52:15.750
rug I was like I'm going to get this
00:52:15.760 --> 00:52:18.069
painting that he had He's just like "Do
00:52:18.079 --> 00:52:19.910
you always have to win?" Like "Oh." And
00:52:19.920 --> 00:52:22.069
I'm like "Okay I'm not going to ask for
00:52:22.079 --> 00:52:24.710
that." Not always but most of the time
00:52:24.720 --> 00:52:26.870
Yeah But but I don't ask for enough So
00:52:26.880 --> 00:52:28.309
again it's a good I would give
00:52:28.319 --> 00:52:30.230
everything away So it's a good balance
00:52:30.240 --> 00:52:33.349
with us as well So as we wrap this up
00:52:33.359 --> 00:52:34.790
what's you know one thing we do at By
00:52:34.800 --> 00:52:36.549
Design is we help owners figure out
00:52:36.559 --> 00:52:38.630
what's next for them personally
00:52:38.640 --> 00:52:40.549
financially and their organization
00:52:40.559 --> 00:52:42.549
What's next for for Joe and Front Porch
00:52:42.559 --> 00:52:44.710
Ventures we're on the road a lot which
00:52:44.720 --> 00:52:46.390
we're happy to you know it's like
00:52:46.400 --> 00:52:47.990
springtime conference season for us
00:52:48.000 --> 00:52:49.829
which is a lot of fun So I was we were
00:52:49.839 --> 00:52:51.589
at the Florida Venture Forum in Miami
00:52:51.599 --> 00:52:53.510
last week Obviously Greenville this week
00:52:53.520 --> 00:52:55.109
Next week I'm in Winston at Winston
00:52:55.119 --> 00:52:57.030
starts The week after we have CED's
00:52:57.040 --> 00:52:59.030
Venture Connect in Raleigh I'm going to
00:52:59.040 --> 00:53:00.870
catch spring break with my family after
00:53:00.880 --> 00:53:03.589
that So we're going to head out We do uh
00:53:03.599 --> 00:53:07.109
hike Zion Grand Canyon and then we come
00:53:07.119 --> 00:53:09.150
back into it and I think I'm in
00:53:09.160 --> 00:53:10.910
Birmingham
00:53:10.920 --> 00:53:13.230
Charlotte
00:53:13.240 --> 00:53:16.309
Nashville Chattanooga Yikes Back to
00:53:16.319 --> 00:53:17.990
Charlotte So it's I mean for anybody
00:53:18.000 --> 00:53:19.270
who's out there who's in these places
00:53:19.280 --> 00:53:20.950
reach out We'd love to say hi And how
00:53:20.960 --> 00:53:22.150
can they reach out to you how do they
00:53:22.160 --> 00:53:23.349
connect with you and Front Porch
00:53:23.359 --> 00:53:24.790
Ventures sure Yeah just either on
00:53:24.800 --> 00:53:27.390
LinkedIn or uh
00:53:27.400 --> 00:53:29.829
frontpporchvp.com Awesome Well Marty Joe
00:53:29.839 --> 00:53:31.510
thank you guys so much for the time I
00:53:31.520 --> 00:53:33.190
learned a lot just by listening And yeah
00:53:33.200 --> 00:53:34.910
one one thing um I want to say
00:53:34.920 --> 00:53:37.349
congratulations Uh Joe has been elected
00:53:37.359 --> 00:53:39.670
to the board of Venture Atlanta Like Oh
00:53:39.680 --> 00:53:42.630
wow That's a big honor um to be on that
00:53:42.640 --> 00:53:44.870
board and I think being part of that So
00:53:44.880 --> 00:53:47.190
first off yeah congratulations Oh thanks
00:53:47.200 --> 00:53:48.950
I mean uh Venture Atlanta's been a big
00:53:48.960 --> 00:53:51.190
part of Front Porch's growth over the
00:53:51.200 --> 00:53:52.710
years and we've found a ton of companies
00:53:52.720 --> 00:53:53.910
there where we've had companies present
00:53:53.920 --> 00:53:55.829
there and Greg Nick and I have been
00:53:55.839 --> 00:53:57.589
involved in some way shape or form for
00:53:57.599 --> 00:53:59.349
you know since the inception of the firm
00:53:59.359 --> 00:54:01.030
So it's Yeah I'm I'm excited for it It's
00:54:01.040 --> 00:54:03.349
fun That's great And for the listeners
00:54:03.359 --> 00:54:05.510
out there you know one exciting news we
00:54:05.520 --> 00:54:07.109
have for you all is there's now a link
00:54:07.119 --> 00:54:09.030
in the description of our videos where
00:54:09.040 --> 00:54:11.109
you can take a free DISC profile So
00:54:11.119 --> 00:54:12.390
you've heard us talk about it you've
00:54:12.400 --> 00:54:14.630
seen the videos on it Uh just click the
00:54:14.640 --> 00:54:16.230
link in the description All you have to
00:54:16.240 --> 00:54:17.589
do is enter your name and email and
00:54:17.599 --> 00:54:19.910
you're off into the assessment And uh I
00:54:19.920 --> 00:54:21.750
look forward to to seeing your results
00:54:21.760 --> 00:54:23.910
and and hearing what you think about
00:54:23.920 --> 00:54:26.309
your results So click on the link take
00:54:26.319 --> 00:54:28.069
the take the assessment and let us know
00:54:28.079 --> 00:54:30.710
what you think Until next time y'all See
00:54:30.720 --> 00:54:35.160
you Thanks Thanks
00:54:35.170 --> 00:54:38.269
[Music]